When Should a Leader Pass Blame?

When Should a Leader Pass Blame? A leader is the “captain of the ship.” He is responsible for his organization’s every outcome—good or bad. He is wholly accountable for everything that happens under his authority.

If there is a problem caused by his mistakes or errors within his organization, a leader should not shirk responsibility. He should not abandon his team if things go wrong, nor should he pass the blame or use an employee as a scapegoat.

However, a leader cannot see and touch all his people, especially if his organization is large. He cannot be personally responsible for a rogue employee who steals information, misuses funds, or engages in unethical behavior. In such circumstances, the leader may pass blame.

Although a leader cannot police every action taken by every employee, the leader should be held accountable for not instituting and overseeing a rigorous control system to prevent problems, deter unethical actions, and to identify employees that engage in such behavior.

A leader also sets the tone for all his employees—not only in terms of goals and priorities but also in terms of proper organizational behavior. A legendary case in point are the ethical rules that investor Warren Buffett set in his company after the 1991 bond-rigging scandal at Salomon Brothers: “I want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper, to be read by their spouses, children, and friends, with the reporting done by an informed and critical reporter. If they follow this test, they need not fear my other message to them: Lose money for the firm, and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.” Even now, Buffett includes this statement in his biannual letters to his managers and displays a video of this speech at every Berkshire Hathaway annual meeting.

How to Get Good Advice and Use It Effectively [What I’ve Been Reading]

How to Get Good Advice and Use It Effectively

Learning How to Take Advice Is Critical

To be effective in your job and personal life, you must be willing to identify your blind spots and recognize when and how to ask for advice. You must seek and implement useful insights from the right people and overcome any immediate defensiveness about your attitudes and behaviors.

Proverbs 15:22 suggests, “Plans fail for lack of counsel, but with many advisers they succeed.” Effective advisers can bridge the gap between your vision of what you want to achieve and implementation of that vision.

'Taking Advice' by Dan Ciampa (ISBN 1591396689) There is extensive literature which offers guidance on giving advice (I particularly recommend Gerald M. Weinberg’s The Secrets of Consulting) and being an effective mentor. However, few resources address the equally important topic of using advisers wisely—particularly about when to solicit advice, how to seek trusted advisers, and how to best act upon their advice. Dan Ciampa’s excellent book Taking Advice fills this void.

“How Leaders Get Good Counsel and Use It Wisely”

Drawing from his vast experience as a leadership consultant, Ciampa provides a comprehensive framework for getting and using advice in Taking Advice. He identifies four elements of work and life where you’ll need advice:

  • strategic aspects
  • operational aspects
  • political aspects
  • personal aspects

Taking Advice’s most instructive element is the framework it provides for thinking through the kind of advice network you may need. Ciampa suggests that you deliberately build a “balanced advice network” which includes a mix of advisers from whom to seek the most effective advice. He identifies four types of advisers and details their specific roles and purposes:

  • the subject-matter experts who can offer you deep specialized/circumstantial knowledge
  • the experienced advisers who’ve previously faced similar circumstances or have been in similar positions
  • the partners who could engage in working relationships and operate up close or hash out ideas in greater detail for a longer duration
  • the sounding boards who proffer a ‘safe harbor’ where you can freely express your mind, discuss your insecurities, seek advice on personal challenges—all while feeling assured that they’ll honor confidentiality and ensure that your discussions remain private.

Providing practical examples, Ciampa describes three considerations for selecting the right advisers and forming strong relationships with them:

  • content: the adviser must possess the kind of expertise you’re looking for
  • competence: the adviser must have direct experience in your context
  • chemistry: the adviser must be compatible or sympathetic with the style and substance of your goals, targets, and mindsets

To derive the most help from advisers, Ciampa recommends techniques for productive advise-seeking:

  • Listen, understand, and accept feedback without becoming defensive
  • Seek advice as quickly as possible when facing challenges
  • Anticipate roadblocks and involve advisers in planning for contingencies
  • Avoid “yes-men” for advisers; do not bar opinions which may clash with or defy your own

Idea for Impact: Become a Good Advice-Seeker

Ciampa draws heavily from his leadership consulting experience and provides case studies of a few large companies’ senior leaders who, by virtue of their position, often feel insulated and isolated at the top. Nevertheless, his examples will benefit anyone seeking advice.

