April 26, 2024 • 39 mins
First people, then business, then finances. That’s the ideal priority order of decision-making according to the former CEO of Best Buy, Hubert Joly. Hubert joins On Leadership to share the lessons he learned from the transformation he led at Best Buy, discussing the importance of creating a positive and inclusive work environment, empowering employees, and fostering a growth mindset. His insights are drawn from his framework, or what he calls the six ingredients of human magic, as outlined in his bestselling book The Heart of Business: Leadership Principles for the Next Era of Capitalism.
- How to Build Trust and Unleash the Potential of Your Direct Reports: Everyone has greatness inside of them. Are your leaders doing enough to unlock it? An exceptional leader's job is to unleash the potential in each of their direct reports.
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Episode Transcript
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(00:10):
Hello and welcome back to OnLeadership with Scott Miller,
the twice weekly podcastproduced by FranklinCovey,
the world's most trusted leadershiporganization. I'm Scott. I'm your host,
where for six years andnearly 400 episodes,
twice weekly,
we shine our spotlight onto thoughtleaders from all walks of life,
all focused on a common mission. Andthat is to make you a better leader,
(00:34):
perhaps a leader as a solopreneur,entrepreneur, entrepreneur,
maybe you're at a first-linelevel, first-time leadership role.
Maybe you're mid-career oryou're in the executive suite.
Regardless of what yourrole is or your purpose is,
we like to invest in you twice weeklythrough this podcast to make you more
effective. And the theme of ourfounder's book, Dr. Stephen R. Covey,
(00:57):
The 7 Habits of Highly Effective People.
Each week we try to pour into ourlisteners and viewers insights from great
guests. Sometimes they are internalthought leaders here inside FranklinCovey.
Most weeks they are people like today'sguests that are renowned thought
leaders, CEOs, authors,practitioners, lecturers.
And today we have Hubert Joly.
(01:18):
He is a senior lecturer atthe Harvard Business School.
He is a Wall Street Journalbestselling author of the book,
The Heart of Business:
Leadership Principles for theNext Era of Capitalism. Hubert,
welcome to On Leadership.
Scott. I really look forward to ourconversation. Thank you for having me.
(01:39):
Look forward to it as well. I'vebeen chasing you for some time.
I've been a big fan ofyour leadership journey.
You and I have a lot of similarconnections and friends around the world.
So today is going to be what I thinkis sort of a classic leadership
conversation around what are thetenets of great leadership inside of
organizations that are changingand evolving dynamically and a landscape that's
(02:00):
almost unrecognizable quarter to quarter.
What I would love to do is as we getinto your book and some of the principles
around The Heart of Business.
Would you rewind a couple of decades andreintroduce yourself to our listeners
and viewers around the world sothey can get a sense for your own
leadership contribution,
(02:21):
your time turning around one of thelargest retailers in the world Best Buy,
and what you've been doingsince your tenure there.
Well, thank you, Scott. So Iwas born and raised in France.
I spent the majority of myadult life now in the US.
I was a consultant with McKinsey andthen led a variety of companies before
(02:43):
joining Best Buy, which ifI look back at that time,
I would say one thing.
I went all the way from being ahard-charging McKinsey consultant,
all about problem-solving
and performance optimizationto now somebody who believes in the power of human
magic. And I didn't drinkanything illegal along the way.
(03:03):
So quite a transformation, if you will.
We'll talk a lot about thisconcept you've coined human magic.
I have a couple of questions.
So you write in the book about howyou came to be invited to be the
CEO of Best Buy. Wasn't the top project,initiative, career goal in your mind,
but you write a great story aboutsome of the research you did,
(03:25):
including going into some of thestores to have a traditional secret
shopper experience.
Talk about the journey of how you wereinvited to become the CEO and some of the
things you did to understand perhapsthe transformation that needed to happen
under you or someone,whoever would be the CEO.
Maybe what I should do, Scott,
is go back a little bit earlierand talk about some of the
(03:49):
milestones before I got to BestBuy that shaped me as a leader.
I think that it's importantto then understand what I did,
and I'll mention maybe a couple of threeof those. One was about 30 years ago,
I was at McKinsey at the time and I wasasked by a couple of friends to write
with them an article about thephilosophy and theology of work.
(04:13):
Why do we work? Is work a punishment?
Because maybe some dudesthink it's paradise, right?
Is work something we do so that wecan do something else that's more fun,
like watch a football game or go outwith some friends or is work part of our
fulfillment as human beings waywe become who we are meant to be.
(04:33):
And of course that's a choice we getto make and about. At the same time,
I remember at dinnerwith one of my clients,
we had dinner at the McKinsey office inParis and we were trying to sell him a
study and study taught us a lesson.And the lesson, this was 30 years ago,
he told me there, the purpose ofa company is not to make money.
(04:57):
The purpose of a company is notto make money. It's an outcome.
It's an imperative of course, but it'sreally an outcome. It says in business,
and I think we all know this,there's two other imperatives.
The people imperative, needto have the right people,
properly equipped and motivatedthe business imperative.
You need to have customers who wantwhat you have and then the financial
(05:17):
imperative. And he said you have totake them in that sequence. People,
business, finance,
and that helps shape howI look at organizations,
how I look at companies.
And the other milestone I would mentionbefore we go to Best Buy is about 20
years ago in many ways,to quote David Brooks,
(05:38):
I had been at the top ofmy first mountain, right? I'd been quite successful.
I'd been a partner atMcKinsey at a young age.
I was on the executiveteam of event Universal,
a big multinational mediaand entertainment company.
And yet I was not happy.
The top of my first mountain was dry.There was no joy, there was no taste.
So maybe call this my midlifecrisis and that I had to step
(06:02):
back and realize that I hadbeen too driven by a few
things, power, fame, glory,and money. For some people,
these may be good drivers, but not for me.
And that led me to revisit my purposein life and try to discern my calling.
Why am I here?
And that led me ultimately to articulatemy purpose is unleashing human
(06:25):
magic, unleashing my own magic,
but unfortunately unleashing the magicin people around me and unleashing and
helping them unleash themagic in people around them.
And so maybe to your questionof when I got to Best Buy,
at the time I was the CEOCarlson Companies in Minneapolis.
