Celebration of Fools: An Inside Look at the Rise and Fall of JCPenney

Wonder Woman

In June 1999, Oesterreicher appointed Steve Farley, formerly with Payless Shoes, to head up marketing. Farley, who would last only 18 months with the company, immediately fired the ad agency of record (Temerlin McClain) and began searching for a replacement. He asked the candidates, as part of their pitch, to define a marketable image for JCPenney.

A month later the new COO, Vanessa Castagna, blew in like a hurricane . She had achieved breakthrough results at Wal-Mart in apparel merchandising . She was a smart, strong, and talented leader who was also imaginatively decisive . A tall, athletic-looking woman who wore high heels, she was an imposing presence who, with her take-charge manner, caused great consternation among the boys on the Crescent and below.

Castagna's arrival scored two Penney firsts. Never before had an outsider come in at such a high level, and never before had a woman been put in charge of running things day to day. As Gale Duff-Bloom observed with wry amusement , "This sent a signal that nobody could disregard. Things were going to change, big time."

Immediately Castagna began an exhaustive search to determine the true state of the company. After a few weeks of getting the headquarters drift , she hit the road to visit stores, distribution centers, and regional offices. Many in Plano were relieved to see her leave for a while, which was a mistake.

While Castagna was searching for the company's identity, and Farley was outsourcing the creation of one, Jim Oesterreicher seemed to lose further faith in the organization in which he had spent his entire career. Because of his consensus methods , he had always been partial to outside consultants (who relieved him and others of decision making). Now more and more consultants arrived at Legacy. By March 2000, Arthur Andersen (not yet notorious) had 26 separate projects working at JCPenney. It was the largest consulting effort ever launched in retail by Andersen, and the biggest consultancy contract in Penney history. And that was just Andersen. Other work was being done by PriceWaterhouse-Coopers, McKinsey, and KPMG.

Upon her return to Plano, Castagna began a remarkable reorganization effort. It was kept under wraps until mid-January 2000 when she held the biggest meeting since a companywide convention in 1925. The giant main ballroom of the Adam's Mark Hotel in downtown Dallas was the site. In attendance would be every one of JCPenney's 1,100 store managers plus several hundred district , regional, and Plano executives. Shock waves would emanate from this event, and they began the night before at a small gathering in the hotel when Castagna stood up and said:

"When I joined JCPenney, I assumed that its store managers would be generally competent and up to speed. This did not turn out to be the case. When I joined the company, I also assumed that the correct systems and procedures would be in place. This did not turn out to be the case. Finally, when I joined the company, I assumed that senior management would at least be on top of things. This did not turn out to be the case, either. So I knew that I had really gotten myself into a challenging situation. But I thrive on challenges and I never back down on anything."

In the ballroom the next morning, there was the predictable motivational video with a sports metaphor. There was the predictable motivational speaker with lots of heart. And there was the predictable name speaker to give the event sizzle (a vague Colin Powell in his big-fee speaker days). Nothing very exciting so far, and when Jim Oesterreicher made his "welcome" speech, the audience began to wonder why Penney had bothered to bring everybody into the Adams Mark during such a time of pain and strain.

The first pages of Oesterreicher's speech typically beat around the bush before he moved into general statements about the pressing issues before them. Not very scintillating, and this was an audience that increasingly needed scintillation.

But then they got it, right between the eyes.

Castagna's speech was the most amazing thing they had ever heard . First of all, it was immediately clear that this woman was loaded with energy and charismaas opposed to their beleaguered chairman, who an observer once said "had all the charisma of your local pharmacist." ^[5] Then, as Oesterreicher looked on from the wings with a pale, bland expression, the whole ballroom seemed to tilt on edge as Vanessa Castagna unloaded. Performing with an amiable and bright enthusiasm , what she said was absolutely stunning.

The store and catalog operations were, as of that day, entering a period of total reorganization (including retraining or replacing anyone who couldn't cut the mustard). Andyes, the impossible the Penney methods were going to change, as everything from this day forward would be keyed to centralized merchandising! The historic J. C. Penney store autonomy would soon be a thing of the past! Moreover, Penney would change from a "pull" company to a "push" company!

Everyone was breathless. And well-designed, surprisingly detailed handouts would anchor her words in forward-march reality. How had she and her team accomplished all this in only a few months' time? For the changes coming were as comprehensive as they were revolutionary.

Then when Castagna finished speaking, an astonishing thing happened . This was an audience made up of many who would not survive the coming transition. It was an audience at least partially responsible for the company's crisis. And what was she doing now but basically taking them to task? Yet this audience was so starved for answers and leadership that they rose en masse and gave her a roaring, standing ovation !

^[5] From the November 25, 1999, Dallas Observer article "Penney Pinched," by Miriam Rozen; reprinted with permission.