BUSINESS
05/28/2013 06:39 pm ET Updated May 29, 2013

Ron Johnson's Desperate Broadcasts To J.C. Penney Workers Fell Flat As Company Faltered

As sales flagged inside J.C. Penney and employees chafed at constant changes, Ron Johnson, the ill-fated chief executive officer tasked with engineering a turnaround, regularly addressed workers via internal broadcasts that only made him seem distant and out of touch, company insiders told The Huffington Post.

Every 25 days, workers at the roughly 1,100 J.C. Penney stores throughout the country were called into training rooms to watch a video address from Johnson, sources told HuffPost. The broadcasts were typically billed as celebrations of another milestone in the reclamation supposedly underway under his tenure, including “Ron Johnson’s 50th Day at J.C. Penney” and “Ron Johnson’s 100th Day at J.C. Penney.”

Once on screen, the CEO confidently proclaimed signs of progress since the previous session. But insiders told HuffPost that few workers or managers believed the tales of improvement, given the chaos and decline they were experiencing in their stores every day.

Johnson did not help his cause by sometimes taping the messages from his home in Palo Alto, Calif. -- 1,700 miles removed from J.C. Penney’s corporate headquarters in Plano, Texas, and a veritable cosmos away in terms of culture.

“He was trying to do it to try to connect,” said a former J.C. Penney stockroom supervisor who viewed many of the broadcasts. “But it didn't work, because he really didn't know what was going on.”

Some workers said the broadcasts underscored what they came to see as Johnson’s imperious style. Rather than pass down messages through the rungs of management or blast mass memos to store managers to share, as is customary inside most large companies, Johnson relied on the personal broadcasts like some sort of retail Wizard of Oz.

“Some did not even take them seriously,” one employee told HuffPost. “Rarely would anyone ask a question after the broadcasts. There was a feeling that most people did not absorb, process or question his messages -- an attitude of inattentiveness.”

That sense that Johnson was out of touch, combined with the disastrous results of his 17-month tenure, ultimately cost the CEO his job. He was ousted by J.C. Penney’s board of directors in April.

J.C. Penney, one of America’s largest department store chains, was already struggling before Johnson took over in late 2011. A former Apple executive, he was supposed to bring fresh ideas and excellent execution. Instead, the company’s deterioration accelerated last year, as Johnson and his management team tried to transform the business with a new pricing strategy, new store layout and new branding. Widespread layoffs accompanied plummeting sales, and store workers were left wondering who would be next.

J.C. Penney did not respond to a request for comment for this story.

Johnson's 25-day broadcasts were supposed to generate a sense of momentum, as he pledged that J.C. Penney would reap rewards once his new strategies were fully in place. He would tell his employees about staffing changes at corporate, and about new brands that had agreed to open shops inside J.C. Penney.

But instead, the broadcasts came to be emblematic of how Johnson seemed to have little grasp of the way he was perceived inside the company, and how little faith workers had in his plans.

He often taped the broadcasts from the J.C. Penney prototype store in the Dallas area. A display related to the most recent big change or announcement, such as an early model of a Joe Fresh shop, would be showing in the background of the videos, sources said. But the taped broadcasts from Johnson's home in Palo Alto raised eyebrows -- especially given that fact that his Silicon Valley pedigree was a source of concern among J.C. Penney’s ranks, who worried Johnson didn't have a solid understanding of the company’s more middle-American customer base.

“I just thought it was odd,” said the former stockroom supervisor. “He's the CEO of the company -- why is he in California?”

Johnson faced a firestorm of criticism when the New York Post reported in February that he only spent four days per week at J.C. Penney’s headquarters, commuted weekly by private jet from the west coast and stayed at the glitzy Ritz-Carlton hotel in Dallas -- all paid for by the ailing retailer.

A J.C. Penney store employee in California explained to HuffPost that after the closing shift, workers would be corralled to view the broadcasts on a television. Supervisors would watch the address first, since there would usually be a special announcement for management. The broadcasts were videotaped, and most of the time they would be viewed in a training room or conference room.

During one of the broadcasts, J.C. Penney Chief Financial Officer Ken Hannah stepped in and started talking about the company’s balance sheet and stock price, in an attempt to reassure workers that everything was healthy. Workers were baffled, the California store employee said.

“You could tell most people had no idea what he was talking about,” the employee said.

In another video, Johnson sat with a store manager, who asked him a question about the diminishing flow of customers into J.C. Penney stores. Employees said that they could easily tell the scene was “pre-planned.” Johnson went on to explain that the situation was expected, since the company was undergoing a transformation. Everything would turn around starting in 2013, Johnson said in the video, according to employees.

Though these addresses caused some discomfort, lower-level employees became particularly disturbed by widely rumored broadcasts for managers only. This practice became so prevalent that employees dubbed them “secret” broadcasts, sources inside the stores told HuffPost. When word spread that the managers were holding a secret broadcast, workers grasped that layoffs were in the offing, sources said.

Those in leadership positions would reportedly duck into their offices alone, close the door, and watch videos reserved only for the eyes of district or store managers. “It was well-known enough that you didn't disturb [the manager],” said the former stockroom supervisor.

According to a J.C. Penney store manager, Johnson typically wouldn’t do the closed-door broadcasts himself. Instead, the task would be pushed to J.C. Penney Executive Vice President and Director of Stores Tim Nichols, or a corresponding subject matter expert, depending on the nature of the announcements.

In early March, store managers were told about a secret broadcast a few days in advance. The contents of the broadcast were known only by Johnson and his “close circle,” according to a J.C. Penney executive. One store manager told HuffPost that he heard rumors about store closings and job eliminations in the build-up to the broadcast, but he couldn’t confirm anything. There was a period of "unease" among management in his district before the broadcast, the executive said.

Then, on March 5, the managers went to their offices to watch the stream. Corporate announced that all “service leaders,” “administrative assistants,” and “office/cash room associates” would be cut from the J.C. Penney hierarchy, effective on April 5. A total of 2,200 J.C. Penney employees lost their jobs that day.

Assistant managers who were laid off last May said their superiors watched a secret broadcast from corporate two weeks prior to a set of nationwide firings at J.C. Penney. Thousands of middle-managers across the country were cut, but they weren't aware of the plans until they were brought into a boss' office to hear of their fate.

Store associates weren’t officially informed about the manager-only broadcasts, even if the announcement involved them, and were left in the dark about some major changes, according to sources within the company.

In a closed-door broadcast in January, J.C. Penney Vice President and Transformational Talent Leader Michelle Steitz instructed managers and supervisors to color-code their associates to prepare for future layoffs. The stores were told to inform workers with low grades that they needed to improve, but not about the new grading system, a J.C. Penney executive said. Instead, many workers told HuffPost that they learned about the new policy from media reports.

Interim CEO Myron Ullman, who led J.C. Penney before Johnson, has been in charge of the company since April. Employees said that Ullman has also produced a broadcast, but instead of a one-way address, it was a town hall format in which the interim CEO answered questions about J.C. Penney's future.

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