Saturday, July 22, 2023

James Cash Penney: A Legacy of Innovative Entrepreneurship and Human-Centered Management



James Cash Penney, the founder of the retail store chain that shares his name, crafted a unique style of entrepreneurship and exceptional management that resonated through much of the 20th century. His journey began in 1902 with a modest dry goods store in Kemmerer, Wyoming, which, through his perseverance, metamorphosed into one of America's most notable retail chains.

Born into a poor family in 1875 in Missouri, Penney wanted to study law after high school but was forced to work as a clerk in a local dry goods store to help support his family after his father's death. When Penney was a young man, he was diagnosed with tuberculosis and advised by his doctor to move to a dryer climate, which he did in 1898 by moving to Colorado. He soon began working for Guy Johnson and Thomas Callahan, who owned two dry goods stores called Golden Rule. Johnson and Callahan were impressed with Penney's business acumen, along with his values of integrity and hard work, so they paved the way for him to open a third store and gave him one-third of the profits from the new store, which he opened in Kemmerer, Wyoming in 1902. Within a year, he had opened another store, paving the way towards developing a chain of stores. A significant change occurred in 1912 when Penney acquired sole ownership of the company and changed its name to J.C. Penney.[1] In 1913, Penney relocated the company headquarters from Salt Lake City to New York City to be closer to garment production, which comprised a significant percentage of his profits. By 1927, he owned 773 stores with over $100 million in sales.[2]

The entrepreneurship demonstrated by Penney was characterized by calculated risk-taking and remarkable foresight. As a business model, Penney prioritized quality and value instead of focusing on bargain sales. He followed in the footsteps of Callahan and applied fixed prices in all his stores when haggling was still the norm, thus promoting fairness and integrity in his operations. Moreover, he required his customers to pay in cash before they could take the goods from his stores.[3] His method of expansion was unique and highly entrepreneurial. Instead of following a top-down approach, Penney mentored promising employees and offered them partnership and managerial positions in new stores, thus fostering a sense of ownership, dedication, and motivation among his workforce. One of the expectations of these new associates was for them to find reliable promising young men and prepare them to open their own store, thus securing the continued growth of the business.[4] To help inspire and support the company’s growing workforce Penney started a monthly newsletter that circulated between 1917 and 1932 called The Dynamo. The newsletter offered merchandising suggestions, letters from company buyers, celebrations of store and manager accomplishments, and other general company news, to name a few, and demonstrated that James Cash Penney really did strive to build relationships with his employee partners. Each newsletter offered several articles written by people related to the industry and thus secured a connection between headquarters and employees that promoted quality and exceptional service. For example, one saleswoman was celebrated by her manager for securing a sale by helping the customer envision the finished product using two yards of fabric that she thought would be a quality substitute since they did not carry what the customer requested.[5]     

Penney's management prowess extended beyond his employees to his relationship with customers and suppliers. His "Golden Rule" philosophy built trust and loyalty with his customer base. He treated suppliers as partners, ensuring prompt payment and building solid relationships. Penney believed in the power of decentralization and delegated operational authority to store managers, instilling in them a sense of responsibility and entrepreneurship.[6] Another distinguishing pursuit that demonstrated Penney’s business ingenuity was that he was among the first businessmen to create private labels for the J.C. Penney brand. This allowed him to cut costs by making high-quality products cheaper than the name brands. Moreover, since advertising was not required for these items, which already drew in customers due to the success of the name-brand alternative, he was further able to maximize profits.[7] This business strategy is now common in the retail industry.

 The 1929 economic downturn was a challenging period for Penney, who personally guaranteed his company's debt, leading to his financial ruin. However, his resilience and dedication to the brand saw him through these turbulent times.

 In conclusion, J.C. Penney's story shows how visionary entrepreneurship coupled with exceptional management can build a legacy. Penney's ability to identify opportunities, his innovative business model, and the respect and trust he established with customers, employees, and suppliers laid the foundation of the J.C. Penney Company. His approach to entrepreneurship and management was characterized by his pursuit of the "Golden Rule" policy that he inherited from his Baptist Minister father not only as a business strategy but also as an ethos that helped weather financial storms and maintain the relevance of the brand that lasts even today, although has struggled because of online shopping and the hegemony of discount stores like Walmart. The retail industry continues to draw inspiration from Penney's innovative strategies and human-centered leadership.


[1] Bert Spector, "The Evolution of a Private-Label Brand Strategy at J.C. Penney, 1902-33," Management & Organizational History: 8, no. 4 (2013), https://dx.doi.org/10.1080/17449359.2013.831736: 391.

[2] Michael  Lisicky, "From Its Beginnings to Bankruptcy, a Historical Timeline of Jcpenney," Forbes, May 17, 2020, https://www.forbes.com/sites/michaellisicky/2020/05/17/from-its-beginnings-to-bankruptcy--a-company-timeline-of--jcpenney/?sh=6a02f20431de.

[3] Bill Hare, Celebration of Fools: An Inside Look at the Rise and Fall of JCPenney, 1st ed., vol. (New York, NY: AMACOM, American Management Association, 2004), 24.

[4] State Historical Society of Missouri, "J.C. Penney," accessed July 22, 2023, https://historicmissourians.shsmo.org/j-c-penney/.

[5] L.M. Luther, "A Lesson in Practical Salesmanship," The Dynamo, November 1924, https://digitalcollections.smu.edu/digital/collection/dyn/id/49.

[6] Bill Hare, Celebration of Fools: An Inside Look at the Rise and Fall of JCPenney, 1st ed., vol. (New York, NY: AMACOM, American Management Association, 2004).

[7] Bert Spector, "The Evolution of a Private-Label Brand Strategy at J.C. Penney, 1902-33," Management & organizational history: no. 4 (2013), https://dx.doi.org/10.1080/17449359.2013.831736.

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