Bob's Gutsy Leadership Blog

Learning from 2013′s CEO Train Wrecks

During 2013, there were two firings of CEO’s who were in their jobs less than two years.  The lesson from those two incidents is vividly clear.  Let’s take a look.

After suffering basically flat results for several years, in November, 2011 JC Penney hired Ron Johnson from Apple as CEO.  Ron had been very successful running Apple’s retail operation.  The stores were simple and elegant in design, offered leading edge products at premium prices, and provided no reduced-price sales or promotions.  In contrast, JC Penney traditionally participated in the low-mid tier of the mass-retailer industry, focusing on low/medium priced goods, deep cut feature pricing and sales, weekly sales circulars with big discounts, and massive displays in stores.

Within weeks of his arrival at JC Penny, Johnson announced a new strategy for JC Penney.  Specifically, he went about eliminating reduced-price sales and promotions, in-store displays, and the weekly sales circular.  That’s right; he simply reached for the Apple retail strategy, much to the surprise of J C Penny customers, who quickly began abandoning ship!

After twelve months, the share price of JC Penney stock was down -55%, sales revenues were off -30%, and profits were pathetic; losing $552 million versus the very modest loss of $87 million a year ago.  In April of 2013, the board of directors replaced Ron Johnson.

The second example is Blackberry.  In January, 2012, the Blackberry board selected insider Thorsten Heins as their new CEO, hoping he could save the company, which was in a death spiral, being badly beaten by Samsung and Apple. The stock price was $10 a share, down from $130 when Blackberry was the smartphone leader in 2008.  People were skeptical about selecting an insider to attempt to fix Blackberry.  They really became alarmed when, having been in the job for a few days, Heins publically claimed “I don’t think that there is some drastic change needed.”  That statement is about as far from reality as you could imagine for Blackberry back in early 2012.

Unfortunately for Blackberry, he truly did live up to the statement he made in those first few days as the CEO.  He made no significant changes and Blackberry continued to slip, leading to his firing in November, 2013.  Today Blackberry shares sell for $6 a share and the company is struggling for survival.

What should leaders take from these two examples?  It is very clear.  At every juncture:

Face Reality and Develop and Implement an Impactful, Well-Reasoned Plan

That’s what CEO’s are paid to do on a regular basis.  Neither of these CEO’s followed this fundamental leadership principle.   Johnson ignored the learning step and just implemented things he did in his last job.  Heins basically watched as Samsung and Apple thrived.

 

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