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Our Guest today is JH Baker the former
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president of Kohl's Mr Baker thank you
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so much for joining us today you're very
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welcome so when you go public uh how
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does that change how did that change
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goals uh and and how did that create new
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challenges that you have to address well
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let's start first on the plus side it
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gave us the opportunity access the cash
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to start to build new stores and then as
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we got bigger we generated our own cash
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so that helped us to this expansion that
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you asked about the other thing people
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said wow it's really tough when you go
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public and I think today it's tougher
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than it was when we went but you've got
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to report numbers naturally you you know
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you're we used to have to report every
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month and then of course quarterly and
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you know they're very tough if you miss
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you know buy a penny your estimate they
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could kill your stock and you know it's
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a crazy world but uh but I said to so
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somebody said must be really tough being
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public I said you know what's tougher
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when we were highly leveraged and a bank
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you know had our debt they could have
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just gone with a SP it and turned it off
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and said you know we're we're not giving
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you any more money that's tough uh going
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public was much easier the three of us
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sat down it's very interesting and you
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know going public you know you have to
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make numbers you have to but we we sat
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down and said we're just going to run
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this company the right way and and we're
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certainly have a great allegiance to
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people who buy our stock but the biggest
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Allegiance is to our own employees and
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we got to make sure that we're going to
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run the company right not make any
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short-term things that will hurt us
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longterm and we really adhered to that
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I'm not saying we didn't want to make
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our numbers and I could tell you
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something I'm really proud in 14 years
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we never missed a quarter wow I mean
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we've had might have had a a down month
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but we never had a down quarter in 14
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years so I'm kind of proud of that part
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of that is because we had a lot of
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growth and that helped us a lot and the
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other thing I think we just had a great
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concept and uh in the 9s we might have
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been the hottest retailer in America uh
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and we started building first 10 stores
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15 and then we got up to 100 stores a
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year and uh and we we never had this
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Vision that we're going to be National
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retailer I think if you have that Vision
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you when you start you start to add too
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many people you start to do maybe some
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crazy things we just went step by step
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we just wanted to be we're not going to
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be the biggest we just wanted to be one
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of the best retailers we wanted to make
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money and we wanted to be successful
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that was it and and and we didn't have
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this Vision that we had to go but we
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kept going and you know we went into
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Chicago very successful Detroit fa
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except Minneapolis then we went into
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other areas went to Texas went to LA
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then we went East we went to
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Philadelphia and Pittsburgh and then we
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go to New York and and it worked so all
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of a sudden we're looking at ourselves
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and we're nearly a national company and
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we never dreamed you know and then uh
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but it happened and and today I mean
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we're proud that today we're just short
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of 1,200 stores and wi $19 billion I
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have a t-shirt from 1986 at the 164th
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largest department store one of the
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buyers gave it to all of us so today
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there's probably what 20 or 30
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department stores and we're number two
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after Macy's we're 19 billion we were a
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little behind pennies until
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unfortunately uh uh they had one of the
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worst years in the history of retailing
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they're about 14 billion now so we're
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the second biggest retailer and and you
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know after Macy's a Macy's bought May
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Company to be that big so uh that's
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pretty amazing and kind of proud of that
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and uh and we're continuing to be you
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know I think a wonderful store we all
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retired in 2000 got off I got off the
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board in six or seven and they just got
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off the board this year they're a little
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younger my protege actually runs it now
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and uh Kevin Manel and you know we're
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proud that when we left we were eight or
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n billion and now we're 19 billion so I
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think we left the foundation that's very
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exciting that's that's remarkable uh let
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me ask take you back to the 1990s to ask
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a question uh uh you went public but the
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other big thing that happened in the
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1990s is that the internet came along
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and e-commerce came along well it really
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wasn't big at that time just starting
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1995 96 yeah but it really more in the
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2000s as as a fast growing brick and
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mortar retailer what was your first
