Harvard Business Review Business And Society Former Best Buy CEO Hubert Joly: Empowering Workers to Create ‘Magic’ December 02, 2021 Summary. Hubert Joly was behind an amazing turnaround at Best Buy. While everybody was saying he should lay people off to solve the company’s problems, Joly instead listened to the people working for him and found solutions that didn't involve people losing their jobs... more Former Best Buy CEO Hubert Joly: Empowering Workers to Crea. Hubert Joly, former CEO and chair of Best Buy, says people are not a resource, they are the creative engine of innovation and change that companies urgently need.HBR editor in chief Adi Ignatius sat down with Joly, author of The Heart of Business: Leadership Principles for the Next Era of Capitalism, in the fifth episode of our new video series “The New World of Work,” to talk about: + Making meaningful purpose a genuine priority of business operations * The “human magic” of empowered and self-directed employees * Admitting you don't have all the answers is a sign of strong leadership. By putting people at the center of your company’s purpose, Joly says, we “start with a declaration of interdependence, where you embrace all stakeholders.” “The New World of Work” explores how top-tier executives see the future and how their companies are trying to set themselves up for success. Each week, Ignatius interviews a top leader on LinkedIn Live — previous interviews included Microsoft CEO Satya Nadella and former PepsiCo CEO Indra Nooyi. He also shares an inside look at these conversations —and solicits questions for future discussions — in a newsletter just for HBR subscribers. If you're a subscriber, you can sign up here. Transcript ADIIGNATIUS: So Hubert, welcome. It’s really great to have you. Let’s start with your role in the amazing turnaround at Best Buy. If there was ever a company that seemed likely to be wiped out by the forces of e-tail and Amazon, it would be Best Buy. How in the world is Best Buy still around? HUBERT JOLY: Yeah, you're right. I mean, back into 2012, everybody thought we were going to die. There was zero buy recommendations on the stock. I think there’s a few lessons that can be learned from that, that are actually very relevant to this challenging time we're in. The first thing: it was a very people- centric turnaround, Everybody was saying, “You better cut, cut,cut, close stores, fire a lot of people.” The usual recipe of turnarounds. No, it started with listening to the front liners. They had all of the answers. And Ispent my first week in a store in St. Cloud with my blue shirt and my khaki pants, the badge called “CEO in Training”, to just listen to the front liners. They had all of the answers and our job was easy. So we talk today about empathy, I think it was empathetic listening to the front liners and to the customers addressing the pain points. The other thing, as relates to people, is that headcount reduction is the last resort. As leaders, we need to first focus on growing the top line. And with cost, first focus on what I call the non-salary expenses, which is all of the elements of the cost structure that have nothing to do with people, which at most companies is the majority of the cost structures. Of about $2 billion we took out in terms of cost, about 70% was non-salary expenses. So a lot of people focus: it’s about creating energy. A company at the end of the day, you and I have talked about th duals working together in pursuit of a goal. And so as leaders, sometimes we focus too much on the ‘what’ to do. The is a human organization made of indi ‘how’ is very important in finding ways to create that energy by co-creating the plan, getting going, celebrating wins. So that was the first phase. The second phase, which is also very relevant today, is about purpose. If I had joined the company and said, “The key thing we're going to do in the next few years is double the share price or the earning per shares,” who would’ve cared at the company? This is not motivating, And so what we did a few years into the journey was to redefine who we were. And we said, “We are not actually a consumer electronics retailer. We’re a company that’s in the business of enriching lives through technology by addressing key human needs.” And the beauty of that is, number one, it’s inspiring, but also it vastly expands the addressable markets. So as companies are hit by this crisis, sometimes you need to grow, you need to redefine what ultimate needs you are serving, And so you align the entire company around this. That was a second key thing.