Next Steps

In last week’s publication, I commented that CEO Ron Johnson’s actions could cost him his position at JCP. Indeed, on Monday, April 8, JCP announced that Johnson was gone and he was being replaced by Mike Ullman, the previous CEO.

I think what surprised me the most about Johnson and his tenure at JCP was his overall attitude about the outcomes of his work. It is known that strategy is about choice¹ and, of all corporate functions, strategy development and execution is not for the faint of heart. Fence sitters rarely win. Johnson was clearly not a fence sitter; he arrived in November 2011 and by February 2012 embarked on a bold new strategy. I discussed in the last publication that significant research should be done before making decisions of this kind; without investigation, risks to business increase. Mr. Johnson's approach seems to have been that what worked at Apple would work at JCP.

Johnson was asked earlier this year by a reporter if he would follow the same path if he was able to start over, and he indicated he would not change anything.² His statements were delivered in the face of evidence that the execution of his strategy had some serious flaws. Many would conclude that overall the approach had merit, but there were components that almost immediately demonstrated a miscalculation, such as the response from customers to no sales and coupons.

Leadership is a complicated enterprise and few leaders have all of the answers. In fact, studies have shown that humility is one of the important characteristics of successful leaders.³ Collins reveals that the combination of "humility [and] will" (p. 22), which he termed Level 5 leadership, can lead to greatness.³ Mr. Johnson seems to have violated a basic premise of good leadership: to view his job as something more than an extension of himself.⁴ One can interpret his actions as though he was so invested in the strategy that it was hard for him to see any areas of error.

In addition to humility, leaders need to understand the importance of effective decision-making processes. I have witnessed leaders use three kinds of decision-making approaches. For example, some leaders believe they must know everything, but there are a few who are more realistic and know they don't have all of the answers. This leader, when faced with a decision, will seek advice and ideas from all constituents. When people are included they are more likely to support any actions implemented. Granted this is more difficult when the organization is in crisis, but as discussed earlier, the crisis Mr. Johnson faced when he started was fantasy compared to the shambles left behind.

A second approach is when the leader tends to believe he or she knows what to do in a decision but has enough humility to understand that it is important to test out what he or she thinks she knows with others. This leader is prepared to make a decision without input but knows that the human mind is flawed in its interpretation of the world and, therefore, seeks alternative views.

The third type of leader truly believes he or she does know what is best – even when faced with contrary evidence – and will forge ahead. There have been examples of leaders being successful when following their own compass, but there also are noted failures. 

I believe that Mr. Johnson came to JCP believing “The Apple” approach to retailing was the right and only way to go (perhaps the board encouraged this) and he forged ahead without adequate evidence that JCP customers would react the same way and, as a result, did not bother testing his concept.

Another characteristic of a successful leader is their willingness to accept that they can make mistakes and should step back and reflect on their actions.⁵ This leader treats daily and ongoing organizational events as learning opportunities. Since leadership is about making change, it requires taking risks; the more risks, the more failures. Failures sometimes take months and years to be apparent but, regardless, the more successful leader is able to consider what went right and wrong and then adjust future practice accordingly.⁵ Mr. Johnson’s commentary suggests that he is unable to see any errors he made. He has some valuable skills (history demonstrates this), but he may have difficulties enacting effective leadership. In other words, organizations need leaders who can learn from their mistakes and not leaders who are stuck in “my way is always best” attitude.

My ongoing research has focused on the relationship between narcissism and leadership. I am fascinated with the draw that followers (and boards) have to narcissistic leaders. It is common for a leader with this trait to be especially attractive to those surrounding him or her.⁶ Mr. Johnson exhibits some signs of this trait. Some characteristics include a steadfast confidence in what they are doing.⁷ Even Mr. Johnson's earlier exhortations that he was going to retrain JCP customers demonstrates a certain grandiosity. Of course I am not referring to the pathological personality disorder but instead to what has been termed  "healthy narcissism." If true, Mr. Johnson is in good company. Trait narcissism is known to be higher among senior executives,⁸ but it becomes a problem when there are no restraints. This means that organizational governance, including board oversight, are keys to preventing problems with afflicted leaders.

In conclusion, this brings me to the board. Why did they seemingly rubber stamp Mr. Johnson’s approach without asking for a test? Were they wowed by his grandiose belief in what he was doing that they did not ask the right questions?  Boards are responsible for restraining the high-flying CEO as a means to protect the business. One of my hypotheses is that to be an effective CEO, a healthy dose of narcissism is necessary (along with all of the other characteristics), but this should never be a blank check.

Please feel free to make comments.

References

¹ Rumelt, R. (2011). Good Strategy/Bad Strategy: The Difference and Why It Matters. New York: Crown Business.

² Lublin, J.S. and Mattioli, D., April 8, 2013. Wall Street Journal, U.S. Edition, on-ine retrieved 4/12/13 at http://online.wsj.com/article/SB10001424127887324504704578411031708241800.html

³ Collins, J. (2001). Good to Great. New York, NY: HarperCollins.

⁴ Erhard, W.H., Jensen, M.C., & Granger, K.L. (2012). Creating Leaders: An Ontological/Phenomenological Model. In S.A. Snook, N. Nohria & R. Khurana (Eds.), The Handbook for Teaching Leadership: Knowing, Doing, Being (pp. 245-262). Los Angeles: Sage.

⁵ Hughes, R.L., Ginnett, R.C., & Curphy, G.J. (2009). Leadership: Enhancing the Lessons of Experience (6th ed.). New York, NY: McGraw Hill Irwin. Refers to the Action-Observation-Reflection model, p. 54.

⁶ Chatterjee, A., & Hambrick, D.C. (2007). It's All About Me: Narcissistic Chief Executive Officers and Their Effects on Company Strategy and Performance. Administrative Science Quarterly, 52, pp. 351-386.

⁷ Campbell, W.K., Goodie, A.S., & Foster, J.D. (2004). Narcissism, confidence, and risk attitude. Journal of Behavioral Decision Making, 17(4), p. 297.

⁸ Arvisais, M.A. (2009). Narcissus in the Workplace: What Organizations Need to Know. Submitted to: Journal of the North American Management Society.