A Stop and Go at J.C. Penney Company

Things haven't been looking so good for J. C Penney Co. and its new CEO, Ron Johnson. Johnson arrived with much acclaim from being the head of Apple's successful retail operations. At Penney's, he immediately began one of retailing's most ambitious overhauls trying to position the company for success in a very challenging and difficult industry. His plans included a "stores within a store" concept, no sales or promotions and a three-tiered pricing plan. He suggested that "Penney needed a little bit of "Apple's magic." From the start, analysts and experts questioned whether Penney's customers, who were used to sales and coupons, would accept this new approach. Long story short...customers didn't. For the full fiscal year of 2012, Penney had a loss of $985 million (compared to a loss of $152 million in 2011). Now, you may be asking yourself, what does this story have to do with human resources management? Well, a lot it turns out! When a company is struggling financially, it is going to impact its people.

And for J.C. Penney employees, that impact came in the form of a "traffic light" colour-coded performance appraisal system. In a company-wide broadcast, supervisors were told that they should categorize their employees by one of three colours: Green, their performance is okay; Yellow, they need some coaching to improve performance; and Red, their performance is not up-to-par and they need to leave. Many employees weren't even aware of the system and supervisors were given no guidance one way or the other regarding whether to tell them about it, although company headquarters choose not to disclose the light system to employees.

Although the uncertainties over how to inform or even whether to inform employees about this human resource (HR) initiative is troubling, communication and HR experts say there are other problems with this green/yellow/red approach. One is that it's insensitive to "approach the livelihoods of human beings" this way. The easy-to-understand simplistic nature of green, yellow and red colours doesn't translate well to what will be a tremendously personal and difficult situation for many employees, especially those with a "red" appraisal. Another problem is that labelling employees, can create difficult interpersonal situations. The labels can become a source of humour and teasing, which can deteriorate into hurt feelings and even feelings of being discriminated against. "No matter how benign a colour-coding system may seem, it's never going to work." This doesn't mean that employees don't evaluate employees. But companies should be open about it. Employees should know that they're being rated, what the criteria are, and if they have a poor rating, what options they have for improving. There should also be a fair process of appeal or protest if an employee feels the rating is unfair.

Epilogue: Ron Johnson stepped down as CEO of JC Penney in April 2013.

Source: based on "Latest Layoffs at Penney Hit Back Office, District Workers," Reuters, www.reuters.com, March 7, 2013.

Supervision Today! Eighth Edition: Stephen P. Robbins David A. DeCenzo Robert Wolter

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2. a. What would be the biggest motivational challenge for the Supervisors at J. C. Penney in implementing the new appraisal method? (10%)

b. Recommend a motivational approach and explain why it would be effective in implementing the new appraisal method. (10%)