‘The third that I would highlight: you know the old method of top down managements, you take a bunch of smart people, they define what to do, and they tell other people what to do, they put incentives in place? That doesn’t work, right? I think motivation is leadership from the inside out. Try to define-and it’s a good moment actually to do it now-what’s important to me, what kind of a leader do I want to be? What kind of purpose do I want to pursue? And what is driving people around me? And connect, help everybody at the company connect what drives them with their work and with the purpose of the company. That’s how we unleash human magic and get these incredible results. So these are three important things in the industry that go beyond just the specifics of the Best Buy store. ADIIGNATIUS: As you said, you went on a listening tour initially. So I think you're saying that to create a winning strategy, you need to go deep into the company and connect with employees before you can even start to figure out what is the new mission, what is the strategy? Is that what you're saying? HUBERT JOLY: With the IBM turnaround that Lou Gerstner did in the early nineties, he said, “The last thing that IBM needs at this point is a vision. We need execution.” In our case, we found that the world needed Best Buy. Customers for some of our purchases, they need a place to touch, feel the products and ask questions. And importantly the vendors also needed us. Our problem was that all of our problems were self-inflicted, execution was terrible, prices were too high, [bad] online shopping experience. So it’s a case where, starting with listening to what’s happening on the frontline, to know what’s going on. And then it’s a case where operational progress creates strategic degrees of freedom. So sometimes, logically we say, “We need strategy first and then execution.” In this case, you flip it. It’s operational progress before strategy. Because if your prices are not competitive or your website is not working, there’s no point in doing strategy. So we started with a very incremental “let’s fix everything that’sbroken.” And then over time we elevated our game to define that new purpose and a whole new set of very, very exciting strategies, but it took time. ADIIGNATIUS: You use the term human magic and I don’t want to blow by that. It’s in your book. What is human magic? What do you mean by that? HUBERT JOLY: Human magic is when at scale you have employees that do things for each other and for customers that nobody has told them to do. So to illustrate the point, one day there is a young mother who comes to a store with a young child, and for th holiday, the child had a dinosaur as a gift. The bad news and the sad news is the dinosaur is sick. The way we know this is the head is dismantled from the body. So very sick. ADIIGNATIUS: Yeah. That's sick. HUBERT JOLY: Yes. And the child doesn’t want a new dinosaur, he wants the dinosaur to be fixed, to be saved. And so most stores, you would’ve been maybe sent to the toy aisle and with some luck you would’ve found it, a new dinosaur, but that’s not what the child wanted. And what happened at that store, the Best Buy store when he came in Florida, is two associates, who understood what was going on, they took the sick dinosaur, they went behind a counter and they started to perform like in “The Good Doctor” on Amazon, a surgical procedure, step-by-step explaining to the child the steps they were taking- ADIIGNATIUS: As if they were doctors. HUBERT JOLY: Yes. They were doctors. And in fact, we give them badges as dinosaur doctors. They substituted, of course, a new dinosaur and gave the child a cured dinosaur. Now, do you think, Adi, at the time that was a standard operating procedure at Best Buy on how to deal with a sick dinosaur? Or even better, maybe a memo from me, the very smart CEO, on how to deal with it? Of course not. They found it in their heart to make that customer, that little child, not even a customer, that child and that mother very happy. And so I think from a leadership perspective, inparticular at this time of great resignation, how do we as leaders create an environment where people naturally, from their heart, want to do this? One of the things we’ve learned during that turnaround journey was that the old Bob McNamara top-down management simply doesn’t work. Incentives don’t work. You have to help people connect what drives them. Which is the Golden Rule. & Subscribe to our Weekly Newsletter ~ The New World of Work Candid conversations on talent, tech, and the future of business. A special email series for subscribers, Sign Up Everybody wants to do something good to other people, and see how it connects to their work. Create an environment that’s very human. Where there’s genuine human connection. Where we are working at the same company, which we are, because we both work for Harvard. We get to know each other. It’s a safe environment. My compatriot René Descartes, the Cartesian philosophy said, “I think, therefore I am.” Ithink he’s wrong. He's dead. But he was wrong. It’s “Iam seen, therefore I am.” I exist. My boss knows what drives me, knows my struggle. Knows me as a human being, respects me as a human being and is interested in what my dreams are. We had a store general manager in Boston who would ask every one of the associates in the store, “What is your dream, at Best Buy, outside of bedroom? What is your dream?” A very practical question. We can ask everybody around us. Okay. Write down in the break room for everybody to see. And then he said, “My job is to help you achieve your dream.” And that’s the kind of leadership behavior with a lot of human focus, empathy, focus on each individual. Size doesn’t matter, right? I don’t care whether you have a company with 1000 people or a million people. It’s oneindividual at a time. Where you can focus on creating the environment where they can become the best, biggest, most beautiful version of themselves. ADIIGNATIUS: Is the issue about empowering people, respecting them and empowering them? Or inspiring them to create a little magic in their work lives? HUBERT JOLY: | think it’s a set