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Our Guest today is JH Baker the former president of Kohl's Mr Baker thank you
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so much for joining us today you're very welcome so when you go public uh how
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does that change how did that change goals uh and and how did that create new challenges that you have to address well
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let's start first on the plus side it gave us the opportunity access the cash
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to start to build new stores and then as we got bigger we generated our own cash
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so that helped us to this expansion that you asked about the other thing people said wow it's really tough when you go
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public and I think today it's tougher than it was when we went but you've got
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to report numbers naturally you you know you're we used to have to report every
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month and then of course quarterly and you know they're very tough if you miss
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you know buy a penny your estimate they could kill your stock and you know it's
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a crazy world but uh but I said to so somebody said must be really tough being public I said you know what's tougher
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when we were highly leveraged and a bank you know had our debt they could have just gone with a SP it and turned it off
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and said you know we're we're not giving you any more money that's tough uh going
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public was much easier the three of us sat down it's very interesting and you
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know going public you know you have to make numbers you have to but we we sat down and said we're just going to run
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this company the right way and and we're certainly have a great allegiance to
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people who buy our stock but the biggest Allegiance is to our own employees and we got to make sure that we're going to
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run the company right not make any short-term things that will hurt us longterm and we really adhered to that
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I'm not saying we didn't want to make our numbers and I could tell you something I'm really proud in 14 years
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we never missed a quarter wow I mean we've had might have had a a down month
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but we never had a down quarter in 14 years so I'm kind of proud of that part
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of that is because we had a lot of growth and that helped us a lot and the other thing I think we just had a great
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concept and uh in the 9s we might have been the hottest retailer in America uh and we started building first 10 stores
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15 and then we got up to 100 stores a year and uh and we we never had this Vision that we're going to be National
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retailer I think if you have that Vision you when you start you start to add too
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many people you start to do maybe some crazy things we just went step by step we just wanted to be we're not going to
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be the biggest we just wanted to be one of the best retailers we wanted to make money and we wanted to be successful
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that was it and and and we didn't have this Vision that we had to go but we kept going and you know we went into
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Chicago very successful Detroit fa except Minneapolis then we went into other areas went to Texas went to LA
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then we went East we went to Philadelphia and Pittsburgh and then we go to New York and and it worked so all
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of a sudden we're looking at ourselves and we're nearly a national company and
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we never dreamed you know and then uh but it happened and and today I mean we're proud that today we're just short
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of 1,200 stores and wi $19 billion I have a t-shirt from 1986 at the 164th largest department store one of the
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buyers gave it to all of us so today there's probably what 20 or 30 department stores and we're number two
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after Macy's we're 19 billion we were a little behind pennies until unfortunately uh uh they had one of the
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worst years in the history of retailing they're about 14 billion now so we're
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the second biggest retailer and and you know after Macy's a Macy's bought May
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Company to be that big so uh that's pretty amazing and kind of proud of that
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and uh and we're continuing to be you know I think a wonderful store we all retired in 2000 got off I got off the
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board in six or seven and they just got off the board this year they're a little
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younger my protege actually runs it now and uh Kevin Manel and you know we're
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proud that when we left we were eight or n billion and now we're 19 billion so I
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think we left the foundation that's very exciting that's that's remarkable uh let
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me ask take you back to the 1990s to ask a question uh uh you went public but the
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other big thing that happened in the 1990s is that the internet came along and e-commerce came along well it really
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wasn't big at that time just starting 1995 96 yeah but it really more in the
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2000s as as a fast growing brick and mortar retailer what was your first reaction to the arrival of e-commerce
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was it to dismiss it as a passing fad or did you think that it's going to become
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well to be honest when we uh while the time we ran up into 2000 the internet didn't have much you know there wasn't
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much in it uh what we did spend a lot of money is improving all our systems so that we automated so many things uh um
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both in store experiences at the register uh all our buying systems you know all our allocations who spent a lot
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of money we believe very strongly in in in being a head of the curve and not this was just starting and I and it
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really more as we were on the board and we were very vocal I can tell you this how important this was going to be and
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that initially like it didn't report to the president to Kevin right and I said
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that's the biggest mistake in the world this is going to be your biggest growth
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vehicle it's going to explode that's what's going to happen I can't tell you
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how big it's going to be but it's going to be incredibly important and uh they were a little slow in
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getting into but then he took it over and they've really you know today you know there as the other retailers I
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think a lot of the brick and water retailers were slow in doing it they saw it but I don't think they realized how
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big it was going to be how important it was going to be how to give you an example when I ran
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coals uh with my partners 75% of our advertising was newspaper and then their 25% was television or
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radio that was it today newspaper and I'm not exactly sure the last time I spoke to Cam was under 40% okay and
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dropping and radio and television you know again changed because you got 80 million television stations before you
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could zero in pretty easily and this whole social networking I'm thecon this
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whole internet is so big today and I think it's still a big problem for uh for our industry I think everybody knows
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it's important everybody's putting a lot of money into it uh they're finding out
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that it costs more to do that than it does to sell from the stores so the profit margins are a little different
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it's something that I I want to take a look at and try and maybe with the baker
