Can Target Hit the Bull's-Eye Again?
After massive layoffs, a bruising data breach, and a failed Canadian expansion, can new CEO Brian Cornell help Minnesota's beloved retailer succeed in an increasingly competitive landscape?
At Left, Target Corp. board chair and CEO Brian Cornell. At right, Target Corporate Headquarters. Photos by Ackerman + Gruber.
On any given workday, the Target Corporation headquarters buzzes like a hive. The lobby escalators down to street level on Nicollet Mall are like a factory’s conveyer belt, moving employees who seem cut from a similar cloth: young, bright-eyed, well dressed. Their distinctive bull’s-eye badges set them apart in the skyways and coffee shops, and give them access to the company’s 10th Street co-working space, which looks like the lobby of a boutique hotel. With more than 7,500 employees, Target is the biggest single employer in downtown Minneapolis. Its roots in the Dayton’s department store are inexorably entwined with the very DNA of Minnesota—embodying a combination of stylish thrift, responsible citizenship, and an air of optimism that reflects Minnesota back to itself and to the rest of America.
But a year ago was a very different story. In March, 1,700 people lost their jobs at Target headquarters, the biggest corporate downsizing in the state in more than a decade. The news was filled with images of dazed employees who had just gotten the axe spilling out onto Nicollet Mall, possessions hastily stuffed into identical boxes.
That terrible occurrence had been preceded by equally bruising events. More than a year before, during the 2013 holiday season, a data breach left more than 100 million customers’ digital information at the mercy of hackers—at the time, the worst such failing for a company of its size. Then in 2014, amid widespread dysfunction that accompanied the ambitious ramp-up and opening of the new Target Canada stores, CEO Gregg Steinhafel resigned.
Revenue and stock prices were down. After the data breach, Target’s profits dropped 46 percent from the prior year. What was worse, there was a sense at headquarters that the company had lost its way. Target’s culture had become too insular, too inefficient, rife with politics and calendars full of meetings, innovation stifled by caution and inertia.
Target Plaza Commons meeting space
Target had long been a company that could seemingly do no wrong, delivering well-designed products at affordable prices like clockwork. Now dinner party conversation reflected the opposite—Minnesotans questioned of whether the company could keep up with competition and change. In the past, Target had a niche between price-focused discounters Kmart and Walmart and department stores. But increasingly its middle-class customers were being lured by Amazon and Costco, or by cheap-chic clothiers such as H&M. It seemed suddenly conceivable that Target—and its jobs, and its place in Minnesota culture—had seen its best days.
in a small conference room on the 26th floor of Target’s headquarters, CEO Brian Cornell offers his hand, a disarming grin, and an air of genial intensity. He’s wearing jeans and an open-collared shirt. He’s serious but straightforward, and seems like a guy you wouldn’t mind working for. The product of a humble background in Queens, he’s a fan of Bruce Springsteen and famed UCLA basketball coach John Wooden, holding up the former as an exemplar of adaptation and admiring the latter’s superhuman attention to detail.
Cornell is a product of corporate America. In his mid-fifties, he’s held executive positions at PepsiCo, Sam’s Club, Michaels, and Safeway. But he’s something different for Target—a chief executive who didn’t come up within the company ranks. He admits that, when he arrived in August of 2014, doubts about the company—in the community, the business world, and the press—were entirely grounded.
Monitoring social media at Guest Central. Photo by TJ Turner.
The perception within the company was that bureaucracy and timidity had squelched the bedrock of Target’s success. One former employee describes how a weekly advertising circular was hamstrung by the requirement that decisions as small as what photos to use be approved up a cumbersome chain of command, which required pushing back deadlines and fostered a sense that management didn’t trust its teams on the ground.
While there’s an inevitable level of complexity at a company of Target’s magnitude—with 341,000 workers around the world and almost $74 billion in earnings in 2015—many felt the culture at headquarters had become inwardly focused and inefficient. One former staffer says her schedule contained “nonstop” meetings, often over matters that could have been settled with a few emails. When meetings happened, the invite list could contain workers whose involvement in the agenda was tangential at best.
