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What Drives Innovation at JCPenney?

Myron E. (Mike) Ullman III, who is retiring in November as chairman and CEO of JCPenney, No. 35 in The 2011 DiversityInc Top 50 Companies for Diversity, is an exemplary diversity leader, professionally and personally. He has spearheaded the retailer’s innovative efforts to connect with an increasingly diverse customer base through the increased use of its associate-resource groups and the executive diversity council, which he chairs. These efforts and the significant improvement in the company’s results, as evidenced by its data, led to JCPenney being named DiversityInc’s Top Company for Diversity-Management Progress at our special awards ceremony in November 2010, with Ullman accepting the award.

Ullman’s commitment to diversity is very personal as well. He has a visible disability (he uses a Segway because he has difficulty walking), he has two daughters with disabilities adopted from China, and he is chair of Mercy Ships International, which brings medical assistance and supplies to third-world countries.

DiversityInc CEO Luke Visconti and Senior Vice President and Executive Editor Barbara Frankel interviewed Ullman at JCPenney’s headquarters in Plano, Texas. Here’s what he had to say about why diversity management is so important to the company—and to him.

FRANKEL: Why is diversity so important to the future business of JCPenney?

ULLMAN: From a practical point of view, we know today that about a third of the U.S. spending is done by people [from traditionally underrepresented groups]. We do business with half the families in America today, and clearly it’s a very important part of our customer segment. Diversity also enriches our associate experience. They have diverse talent. It energizes them to be able to do merchandising and selling and other things with customers of color.

VISCONTI: The data shows that you take those facts, which are readily available to any CEO, and really make them happen. In this company, things are much different than the average company in the United States. The attitude of inclusiveness and the meritocracy exists here that doesn’t exist in most companies. So what in your life has made you such an advocate of diversity and inclusion?

ULLMAN: I’ve been very fortunate. I grew up in a small town with almost no diversity until I went to college. From college and throughout my career, I’ve been fortunate to live in Asia and work in Asia. I’ve been fortunate to live and work in Europe and France, and I also had several assignments in the United States. I actually adopted two Chinese daughters.

It is quite energizing to meet people of other cultures and have different points of view, different upbringing and different situations. From my perspective, for our associates, it’s a much more enriching experience to work in an environment where they meet different kinds of people.

Our engagement scores show that stores that have more diversity actually have higher engagement scores. We work on an integrated team basis here, so almost all of our work is done by teams that are incentivized to work together but also work with other teams. When I came seven years ago, there was certainly a willingness and openness to the idea of ramping up our openness to enriching the work experience as well as the customer experience by including more diverse people.

We believe that the way you enrich the customer experience is have people that like what they do. The only way that people are going to like what they do is if they like the people they do it with. Frankly, people work for people, not for companies, so we spend a lot of time on leadership development and making sure our managers and leaders know how to lead and know that they need to be trusted. They need to encourage candor. They should have a vision for the future, something that’s going to motivate their people to go someplace other than where we are today, and they need to differentiate talent. They need to recognize the people who are doing the best job but also coach and help people who aren’t doing as well, realize they’re either in the wrong assignment or they need to change their behavior or they’re not going to be successful.

FRANKEL: You started the diversity council two years ago, and you’ve been personally involved in that as chair. A lot of times when companies start these councils, we’re told the CEOs are too busy and that they’ll delegate it down, but you didn’t do that. Can you talk about why you did that and how you hold people accountable for those kinds of goals?

ULLMAN: It’s a relatively simplistic answer because people watch what you do, not what you say. So to the extent that I think it’s important and I’m involved, they realize it’s something they may consider important as well. I’d rather have them excited about it for all the right reasons because it’s the right thing to do, that they enjoy it, they see the benefits of it. They get their own scores on the associate survey, so they know that we take a hard look at how they lead.

When you start out by saying we’re going to teach leadership, start with the top team. We got down to the top 700 people, 30 at a time, two days in a room with classes of 30. They always say, “How can you spend this kind of time with us to spend two days in a windowless room on this topic?” I said, “I spend two days in a windowless room because I get to know the 30 of you really, really well.” That really helps them understand who they are in terms of their role in the company, but more importantly, we get to know each other. I learn more than they do. We’ve done it something like 26 times so far, and that’s made a big difference in terms of setting priorities—why this is so important, how we play it out, and what role you can play.

It’s not just a couple of people involved in this process. The council just brings together the leaders of the group and we make it clear that we’re going to hold everybody accountable.

VISCONTI: That’s still a huge commitment of your time.

ULLMAN: This is what I do. I don’t know what’s more important than having our people engaged and having them understand what we think is important.

VISCONTI: Have you factored a commitment to diversity in your succession planning?

ULLMAN: The best way to articulate how we think about it is that I’d want to take a look at the top leadership team, middle management as well as all their associates, and make sure that they mirror the customer segment that we’re dealing with. The best way to do that is to make sure at all levels that we pay attention to this. You have to have a pipeline of talent that’s diverse to be able to grow the talent within the organization. To do it properly, it takes time. I mean, you can’t really just parachute people in at different levels and have them be successful. So the best way to organically grow a diverse organization is to allow opportunities at every level. That means in the recruitment phase that we have people that understand how to recruit. Those of us in the leadership roles are on the campuses.

We’ve got to encourage people to come join us because they’re going to be comfortable here. It’s a place they can thrive. They have to see people of color thriving in the company. You can’t just say it’s something we want to do. The council is just a visual articulation of what hopefully goes on every day at the company.

FRANKEL: You are retiring in November. What would you say are the next steps, past that, in diversity management for JCPenney?

ULLMAN: I think we’re on a good trajectory, but we have a long way to go. While we’ve made great strides, the people who are most excited about it really see a different future. You want to look at the young generation, the X’s and Y’s; they’re about a 1-to-1 ratio of diverse population and non-diverse population in the United States. So those are our future customers and our current customers. The evolution will continue. As people get success in an organization, it kind of builds on itself. People see people who have done very well, that we celebrate that. We don’t try to impose some kind of artificial guideline of what should happen. We’d rather be lifted up by the organization, so I expect that to continue.

VISCONTI: What would you like your legacy to be?

ULLMAN: That my successor is more successful than I am. We recruited a fabulous leader. We worked hard to do that. My first introduction to him was two years ago, so it’s been a journey, but getting the right leaders is extraordinarily important. It’s the responsibility of a leader as they move on, as they retire, to be sure not to tell them how to do it, but to show what the opportunity is and let them do it their way. Ron [Johnson] has enormous capacity for that. He’s a people person. He’s got a great track record at Target as well as Apple, and I think he’ll embrace diversity as much as anybody.

FRANKEL: What is next for you after November? What are you planning?

ULLMAN: I’m still the deputy chairman of the Federal Reserve Bank district here in Dallas. I’ve got Mercy Ships International, which I chair and have for the last 15 years. We’re working mostly in West Africa with people that have enormous challenges. I think we did 59,000 surgeries last year in West Africa as a volunteer organization. I’m still lead director of Starbucks. So I’ve got a few things going on. First Robotics is another board that I serve on. I have six children and five grandchildren, so I’ve got plenty to keep me distracted.

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