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retail Center and things could we study this a little bit more how do we become more efficient how does it work better
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what percent of the business what's the growth you know I think there's a lot of
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questions there I mean all of a sudden you have a company named Amazon has come on they're like a giant retailer and
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they're able to do all this and not make any money you know because they reinvest
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the money and people say it's fine and the stock I mean last year they had a
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little blip because they didn't do as well but the point is they don't make
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much money if a retailer did that the stock would be down to zero you know if you miss buy a penny you you could lose
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10% they've been able to do this because course they're taking such market share
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and people believe one day I mean alone in the world so I I think what's happening naturally there are other
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people doing things like that there's new companies coming out to compete with
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them plus every brick and mortar Place understands it's part of the business
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and instead of brick and morar being a disadvantage the combination of being able to use the internet you can ship
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from stores you can also return in the stores and so the combination is something that can work very well as
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long as you understand it and and and one of the big problems too with advertising when you ran in newspapers
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you know you you knew where your circulation who you were hitting and at the time and and so you know you know
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how many pieces you sold and you really had you could see if the advertisement was working not working the items were
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good or bad now so much of it your advertising in a way you're not really getting the results immediately they'll
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come and they'll be cumulative but it's it's a little trickier so I think for
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everybody um it's a more it's a complicated thing but it's also changed
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you know and the people who are going to be around you look at retailers how many
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are gone because whoever the leadership were didn't change with the times and I
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think the retailers who are changing and adapting to what's new and what customers want you got one thing I think
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in retailing it's never changed got to take care of the customer so it starts
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with the merchandise you have the great merchandise you got to have an environment where they want to shop and
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you got to find out how they want to shop and if they want to shop you know with a telephone if they want to shop
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you know with their computer if they want to shop online however they want to shop you want to be there and the
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younger generation I I was just in some classes you know talking to a lot of students how many read newspapers one
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hand goes up you know that's not what they do today you know we grew up reading newspapers they're not so long
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as we understand what is this generation cuz this is the generation and and the generation above them the generations
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coming up that's your customer right so you got to be able to take care of them
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so I think you know you've got to be on top of this so it also makes people who
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are running companies today to be more broad-based you know the merchant Prince of yesterday maybe of this great store
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guy you know or a young lady today you got to be more well-rounded and understand more things but that's okay
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that's what the business is and you got to be open-minded willing to change and
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the guys and girls that do that going to be very successful and other ones will be like all the companies the
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130 department stores that don't exist today so just a couple last questions if
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you think back on your you spent your whole life in retail uh think back on your career what would you say is the
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biggest leadership challenge that you ever faced and how did you deal with it and what did you learn from
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it I think uh I'm trying to think the greatest um one of the problems you always have as you kind of get promoted
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and let's say in my early career then I'll go to maybe koh's you know when I
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became uh say a divisional merchandise manager on GMM I always felt you know I was a great buyer you know I understood
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and I could be the best at that and then when you move up you now have say six buyers reporting to you or a GMM you've
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got half a store reporting to you you then don't have to be the best buyer what you have to be is the best manager
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of people and understanding how to get people working well together and looking at at the picture the the big picture
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and you know how do you find the businesses that you want to invest in but then you got to give them the
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authority and responsibility to do the job and that takes time to learn and initially that's a tricky thing to learn
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walking into Kohl's I mean here's we understood Kohl's but it was kind of a
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shambles when we took it over you know was doing poorly it was losing money you know wasn't gaining marget share wasn't
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doing anything so I I I think you know when you stand there you look at wow this is this is something and here the
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three of us you know uh we had to invest our own money so we had a you know we had a borrow money because we weren't
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all wealthy guys you know and we had a borrow money to invest in it so here we are with borrowed money you know with a
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company that's kind of really tough and yeah you sit there and you know you shake a little bit and and you don't
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have all the greatest people initially and yet you've just got to sit down and
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and God and say what do we want this company to be you know we spent quite a lot of time as I said we use the outside
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service and and what I'm kind of proud of we we wrote like a half page thing
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what Kohl's is and today he Kevin sent me a manual that they give to all the
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employees it starts with that same damn page you know from 1986 I mean the cies changed a lot a lot of exciting things
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but that same principle is what it is today and we had to do that and stick to that you know and and that's tricky you
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know because things happen and you change and you don't want to waver I mean you you do things to make it work
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but you stay with what you believe you know I think that's uh not the easiest
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thing to do especially you know when you're you're a highly leveraged company
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and you know you could go out of business tomorrow and I think that was one of the toughest things we had is how
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do you manage all that you know how do you take that Focus away from you that you got this highly leveraged and just
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focus on how do you get the business to work you know and how do you make it work a business that's not working but
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we had a lot of confidence we were very fortunate I told you my background Bill and John had Sim
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wonderful backgrounds so we had three really seasoned people who got along very well they're still like my brothers
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we still are very friendly you hear partners that don't talk we just get along very well so again you take three