And one day I got this callfrom my good friend Jim Citrin,
(06:48):
who was at Spencer Stewart andtold me about the Best Buy job.
And initially I was very skepticalbecause of course Best Buy had been a very
successful company, but it was at thetime, this was 2012, it was a mess, right?
Amazon was really challenging the company.
There was all sorts of issues. Andso when I got this call, I said, Jim,
(07:08):
you're crazy, right? I know nothingabout retail. Why are you bothering me?
And he said, well, they'renot looking for a retailer.
They're looking more for somebodywho can take a fresh perspective
and say you have turnaroundexperience, so at least take a look.
And so I followed his advice.
(07:28):
And when I did my diagnosis beforeapplying for the job, Scott,
I found two things. One, the worldactually needed Best Buy, right?
As customers,
it's actually quite helpful to be ableto touch and feel and see the products.
The vendors needed Best Buy becausethey need the place where to showcase
the fruit of their billions of dollarsof R &D investments. And three,
(07:51):
what I found is that all of thecompany's problems, and there were many,
were self-inflicted, right?Prices were too high.
The quality of service had gonedown, the cost structure was bloated.
So what's the good news withself-inflicted problems? Well, you can fix them.
You don't need to blameanybody. And so ultimately,
I had the feeling that there was enoughassets to be able to effect you in a
(08:14):
turnaround. And back tothis purpose question,
I felt that this would be meaningful,
potentially impactfuland quite fun to do this.
So I applied for the joband I got hit by a truck.
They gave it to me maybeto save on moving expenses.
I already lived inMinneapolis at the time.
(08:34):
Hubert,
let's talk about some of your businessprinciples because I think it is a
cliche maybe for some to say
mission first, business, finance,whatever it is, because I don't know,
a CEO of a public company or any memberof any leadership team that isn't
focused on their quarterly performanceand isn't living and dying by the
(08:55):
investor calls and the analyst calls andhow far off the Wall Street's going to
be to predictions on their quarterlyperformance. It's tough to balance that.
Is it not? I mean,
the realities are businessesare also in and have
responsibility to their investors andto shareholder growth. How did you
tease that delicate balance ofproviding solutions that customers
(09:19):
needed with engaging your employeesand also providing value to your
shareholders? It's easier said than done.
Yeah.
So thank you for the question becauseevery company on the planet says that
people is the first thing, andyet how many actually do that?
So when I joined Best Buy and thesituation was quite desperate,
(09:39):
a lot of people were suggesting the recipeis going to be cut, cut, cut, right?
You're going to have to close stores andfire a lot of people. Well, we looked,
all of the stores were profitable,
so closing stores was notgoing to be a great recipe.
And firing a lot of people impliedthat people were the problem.
I thought they would be part of thesolution. So I could talk to you,
(10:01):
Scott, about what we did.
We matched Amazon prices. We investedin the shopping experience online,
in the supply chain toship as fast as Amazon.
We improved the shoppingexperience in the stores.
We partnered with the key vendors,Microsoft, Samsung, Apple,
Sony, all of them. And thenwe did take some cost out.
(10:26):
But so that's the what. Moreimportant was the how. And for me,
that's a big leadershiplesson. As I was growing up,
I spent a lot of timeemphasizing the what,
but I now believe the why and thehow are at least as important.
So let me double-click on the how.
Because what we followed throughout theturnaround and resurgence of Best Buy
was a very human-centricapproach. So what does that mean?
(10:50):
We started by listeningto the frontliners.
We started with peoplelistening to the front liners.
I spent my first week on the job workingin a store in St. Cloud, Minnesota.
I think they should say St. Lu,but over there they say St. Cloud.
So here you have it. And the frontliners,Scott, they had all of the answers.
I asked them three questions.What's working? What's not working?
(11:13):
What do you need? My job was easy.Show up, ask the questions, listen,
take notes, and do as I was told,
starting with people also meant makingsure we had the right team at the top.
I'm a bit of a [unintelligble],I'm a big believer that fish rot
from the head. So we had to remove someof the executives and either promote or recruit some new team members. The other thing about people is
that instead of firing people asthe first thing I consider, it's the
last resort. So here you have to endwith people, priority number one in a
turnaround, do what you canto increase the revenue. It's amazing what growth can do.
So
matching Amazon prices, improvingthe customer experience, that was key. On the cost side before firing anybody, look at all of the elements of the cost structure that
I call non-salary expenses.
(12:07):
Everything that has not to do, has nothingto do with people. At most companies,
it's actually the majorityof the cost structure.
And out of the $2 billion,
we took out about 70%of the $2 billion was
not people really, not salaryexpenses. As an example,
at Best Buy, we sell a lot of TVs.So they're thin, they're large,
(12:29):
so they break. We would break for about$200 million worth of TVs every year,
Scott, that's a lot.
And so if you can reduce that byhalf by redesigning the product,
working with the vendors, the supplychain and so forth, that's good.
And then the other thing aboutpeople is I think that in physics,
it's all about creatingenergy. In physics,
(12:50):
we learn that you cannot create energy.In a human organization, of course,
you can create energy by definition.
How do you create energy by co-creatingthe diagnosis, co-creating the plan,
getting going. You don't need to havea perfect plan, starting to implement,
celebrate the early wins. Andif something is not working,
you actually say it andthen you correct it.
(13:12):
And now end by one thing aboutthis people, business, financing.
That's a very practicaltool that everybody can use.
And I heard that fromthat same client. He said,
when you do your monthly performancemanagement meeting, whether it's weekly,
monthly, or quarterly, he said, don'tstart with the financial results.
End with the financial results. Ifyou start with the financial results,
(13:35):
you're going to spend your entire meetingdissecting these numbers and you won't
understand what's driving them. Sostart with people and organization,
then go to business, meaningproducts and customers,
and then finish with the financial resultsbecause that way you'll have a good
understanding and your CFO will makesure you spend enough time on that.
And so you have to focus on the driversof performance. And to your point,
(13:57):
of course you have to deliver theresults quarter after quarter,
but it's by focusing on the driversthat you actually get there from here.
So hopefully that sheds some concretelight on what I mean by people, business,
finance.
Well,
I think that was a masterclass and howto perform a business review meeting with
your unit leaders.During yourtenure Best Buy had a remarkable
(14:18):
turnaround with lots of greatleaders under your direction.
