The share price of JCPenney (JCP) fell 6% today on the news that its CEO, Marvin Ellison, is departing to take the reins at Lowes. Ellison was working on a turnaround plan that he initiated after joining the retailer in 2014, following 12 years at The Home Depot. While some improvements have been seen at JCP, the brand is laboring against the headwinds of a retail market that has seen dramatic changes. Yet, retailers Kohl’s and Macy’s are delivering positive results, despite the challenges.

The Wall Street Journal quoted Neil Saunders, managing director of GlobalData Retail (a consulting firm), saying, the “exit will also raise speculation that he is not particularly optimistic about the future prospects of JCP.”

That is probably an understatement.

The transition of leadership at the top of any organization is fraught with risk even when planned and well managed. CEO changes create the risk of reduced traction in execution, loss of talent (such Ellison’s departure from The Home Depot following selection of Craig Menear to succeed Frank Blake), and distraction as the new CEO takes over and takes time to declare his or her direction and priorities. In a well-performing organization, temporary uncertainty can be minor as employees continue to do what is needed and trust that changes will be forthcoming but not needlessly disruptive. In a crisis situation, leaders cannot rely on people and processes to keep the ship on course while they engage in a long and costly strategy review.

When a company is in a crisis like Penneys, a few critical actions are needed.

First, the board needs to talk about the situation as a crisis. The company has lost value and now has a market capitalization of less than 1Billion dollars. This is not the time for denial or over-confidence. It is time for courageous leadership.

Second, a new leader is needed and quickly. This leader needs to be capable of and concerned enough to understand customers and employees.

Third, the company needs to give customers a reason to visit the store. As Toys-R-Us liquidates and Sears continues to close stores, there is an opportunity to give customers an alternative that is not merely available, but better.

While courage may be more obvious when leaders are heroic, it is more valuable when it is woven into the fabric of a business. Share on X

Fourth, employees need a reason to care about what they are doing. Leaders need to articulate a purpose that helps people feel a sense of accomplishment in what they are doing. Human beings are capable of surprising resilience and much more so when they have a meaningful purpose and the autonomy to fulfill the mission they have been given.

Fifth and finally, remember that financial results are results. Running a business by staring at spreadsheets means that you only realize the tide is in when your feet are wet.

The benefit of a crisis is the clarifying effect it can have. But why should you care about the crisis at JCPenney?

You should care because crises like this can be long in coming. One may be headed your way. The dramatic and obvious aspects of a crisis may seem to occur suddenly, but it’s not so in many cases. Success can breed blindness and in that blindness, the seeds of crisis are sown.

Leaders who have the courage to put down their microscope and pick up a telescope have a better chance of seeing what is on the horizon before they are face-to-face with a threat. Leaders who are in touch with all the aspects of their business stand a much better chance of feeling the vibration from changes that are still miles away and won’t show up in a strategy review. They are able to use the information, no matter how faint, to create rather than waiting until a reaction is their only option.

While courage may be more obvious when leaders are heroic, it is more valuable when it is woven into the fabric of a business. Doing so helps leaders and, indeed, everyone see more clearly, create the products and experiences people don’t even know they need or want, and build companies where misdeeds die of lack of oxygen.

You should care about JCPenney not only because it may fade away and not just because you may learn by studying them.  You should care because the most important lesson is that very smart human beings can, and do, make mistakes. Human errors of perception, cognition, and decision-making can happen to anyone and to any company.

That’s why you should care.

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