Recommendation: Read. Taking Advice offers important insights into a seemingly obvious dimension of leadership success, but one that’s often neglected, poorly understood, or taken for granted.

The comprehensive and practical framework discussed in Taking Advice will help you find the right kind of help from within and beyond your organization, get the most from your advisers, and deal effectively with emergent situations in your life and at work.

Don’t Reward A While Hoping for B

Effective Award Systems

We do what we are rewarded for doing. We are strongly motivated by the desire to maximize the positive consequences of our actions and minimize the negative consequences. Academics identify these aspects of behavioral psychology using the monikers “expectancy theory” and “operant conditioning.”

Flawed Reward Systems

Reward systems ought to commend positive behavior and punish negative behavior. But many organizations tend to reward one type of behavior when they really call or hope for another type of behavior. For instance,

  • A manager who wants his sales force to create long-term customer relationships mustn’t reward salespeople for new business from new customers, but for retaining customers and expanding sales to them.
  • A project manager focused on work quality shouldn’t reward a team for completing a project on time.
  • At institutions of higher learning, especially at prestigious universities, a professor’s primary responsibilities ought to be teaching and advising students. However, the academic rewards systems assert that the primary ways to achieve promotion and tenure are through successful research and publishing. Hence, given the constraints of time, a professor is likely to dedicate more time to research at the expense of quality teaching. Alas, mediocre teaching isn’t censured.
  • As I described in my article on “The Duplicity of Corporate Diversity Initiatives,” managers who extol the virtues of “valuing differences” stifle individuality and actively mold their employees to conform to the workplace’s existing culture and comply with the existing ways of doing things. Compliant, acquiescent employees who look the part are promoted over exceptional, questioning employees who bring truly different perspectives to the table.

“On the folly of rewarding A, while hoping for B”

In 1975, Prof. Steven Kerr wrote a famous article titled, “On the folly of rewarding A, while hoping for B” that’s become a management classic. Over the decades, this article has been widely admired for its relevance and insight. The article (the 1975 original is here and the 1995 update is here) provides many excellent examples of situations where the reward structure subtly (or sometimes blatantly) undermines the goal. The abstract reads,

Whether dealing with monkeys, rats, or human beings, it is hardly controversial to state that most organisms seek information concerning what activities are rewarded, and then seek to do (or at least pretend to do) those things, often to the virtual exclusion of activities not rewarded. The extent to which this occurs of course will depend on the perceived attractiveness of the rewards offered, but neither operant nor expectancy theorists would quarrel with the essence of this notion.

Nevertheless, numerous examples exist of reward systems that are fouled up in that the types of behavior rewarded are those which the rewarder is trying to discourage, while the behavior desired is not being rewarded at all.

Idea for Impact: “Put Your Money Where Your Mouth Is”

Aligning Reward Systems If you see behavior in your organization that doesn’t seem right or doesn’t make sense, ask what the underlying reward system is encouraging. Chances are that the offending behavior makes sense to the individual doing it because of inefficiencies in your reward system.

Take stock of your reward systems. Effective systems should induce employees to pursue organizational goals by appealing to employees’ conviction (or intrinsic motivations) that they will personally benefit by doing so. To inspire employees, translate levers of extrinsic motivation at your disposal to intrinsic motivation as I elaborated in my previous article.

Idea for Impact: Make sure that you understand and clearly communicate expectations, and reward what you really want your employees to achieve. Don’t encourage a particular behavior while promoting an undesirable one through your rewards and praises.

Lessons from Dwight Eisenhower: Authentic Leaders Demonstrate Accountability

In a previous article about how you can control just your efforts and not the outcomes of those efforts, I detailed Dwight Eisenhower’s weather-induced dilemma on the eve of the Allied invasion of Normandy in June 1944.

