Faculty Guest Post: The Action Research Model of Organizational Change and J.C. Penney

As a customer, I was sad to see the local J.C. Penney store in Latham Circle Mall close in January 2014. In my opinion, the mall itself was partly the cause, but the closing also reflected J.C. Penney’s unsuccessful organizational change efforts in the last few years.

J.C. Penney hired Ron Johnson, then a senior vice president of retail operations at Apple in 2011, as the CEO to turn around its declining sales. Johnson initiated a series of bold changes, such as systematic layoffs, a reshuffle of the top management team, drastic modifications of the in-store design, eliminating coupons, and a three-tiered pricing policy.

I was impressed by the increased lighting and upscale feel of the store.  I remained skeptical because most of the company’s changes were so costly and radical that employees and customers may have been resistant. My worries turned out to be true. The retail sales of J.C. Penney fell 25 percent and the stock price fell by half during Johnson’s tenure. Not surprisingly, Johnson was fired in 2013.

We can weigh these events against the action research model of organizational change.  This model has three stages: planning, change, and refreezing. Apparently, Johnson ignored the first stage.  His overconfidence was evidenced when he said, “We will teach [the customers] how to shop.”  

Well, that reminded me of Steve Jobs, but selling clothes is very different from selling smartphones.  Sometimes you have to respect and listen to your customers better and take your time when you attempt to transform an organization.   

Hao Zhao is an associate professor at the Rensselaer Lally School of Management.