Yet skipping a meeting in order to get some work done could leave one subject to peer pressure amid a competitive internal culture. “Definitely a dusting of high school” is how one former staffer describes the emphasis on fitting in through attitude and dress. Some felt being “fast, fun, and friendly” (the company’s description of its culture) was valued more than quality work or productivity.
After the 2008 housing crisis, Target began focusing on cutting costs to deliver lower prices to its customers, feeling squeezed by competitors such as Walmart. It was a strategy that may have seemed necessary during the Great Recession, but was based more on boardroom strategizing than on-the-ground understanding of customers needs. “I think coming out of all that success we became a little insular and lost sight of that, frankly,” says COO John Mulligan, a company veteran of two decades.
Inside the Product Design and Development space at Target's Minneapolis HQ
Meanwhile, Target Canada was an unqualified disaster. The company had bought the leases of a chain of failing stores with questionably desirable locations, and a new shipping-and-inventory system bogged down under the weight of incorrect or incomplete data. Store shelves were empty while warehouses bulged with products despite herculean effort from staff on the ground. It was a perfect storm of bad luck and regrettable decisions, but also marked by a lack of understanding of the customer and the market.
“Two-and-a-half years ago, Target took their customers for granted,” says Akshay Rao a professor at the U of M’s Carlson School of Management. “They thought Canadians were Americans who talked funny and had better healthcare.”
In May of 2014, internal frustration went public when the snarky NYC media site Gawker published an open letter by an anonymous Target employee. It was absolutely scathing. “You’re penalized and viewed as unfriendly and not a team player if you spend too much time in your cube working and not enough time socializing,” it read, going on to accuse the company of promoting lax workers based on popularity and a conformist, passive-aggressive culture.
In years past, the expectation would be that Target would circle the wagons in the face of such criticism. Instead Jeff Jones, the company’s Chief Marketing Officer and a newcomer to headquarters, wrote a response titled “The Truth Hurts,” distributed it to Target’s staff, then posted it on LinkedIn. Jones quoted Émile Zola on unpleasant truths, described his initial anger in reaction to the Gawker letter, then admitted much of it was true. It was a remarkable mea culpa from the executive suite.
Senior Vice President of Product Design Julie Guggemos with Team Members; guggemos drives much of the aesthetic that ends up on target shelves
Jones says that Target leadership now aims in general to be more communicative, less formal, and unafraid to talk openly. “It’s really a shift from a way of communicating that was, essentially: not much, and rarely ever externally,” Jones reflects. “And when we communicated internally, it was largely leaders reading scripts.”
Cornell’s arrival is spoken of today as something akin to a Glasnost moment (only a slight exaggeration). He immediately held a company-wide rally at headquarters, posed for selfies with staffers and their families. He ate lunch in the cafeteria and talked to people informally in a way that Target CEOs had never done. He eschewed HQ’s premiere office in favor of a smaller one closer to Guest Central, the tech-heavy command hub where social media trends and breaking news are monitored in real time.
To counter the company’s drift, Cornell moved decisively. Within nine months, layoffs claimed the jobs of 18 percent of staff at headquarters. He also pulled the band-aid off the sore that was Target Canada, closing 133 stores in April of 2015. Some 17,000 workers lost their jobs and the company took a $5.4 billion hit. Target stock subsequently rose to near record highs, and the company’s five quarters of positive performance bolstered Cornell’s pay by millions of dollars in stock awards and incentives. Last year he was reported to be the second-highest-paid retail executive in the country.
“It’s not a broken company,” Cornell says. “It never was.”
Guggemos with products from the Marimekko for Target Line
The design floor at target headquarters, full of mock-ups and prototypes of everything from children’s shoes to dog’s blankets, was recently renovated with open workspaces and a communal kitchen. The same goes for the space at HQ devoted to Target’s website. Until recently the company’s engineers, designers and coders worked in cubicle land. Now workers mingle at standing desks and problem solve in collaborative groups. The walls are whiteboards, covered with plans and ideas. Small squads tackle discrete tasks aimed toward improving the notoriously glitchy target.com. Even the executive suite on the 26th floor was renovated prior to Cornell’s arrival, with walls literally torn down to make the space feel more open, accessible, and collaborative.