The Success of the Normandy Invasion Was Not Entirely in Eisenhower’s Control

Despite a year of intense planning and preparation under Eisenhower’s leadership, the Allied invasion’s success ultimately depended on the weather across the English Channel. Their landings hinged on suitable weather—something entirely beyond their control.

General Eisenhower addressing American paratroopers on 5-June-1944 before the Battle of Normandy.

Eisenhower tentatively planned to send his troops across the English Channel on 5-June. On 4-June, however, the troops predicted cloudy skies, rain, and heavy seas that threatened the invasion. Although the following day’s weather was not necessarily ideal, it was comparatively more suitable than the 5-June, so Eisenhower postponed the invasion by a day. If he did not invade on 6-June, the tides would not favor an invasion for another two weeks, which would possibly give the Germans enough time to get wind of the Allies’ plan.

Early in the morning of 5-June, Eisenhower gathered his advisers’ and military officers’ opinions on whether to launch the attack despite the less-than-suitable weather. He sat quietly in deep contemplation. One of his advisers later recalled, “I never realized before, the loneliness and isolation of a commander at a time when such a momentous decision has to be taken, with full knowledge that failure or success rests on his judgment alone.”

After five minutes, Eisenhower gazed at his advisers and said, “Well, we’ll go!”

With those words, Eisenhower launched the D-Day invasion of Europe on 6-June. After issuing those marching orders, events passed from Eisenhower’s control. He then realized that the invasion’s success was no longer in his hands. Its outcome depended on 160,000 allied troops, thousands of commanders, and hundreds of lieutenants. Eisenhower had done everything in his power to coordinate their efforts and create conditions conducive to the mission’s success. After issuing his orders, all he could do was let those conditions come to fruition on their own terms. After all his efforts, he could not control the outcomes—he let go of the outcomes.

An Authentic Leader in Action: Eisenhower’s Character, Responsibility, & Accountability

That evening, on his way to visit American and British paratroopers (pictured above) who were headed into battle that night, Eisenhower told his driver, “I hope to God I’m right.”

Just before he went to bed at night, Eisenhower scribbled a note and tucked it into his wallet. He thought he would use this letter if the invasion went wrong. (Eisenhower mistakenly dated the note July 5 instead of June 5.)

Our landings in the Cherbourg-Havre area have failed to gain a satisfactory foothold and I have withdrawn the troops. My decision to attack at this time and place was based upon the best information available. The troops, the air and the Navy did all that bravery and devotion to duty could do. If any blame or fault attaches to the attempt it is mine alone.

Dwight Eisenhower's note to use if the Normandy Invasion went wrong, 5-June-1945

Observe that Eisenhower crossed out “This particular operation” and wrote “My decision to attack.” This demonstrates Eisenhower’s assertive and responsible leadership in action. He wrote, “any blame or fault … is mine alone” and underscored the phrase “mine alone.” He did not use passive language or try to camouflage failure with phrases like, “as fate would have had it,” “unaccommodating weather,” “forecast not met,” “mistakes were made,” or “we tried really hard, but ….”

Eisenhower was an authentic leader in action—a leader who was ready and willing to accept unshrinking responsibility for his actions and their results.

Eisenhower won his wager with the weather. The invasion of Normandy was successful and proved to be a turning point in World War II. Eisenhower never used the note he had prepared on the eve of the attack. It is now on display at Dwight D. Eisenhower Library and Museum in Abilene, Kansas.

Authentic Leaders Demonstrate Accountability

As exemplified by Dwight Eisenhower’s leadership as the Supreme Allied Commander during World War II, authentic leaders recognize the accountability that comes with their roles. They accept absolute responsibility for the expected outcomes—both good and bad—no matter what the situation is. They don’t blame unfavorable circumstances, the external environment, employees, superiors, customers, or anybody else.

Ten Rules of Management Success from Sam Walton

Sam Walton (1918–1992,) the iconic founder of Walmart and Sam’s Club, was arguably the most successful entrepreneur of his generation. He was passionate about retailing, loved his work, and built and ran Walmart with boundless energy.