But I'm guessing therewere some dark days.
Would you perhaps share one ofthe darkest, what were you facing?
What were the insurmountable odds andhow did you perhaps summon the resilience
and the tenacity
and the just perseverance to keep going?
(14:40):
This is such an important anddifficult question, Scott, right?
Because we can agree that theworld we live in today is full of
multiple intersecting crisisand challenges. So today,
great leadership means they'dbe able to navigate this crisis.
And the good news is thatthere's many that we run into.
So let me take maybe one or two examples.
(15:02):
The first one was in January of 2014.
So I started in September of 2012.We had several good quarters,
but November, December,2013 was not so good.
We missed our own guidance,our own expectations.
And in January we had toreport that to the street.
(15:23):
And we knew the street wouldn'tlike it, and we were right.
The stock price had gone from $11 to $39.
But when we announced sales duringNovember, December, in that January,
the stock price went down from$39 to $26. So we were right.
The stock market didn't like that.Now, the day before we announced,
I gathered all of the officersand everybody listening can ask
(15:48):
themselves,
what would you have discussed with theofficers the day before announcing I know
what we did. I said, tomorrow, thisis what we're going to announce.
It sort of knew it becausethey were part of the team,
but until the numbers are final,you don't know them exactly,
but they were not good. And Isaid, tomorrow we have a choice.
We can either surrender and say thatthe naysayers on Best Buy were right and
(16:10):
that we're going todie. Or we can say, yes,
the market was a bit challenging,the iPhone that year was not great,
but frankly, we own the results. It'sinteresting, oftentimes in retail, Scott,
if a retailer misses theirnumbers, they'll blame the weather.
If they exceed their numbers, they'llnever credit the weather. So we say,
(16:30):
we're not going to talk about the weather,
we're going to talk about what wemissed, what we didn't do. Well,
we say we've made some mistakes and we'regoing to am analyze them and correct
them and self included,I've made mistakes,
I'm going to correct and we're goingto get back on the saddle and we still
believe in the opportunity and so on.
So we had a vote between option oneand option two. It was unanimous,
(16:52):
as you can guess.
It was option two and we decided to goback on the saddle and the leadership
lesson, for me, leadingin a time of crisis,
you have to see the reality. Itwas not good. But then as a leader,
you have to be a thermostat,not a thermometer,
meaning you have to keep your temperatureconstant, always be in a sense,
(17:13):
upbeat and positive and see howyou can show up the best version of
yourself as you move forward and createan environment where your team has the
opportunity to do their best work.
There was other crisis.
At some point we were toldthat maybe we had a data breach
or we had to deal with that. Thenof course we had to deal with Covid.
(17:34):
But I think the lesson that'sconstant is face reality.
Go back to your values and principles.
Go back to how do I want to showup during these moments of crises?
Don't forget to take careof yourself, by the way,
because sometimes thisenvironment that's going to last,
so maybe that's one of thefirst lessons, is on the planes.
(17:57):
When the oxygen mask come down,
we're told put them on yourselffirst so that you can help others.
So as leaders,
taking care of yourself is such acritical piece so that you can then be the
best version of yourself.
Best Buy has roughly a hundredthousand associates, give or take,
given on how big they are.And I'd like to ask you,
(18:19):
how do you engage? The vast majorityof those associates, I'm guessing,
are generally lower skilled, lower wage,no less important. They have visions,
they have dreams, they haveaspirations for their skills.
But speak to the otherleaders of large industries,
whether they're retail or e-commerce orhospitality or technology or you name
(18:40):
it, healthcare.
When you've got a large portion ofyour employees that are frontline,
they're dealing with the customer,
they're usually oftentimes lower wageand they don't have the same level of
upside, the same level of perhapsmotivation or skin in the game,
as you might call it.
I don't mean to associate lower skillpeople that don't have vision and wages,
(19:00):
but they're not going to have thesame generally level of commitment.
And maybe you'll prove me wrong.
How do you win the hearts and ignitethe magic of 80,000 people across the
stores that are oftentimes justthere making $10, $12 an hour?
Talk to that I think conundrumthat every leader faces.
It's such an important question,right? And I think as a country,
(19:23):
through around the world, we'veneglected frontliners for so many years,
it's tragic. And during my timeat Best Buy, I must say, Scott,
I've learned so much. In fact,towards the end of my tenure,
there was a meeting, I wasattended and somebody asked me,
so you've transformed Best Buy now.
The quality of service has improveddramatically. It's growing.
(19:44):
The frontliners has engaged.Did you replace everybody?
And the truth is that wereplaced people at the top,
but on the frontline other than turnover,it was essentially the same people.
So what did I learn on this?
I think that it's about the basic humanity
and what drives extraordinarybehaviors and the book is
(20:07):
full of stories about this.
When I was growing up,
I grew up last century and Iwas told last century that the
leaders needed to be thesmartest person in the room.
And we would tell other people what to do,
we would put incentives in placeand then people would behave.
And here's what I've learned. If youuse carrots and sticks, you get donkeys.
(20:30):
And that's not a great wayto run an organization.
And what I've learned is about whatI would call the six ingredients
of human magic.
And I'm going to share them withyou because this is so powerful.
The first one is meaning, of course,
in the Maslovian sense, theyneed shelter, they need food,
(20:53):
they need the basic needs,but what drives human beings?
And Viktor Frankl, the authorof Man's Search for Meaning,
a beautiful book that somany people have read,
says that meaning is maybe theprimary driver of human motivation.
And so one of the keyquestions that as leaders,
we have to ask people around us,
people we work with is whatdrives you? At a store,
(21:18):
general manager in Boston,
you would ask every one ofthe associates in the store,
what is your dream at Best Buy? Outsideof Best Buy? What is your dream?
You would write it down inthe break room. He said,
my job is to help you achieve your dream.
And the work is for all of us leadersto be clear about what drives us,
what is our purpose in life, be curiousabout the purpose of people around us,
(21:39):
and then see how you can connecttheir purpose with their work.
The second thing is aboutauthentic human connections.
My compatriot,
René Decartes of Decarsianphilosophy famously said,
I think therefore I am. He saidit in Latin cogito ergo sum.
If you want to know, I thinkhe was wrong. It's I am seen,
(22:03):
therefore I am. I remember visiting astore. I met with a young associate.