of ingredients. And in The Heart of Business, of course being French, if you allow me, Ihave ingredients for a recipe, right? There's multiple ingredients. One, I think of the company focused on the noble purpose, doing something good in the world. Like in our case at Best Buy, enriching lives through technology is important because it focuses on something bigger than ourselves. That’s important. But the second thing is, we need the purpose. We need values. We need to know what values are. Because values are what people do when nobody's watching, right? We need some principles. And then we need clarity around decision-making. And that's one of the things I've learned during that journey is that as the CEO, I make very, very few decisions, And the key for me is to push them down as far as possible. So these blue shirts in my example, they knew they had the power. They were empowered in their store to do this. And with the sense of, “We are here to create happiness,” right? And I have this and then a colleague, Amy Edmondson talks about creating a safe environment, right. And Kamy Scarlett, head of HR, one day ina big conference in front of everybody says, “You know what SOP stands for?” Normally in retail, it’s “standard operating procedure”. She said, “No, no, no. It’s ‘service over policy’.” Right? And early on, when I joined, we said, “We should stop doing anything that's either stupid, goofy, or crazy.” That's that was the extent of the new policy. And so you empower. If you see something, do something. And it’s creating that sense that, yes, I can make a difference. I can create a world around me. Initially you can think that’s going to be chaos. No, because if you have this purpose, the values, the principles, clarity about what peopleare doing, that’s how you unleash your magic. It’s so beautiful to see. Because there was a point, Adi, where I said, “I've actually lost control of this operation. I mean, it’s completely out of my hands now.” And that’s when the performance started to skyrocket. ADIIGNATIUS: I have one question about flexible work. If 1 understand things right, when you came to Best Buy, there had been a flexible work program. But your initial response was, “Yeah. Let's get people together. We're building a culture.” So talk about what you were trying to achieve, and how that played out. HUBERT JOLY: And then what would be relevant today? Because that was in 2012. So when I joined the company, there was a program called ROWE, Results-Only Work Environment, which was well-intentioned. Because the idea that what really matters in a sense is results. And everybody gets to decide how they do the work and specifically where they do the work. And as manager, you wouldn't have a say on whether people would join a meeting. And my team was very divided around this. There were team members that said, “This is not a way to work.” Other people said, “Well, this is not the biggest issue we have to deal with, frankly.” And because they were not able to decide, I had to look into this. And we decided to kill the program, for a variety of reasons. One, the assumption of the program was that delegation is always the right leadership approach. And I think that’s fundamentally flawed. Sometime, if you ask me to build a brick wall, you're going to need to be very directive. Because I have no interest in building it. And I don’t know how, so you need to really tell me. The other thing is that the ship was sinking. At the time, remember there was no Zoom, there was no [Microsoft] Team{s]. The only way you could communicate remotely was through conference calls, which is not really a very effective way to have intensive life-saving, problem-solving moments. So we said, “Let’s suspend the program. And all hands on deck.” And of course today, we've all learned that, we've been very, very productive. Certainly for certain activities, some of the work stillneeded to be done in stores or in hospitals, frankly. And of course technology was there. One of the key questions that as leaders, we are all trying to figure out is, how do we reinvent work in that context? But the context in 2012 was very different. ADIIGNATIUS: I'd like to talk to you about 2021. Because what we're writing about is that, well, actually our stories contradict one another in some ways. There’s some people who think leadership needs to step up and just say, “This is what we're doing.” And that people will adapt. And remember what it was like to be in the office together. On the other hand, we're publishing articles that say no, what workers desire now is agency and flexibility. And you’re right. We're talking about a certain strata of non- frontline employees, who are lucky enough to have the option. So let’s make that clear. We're productive remotely, we're productive and hybrid, but there is the cultural aspect that we haven't solved for. And it may be that that’s what we need to solve for. How to create and sustain cultures effectively in a dispersed world that we're certainly not good at. You have done the culture work before. What do you think about all that? HUBERT JOLY: Yeah, this is probably one of the top two or three greatest challenges we're facing. On your show, [Microsoft CEO] Satya [Natella], in a wonderful interview, talked about the Big Reshuffle. Because there’s so many things happening at the same time. You have the