'Sam Walton: Made In America' by Sam Walton (ISBN 0553562835) “Made in America” is Walton’s very educational, insightful, and stimulating autobiography. It’s teeming with Walton’s relentless search for better ideas, learning from competitors, managing costs and prices to gain competitive advantage, asking incessant questions of day-to-day operations, listening to employees at all levels of Walmart, and inventing creative ways to foster an idea-driven culture. “Made in America” is also filled with anecdotes from Walton’s associates and family members—in fact, some of their opinions are less than flattering.

Former CEO of General Electric Jack Welch once said, “Walton understood people the way Thomas Edison understood innovation and Henry Ford, production. He brought out the very best in his employees, gave his very best to his customers, and taught something of value to everyone he touched.”

Here are ten insightful management ideas from “Made in America” with the relevant anecdotes from Walton or his associates.

  1. When hiring employees, look for passion and desire to grow. Having the right skills and qualifications is no doubt essential in a potential employee, but a better predictor of long-term success and career advancement is his/her passion for learning new things, commitment to a task, and a drive to get things done. A former Walmart executive recalls, “Sam would take people with hardly any retail experience, give them six months with us, and if he thought they showed any real potential to merchandise a store and manage people, he’d give them a chance. He’d make them an assistant manager. They were the ones who would go around and open all the new stores and they would be next in line to manage their own store. In my opinion, most of them weren’t anywhere near ready to run stores, but Sam proved me wrong there. He finally convinced me. If you take someone who lacks the experience and the know-how but has the real desire and the willingness to work his tail off to get the job done, he’ll make up for what he lacks.”
  2. Delegate and follow up. Delegation is indispensable; yet it remains one of the most underutilized and underdeveloped managerial skills. One element of effective delegation is consistent follow-up. Far too often, managers will delegate a task and then fail to follow up to see how things are going. Such failure to follow-up is tantamount to abdication of accountability for results, which still lies with the manager. Former Walmart CEO David Glass recalls, “As famous as Sam is for being a great motivator … he is equally good at checking on the people he has motivated. You might call his style: management by looking over your shoulder.”

Management Ideas from Sam Walton

  1. Persist and rally people to the cause. Passionate managers demonstrate the energy and drive needed to rally their teams around a shared vision. They engage their employees with the same messages over and over, escalate their sense of urgency, and get their vision implemented quickly. Former Walmart CEO David Glass recalls, “When Sam feels a certain way, he is relentless. He will just wear you out. He will bring up an idea, we’ll all discuss it and then decide maybe that it’s not something we should be doing right now—or ever. Fine. Case closed. But as long as he is convinced that it is the right thing, it just keeps coming up—week after week after week—until finally everybody capitulates and says, well, it’s easier to do it than to keep fighting this fight. I guess it could be called management by wearing you down.”
  2. Mentor, critique, and inspire employees. Mentoring employees is an effective way to improve employee performance and build trust and loyalty. Effective mentoring is not merely telling employees what to do. It is helping them broaden and deepen their thinking by clarifying their goals and asking the right questions. Effective mentoring is also about supporting employees as they learn and practice new skills and habits. Walton writes, “I’ve been asked if I was a hands-on manager or an arm’s-length type. I think really I’m more of a manager by walking and flying around, and in the process I stick my fingers into everything I can to see how it’s coming along. I’ve let our executives make their decisions—and their mistakes—but I’ve critiqued and advised them.”
  3. Invest in frontline employees for better customer relationships. Much of customers’ opinions about a business come from the myriad interactions they have with customer-interfacing frontline employees, who are the face of any business. If a business doesn’t get these customer experiences right, nothing else matters. Walton writes, “The way management treats the associates is exactly how the associates will then treat the customers. And if the associates treat the customers well, the customers will return again and again, and that is where the real profit in this business lies, not in trying to drag strangers into your stores for one-time purchases based on splashy sales or expensive advertising. Satisfied, loyal, repeat customers … are loyal to us because our associates treat them better than salespeople in other stores do. So, in the whole Wal-Mart scheme of things, the most important contact ever made is between the associate in the store and the customer.”
  4. Treat employees like business partners and empower them by sharing information. Effective managers foster open communication by treating employees as co-owners of the business and sharing operational data regularly. Managers empower employees by helping them understand how their contribution makes a difference, discussing opportunities and challenges, and encouraging them to contribute to solutions. Walton writes, “Our very unusual willingness to share most of the numbers of our business with all the associates … It’s the only way they can possibly do their jobs to the best of their abilities—to know what’s going on in their business. … Sharing information and responsibility is a key to any partnership. It makes people feel responsible and involved …. In our individual stores, we show them their store’s profits, their store’s purchases, their store’s sales, and their store’s markdowns.
  5. Never be satisfied. There’s always room for improvement. Effective managers never rest on their laurels and are persistently dissatisfied with the status quo. They possess a pervasive obsession for discovering problems and improving products, services, and people. Home Depot founder Bernard Marcus recalls, “If you ask Sam how’s business, he’s never satisfied. He says, ‘Bernie, things are really lousy. Our lines are too long at the cash registers. Our people aren’t being helpful enough. I don’t know what we’re gonna do to get them motivated.’ Then you ask some of these CEOs from other retail organizations who you know are on the verge of going out of business, and they brag and tell you how great everything is. Really putting on airs. Not Sam. He is down to earth and knows who he is.”

