Organisational Culture Jc Penney free essay sample

Do you think JC Penney was justified in appointing Mike Ullman, an outsider, as CEO instead of Vanessa Castagna, considering that Castagna was instrumental in turning around JC Penney in the early 2000s? Soon afterwards, Castagna left the company. What are the pros and cons of â€Å"bringing in an outsider† and promoting from within†? Discuss too the impact of such decisions on the morale of the employees. JC Penney is a mid range chain of American department stores, which was first started by James Cash Penney 1902, when he was offered a one third partnership in a new store with Guy Johnson and Thomas Callahan called The Golden Rule. The store was a dry goods and clothing store in Kemmerer, Wyoming and from here the chain spread rapidly throughout the United States changing its name to JC Penney in 1913 when James Penney took a greater ownership of the chain. At about this time several partners met at Salt Lake City to draft â€Å"The Penney Idea†, a set of business principles that were to guide the business from then on. We will write a custom essay sample on Organisational Culture Jc Penney or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Wikipedia. com viewed 9th September 2007. Over the years the chain of the department stores continued to grow through a system where the managers put equity into their stores giving them more control over what was sold. As a result the merchandising system was decentralised while all its competitors had a more centralised system allowing them to know what was in stock at any one time, what was moving and what was not; and to be able to advertise on a national basis. With the intense competition found in the retail sector in the late 1990s, JC Penney began to find its place in the market was under pressure and profits began to decline. At this stage it made the new appointments of Allen Questrom as the CEO and Vanessa Castagna as the new COO. Castagna came to JC Penneys with a great deal of merchandising experience gained from other retail chain stores. With this experience she helped Questrom turn around JCP by centralising the buying system, decreasing the number of lines sold, closing down non performing outlets and re-imaging the lines sold to the customers.This plus the selling of a number of the company’s other interests left it in a very good financial position avoiding what looked like possible disaster. These changes brought JCP into line with its competitors and in doing this Castagna showed excellent management skills. The share market also approved, as can been seen with shares rising from about $20 when she joined the company in 1999 to over $40 when she quit in March 2005, as can be seen in Diagram1. Diagram 1 http://investing. businessweek. com/research/stocks/charts/charts. sp? symbol=JCP viewed 9th September 2007. Even though Castagna showed great management skills she did not necessarily show the vision or leadership skills that were necessary to take JCP the next step further were it could attract, train and keep good staff as well as present a new image that would excite and attract new customers and ensure old customers kept coming back. Kotter (1996, pg 25) stated, â€Å"Management is a set of processes that can keep a complicated system of people and technology running smoothly.The most important aspects of management include planning, budgeting, organising, staffing, controlling, and problem solving. Leadership is a set of processes that creates organisations in the first place or adapts them to significantly changing circumstances. Leadership defines what the future should look like, aligns people with that vision, and inspires them to make it happen despite the obstacles. † When Myron E. Ullman joined JC Penney as Chairman and CEO late in 2004 he found that the company had maintained a rigid old world culture that discouraged new recruits and stifled creative thinking.Morale amongst employees was high, but only because the company had just avoided disaster and Ullman felt to increase morale and retain quality staff the culture within the organisation had to change dramatically. He had a vision to take the company to the industry leadership level through the â€Å"Long Term Plan† which has been updated over the last couple of years and can be summarised as follows: Annual Report (2006, Pg 4) †¢Develop strong enduring relationships with customers †¢Inspir e customers with our merchandise and services †¢Being the preferred choice for a retail career Establish JCP as the growth leader in the retail industry Unlike Castagna, Ullman has displayed high cognitive leadership abilities allowing him to see the underlying problems within JCP and act on them with innovative ideas. Of the five factors that make up Cognitive Intelligence, he shows high levels in all of them. †¢Experienced in retail industry. Gathered information about JCP before acting †¢Creativity was shown through in range of cultural change initiatives †¢Recognised when people are engaged with work they relate better to customers †¢Showed farsightedness through the â€Å"Long Term Plan† Putting 164 hrs into Retail Academy showed openness Ullman has proven that he is Strategic Leader as shown by Daft (2005, Pg 510-53). †¢His Mission was simple and it was to take the company to the Industry Leadership Level. This gave the organisation something to aim at for the future, established a standard of excellence and it reflected high ideals. †¢The Mission is in the form of the â€Å"Long Term Plan†. It defines the JCP’s character, core