The Best and the Brightest – J.C. Penney-Style
One of the best accounts of the origin of the Vietnam War disaster was David Halberstam’s 1972 The Best and the Brightest. The focus of the book is the disastrous consequences of the erroneous Vietnam War foreign policies crafted by the academics and intellectuals who were members of John F. Kennedy’s administration.
The title referred to Kennedy’s “whiz kids”—leaders of industry and academia brought into the Kennedy administration—whom Halberstam characterized as arrogantly insisting on “brilliant policies that defied common sense” in Vietnam, often against the advice of career U.S. Department of State employees. Perhaps the most famous of these whiz kids was Robert S. McNamara, who served as Secretary of Defense for both President Kennedy and President Johnson.
While reading Fortune Magazine’s (April 7, 2014 issue) account of the J.C. Penney (JCP) disaster, I was taken by the similarities between the efforts to win the Vietnam War and the efforts to transform Penney’s into a winner.
By 2010-11, it became clear that J.C. Penney was in need of management change. The company was going nowhere. Revenues had dropped from $19.9 billion in 2006 to 17.2 billion in 2011.
The drama began with a phone call on Oct. 7, 2010 to Penney’s CEO Myron “Mike” Ullman, who had been in charge of the company since 2004. Investor Steven Roth, a Penney’s Board member, requested a meeting. It turned out that Roth had teamed up with another Board member, Bill Ackman, owner of the Pershing Square Capital hedge fund, had teamed up to buy 26% of Penney’s stock, at the time selling for $32 a share, They had a vision of a company selling for $60 per share—under a totally new management team.
And they brought in “the best and the brightest” starting with Ron Johnson, the man who transformed Target before moving on to Apple where he created the company’s retail stores. Johnson was a true winner, whiz kid, visionary, and charismatic leader. On Johnson’s acceptance of the Penney CEO position, Penney’s stock spurted 17%.
Johnson next started building his team of high-priced all-stars: Michael Francis, Target’s marketing head, became Penney’s president and head of both merchandising and marketing; Mike Kramer, from specialty retailer Kellwood, joined J.C. Penney as COO; Dan Walker, another Apple veteran, became Penney’s chief talent officer. This “dream team” received $24 million in cash and signing bonuses plus millions of dollars in stock options.
Of course, they never could take advantage of the stock options. Johnson was loaded with ideas and had the talented team to make it happen, but like a rocket in the early stages of the U.S. space program, it never got off the ground.
The Fortune article chronicles the story of Johnson’s 16-month regime—all the ideas, elaborate Steve Jobs-like presentations and the ultimate collapse that has put Penney’s in a highly vulnerable position with a doubtful future. As with President Kennedy’s Vietnam War team, Ron Johnson’s J.C. Penney team showed how the “best and the brightest” can fail miserably.