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reaction to the arrival of e-commerce
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was it to dismiss it as a passing fad or
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did you think that it's going to become
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well to be honest when we uh while the
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time we ran up into 2000 the internet
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didn't have much you know there wasn't
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much in it uh what we did spend a lot of
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money is improving all our systems so
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that we automated so many things uh um
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both in store experiences at the
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register uh all our buying systems you
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know all our allocations who spent a lot
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of money we believe very strongly in in
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in being a head of the curve and not
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this was just starting and I and it
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really more as we were on the board and
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we were very vocal I can tell you this
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how important this was going to be and
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that initially like it didn't report to
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the president to Kevin right and I said
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that's the biggest mistake in the world
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this is going to be your biggest growth
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vehicle it's going to explode that's
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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
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to be incredibly important
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and uh they were a little slow in
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getting into but then he took it over
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and they've really you know today you
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know there as the other retailers I
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think a lot of the brick and water
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retailers were slow in doing it they saw
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it but I don't think they realized how
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big it was going to be how important it
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was going to be how to give you an
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example when I ran
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coals uh with my partners 75% of our
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advertising was newspaper
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and then their 25% was television or
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radio that was it today newspaper and
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I'm not exactly sure the last time I
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spoke to Cam was under 40% okay and
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dropping and radio and television you
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know again changed because you got 80
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million television stations before you
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could zero in pretty easily and this
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whole social networking I'm thecon this
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whole internet is so big today and I
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think it's still a big problem for uh
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for our industry I think everybody knows
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it's important everybody's putting a lot
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of money into it uh they're finding out
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that it costs more to do that than it
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does to sell from the stores so the
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profit margins are a little different
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it's something that I I want to take a
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look at and try and maybe with the baker
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retail Center and things could we study
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this a little bit more how do we become
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more efficient how does it work better
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what percent of the business what's the
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growth you know I think there's a lot of
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questions there I mean all of a sudden
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you have a company named Amazon has come
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on they're like a giant retailer and
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they're able to do all this and not make
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any money you know because they reinvest
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the money and people say it's fine and
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the stock I mean last year they had a
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little blip because they didn't do as
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well but the point is they don't make
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much money if a retailer did that the
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stock would be down to zero you know if
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you miss buy a penny you you could lose
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10% they've been able to do this because
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course they're taking such market share
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and people believe one day I mean alone
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in the world so I I think what's
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happening naturally there are other
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people doing things like that there's
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new companies coming out to compete with
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them plus every brick and mortar Place
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understands it's part of the business
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and instead of brick and morar being a
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disadvantage the combination of being
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able to use the internet you can ship
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from stores you can also return in the
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stores and so the combination is
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something that can work very well as
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long as you understand it and and and
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one of the big problems too with
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advertising when you ran in newspapers
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you know you you knew where your
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circulation who you were hitting and at
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the time and and so you know you know
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how many pieces you sold and you really
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had you could see if the advertisement
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was working not working the items were
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good or bad now so much of it your
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advertising in a way you're not really
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getting the results immediately they'll
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come and they'll be cumulative but it's
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it's a little trickier so I think for
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everybody um it's a more it's a
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complicated thing but it's also changed
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you know and the people who are going to
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be around you look at retailers how many
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are gone because whoever the leadership
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were didn't change with the times and I
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think the retailers who are changing and
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adapting to what's new and what
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customers want you got one thing I think
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in retailing it's never changed got to
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take care of the customer so it starts
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with the merchandise you have the great
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merchandise you got to have an
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environment where they want to shop and
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you got to find out how they want to
