Courage with Evidence

Courage is an intriguing characteristic commonly identified with successful leaders. According to Random House Webster's dictionary, courage is defined as "the quality of mind or spirit that enables a person to face difficulty, danger, pain, etc. without fear...[and] to act in accordance with one's beliefs...in spite of criticism.” As stated in a previous publication, change or the deliberate movement of the organization from its current state to some future alternative situation is a fundamental responsibility of those who are leading.

Therefore, change is an act of courage. It is having faith that the future envisioned position is where the business needs to be in order to grow, develop, sustain and survive. When I scan the business press, I see many acts of courage. Of course we all know about the more famous leaders like Bill Gates who left college to pursue what he believed would be the future in technology (of course, he was right!), and for sure there are many who are not as well known.

Leaders who take bold new steps are fascinating studies. Ron Johnson, who took over as CEO of JCPenney (JCP) in November 2011, exemplifies courage. Mr. Johnson came from Apple, and it is probably not so coincidental that soon after his arrival, he altered JCP's strategy with a somewhat Appleish direction. The changeover included a significant makeover of the stores, replacement of coupons with “everyday low prices” and an apparent refocus toward a new customer demographic. His vision also included a new shopping experience akin to a social environment; people can visit JCP stores for more than just the purchase of goods. Customers have not reacted well; if this were a vote, they have voted “no” with their feet. That is, store traffic is down and the new pricing strategy has confused customers rather than helped; revenues have plummeted. There are some bits of good news; while traffic is down, the remodeled stores’ revenues per square foot has increased.¹ Reports also suggest that competitors are paying attention (e.g. Macy's), which could signal the merits of the strategy.

Nevertheless, sales results tumbled in the first three quarters of 2012 (beginning 2-1-12) and year-end results are expected to continue the trend.¹ Further, 52 weeks ago the stock price was trading at $43.18 per share and now is at $18.15 (1-15 price at around 10:59 AM eastern time), up from its recent low of $15.69. Those watching the situation are questioning Johnson's sanity asking, "Doesn't he realize this is not Apple?" Some have suggested that JCPenney could fail during the 2013-2014 fiscal year.⁴

From a leadership perspective, one asks if Johnson is being courageous or just plain stubborn. It does not take a skilled strategist to realize what JCP’s competitors would do when they eliminated coupons overnight; a competitive countermeasure would be an attempt to increase market share by boosting coupon offers. The end result is that JCP has lost customers since this new direction has been implemented.

Some relevant questions that might be asked about what happened:

• Was Johnson so intent on introducing a new strategy that he failed to consider the likely outcomes? There was evidence something needed to happen at JCP, but little evidence exists that they were in a crisis that required instant overnight action. Is this a case of trying to make a splash as a leader rather than taking common sense actions?
  
• The makeover he proposed (100 stores within a store, like Sephora) may work, but why the “knee jerk” to eliminate coupons? Could JCP have started the makeover and gradually weaned customers off of the coupons? They have recently back-pedaled and are once again offering some coupons, but only after customers became confused and sales slowed dramatically. Will the reintroduction of coupons confuse customers more? Did Johnson have evidence that customers would react positively to the shift at the start?
  
• Is it possible that groupthink has consumed the management team and has become so entrenched in the strategy that they can no longer see another path to the final objective?
  

Organizational behaviorists might claim that Johnson and his group were over confident in their outcomes. There is a natural human tendency to take for granted that judgments are correct.² Similarly, Johnson and team may be guilty of "escalation of commitment," which is defined as "an increased commitment to a previous decision in spite of negative information."³

The challenge that Johnson now faces is to determine if he has escalated commitment or if the decision is still on solid ground and worthy of continuation. Perhaps there is some middle strategy that can be adopted. There is some evidence that the strategy is being questioned internally, given that some coupons are now being offered again. However, with an anticipated continuation of criticism up to and including a call for Johnson’s termination, it is probably wise for JCP to revisit the decisions and reorient the strategy if needed.

This brings us back to the idea of courage. Leadership is not about courage and focusing only on beliefs about what is right. Instead, it is about courage with evidence. That is, leaders should move forward with changes only after forming a realistic hypothesis about what is believed to be a suitable direction and then spend time confirming the proposition; up front there should also be some acceptance that a strategy might not work and backup plans readied. Not only should recovery plans be created for the overall plan but also the sub-tasks as well (e.g. elimination of coupons). 

The process of supporting a courageous decision should include protecting against groupthink (e.g. appoint a devil's advocate in the decision-making body) and as much evidence should be gathered to support the direction. It is never possible for decisions to be made under conditions of certainty. However, leaders must endeavor to find supporting evidence before marching forward (e.g. what has happened to other similar department stores that have tried this strategy and what were the results? Why will the results be different here? Is it better to make gradual changes, so as not to confuse customers, or is it best to change all at once like diving off of a cliff?). Uncertainty will always exist. This lack of pinpoint accuracy means that when a strategy is implemented, a revamp of that strategy should always be on the table and any retrenchment, if needed, should be rapid. Johnson has made some movement in this direction but JCP, for the most part, is staying its course; hopefully they have good evidence to remain committed.

Courage is a component of being a leader because the execution of change is part of the job. However, it is not blind courage that is needed. Instead, courage with evidence should be the guiding principle.

Please feel free to make comments.

References

¹ J.C.Penney Bargain or Bust? By Nathaniel Munson from http://seekingalpha.com/article/1110471-j-c-penney-bargain-or-bust. Retrieved 1-14-2013 from Google Alerts.

² Robbins, S., & Judge, T. (2011). Organizational Behavior (14th ed.). Upper Saddle River, NJ: Pearson Education.

³ Robbins, S., & Judge, T. (2011), page 181. Organizational Behavior (14th ed.). Upper Saddle River, NJ: Pearson Education.

⁴ Reported by Small Business Trends. Retrieved from smallbix.trends.com/2013/01/experts-debate-whether-j-c-penney-sears-will-survive.html on 1-17-2013.