Lesson #3: Hire Good People and Take Good Care of Them

It was not only Penney’s focus on the customer that drove his success. With the same amount of energy and dedication he gave to each and every visitor that entered one of his stores, so too did Penney give to his employees. Penney was a visionary; he wanted his store to have a national reach, which he knew meant ensuring long-term growth. Superior customer service alone would not be enough to achieve that. Instead, Penney understood that it would be the people behind his company that would help push it to the top.

It was to this end that Penney took the time to choose his staff shrewdly. He understood that the future of his business rested in the hands of his associates, and thus spent much time and energy devoted to finding and training them. In 1903, after the success of his first Golden Rule store in Kemmerer, Penney was placed in charge of a second store in Rock Springs, Wyoming. It was here that Penney’s managerial skills were largely tested. After discovering the clerk would often close the store early so he could perform an instrument in local dances, Penney immediately fired him. A replacement with a much stronger work ethic was subsequently hired.

Penney did not take the hiring process lightly. He placed advertisements in newspapers across the American Midwest and personally interviewed all of the prospective trainees. He wanted his stores to be staffed by the best. But Penney was astute enough to recognize that it took more than a strict hiring regime to ensure a strong team. Once people were brought on board, he knew he had to take good care of them.

To this end, Penney established an employment department, which immediately set out to create a company newsletter. In 1917, “The Dynamo” was launched, to which Penney himself regularly contributed articles about his own life and personal experiences. Initially, the newsletter was meant to train and educate its readers, but it would quickly become a uniting force that instilled loyalty and pride amongst the associates.

Penney understood that many of his employees came from the same humble beginnings as he did, and thus established an Education Department within the company. In 1921, the company’s first free Business Training Course was shipped to all of its stores, offering a free correspondence course for up-to-date business training. Over 90 percent of the company’s 2,500 employees had enrolled within the first year.

Penney also made sure his staff was motivated. When any of his store managers had saved enough money, he would offer him one-third ownership in a new store. The manager was responsible for raising one-third of the necessary startup capital, while Penney would supply the remaining two-thirds. The manager would also agree to help train someone to take his place at the existing store. This not only helped motivate younger trainees, but also helped facilitate the company’s early expansion.

When he was 85 years old, Penney traveled more than 80,000 miles to visit 67 stores and continue giving the pep talks for which he had become famous over the years. He encouraged his workers with phrases such as “No man can climb the ladder of success without first placing his foot on the bottom rung,” and “The profit is in the last shirt in the box.”

Penney was so devoted to his associates that he even turned down two major merger offerings from Montgomery Ward and Sears Roebuck in the 1920s. If it meant laying off some of his personnel, Penney just could not see how such a deal would be worth it.

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