Insightful Management Ideas from Sam Walton

  1. Appreciate employees and give honest feedback. A key determinant of employee engagement is whether employees feel their managers genuinely care. Do the managers provide regular, direct feedback, both appreciative and corrective? Do they coach employees in their learning and career growth? Walton writes, “Keeping so many people motivated to do the best job possible involves … appreciation. All of us like praise. So what we try to practice in our company is to look for things to praise. … We want to let our folks know when they are doing something outstanding, and let them know they are important to us. You can’t praise something that’s not done well. You can’t be insincere. You have to follow up on things that aren’t done well. There is no substitute for being honest with someone and letting them know they didn’t do a good job. All of us profit from being corrected—if we’re corrected in a positive way.”
  2. Listening to employee’s complaints and concerns could be a positive force for change. Effective managers provide their employees the opportunity to not only contribute their ideas, but also air concerns and complaints. By fostering an environment of open communication, managers who handle employee opinions effectively not only boost employee motivation, performance, and morale, but also benefit from learning directly about problems with teams, organizations, and businesses. Walton writes, “Executives who hold themselves aloof from their associates, who won’t listen to their associates when they have a problem, can never be true partners with them. … Folks who stand on their feet all day stocking shelves or pushing carts of merchandise out of the back room get exhausted and frustrated too, and occasionally they dwell on problems that they just can’t let go of until they’ve shared it with somebody who they feel is in a position to find a solution. … We have really tried to maintain an open-door policy at Wal-Mart. … If the associate happens to be right, it’s important to overrule their manager, or whoever they’re having the problem … . The associates would know pretty soon that it was just something we paid lip service to, but didn’t really believe.”
  3. Learn from the competition. Effective managers understand that keeping tabs on competitors, copying their innovations as much as possible, and reaching out to customers the way competitors do is a great strategy for growing business. Sam Walton’s brother Bud recalls, “There may not be anything (Walton) enjoys more than going into a competitor’s store trying to learn something from it.” A former K-Mart board member recalls, “(Walton) had adopted almost all of the original Kmart ideas. I always had great admiration for the way he implemented—and later enlarged those ideas. Much later on, when I was retired still a K-Mart board member, I tried to advise (K-Mart) management of just what a serious threat I thought he was. But it wasn’t until recently that they took him seriously.”

