Ron Johnson's Ego Led Him To Run JCPenney Into The Ground

Ron Johnson arrived at JCPenney with pomp and high expectations, built by his own reputation and hedge fund manager Bill Ackman's heavy recruitment.

Confidence was never an issue for Johnson, and that showed in his strategy. He made big changes, extremely rapidly, without testing them first like retailers usually do. He argued that short-term losses were worth it to transform the company. But those short-term losses became much bigger and lasted far longer than Johnson and Ackman's upbeat predictions.

Lauren Sherman at Fashionista argues that his ego was his downfall. "It’s obvious why Ron Johnson took this job. He’s got an ego. He’s seen incredible turn-arounds happen in the past," she writes. "He wanted to sweep in and save Penney because he believes he is special and capable of doing so."

The problem with Johnson's grand and aggressive turnaround, she writes, is that it's a public company, which means that it lives and dies by quarterly results. Investors simply aren't willing to put up with massive losses on the promise that things may pick up in the future. At a private company, where you only have to answer to a few investors, you can take a long-term view and make massive changes. That's what Mickey Drexler famously did at J. Crew.

Confidence is essential for any leader, especially one making big changes. But just as important is realizing that you don't know everything.

Take one famous turnaround CEO, Howard Schultz. He stepped down as CEO of Starbucks in 2000, but stayed on as chairman. During the eight years he was gone, the company vastly over expanded, and was badly struggling. He returned, but things were still going very badly a year into his highly anticipated return, and investors were starting to turn on him.

It wasn't until Schultz admitted his mistakes and how bad things looked that he was able to change things. Instead of confidently going with his gut, like he did in the past, he learned to start listening to other people, to hold focus-groups and test ideas, and delegate.

Johnson's former boss, Steve Jobs, left Apple in 1985 after being removed as head of the Macintosh division. At his famous commencement speech at Stanford, Jobs said the experience helped define him: "I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me," Jobs said. "The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything." He returned in 1996, a changed man, and helped bring the company from bankruptcy to massive profits in 14 years.

Johnson, on the other hand, built his reputation at Target as it was in the middle of a massive nationwide expansion, and at Apple as it first returned to profitability, then became massively successful. He did great work at both places, but never dealt with a company in crisis.

His confidence meant that he jumped whole heartedly into his strategy, but meant he wasn't prepared for the idea that this time, his ideas might not work.