CASE STUDY

After running successfully for close to 90 years, JC Penney Corporation, Inc. (JCP), a chain of department stores in the US, got into trouble. By the late 1990s, the retail scenario in the US had changed considerably. JCP had to contend with the onslaught of giant retail chain Wal-Mart on the one side, and mall-based competitors like Dillards on the other. The youth started avoiding JCP as they considered its merchandise to be outdated and lacking in style.

Between 1999 and 2004, a turnaround was orchestrated at JCP by chairman and CEO Allen Questrom (Questrom) and COO, Vanessa Castagna (Castagna). Castagna joined JCP in 1999 as the COO and Questrom joined as the Chairman and CEO in 2000. Both of them were brought in from outside and were the first outsiders to join JCP in their respective positions...

Issues:

» Recruitment/Hiring

» To promote from within or from outside

» Job satisfaction/dissatisfaction

» Employee reaction to job dissatisfaction

The decision of whether to promote from within or look elsewhere had always been an organizational dilemma. In 2004, JC Penney was faced with this dilemma while appointing the successor for its chairman and CEO, Allen Questrom. JC Penney surprised many by passing over Vanessa Castagna, who was instrumental in turning around the company between 1999 and 2004, in favor of an outsider.

Question:-

Q1. Do you think JCP was justified in appointing Mike Ullman, an outsider, as CEO instead of Vanessa Castagna (Castagna) considering that Castagna was instrumental in turning around JCP in the early 2000s?

Q2. What are the pros and cons of ‘bringing in an outsider’ and ‘promoting from within’? Discuss the impact of such decisions on the morale of the employees.