He told me that his lifechanged the day a manager
recognized him from initial training andtook an interest in him and focused on
helping him grow.
So making sure that everybody onthe team feels that they belong,
that they're respected, that theymatter, is part of the secret sauce.
(22:28):
The third one is aroundpsychological safety.
People feel that if they speak up or ifthey make a mistake, they can recover.
Very important one is autonomy andempowerment. Think about ourselves.
Do we like to be told what to do? No,
we don't like to be toldwhat to do except by my wife.
But that's a different discussion.She's the decision maker in my life.
(22:51):
But for the most part, peopledon't like to be told what to do.
And so this has leadership implicationsat Best Buy. For example, Scott,
we had done a great job
spreading out how to sell a TV, how tosell a computer, what questions to ask,
how to do the demo and so forth. It wasreally well done except the blue shirts,
(23:12):
the sales associate, they just hatedthat because it was too mechanical.
And so we empowered them. We gave themthe notion as part of our strategy work,
that our positioning as a companywas to try to be an inspiring
friend to customers and to each otherby the way. And to treat everybody,
(23:32):
the customers and our colleagues ashuman beings. Everybody understands that.
And so we empowered the blueshirts to treat each other and the
customers as if we were aninspiring friend to them.
And there's wonderful storiesof how much of a better outcome
(23:53):
this leads to. And then the other onesaround creating a learning environment.
And it's about developingone associate at a time,
meaning mass training is interesting.
But if you imagine that maybe RogerFederer and I are the same coach,
I play tennis, it's not true. But imaginehe and I would have the same coach.
I can guarantee our coach wouldnot focus on the same things.
(24:16):
The coach would tell me there, youneed to lose another 10 or 15 pounds.
That's not what we wouldneed to tell Roger.
So we developed individualizedcoaching by the sales
supervisors every week in the storesfor every one of the associates.
And then the last one is about the growthmindset, imagining what's possible.
(24:36):
And so these are significantleadership implications, Scott,
because it means the role of the leaderis not to be the smartest person in the
room and tell others what to do, havethe vision of the leader as a gardener.
So in gardening, you needlandscaping. You described the frame,
but then it's about making sure the siteis fertile and that the people on the
(24:57):
team can blossom and becometheir best, which is,
so it's all about creating the rightenvironment for others to be successful.
So many more stories in the book,
but that's what I learnedduring my time at Best Buy,
is how to unleash that magicby using these key ingredients.
Speaking of stories in the book,The Heart of, Heart of Business,
(25:20):
you share a fascinating story aboutthe data breach and will you talk about
that? And will you share when that wasand what you learned and maybe what the
leadership and culture was like thatallowed you all to move through that?
So it's
end of November, early November,end of October, early November,
(25:43):
I think in 2014. The authoritiescontact us and tell us,
we think that you've been breached.
And there have been multiple storiesof large retailers including Home
Depot and Target, who had a data breach.And of course, if you're Best Buy,
if you're any retailer,but Best Buy in particular,
you don't want to have a data breach ever,
(26:05):
but certainly not twoweeks before Black Friday.
And so the day after we learned this,
of course we have acrisis management team.
So I gather the crisis management team,
and as I'm going to theoffice, I think about,
I think I'm going tohave to open the meeting.
(26:26):
What am I going to say? And of course,
that's a question that everyonelistening can ask themselves.
How do you open a meeting like thiswhere it's potentially so dramatic?
And here's how I opened the meeting.
I remember this as if thiswas yesterday. He said, look,
nobody would dream of having a databreach two weeks before Black Friday.
(26:48):
Let's be clear. And thispotentially can have dramatic
consequences, of course.Now having said that,
I couldn't be more proud and moreexcited than to have the opportunity
to try to go through this with this team,
given the skills wehave and the dedication.
(27:09):
And I know that we're going to doour best to navigate this challenging
situation.
And so now over to you and I turnit over to the person in charge of
this particular process.
Note that I didn't ask whoforgot to close the back door
or try to find the blame.
(27:30):
But back to this idea of facing reality,
but also being even keeled inthis thermostat and try to be
upbeat and positive irrespectiveof the circumstances with the view.
It's a mindset shift or it's a mind shift.
It's the idea that pressure is privilege.
I've been put in thisposition of leadership and I
(27:53):
get to decide how I'm going to show up,and I'm not going to complain about,
oh, it could be bothermy friends, right? No,
this is all about what we're going todo. So of course, I have to be centered.
I've to go back to my leadershippurpose, my principles,
my values, think about the impactI'm trying to have in the world,
(28:15):
what's going to be my NorthStar guiding us in this journey?
And the leadership principles,
this is about not being thesmartest person in the world,
but leveraging the team and then doingour best. The only thing you can do,
by the way, Scott, in thisuncertain challenging environment,
increasingly difficultto control the outcome,
(28:35):
what I can do is be thebest version of myself.
It was a phenomenal chapter. In fact,
there wasn't a data breach at the scaleor scope that the FBI thought, great.
You tell the story in a great way andyou talk about how you can't control your
circumstance. What you cancontrol is your mindset.
Obviously Victor Frankl wrote a lotabout this, including our choices.
(28:58):
I'd love to pivot becauseour time is coming to an end.
You share some fascinating storiesabout almost friending your competition,
figuring out how you worked withSamsung and Apple and Amazon and others.
Would you share maybe one or two of thosepartnerships? I love the story about,
I think it was Samsung and the hundredthousand stores in his stores because I
(29:19):
think it's such a great reminder toleaders that maybe they need some
counterintuitive thinking.
Instead of taking your competitorsor your suppliers at harm length,
you bring them in.
Take that wherever you'd like to goabout the power of partnership and how it
was so instrumental to Best Buy success.
Yeah, Scott, other than Covid, there'sbeen another pandemic in the world,
(29:40):
which is the pandemic of zero sum games.
The only way this conversation can gowell is if you're brilliant and I'm
terrible. No, thatdoesn't make sense, right?
Or the only way we can make profitis if we squeeze our vendors and our
employees. That makes no sense.
So I'm a big believer inlooking for win-win-wins.
And so dealing with our vendorswas a good example of that.
(30:03):
And so I have to give somecontext for the strategy.