How to Make Wise People Decisions

How to Make Wise People Decisions

Here are eight basic management principles for making wise people decisions:

  1. Pay attention to your people decisions. These are the decisions that determine your team/organization’s performance. Hiring and coaching employees is a manager’s most important task.
  2. For any assignment, pick people who’ve shown at least some evidence of the ability to do it well. Don’t expect them to be productive in their new role within days or weeks.
  3. Do not give new people major assignments. First, put them into positions where expectations are known and help is available. Help them make the transition.
  4. Set the right expectations. A manager can forestall a great deal of employee problems by proactively setting expectations.
  5. Don’t ignore concerns until they morph into problems. Conflict can be emotionally distressing, but being decisive and doing what’s best eventually works out well for everyone.
  6. If an employee is doing poorly, first attempt remediation and coaching. If those don’t solve his/her underperformance, it’s usually prudent to cut your losses. Giving the employee more time to improve not only wastes time and energy, but increases the mutual hostility and chances of a claim of wrongful termination.
  7. Take responsibility for mistakes. Don’t blame the person you hire or promote for not performing. Your decision put them there.
  8. Take your managerial duties seriously. It’s your obligation to make sure that responsible people in your organization perform. In turn, they have a right to expect you to be a competent manager.

Effective Goals Can Challenge, Motivate, and Energize

One of my blog readers asked me to write more about goal-setting and performance against goals. In response, I studied the work of University of Maryland’s Edwin Locke and University of Toronto’s Gary Latham, two renowned researchers on goal-setting. Here is a summary.

Effective Goals Can Challenge, Motivate, and Energize

Goals Impact Performance in Several Ways

  • Goals can help direct: A person’s goals should direct his/her attention, effort, and action toward goal-relevant actions at the expense of less-relevant actions.
  • Goals can help motivate: A person’s goals can motivate him/her to pursue specific outcomes. The person can be motivated only when his/her goals are sufficiently challenging and can nudge him/her to put in special efforts.
  • Goals can help persist: A person is likely to persist at his/her efforts when his/her goal is worthy enough to attain.
  • Goals can trigger learning: Goals can either activate a person’s knowledge and skills that are relevant to performance or induce the person to acquire such knowledge or skills.

Best Practices for Goal-Setting and Performance

  • Specific, difficult, but attainable goals lead to better performance than easy, vague, or abstract goals such as the general-purpose exhortation to “do your best.” Hard goals motivate because they require a person to achieve more in order to be content with his/her own performance.
  • 'Goals' by Brian Tracy (ISBN 1605094110) Goal specificity and performance share a positive, linear relationship. When a person’s goals are specific, they direct and energize his/her behavior far more effectively than when they are vague and unspecific.
  • Performance is directly proportional to the difficulty of a goal as long as a person is committed to the goal, has the requisite ability and resources to achieve the goal, and does not have conflicting goals.
  • Taking on excess work without access to the necessary resources to realize the goals (“overload”) can moderate the effects of goals.
  • A team performs best when the goals of the individuals on the team are compatible with the team’s goal. Therefore, when an individual’s goals are incompatible with his team’s, his/her contribution to the team will be subpar.
  • The goal need not be in focal awareness all the time. Once a goal is accepted and understood, it resides in the periphery of the person’s consciousness and serves to guide and give meaning to his/her actions.
  • While long-term goals are relevant and helpful, most people find short-term goals more effective because they channel a person’s immediate and direct efforts and provide quick feedback. This suggests that it’s best to divide long-term goals into concrete short-term objectives.
  • 'Living in Your Top 1%' by Alissa Finerman (ISBN 1453619232) Self-efficacy plays a key role in the achievement of goals. A person is much more likely to buy into and pursue goals if he/she believes himself/herself to be competent enough to reach those goals. The most effective goals must therefore embrace a person’s strengths—such goals help him/her strive towards success by leveraging the best of who he/she is and what he/she can do.
  • One reason a person may lack self-efficacy is his/her past failures with undertaking similar goals. Such a person may believe that he/she may never reach his/her goals and should first undertake a series of small, near-term goals instead of difficult, distant goals. The person’s success with a series of smaller goals can boost his/her confidence and can inspire him/her to undertake larger goals. For example, a chain-smoker will find the goal of smoking cessation daunting. He should therefore focus on smaller goals like gradually cutting down the number of cigarettes he smokes every day. Experiences of goal achievement can build up momentum to tackle the larger goal.
  • Goals are not effective by themselves. Feedback is the most important moderator of goal-setting because it tracks the progress of performance towards goals and creates new sub-goals. If a person finds his/her progress towards a goal unsatisfactory, the feedback he/she receives can drive corrective efforts to develop new skills or pursue the goal in a new way.