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personalities very different and how do you make them work and we all have different skills and how do you make
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that work that you don't step on your toes and stuff that's all tricky you
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know because we never did that before all of a sudden the buck stops here you know before we always worked for
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somebody and there was always somebody else making the ultimate decision now you're making all the decisions it's a
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big change I think what was fortunate that we felt we were ready to do it you know and and and but but I can't tell
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you you don't have sleepless nights at times about it and maybe one of the toughest times we ever had that maybe
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was one of the things that really shaped colds uh 1987 we had like a mini recession
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we're just one year into this whole thing right still very leveraged you know cuz we actually paid it off but it
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was the next year and uh everything looks like Christmas is could be a disaster you
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know because we're in this mini recession or maybe bigger than a mini recession and I remember going home and
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thinking what the hell do we do and I called Bill and John at home I said let's meet at 6:00 tomorrow morning and
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let's talk and so the three of us sat down and we said we have two choices one
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is just hunker down you know and and just ride it out and try and survive well let's do something dramatic and and
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and I came up with a plan with them that uh we would lower our prices make ourselves super
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competitive would put more marketing dollars out there and every marketing extra dollar had to be saved by expenses
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so we had to get the whole company to sit down and say we're going to cut this
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amount of dollars in expenses we're going to put it into marketing but all rock them and sck them marketing and
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we're going to lower our prices and we're going to bring in you know enough
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Goods really put it in but you know we had some wonderful vendor relationships where we maybe had our backside covered
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a little bit we didn't you know totally and we said we're just going to go for
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it but with protection we had a 16% Christmas that year probably better than any other retail we were very small but
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doing that gave us such confidence and it also showed like if we really step out there but with good thought you know
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we we protected ourselves with expenses protected ourselves with vendors but it worked and uh and that was a big turning
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point for us and we we started getting this momentum but that was a tough decision to make cuz if it didn't work I
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mean we were protected but you're never 100% protected so these are some of the
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things we remember uh as as uh special things in in in in the career of coals let me ask
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you one last question how do you define success well that's interesting I I uh I
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guess if I look at my career you know I for many years you know I work for for companies work my
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way up so success I'll tell you when I was just starting I'll tell you what I
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made at Macy's I mean I made 3,200 a year and they said don't tell anybody
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cuz you're from Wharton and we pay a little more I didn't tell anybody because all my friends are making more
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money you know and and so I I said in life boy if I can make 10,000 you know at that time I'll be doing good then I
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made 10,000 didn't mean anything you know cuz half of half of what I made different went into taxes you know or
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whatever and it didn't change my lifestyle so I think it's success is having satis doing something that you
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have passion for and that you end up whatever that is that you do well at it and and you have satisfaction that that
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you had a successful career whenever you chose none of us thought about making a
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lot of money making money is wonderful but that was always over here someplace that like if we could made Cole
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successful we'll do well right but the satisfaction of taking this little company and making it you know we never
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dreamed it be 19 billion I'll tell you somebody said you dreamed that I said
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are you kidding me I would have passed out you know we wanted to make the next day you know and then we'd go from here
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to here it was a building block but it was doing something you loved that you had passion for and you made something
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happen and it might be being an artist doing a great painting you know being a school teacher that that has these kids
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all go to college you know or whatever it is but something that that you have a goal for and you achieve it if at one
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part of it you make money that's great you know I I I don't think that was ever
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the motivator but you're happy as hell to have it you know and and it's changed
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my whole life because I have this money and and and it's also as I retired you
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know I always had a lot of energy and what do you do and one of the things my wife we both grew up middle class and uh
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my parents I mean sent me to Wharton but I worked there you know Summers I worked
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after school we didn't have the money I always kid you have a lot of people with
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you know silver spoons and I had a lead pipe but I didn't really you know but I
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wasn't a wealthy kid uh but I was so happy that I that I went to Wharton and
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it's always been and so when we you know retired what was I going to do somebody
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said you know you'll go I have a lot of energy to go to work I said I'm not
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going to work eight days a week anymore and you're not going to build another
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coals you know and so we decided to like give back we've been so fortunate and
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we've got involved in a lot of charitable things and of course one of my most favorite is being involved and
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that W you know I love it and the retail Center and the students and it's just
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all good but it is such a wonderful feeling that we're able to give back and
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do things and we want to do it in our lifetime you know a lot of the old days you know you'd have a foundation and
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when you died you know they give the money I'm sure there'll be something
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left but it's nice to do it when you're Al and to be involved in it and see it
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happening and it's our choices and it isn't somebody else's choices and so I
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think that's you know all the success I I think I can look back and here we got this $1 19
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billion company it's still there and it's still doing well and we employ all
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these thousands of people and we helped a lot of people be pretty success successful I think that's a wonderful
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feeling of success and that today because we were successful we can give back and help other people and it's a
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wonderful feeling and uh we're proud you know I'm really proud to do that thank
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you so much for speaking with knowledge at War you're very welcome thank [Music]
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you [Music]