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shop and if they want to shop you know
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with a telephone if they want to shop
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you know with their computer if they
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want to shop online however they want to
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shop you want to be there and the
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younger generation I I was just in some
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classes you know talking to a lot of
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students how many read newspapers one
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hand goes up you know that's not what
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they do today you know we grew up
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reading newspapers they're not so long
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as we understand what is this generation
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cuz this is the generation and and the
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generation above them the generations
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coming up that's your customer right so
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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
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top of this so it also makes people who
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are running companies today to be more
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broad-based you know the merchant Prince
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of yesterday maybe of this great store
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guy you know or a young lady today you
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got to be more well-rounded and
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understand more things but that's okay
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that's what the business is and you got
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to be open-minded willing to change and
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the guys and girls that do that going to
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be very successful and other ones will
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be like all the companies the
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130 department stores that don't exist
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today so just a couple last questions if
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you think back on your you spent your
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whole life in retail uh think back on
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your career what would you say is the
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biggest leadership challenge that you
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ever faced and how did you deal with it
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and what did you learn from
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it I think uh I'm trying to think the
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greatest um one of the problems you
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always have as you kind of get promoted
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and let's say in my early career then
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I'll go to maybe koh's you know when I
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became uh say a divisional merchandise
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manager on GMM I always felt you know I
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was a great buyer you know I understood
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and I could be the best at that and then
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when you move up you now have say six
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buyers reporting to you or a GMM you've
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got half a store reporting to you you
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then don't have to be the best buyer
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what you have to be is the best manager
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of people and understanding how to get
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people working well together and looking
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at at the picture the the big picture
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and you know how do you find the
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businesses that you want to invest in
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but then you got to give them the
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authority and responsibility to do the
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job and that takes time to learn and
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initially that's a tricky thing to learn
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walking into Kohl's I mean here's we
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understood Kohl's but it was kind of a
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shambles when we took it over you know
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was doing poorly it was losing money you
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know wasn't gaining marget share wasn't
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doing anything so I I I think you know
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when you stand there you look at wow
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this is this is something and here the
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three of us you know uh we had to invest
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our own money so we had a you know we
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had a borrow money because we weren't
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all wealthy guys you know and we had a
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borrow money to invest in it so here we
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are with borrowed money you know with a
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company that's kind of really tough and
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yeah you sit there and you know you
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shake a little bit and and you don't
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have all the greatest people initially
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and yet you've just got to sit down and
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and God and say what do we want this
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company to be you know we spent quite a
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lot of time as I said we use the outside
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service and and what I'm kind of proud
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of we we wrote like a half page thing
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what Kohl's is and today he Kevin sent
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me a manual that they give to all the
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employees it starts with that same damn
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page you know from 1986 I mean the cies
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changed a lot a lot of exciting things
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but that same principle is what it is
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today and we had to do that and stick to
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that you know and and that's tricky you
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know because things happen and you
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change and you don't want to waver I
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mean you you do things to make it work
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but you stay with what you believe you
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know I think that's uh not the easiest
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thing to do especially you know when
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you're you're a highly leveraged company
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and you know you could go out of
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business tomorrow and I think that was
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one of the toughest things we had is how
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do you manage all that you know how do
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you take that Focus away from you that
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you got this highly leveraged and just
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focus on how do you get the business to
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work you know and how do you make it
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work a business that's not working but
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we had a lot of confidence we were very
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fortunate I told you my background Bill
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and John had Sim
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wonderful backgrounds so we had three
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really seasoned people who got along
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very well they're still like my brothers
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we still are very friendly you hear
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partners that don't talk we just get
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along very well so again you take three
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personalities very different and how do