values, remains mostly constant over a five year period and provides a basis for creating the Mission. The strategy formulation is the cultural change initiatives that were required to build a customer focused culture. It was unfortunate that Castagna resigned from her position as the COO only some months after Ullman began in his role, as together, when considering their abilities, they would have made a very good team. However in light of the leadership skills and abilities that Ullman brought to JCP, it was a gamble that was worth the risk that the board took. Stone (2005, pg 192) lists the following advantages and disadvantages of promoting from within or outside an organisation: From OutsideAdvantages †¢Pool of Talent is bigger †¢New insights, skills and know-how can be introduced into the organisation †¢It is sometimes cheaper and easier hire employees †¢Outside employees are not members of existing cliques Disadvantages †¢Attracting and selecting new employees is more difficult †¢New employee adjustment and orientation takes longer †¢Morale may suffer among existing employees who have been passed over †¢Incumbent’s performance or personality is below what was expected or is acceptable From WithinAdvantages †¢Have knowledge of candidate’s strengths and weaknesses †¢Candidate already knows the organisation †¢Employee morale and motivation are enhanced †¢Return on investment in training and development is enhanced †¢Can generate a succession of promotions †¢Organisation needs to hire only entry level candidates Disadvantages †¢Employees may promoted beyond their level of competence †¢Employee infighting for promotions can affect morale †¢Inbreeding can stifle creativity and innovation †¢System can become bureaucratic Excellent training and development programs become necessary One would only image the impact on morale when the head on an organisation was sourced from outside the group and then to find the COO, whom it was widely expected to have taken on this role, to offer her resignation and leave. The mood at JCP which was quite high because of the recent turn aroun d in financial fortunes would dissipated very quickly. However the low morale that had resulted would have turned around once the cultural initiatives that were implemented started showing positive effects. Some analysts consider that culture change is driven from the top, whereas, others say that it is the system that drives change, not top management. Give your comments with reasons. DuBrin, Dalglish and Miller (2006, Pg. 429-30) define organisational culture, in three components: †¢The Artefact Level This includes the physical layout of the premises, the terminology, the signs, rituals and stories of the organisation. In the case of JC Penney, this would include such things as the expectation to always dress formally, the ban on decorating and personalising cubicles and the addressing of managers in a formal manner. The Value Level This is the individual’s sense of what ought to be, as distinct from what is. These are statements made about the organisation, what it does, and how it does it, which reflect the culture. The Penney Idea is an example of this, the document espousing values such as being agreeable, moral leadership, thriftiness and the need for employees to conduct themselves in a particular way both on the job and at home. †¢The Underlying Set of Assumptions These assumptions develop when values become so entrenched they are taken f or granted and are assumed to be unchangeable. After being in existence for over one hundred years JCP had entrenched values that would take concerted efforts to change. DuBrin, Dalglish and Miller (2006, Pg. 430) also identify four ways in which the organisational culture can be influenced: †¢The beliefs and values of the organisations founder. James C Penney bought his first shop in 1902, was the CEO until 1917 and remained as the Chairman of the Board until 1946 and after that as the Honorary Chairman until his death in 1971, Wikipedia. com viewed 9th September 2007.With this long connection and the organisation bearing his name it is easy to understand why the organisational culture had not changed and was one that reflected his ideals and that of a bygone era. †¢The social norms of the country in which the organisation first developed. According to the Annual Report 2006, Pg. 9, JCP has 1,026 stores in the USA and a further 7 stores in Puerto Rico. The South American influence can be seen in lines of clothing developed that are specifically aimed at the Hispanic population. Requirement to adapt to external pressures and the need to survive. In the case of JCP, changes in the culture began to come about from the near financial collapse in the late 1990s and the plummeting value of its shares on the stock market as can be seen on Diagram 1. It was first essential that the organisations procedures where brought up to industry standards. This was done by Questrom and Castagna and later in order to make JCP to an industry leader Ullman and team brought about significant changes in an attempt to completely revamp the culture. Internal Integration and problems with it. In 1922, the President of JCP Earl C. Sams was apparently critical of the informality of staff calling each other by their first names as he believed that it did not show enough dignity and respect. Although nothing was conveyed to the employees of JCP, they began the formal tradition of addressing each other by their surnames. Limerick and Cunnington (1993, Pg. 184) also states that, â€Å"We also do not assume