Tech companies adopted this kind of start-up model more than a decade ago, but for Target, and for retail in general, it’s an epochal shift. The overall goal is to break down the company’s silos and bureaucratic layers that Cornell describes as having been “very rigid practices.”
The company is becoming more nimble when rolling out new products. The Cartwheel app, for example, started out modeled after Facebook with users posting shared experiences. After user feedback indicated customers preferred daily bargains as well as a loyalty-club feel, the team quickly changed course. Under the previous regime, this obviously common-sense move might have been hindered amid countless meetings and interminable waits for approval. In another shift toward an entrepreneurial mindset, the company created an accelerator program and will select 10 startups to develop their ideas in a space being custom built at Target HQ. They’ve also recruited three well-pedigreed entrepreneurs in residence to think broadly about new opportunities in an industry in upheaval.
At the same time, Cornell is a stickler for fundamentals. Under his watch the company has allocated $1.8 billion in improvements primarily in managing its supply chain as well as its tech infrastructure for 2016, a number that rises to $2.5 billion in 2017 and beyond. He’s also directed the company to focus on innovation in its strengths—style, baby goods, kids, wellness—while stocking the right brands in the right amounts for fundamentals such as bottled water and laundry detergent. The company might lure millennials with more organic produce and new parents with expanded carseat options, but its success has always relied on then getting them to pile their carts with household staples. Cornell relies on data about the company’s consumers as well as “immersions,” in which he travels with staff to the homes of average folks to pick their brains (other retailers do it too, but it’s rare for a CEO to participate).
Focus on the customer might seem obvious, but large retailers often drift. Rao at the Carson School cites “managerial hubris” in describing J.C. Penney’s recent misstep when, in 2011, its CEO simplified the chain’s pricing and lost its emphasis on the discounts its core customer treasures. “They said, We don’t need to do any market research. We know our customers,” Rao says. “And it turned out they didn’t.”
Business is darwinian. There’s adaptation on the one hand, death on the other. Few in the Twin Cities are still lamenting the death of Borders bookstores, a company shattered by the Great Recession and an inability to adapt to digital pressures. But the loss of Target would be catastrophic. To modify the old saying, when Target sneezes, Minnesota catches a cold.
Target is rightfully proud of recent successes: small flexible stores such as its new Dinkytown location; prototypes of innovative retail displays, such as a cooler of fresh baby food, at its Stinson store in northeast Minneapolis; and online orders that customers pick up at brick-and-mortar stores.
On the open work floor of the Cartwheel team
All well and good on their own terms, but hardly revolutionary. Physical competitors such as Costco bite into Target’s territory for food price and selection. And a digital storm continues to beat at the shutters of the retail industry, with Amazon Prime making home delivery increasingly attractive for the staples that make up much of Target’s sales. Why, Target must ask itself, should a customer venture out to buy Tide when she can just order it automatically by pressing the Amazon Dash button she’s stuck to the washing machine?
Rao and others are confident Target can compete by relying on complex, data-driven analysis to fine-tune prices, and studying the behavior and emotions of the customer to make sure its adherents have an experience that satisfies. On the digital front, the millions Target has dedicated to shoring up its infrastructure looks like a prudent bet against an uncertain future, in which finding and keeping customers will be an ongoing battle on multiple fronts.
Even two years ago, it seems unlikely the company would have allowed a reporter inside to talk about its inner workings, its culture, and its efforts to be more connected and less monolithic. There’s been a palpable sense of relief now that the elephant in the room was finally acknowledged. “You could feel it ramping up,” a former HQ staffer says about the tension inside the company a couple of years ago. “Something was going to change, or shit was going to hit the fan.”
Target is as near and dear to Minnesota as a company can be to a place. And while we’re a state that rightfully touts its national role as a lifestyle and thought leader, our own regional culture can be risk averse and in need of a shot of innovation. After working through its challenges, hitting the bull’s-eye might be trickier for Target than in years past, but its aim has certainly sharpened.
alternate workspace at target plaza commons
inside target corporation headquarters
upcoming goods in the product design and development space
ideas juxtaposed in the product design and development space
foosball and whiteboards in target's cartwheel work floor
target has recently adopted an open, collaborative layout in many of its headquarters work spaces