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you make them work and we all have
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different skills and how do you make
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that work that you don't step on your
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toes and stuff that's all tricky you
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know because we never did that before
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all of a sudden the buck stops here you
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know before we always worked for
00:14:30
somebody and there was always somebody
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else making the ultimate decision now
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you're making all the decisions it's a
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big change I think what was fortunate
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that we felt we were ready to do it you
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know and and and but but I can't tell
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you you don't have sleepless nights at
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times about it and maybe one of the
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toughest times we ever had that maybe
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was one of the things that really shaped
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colds uh
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1987 we had like a mini recession
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we're just one year into this whole
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thing right still very leveraged you
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know cuz we actually paid it off but it
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was the next
00:15:07
year and uh everything looks like
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Christmas is could be a disaster you
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know because we're in this mini
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recession or maybe bigger than a mini
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recession and I remember going home and
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thinking what the hell do we do and I
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called Bill and John at home I said
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let's meet at 6:00 tomorrow morning and
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let's talk and so the three of us sat
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down and we said we have two choices one
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is just hunker down you know and and
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just ride it out and try and survive
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well let's do something dramatic and and
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and I came up with a plan with them that
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uh we would lower our prices make
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ourselves super
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competitive would put more marketing
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dollars out there and every marketing
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extra dollar had to be saved by expenses
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so we had to get the whole company to
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sit down and say we're going to cut this
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amount of dollars in expenses we're
00:16:06
going to put it into marketing but all
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rock them and sck them marketing and
00:16:11
we're going to lower our prices and
00:16:13
we're going to bring in you know enough
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Goods really put it in but you know we
00:16:18
had some wonderful vendor relationships
00:16:21
where we maybe had our backside covered
00:16:23
a little bit we didn't you know totally
00:16:26
and we said we're just going to go for
00:16:27
it but with protection we had a 16%
00:16:32
Christmas that year probably better than
00:16:34
any other retail we were very small but
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doing that gave us such confidence and
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it also showed like if we really step
00:16:44
out there but with good thought you know
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we we protected ourselves with expenses
00:16:48
protected ourselves with vendors but it
00:16:50
worked and uh and that was a big turning
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point for us and we we started getting
00:16:56
this momentum but that was a tough
00:16:58
decision to make cuz if it didn't work I
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mean we were protected but you're never
00:17:02
100% protected so these are some of the
00:17:05
things we
00:17:06
remember uh as as uh special things in
00:17:10
in in in the career of coals let me ask
00:17:13
you one last question how do you define
00:17:19
success well that's interesting I I uh I
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guess if I look at my
00:17:26
career you know I for many years you
00:17:29
know I work for for companies work my
00:17:31
way up so success I'll tell you when I
00:17:34
was just starting I'll tell you what I
00:17:36
made at Macy's I mean I made 3,200 a
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year and they said don't tell anybody
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cuz you're from Wharton and we pay a
00:17:43
little more I didn't tell anybody
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because all my friends are making more
00:17:45
money you know and and so I I said in
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life boy if I can make 10,000 you know
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at that time I'll be doing good then I
00:17:53
made 10,000 didn't mean anything you
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know cuz half of half of what I made
00:17:57
different went into taxes you know or
00:17:59
whatever and it didn't change my
00:18:01
lifestyle so I think it's success is
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having satis doing something that you
00:18:06
have passion for and that you end up
00:18:09
whatever that is that you do well at it
00:18:13
and and you have satisfaction that that
00:18:15
you had a successful career whenever you
00:18:18
chose none of us thought about making a
00:18:21
lot of money making money is wonderful
00:18:24
but that was always over here someplace
00:18:27
that like if we could made Cole
00:18:29
successful we'll do well right but the
00:18:32
satisfaction of taking this little
00:18:34
company and making it you know we never
00:18:36
dreamed it be 19 billion I'll tell you
00:18:38
somebody said you dreamed that I said
00:18:40
are you kidding me I would have passed
00:18:41
out you know we wanted to make the next
00:18:45
day you know and then we'd go from here
00:18:47
to here it was a building block but it
00:18:49
was doing something you loved that you
00:18:51
had passion for and you made something
00:18:54
happen and it might be being an artist
00:18:56
doing a great painting you know being a
00:18:58
school teacher that that has these kids
00:19:01
all go to college you know or whatever
00:19:03
it is but something that that you have a
00:19:06
goal for and you achieve it if at one
00:19:09
part of it you make money that's great
00:19:12
you know I I I don't think that was ever
00:19:15
the motivator but you're happy as hell
00:19:17
to have it you know and and it's changed
00:19:19
my whole life because I have this money
00:19:22
and and and it's also as I retired you
00:19:25
know I always had a lot of energy and
00:19:27
what do you do and one of the things my
00:19:29
wife we both grew up middle class and uh
00:19:32
my parents I mean sent me to Wharton but
00:19:35
I worked there you know Summers I worked
00:19:37
after school we didn't have the money I
00:19:39
always kid you have a lot of people with
00:19:41
you know silver spoons and I had a lead
00:19:43
pipe but I didn't really you know but I
00:19:45
wasn't a wealthy kid uh but I was so
00:19:48
happy that I that I went to Wharton and
00:19:51
it's always been and so when we you know
00:19:54
retired what was I going to do somebody
00:19:56
said you know you'll go I have a lot of
00:19:58
energy to go to work I said I'm not
00:20:00
going to work eight days a week anymore
00:20:02
and you're not going to build another
00:20:03
coals you know and so we decided to like
00:20:06
give back we've been so fortunate and
00:20:07
we've got involved in a lot of
00:20:09
charitable things and of course one of
00:20:11
my most favorite is being involved and
00:20:13
that W you know I love it and the retail
00:20:15
Center and the students and it's just
00:20:17
all good but it is such a wonderful
00:20:20
feeling that we're able to give back and
00:20:22
do things and we want to do it in our
00:20:24
lifetime you know a lot of the old days
00:20:26
you know you'd have a foundation and
00:20:28
when you died you know they give the
00:20:30
money I'm sure there'll be something
00:20:31
left but it's nice to do it when you're
00:20:33
Al and to be involved in it and see it
00:20:36
happening and it's our choices and it
00:20:38
isn't somebody else's choices and so I
00:20:42
think that's you
00:20:44
know all the success I I think I can
00:20:47
look back and here we got this $1 19
00:20:49
billion company it's still there and
00:20:50
it's still doing well and we employ all
00:20:53
these thousands of people and we helped
00:20:56
a lot of people be pretty success
00:20:58
successful I think that's a wonderful
00:21:00
feeling of success and that today
00:21:02
because we were successful we can give
00:21:04
back and help other people and it's a
00:21:06
wonderful feeling and uh we're proud you
00:21:09
know I'm really proud to do that thank
00:21:12
you so much for speaking with knowledge
00:21:13
at War you're very welcome thank
00:21:20
[Music]
00:21:27
you
00:21:28
[Music]