So we had to say to match Amazon prices,
we had to take price off thetable. But when we did this,
the investors said, weunderstand why you're doing this,
but you're still going to die becauseyour cost structure is higher than Amazon
and Walmart and what have you. Andso of course we took some cost out,
(30:25):
but still it was going to be a problem.
But what we discoveredis that our business was actually a two-sided business,
meaning we were servingthe needs of our customers,
but we also had the opportunityto serve the needs of our vendors.
Because if you think about the Samsungsand the Microsoft and the Sonys,
the Apples of the world, theyspend billions of dollars on R&D.
(30:48):
They come up with these great products,
they have to showcase the fruit oftheir billions of dollars of R&D
investments,
and a vignette on Amazon or abox at Walmart doesn't do the
job. So we thought that wecould provide a service to them.
And the first one was Samsung.
I had indicated in the media that Iwas open to partnerships and J.K. Shin,
(31:10):
the then CEO of SamsungElectronics visited us in December
of 2012. So these were thedark days in Minneapolis.
And Samsung didn't have Samsungstores in the US and he had a
choice.
He could build a chain of stores likeApple had been doing or he could partner
with us. And over dinner, we did adeal whereby in a matter of months,
(31:33):
you would have 1000 stores, aSamsung store in each of our stores,
which was good for the customers becausethat's way they could see the beautiful
Samsung products and comparethem with the Apple products,
good for the customers,
good for Samsung because the pain andsuffering of building their own chain of
stores have taken a lot of time and goodfor us because of course there was some
(31:54):
economics for us, as you can imagine.
And so the day weannounced that partnership,
I think the share price went up 23%.
And then of course everybody wantedto follow. So we did with Microsoft,
with Apple, we reinforcedthe partnership with them.
We even did a partnershipdeal with Amazon of all
(32:16):
people, the people whowere supposed to kill us.
We sold their eco products inour stores and in a beautiful
display.
And we also did a partnership wherebyAmazon gave us the exclusive rights
to the Fire TV TVs andthat were exclusively sold
at Best Buy and by Best Buy on Amazon.And when we announced the deal,
(32:38):
Jeff came to one of our storesin Bellevue, Washington,
and he said to the media that werethere, look, it's very simple.
A TV is a considerate purchase.You need to see the product,
the best place where to seethe product is at Best Buy.
That's why we've done thispartnership. And of course, the media,
their jaws just dropped
(33:00):
and it was a win-win-winoutcome. So the encouragement,
there's a broader lesson, right?
Last century businesses could just focuson the four walls of their business,
their employees, their customers,and their shareholders. Today,
I think it's increasingly, we haveto look at all of our stakeholders,
of course, the employees, thecustomers, but our vendors,
(33:21):
the communities in which we live,the planet, and the shareholders.
And we have to embrace all of themin some kind of declaration of
interdependence and treat themin a way that leads to great
outcome for the shareholders.
But it's also beneficial toeach group of stakeholders.
It's very difficult to besuccessful in isolation.
(33:44):
So might as well make thisdeclaration of interdependence.
Hubert, I want to touch onsomething you mentioned.
You put together a deal with this CEOof Samsung over dinner for a thousand
stores within a stores,
and they magnified theirfootprint in a matter of months.
I'm guessing that was as much aboutmutual trust and respect and relationships
as it was about the economics of thedeal. If that's the case, I'm sure it is.
(34:07):
But talk about how important it wasfor you and he to build trust on an
individual level to put together adeal that hundreds of people would
execute over the next couple ofmonths to turn this partnership into a
trusted relationship.
I would actually give credit to thetrust that had been built between our two
(34:28):
teams over the preceding 20 years.
Of course,
best Buy had been selling Samsung productsand Best Buy has played a huge role
in the history of Samsung,believe it or not,
where in the early nineties, Samsung said,
we're going to be successful whenwe are a big vendor at Best Buy.
And similarly, when we didthe deal with Jeff, my,
(34:53):
our team at Best Buy had been settingAmazon products for quite a number of
years. And so you had built thattrust. I think there is a lesson here.
Sometimes we make businessvery complicated and abstract. It's all about people.
What is the company if it's not ahuman organization made of individuals
working together and they're workingtogether in service of customers who are
(35:16):
other people with vendors whoare a bunch of other people,
and of course making sure that wemeet the needs of our investors,
who themselves are a bunch of individuals.
I know I spent a lot of time with them.
And what is the mission of shareholdersis to make sure that they take care of
our retirement.
So if we think about businessas human relationships,
(35:41):
it makes a big difference. I love theLebanese poet Kahlil Gibran who said,
work is love made visible work is
love made visible. If you think aboutit this way, it may sound very naive,
but it actually works. I mean, just totake financial terms, financial terms,
the share price of Best Buyin the fall of 2012 was $11.
(36:05):
It's gone up to morethan a hundred dollars.
And we did this by focusingon people internally,
by focusing on customers, buildingthese partnerships with the vendors,
making sure we would take care ofthe community and caring deeply
about our customers, excuseme, our shareholders,
but in that sequence.
(36:26):
So work is love made visible.
Okay, last question, sir,
I'm still fixated on the $200 millionworth of broken TVs every year.
Can you tell us how did your teamget that down? What did they do?
How low did you get that?How did you solve it?
I'm sure everybody is interested. I mean,
every company has spoilage and breakageand theft and that, but tell us,
(36:50):
you took it from what towhat and how did that happen?
So we called it waste andInefficiencies. So first, Scott,
we did a survey of customers.
We found that 0% of customers wantedto buy a broken TV, right? Of course.
Didn't have to do asurvey to find this out.
So we had a number of teams thatlooked at these various opportunities,
(37:11):
and they applied goodmanagement practices,
lean management practices, workingon quality. So very concretely,
they worked with the vendorsto improve the packaging.
We're going to make it very concrete.
You had to put a label on the packagebecause the TVs had to be stored,
not horizontally, butvertically. Don't ask me why,
(37:33):
but that's why we also worked onthe design of the TVs to make them
more study.
We also worked with the supplychain in our warehouses to say,
you cannot stack them up morethan three above one another.