Three Leadership Lessons from Ron Johnson’s Debacle at J.C. Penney

Ron Johnson's Debacle at J.C. Penney

Monday’s dismissal of J.C. Penney CEO Ron Johnson comes as no surprise.

In late 2011, J.C. Penney had hired Ron Johnson from Apple to revive the sagging fortunes of the storied retailer. He was deemed as a retailing genius who had proved himself by creating Target’s hip-yet-inexpensive cachet and then by leading Apple’s highly lucrative retail stores.

During his 17-month tenure, Ron Johnson had poured hundreds of millions into rapidly remaking the retailer. Mostly, his attempt at the high-stakes makeover of J.C. Penney hadn’t worked. Revenue deteriorated sharply, feedback from customers and employees was persistently negative, and the J.C. Penney share price declined by over 50%.

Lesson 1: Don’t disenfranchise your traditional customer base

Over the years, J.C. Penney’s economic moat had declined considerably. J.C. Penney lost customers to higher-end retailers and specialty stores who had started to offer better value at lower prices. At the other end, Wal-Mart and Target wooed price-sensitive customers with better-than-basic goods.

When retailing relatively undifferentiated merchandise, one of the key levers to revenue is discounts and promotions. Like other retailers, J.C. Penney had trained its customers to buy largely when its stores had a sale. Shoppers recognized that J.C. Penney’s tag prices were made-up to be marked down during sales events and were fixated on coupons, discounts, and promotions. Shoppers had come to regard of shopping at J.C. Penney as a treasure hunt for significantly marked-down merchandise.

Discounts and Promotions at J.C Penney

Within weeks of joining J.C. Penney, Ron Johnson observed that three-quarters of everything sold had been discounted by at least 50% from list price. Instead of marking up the tag prices and then using deep discount sales to attract customers, he initiated a new “fair and square every day” pricing strategy. By offering good prices every day he attempted to change customer bahavior and dissuade them from waiting for markdowns. Further, by minimizing sales, promotions, and coupons, Ron Johnson eliminated the thrill of pursuing markdowns, a key characteristic of J.C. Penney’s conventional customer. When the pricing strategy flopped, Ron Johnson reinstated sales and coupons, and even brought back “fake prices.” The successive changes confused employees and customers. Additionally, J.C. Penney stopped carrying some traditional brands that many of its long-time customers had favored and injected trendy brands to appeal to younger customers. Ron Johnson’s team created exciting marketing and advertising that was seen as too edgy and further confused traditional customers.

Lesson 2: Don’t be so hubristic as to wager big on hunches without prototyping

At Apple, Steve Jobs frequently shunned extensive consumer research because he had the exceptional genius to introduce the right products, with the right features, at the right time. Drawing from his success at the helm of Apple stores, Ron Johnson was perhaps overconfident that he had all the right answers and could therefore forego the crucial feedback from employees and customers before embarking to “revolutionize retailing” by “teaching people how to shop on their terms” and “fundamentally disrupting the traditional retailing paradigm.”

The gravest error Ron Johnson made at J.C. Penney was not testing his new pricing strategy in a handful of stores. According to this WSJ article, when a colleague proposed a limited store-test of the new pricing strategy, Johnson allegedly responded, “We didn’t test at Apple.”

Ron Johnson's Debacle at J.C. Penney Clearly, what Ron Johnson thought of value was not what its customers saw as value. As a result, J.C. Penney overlooked the reality that, for its customers, pursuing discounted goods on sale was part of the fun of shopping at J.C. Penney. Ron Johnson set about to tear down an old business model before he had switched over to a new business model without prototyping.

Ron Johnson possibly had a compelling out-of-the-box vision for J.C. Penney. However, he did not stay closely connected to J.C. Penney’s customers and employees before the launch of a radical strategic change. It is challenging to be an effective leader when customers and employees don’t understand and buy major changes.

Incremental improvements to J.C. Penney’s merchandising strategy through extensive prototyping and measured makeover could have provided the opportunity to learn through trialing and encouraged ownership of the strategy by employees, especially those in customer-facing roles.