Great Resignation, as we call it. People have taken the time to step back and think about what’s important. So they’re really rethinking, they’re leaving companies. These are diverging points of view, right? Many of the employees want the flexibility. They also want the intimacy. And then there's the question: If you're a big company like Amazon or Microsoft or Apple or Best Buy, how do you decide? And who should decide? And should it be uniform across the entire company? So people are rethinking. I think it’s actually a great opportunity, because work had been structured in the same way for many, many years.And so I see it as an opportunity. It’s very challenging because we don’t know what the future is going to be, with Omicron and everything. But it’s the opportunity to work with the employees on what's the best approach. And so I see people trying to push this down, saying this should be decided, not at the company level, but at the team level, whatever that means. And that we should involve them in the decision-making, they should be empowered to make decisions. Then you're seeing people say it should be uniform. There’s some tasks that are extremely well done remotely. Like coding could be. But maybe design of anew product, that’s different, or onboarding new employees. And so I think that there’s a big puzzle. And I think the only thing we know is that we don’t know. I think that’s a great leadership trend today is to be able to say, “My name is Hubert. I don’t know. I'm going to need help. We're going to figure this out. We're going to experiment.” I'm not seeing anybody who says, “I have got the definitive answer on that.” So I think we're going to see a lot of experimentation in the next few quarters. We're going to see things emerge on best practices. The idea of the leader banging their fist on the table and saying that’s the way it is. [don’t think so. ADIIGNATIUS: I’m actually going to go the first audience question now. This is from Marilyn from Kansas City, Missouri. It’s a question about purpose during the great reshuffle, but specifically on diversity-inclusion issues. How do you move forward with a commitment to diversity and inclusion when you are in a kind of virtual or hybrid work situation? HUBERT JOLY: So I think that irrespective of whether it’s hybrid or not, to start with a very clear point of view that diversity and inclusion is not a nice to have thing, It’s a business imperative. If your team does not represent the customers you're trying to serve or the communities in which you operate, you're going to miss. How stupid would it be if you and I were partners in a business, said we're going to decide to recruit from only a quarter of population. People who look like you and I. I think it'd be crazy and stupid. So you have to build diversity.So make it a business priority. Because people have been talking about it. And for many years it was just the bragging opportunity. You look at everything you have done and then nothing happened. So what I'm seeing now happening is that business leaders are considering, this is a business issue. And do we know to deal how to deal with business issues in the business world? Yes we do. And so we do the diagnosis, we do the work, we set goals. Boards are now holding management teams accountable. We track progress. We do all of the work. In the context of hybrid work, there’s new challenges that have emerged. And I think in particular of gender diversity. I think we've seen women leave the workforce in great numbers. That's a problem. People don’t have the same setup at home. How do we deal with this? There's also diversity around health conditions. And so there’s a business imperative now for leaders to be human leaders, right. And to really connect with their team members, their colleagues, and a great question that I know people ask in their empathetic listening tours is, what are you struggling with? I may not be able to solve your struggle, but it’s reaching out. Because here’s the scoop: everybody is struggling. So we might as well say it loud and understand what are the struggles, understand it at the individual level, at the community level, at the group level. ADIIGNATIUS: Yeah. I’m seen therefore I am. HUBERT JOLY: | am seen therefore I am. Empathy is not a word that we were using much five years ago in the business world. I think this is maybe the key word today. ADIIGNATIUS: Yeah. You mentioned in The Heart of Business that most people feel indifferent when it comes to the work they do, or the company that they work for. What can leaders do about that?HUBERT JOLY: This is a tragedy, of lost human happiness and, frankly, productivity. I remember my first job when I was 16. Many of us worked as teenagers. I was putting price tags on vegetable cans in a supermarket in the north of France. And one day I got hit by a forklift, which damaged my spine in the back, mildly, but I got on leave. I was in heaven because I didn’t need to work and I was paid. And so many of us have these soulless jobs. So for me, that’s the key thing as leaders is that if we are able to connect with people around us. And it starts with people around us, and truly understand who they are, what’s driving them and how the pursuit of their dream can be accomplished through their work. Because we talk about workclife balance, as if life was outside of work. That’s