We worked with salespeople andour customers to tell them,
because sometimes customers would cometo the store with their pickup truck and
(37:56):
put the TV or in their car and put the TV,
these very fragile TVs and not payattention to them. We say, no, no,
you can't do this,
and we would actually deliver a lotof the TVs for free and install them
and so forth. So you look atevery step in the process,
and you would ask the people closestto this to find the solutions,
(38:17):
work with the vendors. So in other words,
this is not a case where theCEO found any of the answers.
My role was more to frame thingsand say, don't rush to fire anybody.
Let's look at non-salary expenses first,
and let's see how manydollars we can take out.
Hubert Joly,
you have been recognized as one ofthe 100 best performing CEOs in the
(38:42):
world by Harvard Business Review,
one of the top 30 CEOsin the world by Barron's,
and one of the top 10 CEOsin the US by Glassdoor's,
annual Employee Choice Awards.
You're now a senior lecturer at theHarvard Business Review and the author of
the Wall Street Journal, bestsellingbook, The Heart of Business:
(39:03):
Leadership Principles for theNext Era of Capitalism. Hubert,
thank you today for what isa masterclass in leadership.
We appreciate your time.
Scott, thank you so much everyone.Good luck on your own journey.
My best wishes, the worldneeds great leaders. So
this can be the worst times,
but this can be also the best timesto be the leader that the world needs.
(39:27):
Good luck with it.
And we'll see you back here nextweek for a new conversation On
Leadership.
Hello and welcome back to OnLeadership with Scott Miller,
the twice weekly podcastproduced by FranklinCovey,
the world's most trusted leadershiporganization. I'm Scott. I'm your host,
where for six years andnearly 400 episodes,
twice weekly,
we shine our spotlight onto thoughtleaders from all walks of life,
all focused on a common mission. Andthat is to make you a better leader,
(00:34):
perhaps a leader as a solopreneur,entrepreneur, entrepreneur,
maybe you're at a first-linelevel, first-time leadership role.
Maybe you're mid-career oryou're in the executive suite.
Regardless of what yourrole is or your purpose is,
we like to invest in you twice weeklythrough this podcast to make you more
effective. And the theme of ourfounder's book, Dr. Stephen R. Covey,
(00:57):
The 7 Habits of Highly Effective People.
Each week we try to pour into ourlisteners and viewers insights from great
guests. Sometimes they are internalthought leaders here inside FranklinCovey.
Most weeks they are people like today'sguests that are renowned thought
leaders, CEOs, authors,practitioners, lecturers.
And today we have Hubert Joly.
(01:18):
He is a senior lecturer atthe Harvard Business School.
He is a Wall Street Journalbestselling author of the book,
The Heart of Business:
Leadership Principles for theNext Era of Capitalism. Hubert,
welcome to On Leadership.
Scott. I really look forward to ourconversation. Thank you for having me.
(01:39):
Look forward to it as well. I'vebeen chasing you for some time.
I've been a big fan ofyour leadership journey.
You and I have a lot of similarconnections and friends around the world.
So today is going to be what I thinkis sort of a classic leadership
conversation around what are thetenets of great leadership inside of
organizations that are changingand evolving dynamically and a landscape that's
(02:00):
almost unrecognizable quarter to quarter.
What I would love to do is as we getinto your book and some of the principles
around The Heart of Business.
Would you rewind a couple of decades andreintroduce yourself to our listeners
and viewers around the world sothey can get a sense for your own
leadership contribution,
(02:21):
your time turning around one of thelargest retailers in the world Best Buy,
and what you've been doingsince your tenure there.
Well, thank you, Scott. So Iwas born and raised in France.
I spent the majority of myadult life now in the US.
I was a consultant with McKinsey andthen led a variety of companies before
(02:43):
joining Best Buy, which ifI look back at that time,
I would say one thing.
I went all the way from being ahard-charging McKinsey consultant,
all about problem-solving
and performance optimizationto now somebody who believes in the power of human
magic. And I didn't drinkanything illegal along the way.
(03:03):
So quite a transformation, if you will.
We'll talk a lot about thisconcept you've coined human magic.
I have a couple of questions.
So you write in the book about howyou came to be invited to be the
CEO of Best Buy. Wasn't the top project,initiative, career goal in your mind,
but you write a great story aboutsome of the research you did,
(03:25):
including going into some of thestores to have a traditional secret
shopper experience.
Talk about the journey of how you wereinvited to become the CEO and some of the
things you did to understand perhapsthe transformation that needed to happen
under you or someone,whoever would be the CEO.
Maybe what I should do, Scott,
is go back a little bit earlierand talk about some of the
(03:49):
milestones before I got to BestBuy that shaped me as a leader.
I think that it's importantto then understand what I did,
and I'll mention maybe a couple of threeof those. One was about 30 years ago,
I was at McKinsey at the time and I wasasked by a couple of friends to write
with them an article about thephilosophy and theology of work.
(04:13):
Why do we work? Is work a punishment?
Because maybe some dudesthink it's paradise, right?
Is work something we do so that wecan do something else that's more fun,
like watch a football game or go outwith some friends or is work part of our
fulfillment as human beings waywe become who we are meant to be.
(04:33):
And of course that's a choice we getto make and about. At the same time,
I remember at dinnerwith one of my clients,
we had dinner at the McKinsey office inParis and we were trying to sell him a
study and study taught us a lesson.And the lesson, this was 30 years ago,
he told me there, the purpose ofa company is not to make money.
(04:57):
The purpose of a company is notto make money. It's an outcome.
It's an imperative of course, but it'sreally an outcome. It says in business,
and I think we all know this,there's two other imperatives.
The people imperative, needto have the right people,
properly equipped and motivatedthe business imperative.
You need to have customers who wantwhat you have and then the financial
(05:17):
imperative. And he said you have totake them in that sequence. People,
business, finance,
and that helps shape howI look at organizations,
how I look at companies.
And the other milestone I would mentionbefore we go to Best Buy is about 20
years ago in many ways,to quote David Brooks,
(05:38):
I had been at the top ofmy first mountain, right? I'd been quite successful.
I'd been a partner atMcKinsey at a young age.
I was on the executiveteam of event Universal,
a big multinational mediaand entertainment company.
And yet I was not happy.
The top of my first mountain was dry.There was no joy, there was no taste.