Lesson 3: Beware of the “Halo Bias” in rating leaders

Halo Bias We tend to attribute a manager/leader’s success to his apparent genius and we overlook the role of the context (team, product, industry, timing, and luck) in his success. Thus, we come to expect him to have the same success in a different context. We anticipate that the very tactics and devices that proved successful in the past would work for him in the new context. (See my earlier article on the halo and horns biases in rating people.)

Ron Johnson certainly proved his retailing genius by first creating Target’s hip-yet-inexpensive brand image and then, for ten years, by leading Apple’s highly lucrative retail stores where he most famously introduced the Genius Bar concept. Nevertheless, his experience with selling premium-priced products at full price all the time with no promotions at the Apple stores did not translate well to J.C. Penney’s undifferentiated merchandise and its customer base of bargain hunters.

In June 2011, J.C. Penney stock spiked by 17.5% when the company announced Ron Johnson’s appointment as CEO. Wall Street saw in him a proven leader with the silver bullet. Investors got overly optimistic that he would remake the embattled retailer and overlooked the fact that J.C. Penney lacked the brand image of Apple and its most-sought-after products. Alas, J.C. Penney stock slid by over 50% during Ron Johnson’s 17-month tenure. The golden boy of retail never hit his stride.

Leadership: Stay out of the kitchen if you can’t handle the heat

Leadership: Stay out of the kitchen if you can't handle the heat Not everybody is prepared to endure the demanding responsibilities of a leadership role:

  • It’s tough to challenge status quo and to pilot your organization forward into unfamiliar territory
  • It’s tough to be long-term oriented and to propose transformative ideas that may fall eventually short of expectations
  • It’s tough to see around the corner and to rely on gut intuitions to develop an “end state” vision
  • It’s tough to prioritize decisiveness over inclusivity and to take tough—and sometimes unpopular—decisions
  • It’s tough to resist the urge to settle and to avoid letting circumstances define your strategy
  • It’s tough to gain strong credibility and communicate the direction and priorities of your organization
  • It’s tough to face censure and be verbally graceful under fire
  • It’s tough to be decisive, to acknowledge setbacks, and to change course midstream, if required
  • It’s tough to rationalize seemingly irrational actions and to ask for resources
  • It’s tough to be tough-minded without being inflexible or insensitive
  • It’s tough to do the right thing while resisting the temptation to please your constituents
  • It’s tough to say no when you must; it’s tough to say yes when you can’t

If you cannot come to terms with the pressures of a leadership role, perhaps leadership may be the wrong kind of work for you.

It is acceptable to be an individual contributor; although you must still develop your leadership skills to succeed in any role in the modern organization.

The Duplicity of Corporate Diversity Initiatives

Corporate Diversity Initiatives Even after years of diversity initiatives in corporate America, “inclusion” is more about meeting the numbers on gender, race, and other obvious differences, and less about pursuing intellectual, ideological, pedagogical, and stylistic diversity within teams and organizations.

Overall, the workforce diversity initiatives have succeeded in deterring explicit discriminatory behavior and preventing employee lawsuits. However, to make the representation numbers look good, corporate diversity initiatives have largely resulted in exclusionary practices for the preferential hiring and promoting of underrepresented demographic groups, much to the chagrin of those who are more competent, yet arbitrarily overlooked because the latter belong to groups that are numerically “overrepresented”—reverse discrimination, indeed. For fear of reprisal, the shortchanged majority is reluctant to speak out against this veiled unfairness or to call attention to the dichotomy between the ideals and the practice of affirmative action in the workplace.

Even if nearly all corporate mission statements extol the virtues of “valuing differences,” managers stifle individuality down in the trenches. They are less willing to be receptive of distinctive viewpoints and seek to mold their employees to conform to the existing culture of the workplace and to comply with the existing ways of doing things. Compliant, acquiescent employees who look the part are promoted in preference to exceptional, questioning employees who bring truly different perspectives to the table. The nail that sticks its head up indeed gets hammered down.