a crazy thought. We spend a great chunk of our time working. We have to think, is work a punishment because some dude sinned in paradise, or can work be part of our search for meaning and our fulfillment as individuals? Clearly I have a vote for the latter. And I think a key responsibility we have as leaders is to be that person who can create that environment where people can be themselves and can find happiness in their job. It’s doable. It doesn’t need to be rocket scientists or people working in hospitals or in healthcare or in Calcutta. We've done it at scale at Best Buy, which some people might say, “Well, that’s not very exciting...” It's the happiness of serving customers. Oh my God. ADIIGNATIUS: Here’s another question that I think is right on topic. This is from Stephanie, from Heidelberg, Germany. What do you do ifa leader doesn’t create an environment that allows employees to be the best versions of themselves? HUBERT JOLY: So the most important decision we make as leaders may well be who we put in positions of leadership. And I made a mistake. For many years I put most of my emphasis on experience and expertise. I wanted the best e-commerce person, the best marketing person, the best supply chain person. Now I place much more emphasis on, Who is this person? What kind of a leader is this? The ultimate interview question I was asked when I was applying for the job of CEO at Carlson Companies was by Marilyn Carlson Nelson, the daughter of the founder, it was toreplace her as CEO of the company. She asked me, “Hubert, tell me about your soul.” It’s such a great question. Right? What drives the individual? What kind of impact do they want to live? How do they want to be remembered? So that’s what I focus on. And to the question, it’s a great question. ‘We do the two-by-two matrix, right? Great performer, who is not behaving well from a leadership standpoint. You have a choice. If you tolerate it, you've just told the entire organization: this thing about values and leadership behaviors? That's just talk, we really only care about results. Or, you act, which maybe we start having a conversation. You know, “Adi, I’ve noticed in the last meeting you made disparaging comments about Mary. How do you feel about this? Do you feel it’s in line with the leadership behaviors we've accepted?” And if Adi you say, “Well, that’s me. That’s how I am.” Lask you, “Is it in your DNA or would you like to change?” And if you say, “No, this is who I am.” I say, “That’s okay. That’s okay. You simply cannot work here, but that’s okay. We'll still love you. Or if you want help, you know, we can give you a coach and we can help you change.” But this is a leadership moment to decide and not let go. You just can’t let it happen. ADIIGNATIUS: I want to go higher altitude for a second. Like me, you often talk about how the Milton Friedman era is over and maybe this is a caricature of what Milton Friedman actually believed, but in his name for the past 50 years, companies by and large have pursued shareholder-first approach to business, feeling it’s the fiduciary duty of the CEO. I think we agree that era is over. What do you expect the next 50 years would look like? HUBERT JOLY: The model or the principle I advocate for in the book is one that places a noble purpose as the North Star of business. Business needs to be a force for good. Do good things in the world. Otherwise you don’t have a license to operate. And it’s a great way as we’ve demonstrated the case of Best Buy to grow and do good things in the company. It’s the idea of putting people at the center. People are not a resource. They’re not a problem. They're the source. They’re the engine. Whether you're a tech company or a service company it’s the same. It’s always people atthe center and creating the environment where you can unleash that magic. It’s a model where you have to start with a declaration of interdependence, where you embrace all stakeholders. We used to believe that business could be successful in isolation. Well, if the planet is on fire, Larry Fink of BlackRock, that's the biggest business risk we have. Or in Minneapolis, that’s where Best Buy's headquartered. After the murder of George Floyd, if the city’s on fire, you cannot open your stores, you cannot run a business. So you have to make sure that the impact you have in the world is positive on all of the stakeholders, and refuse zero sum games. Another pandemic we have in the world is the pandemic of zero sum games. “The only way for this LinkedIn Live to go well is if you do well and I do poorly.” That's crazy, right? So we have to- ADIIGNATIUS: You're winning by the way. HUBERT JOLY: No, no. HUBERT JOLY: And then you treat profit as an outcome, not as the goal. Now this is easy to say. And I think most people today agree that this is the right direction. We also know from experience that this is really hard to do because it requires us to reinvent most of the way business has been done and it starts with ourselves. Right? So the key message in this new world for leaders is: during Covid, if you couldn't go outside, you had to go inside and spend time with yourself and start with what kind of impact do I want to leave? Why am I working? What's the purpose of my work? How do I want to be remembered? My wonderful wife Hortense, who is an executive leadership coach, she asks her clients