So maybe call this my midlifecrisis and that I had to step
(06:02):
back and realize that I hadbeen too driven by a few
things, power, fame, glory,and money. For some people,
these may be good drivers, but not for me.
And that led me to revisit my purposein life and try to discern my calling.
Why am I here?
And that led me ultimately to articulatemy purpose is unleashing human
(06:25):
magic, unleashing my own magic,
but unfortunately unleashing the magicin people around me and unleashing and
helping them unleash themagic in people around them.
And so maybe to your questionof when I got to Best Buy,
at the time I was the CEOCarlson Companies in Minneapolis.
And one day I got this callfrom my good friend Jim Citrin,
(06:48):
who was at Spencer Stewart andtold me about the Best Buy job.
And initially I was very skepticalbecause of course Best Buy had been a very
successful company, but it was at thetime, this was 2012, it was a mess, right?
Amazon was really challenging the company.
There was all sorts of issues. Andso when I got this call, I said, Jim,
(07:08):
you're crazy, right? I know nothingabout retail. Why are you bothering me?
And he said, well, they'renot looking for a retailer.
They're looking more for somebodywho can take a fresh perspective
and say you have turnaroundexperience, so at least take a look.
And so I followed his advice.
(07:28):
And when I did my diagnosis beforeapplying for the job, Scott,
I found two things. One, the worldactually needed Best Buy, right?
As customers,
it's actually quite helpful to be ableto touch and feel and see the products.
The vendors needed Best Buy becausethey need the place where to showcase
the fruit of their billions of dollarsof R &D investments. And three,
(07:51):
what I found is that all of thecompany's problems, and there were many,
were self-inflicted, right?Prices were too high.
The quality of service had gonedown, the cost structure was bloated.
So what's the good news withself-inflicted problems? Well, you can fix them.
You don't need to blameanybody. And so ultimately,
I had the feeling that there was enoughassets to be able to effect you in a
(08:14):
turnaround. And back tothis purpose question,
I felt that this would be meaningful,
potentially impactfuland quite fun to do this.
So I applied for the joband I got hit by a truck.
They gave it to me maybeto save on moving expenses.
I already lived inMinneapolis at the time.
(08:34):
Hubert,
let's talk about some of your businessprinciples because I think it is a
cliche maybe for some to say
mission first, business, finance,whatever it is, because I don't know,
a CEO of a public company or any memberof any leadership team that isn't
focused on their quarterly performanceand isn't living and dying by the
(08:55):
investor calls and the analyst calls andhow far off the Wall Street's going to
be to predictions on their quarterlyperformance. It's tough to balance that.
Is it not? I mean,
the realities are businessesare also in and have
responsibility to their investors andto shareholder growth. How did you
tease that delicate balance ofproviding solutions that customers
(09:19):
needed with engaging your employeesand also providing value to your
shareholders? It's easier said than done.
Yeah.
So thank you for the question becauseevery company on the planet says that
people is the first thing, andyet how many actually do that?
So when I joined Best Buy and thesituation was quite desperate,
(09:39):
a lot of people were suggesting the recipeis going to be cut, cut, cut, right?
You're going to have to close stores andfire a lot of people. Well, we looked,
all of the stores were profitable,
so closing stores was notgoing to be a great recipe.
And firing a lot of people impliedthat people were the problem.
I thought they would be part of thesolution. So I could talk to you,
(10:01):
Scott, about what we did.
We matched Amazon prices. We investedin the shopping experience online,
in the supply chain toship as fast as Amazon.
We improved the shoppingexperience in the stores.
We partnered with the key vendors,Microsoft, Samsung, Apple,
Sony, all of them. And thenwe did take some cost out.
(10:26):
But so that's the what. Moreimportant was the how. And for me,
that's a big leadershiplesson. As I was growing up,
I spent a lot of timeemphasizing the what,
but I now believe the why and thehow are at least as important.
So let me double-click on the how.
Because what we followed throughout theturnaround and resurgence of Best Buy
was a very human-centricapproach. So what does that mean?
(10:50):
We started by listeningto the frontliners.
We started with peoplelistening to the front liners.
I spent my first week on the job workingin a store in St. Cloud, Minnesota.
I think they should say St. Lu,but over there they say St. Cloud.
So here you have it. And the frontliners,Scott, they had all of the answers.
I asked them three questions.What's working? What's not working?
(11:13):
What do you need? My job was easy.Show up, ask the questions, listen,
take notes, and do as I was told,
starting with people also meant makingsure we had the right team at the top.
I'm a bit of a [unintelligble],I'm a big believer that fish rot
from the head. So we had to remove someof the executives and either promote or recruit some new team members. The other thing about people is
that instead of firing people asthe first thing I consider, it's the
last resort. So here you have to endwith people, priority number one in a
turnaround, do what you canto increase the revenue. It's amazing what growth can do.
So
matching Amazon prices, improvingthe customer experience, that was key. On the cost side before firing anybody, look at all of the elements of the cost structure that
I call non-salary expenses.
(12:07):
Everything that has not to do, has nothingto do with people. At most companies,
it's actually the majorityof the cost structure.
And out of the $2 billion,
we took out about 70%of the $2 billion was
not people really, not salaryexpenses. As an example,
at Best Buy, we sell a lot of TVs.So they're thin, they're large,
(12:29):
so they break. We would break for about$200 million worth of TVs every year,
Scott, that's a lot.
And so if you can reduce that byhalf by redesigning the product,
working with the vendors, the supplychain and so forth, that's good.
And then the other thing aboutpeople is I think that in physics,
it's all about creatingenergy. In physics,
(12:50):
we learn that you cannot create energy.In a human organization, of course,
you can create energy by definition.
How do you create energy by co-creatingthe diagnosis, co-creating the plan,
getting going. You don't need to havea perfect plan, starting to implement,
celebrate the early wins. Andif something is not working,
you actually say it andthen you correct it.
(13:12):
And now end by one thing aboutthis people, business, financing.
That's a very practicaltool that everybody can use.
And I heard that fromthat same client. He said,
when you do your monthly performancemanagement meeting, whether it's weekly,
monthly, or quarterly, he said, don'tstart with the financial results.
End with the financial results. Ifyou start with the financial results,
(13:35):
you're going to spend your entire meetingdissecting these numbers and you won't
understand what's driving them. Sostart with people and organization,
then go to business, meaningproducts and customers,
and then finish with the financial resultsbecause that way you'll have a good
understanding and your CFO will makesure you spend enough time on that.
