By:-Ankita GroverMehak KukkarShankar Mohan

“The associates are the first customers we sell. If it doesn't ring to them, it’s impossible to communicate and inspire the customer.”

Background Set up in 1902 by James Cash Penney in Kemmerer, Wyoming

Traced back to The Golden Rule, a dry fruits and clothing store

By 1902 TGR had 312 stores in 26 states

In 1924 , was incorporated as the JCPenney Company

Crossed the US$ 1 Billion revenue mark in 1951 and US$ 2 Billion mark in 1964

Targeted the middle income customers facing aggressive competition from both the discounters and higher end department stores

Operational Problems JCP followed a decentralized merchandising policy as part of its expansion plans

Little idea what each store stocked leading to stretched out lead times

Changing retail scenario in 1990 made the merchandise outdated and lacking in style

Led to plummeting financials and share prices

Remedies Turnaround orchestrated by Questrom and Castagna in 1999

Centralized the Buying system and slashed the number of items displayed in the stores

Sale of JCP’s Direct Marketing Services

Efforts undertaken to project a fashionable image of the company

Other Pull strategies

Sale of Eckerd drugstore chain for US$ 4.52 billion in cash

Need for Change in Culture The need for change in culture was felt by

Ulleman in 2004

Organisation culture was very formal

Employees wore formals, casuals not accepted

Employees dissuaded from decorating/customizing their cubicles

“Office police”

Promotion from within given priority

Freshers were intimidated by the formal culture

Initiatives Taken at JCP Appointment of Theilmann as the executive Vice president, chief human resources and administration officer

Long term plan to make “JCPenney a great place to work “

Focus on involving employees make an emotional connection with the customers

Attract and retain the best talent in the retail industry

Small changes called “Quick Hits”

Poster Campaign called “Just call me Mike”

Dress Code relaxed to business casuals

Office Police team was disbanded

Allowed to decorate their cubicles

Replaced the art works with the photos of the employees

New security ID badges

Launch of the “Winning together principles”

Associate engagement survey

In 2005, threw their first Christmas party

Leadership conference for the store managers

Training and Development

Corporate coaching initiatives

Identified high potential employees called “Hypos”

Retail academy where Ullman and Theilmann acted as faculty members

Rigorous training sessions

Opted for a new brand positioning strategy “Every day matters”

Multiplier effect as trainees inn the academy went on to train their respective staff

Multiplier effect with Coaching

Results

JCP’s second AES in 2006 revealed that 73% of its employees were “engaged” in comparison to 67% in 2005

Was able to attract graduates from best professional colleges

Operating profit for the fiscal year 2005 was US$1.6 Billion, a 22.5 % increase over prev. year

Opened 18 new stores

Three year financial summary of JCP

US$ MILLIONS 2006

2005 2004

2003

RETAIL SALES,NET (US$ MILLIONS 19903

18781 18086

17513

COMPARABLE DEPARTMENT STORE SALES (US$ MILLIONS)

3.7 2.9 4.9 0.8

GROSS MARGIN (US$ MILLIONS) 7825 7191 6792 6276

OPERATING INCOME (US$ MILLIONS) 1922 1631 1275 786

INCOME FROM CONTINUING OPERATIONS (US$ MILLIONS)

1134 977 657 360

DILUTED EPS FROM CONTINUING OPERATIONS (US$ MILLIONS)

4.88 3.83 2.2 1.2

NUMBER OF JCP STORES 1033 1019 1017 1020

GROSS SELLING SPACE(SQ FT IN MILLIONS)

103.1 101.4 101.3 101.1

Reactions to the culture change initiativesNot a gimmick but symbolic of its effort to position itself as an employer of choice

Need for change was paramount due to the shortage of talent in the retail industry

Focus on job satisfaction

Happy employees make happy customers

Ullman listened to his employees

Repeated engagement with the lower level employees

Sustaining the involvement

Culture not driven by the top management but by the system

JCP’s Winning Together Principles