to write down their eulogy. “What do I want people to say on that day where I won’t be there to listen?” Or in the new CEO program here at HBS that we do with Nitin [Nohria] and Michael Porter, we ask the new CEOs to write downtheir retirement speech. If you start that conversation about the kind of capitalism we want with this reflection, then I think it changes everything because I think there’s good in the heart of most people. I think that’s the direction, At the same time, I think we have to realize there's a few ticking time bombs. The planet, society, racism, there’s a few things. And our responsibility as leaders, it’s a big moment for all of us, is to create a future that does not exist yet, but that needs to deal with these time bombs, that needs to be better than what we have today. ADIIGNATIUS: want to take one more question from the audience. So this is from Badria from Cedar Park, Texas, in the US. What if the sophisticated culture you are building for the company doesn’t work for some of your potential clients? How do you deal with clients who don’t share the purposeful culture that you practice? HUBERT JOLY: Well, the first thing I would say is that our focus is incredibly client focused. So we are here to make you happy as a customer. So maybe this individual can email me after class and I can see what challenge they have. Our focus is entirely helping people live a better life through technology. And now sometimes what happens, as companies and CEOs we are asked to weigh in on a wider and wider range of societal issues, whether it’s the environment, whether it’s immigration, whether it’s racism as well. And Bill George, another professor here, and I have written a case about Georgia voting rights law with a discussion of [whether] business should be involved in matters like this; five years ago, nobody would’ve asked us to do this. Or, following the murder of George Floyd, what posture do you take on the inclusion of Black, African-American leaders? My view is that this in a sense is not about politics. It’s about doing the things that are important to the business and to your values, your purpose, your employees. So for me, building an environment that’s very inclusive of a Black African-American is abusiness imperative. Making sure that it’s easy for everyone to vote on the Tuesday in November, providing PTO on Election Day, these are things that business gets involved [in]. Now there’s some cases that are sensitive topics. Guns is another one, right? Not everybody’s going to love you. So you're going to get some hate mail. But if you're driven by your purpose, your values, what’s right for your employees and your business, I think then, if you get some hate mail, that’s hard, but it’s unfortunately the way it is. ADIIGNATIUS: And there’s the client question. I mean, it was Michael Jordan who said, “Republicans buy sneakers, too,” which for him, he didn’t really advocate for certain Black causes because he didn’t want to alienate people who didn’t want to hear it. But the question I want to ask is, 50 years from now, when we look at this era, do you think we'll say, “Wow. That was very charged, socially, politically, woke, whatever you want to call it.” Do you think we'll look at this as a kind of unusual moment, or will things have fundamentally changed and we're in a different place? HUBERT JOLY: Well, look, I'm hoping. And hope is not a good strategy, but I'm hoping that $0 years from now, well, I'm not sure I'm going to be around at that time, but let’s call it 30 years from now, that we'll say this is a generation of leaders who realized that the world was not working. We had health issues, economic issues, societal issues, racial issues, environmental issues. And they did what they needed to do to change the trajectory of humanity, and that they avoided a major blow up with the environment. They were able to overcome their hatred or the lack of understanding to rebuild society. This is not a given. We're right in the middle of this, but this is what's at stake. And it's interesting to hear business leaders talk about this, because I feel that business, businesses, large companies in particular are very large institutions. They may be the most powerful institutions we have because of other institutions having decayed or not being at the table. And then, I think about businesses who just have this responsibility to dotheir best. That’s the only thing they can do, to create a better future and be a force for good in the world and at least within the realm of their responsibilities, do some good. That’s our response. Now, is that going to happen? That’s for us to decide. The history, the chapter is being written now. What’s exciting for me personally is: I feel we are at the beginning of a new era and it’s our decision, every one of us as leaders. ADIIGNATIUS: | like that. And for everyone listening as well, we're all sort of at the ground floor of something, and it can be what we make it. Hubert, thank you very much for joining us. It was really fantastic talking to you today. HUBERT JOLY: Thank you, Adi. That was a treat. Recommended For You The Secret Ingredient of Thriving Companies? Human Magic. 5 Principles of Purposeful Leadership There's No Formula for Fixing Detroit, and That's a Good Thing PODCAST Can the Foodservice Distribution Industry Recover from the Pandemic?