that the founder or the CEO of an organisation has the unilateral control over culture.On the contrary, a host of individuals and interest groups are normally trying to shape the culture according to their vision or interests. But we do assert that CEOs in general, and founders in particular, form a very powerful, if not dominant, influence on corporate culture. † It can be seen James Penney had left a long lasting influence over the culture of the organisation, with his death in 1971, there was the opportunity for the CEO to change the culture, providing it was done in a careful and considerate manner in order for it to be taken seriously and not o offend employees. When Myron Ullman was appointed chairman and CEO, rather than make large encompassing changes he listened to employees, gathered ideas and spoke to other people who had been through the same process, and little by little he started making changes that had positive effects to the culture. The effect of these changes filtered through to the value placed on the company by the share market (which can be seen in Diagram 1), with shares rising from $40 per share at the time he took over as CEO to about $65 per share as 9th September 2007. Wha t are the lessons to be learned from the JC Penney culture change initiatives? What do you see as the key components in its having achieved it goals, at least in the near term? How can JC Penney keep the momentum of change rolling in its favour in the future? When Myron Ullman first joined JC Penney he wanted to create a customer focused culture and in trying to do so he came across significant opposition due to the ingrained culture that was very formal and rigid going back over one hundred years.Once having assessed JCP’s culture and being mindful on how it prided itself on its corporate tradition, Ullman set about making symbolic changes: He also started in-house training programs, which were not the norm in the retail industry due to the high turnover rates. The argument was that if training was provided employees would be more willing to invest their careers with JCP and as a result it would be a cure to the retention problem of high staff turnover. The programs were: †¢The Retail Program, which was like an intense graduate school on retail, strategy and team development for their managers.In these training groups it was reinforced that the members were the future of the organisation and it was also believed that the well trained managers helped train their subordinates. †¢The graduates of these programs would in turn take courses titles â€Å"Leading a Store† Another type of initiative that was introduced by Ullman was the repositioning of its brand, the first in its 105 year history, with the slogan â€Å"Every Day Matters† with all its employees trained in the new initiatives.The lessons learned from the culture change initiatives were, that although resistance by employees was met, if management were committed to and persisted with meaningful changes over the long term the culture can change and employees will become more positive in regard to positions which in turn should flow through to customers. The positive results to the initiatives can be seen in: †¢The second survey of employees which showed an increase job satisfaction from 67 per cent in 2005 up to 73 per cent in 2006. The increased ability to attract graduates from the best professional retail schools. The bottom line increased with Operating Profit going from $1,275mill in 2004 to $1,631mill in 2005 up to $1,922mill in 2006, Annual Report (2006, Pg 20). The key components in JCP having achieved its goal to date, has been having an effective leader and team who have: †¢Been patient so as to ensure that they listen, learn and understand the problems and issues that the organisation faces. To surround themselves with capable and trustworthy people who are able to perform their roles to the level that is required †¢While keeping a focus on what is trying to be achieved, making small but significant changes within the working environment to ensure improvement in job satisfaction. †¢Ensuring employees are equipped to perform their roles eg ongoing training. Daft (2005, Pg 564-69) gives a number techniques to maintain a healthy culture that could be used to maintain the momentum of change.They are: †¢Ceremonies, they are special events which are for the benefit of an audience, they reinforce specific values, create bonds and celebrate achievements. Eg. Celebrate certain milestones or achieving targets. †¢Stories which are repeated frequently and shared amongst employees, they can illustrate and reinforce important cultural values. The story can be factual or fictional and relate to JCP’s motto â€Å"Every Day Matters† †¢Symbols, can be an object, act, or event and convey cultural values. An example of this is the replacement of art with photos of employees and pictures of certain organisational sites on the corporate office walls. Specialised Language. The use of slogans or sayings can express key corporate values such as the â€Å"Every Day Matters† slogan. †¢Selection and Socialisation. Ensuring the right people are hired is essential then they must be socialised by instilling good values, high self esteem and confidence. †¢Daily Action. Leaders must signal and support important cultural values through daily actions. Employees learn what is valued most in a company by watching what attitudes and behaviours leaders pay attention to and reward, how they act in organisational crises and how their own behaviour match the companies values.