And so you have to focus on the driversof performance. And to your point,
(13:57):
of course you have to deliver theresults quarter after quarter,
but it's by focusing on the driversthat you actually get there from here.
So hopefully that sheds some concretelight on what I mean by people, business,
finance.
Well,
I think that was a masterclass and howto perform a business review meeting with
your unit leaders.During yourtenure Best Buy had a remarkable
(14:18):
turnaround with lots of greatleaders under your direction.
But I'm guessing therewere some dark days.
Would you perhaps share one ofthe darkest, what were you facing?
What were the insurmountable odds andhow did you perhaps summon the resilience
and the tenacity
and the just perseverance to keep going?
(14:40):
This is such an important anddifficult question, Scott, right?
Because we can agree that theworld we live in today is full of
multiple intersecting crisisand challenges. So today,
great leadership means they'dbe able to navigate this crisis.
And the good news is thatthere's many that we run into.
So let me take maybe one or two examples.
(15:02):
The first one was in January of 2014.
So I started in September of 2012.We had several good quarters,
but November, December,2013 was not so good.
We missed our own guidance,our own expectations.
And in January we had toreport that to the street.
(15:23):
And we knew the street wouldn'tlike it, and we were right.
The stock price had gone from $11 to $39.
But when we announced sales duringNovember, December, in that January,
the stock price went down from$39 to $26. So we were right.
The stock market didn't like that.Now, the day before we announced,
I gathered all of the officersand everybody listening can ask
(15:48):
themselves,
what would you have discussed with theofficers the day before announcing I know
what we did. I said, tomorrow, thisis what we're going to announce.
It sort of knew it becausethey were part of the team,
but until the numbers are final,you don't know them exactly,
but they were not good. And Isaid, tomorrow we have a choice.
We can either surrender and say thatthe naysayers on Best Buy were right and
(16:10):
that we're going todie. Or we can say, yes,
the market was a bit challenging,the iPhone that year was not great,
but frankly, we own the results. It'sinteresting, oftentimes in retail, Scott,
if a retailer misses theirnumbers, they'll blame the weather.
If they exceed their numbers, they'llnever credit the weather. So we say,
(16:30):
we're not going to talk about the weather,
we're going to talk about what wemissed, what we didn't do. Well,
we say we've made some mistakes and we'regoing to am analyze them and correct
them and self included,I've made mistakes,
I'm going to correct and we're goingto get back on the saddle and we still
believe in the opportunity and so on.
So we had a vote between option oneand option two. It was unanimous,
(16:52):
as you can guess.
It was option two and we decided to goback on the saddle and the leadership
lesson, for me, leadingin a time of crisis,
you have to see the reality. Itwas not good. But then as a leader,
you have to be a thermostat,not a thermometer,
meaning you have to keep your temperatureconstant, always be in a sense,
(17:13):
upbeat and positive and see howyou can show up the best version of
yourself as you move forward and createan environment where your team has the
opportunity to do their best work.
There was other crisis.
At some point we were toldthat maybe we had a data breach
or we had to deal with that. Thenof course we had to deal with Covid.
(17:34):
But I think the lesson that'sconstant is face reality.
Go back to your values and principles.
Go back to how do I want to showup during these moments of crises?
Don't forget to take careof yourself, by the way,
because sometimes thisenvironment that's going to last,
so maybe that's one of thefirst lessons, is on the planes.
(17:57):
When the oxygen mask come down,
we're told put them on yourselffirst so that you can help others.
So as leaders,
taking care of yourself is such acritical piece so that you can then be the
best version of yourself.
Best Buy has roughly a hundredthousand associates, give or take,
given on how big they are.And I'd like to ask you,
(18:19):
how do you engage? The vast majorityof those associates, I'm guessing,
are generally lower skilled, lower wage,no less important. They have visions,
they have dreams, they haveaspirations for their skills.
But speak to the otherleaders of large industries,
whether they're retail or e-commerce orhospitality or technology or you name
(18:40):
it, healthcare.
When you've got a large portion ofyour employees that are frontline,
they're dealing with the customer,
they're usually oftentimes lower wageand they don't have the same level of
upside, the same level of perhapsmotivation or skin in the game,
as you might call it.
I don't mean to associate lower skillpeople that don't have vision and wages,
(19:00):
but they're not going to have thesame generally level of commitment.
And maybe you'll prove me wrong.
How do you win the hearts and ignitethe magic of 80,000 people across the
stores that are oftentimes justthere making $10, $12 an hour?
Talk to that I think conundrumthat every leader faces.
It's such an important question,right? And I think as a country,
(19:23):
through around the world, we'veneglected frontliners for so many years,
it's tragic. And during my timeat Best Buy, I must say, Scott,
I've learned so much. In fact,towards the end of my tenure,
there was a meeting, I wasattended and somebody asked me,
so you've transformed Best Buy now.
The quality of service has improveddramatically. It's growing.
(19:44):
The frontliners has engaged.Did you replace everybody?
And the truth is that wereplaced people at the top,
but on the frontline other than turnover,it was essentially the same people.
So what did I learn on this?
I think that it's about the basic humanity
and what drives extraordinarybehaviors and the book is
(20:07):
full of stories about this.
When I was growing up,
I grew up last century and Iwas told last century that the
leaders needed to be thesmartest person in the room.
And we would tell other people what to do,
we would put incentives in placeand then people would behave.
And here's what I've learned. If youuse carrots and sticks, you get donkeys.
(20:30):
And that's not a great wayto run an organization.
And what I've learned is about whatI would call the six ingredients
of human magic.
And I'm going to share them withyou because this is so powerful.
The first one is meaning, of course,
in the Maslovian sense, theyneed shelter, they need food,
(20:53):
they need the basic needs,but what drives human beings?
And Viktor Frankl, the authorof Man's Search for Meaning,
a beautiful book that somany people have read,
says that meaning is maybe theprimary driver of human motivation.
And so one of the keyquestions that as leaders,
we have to ask people around us,
people we work with is whatdrives you? At a store,
(21:18):
general manager in Boston,
you would ask every one ofthe associates in the store,
what is your dream at Best Buy? Outsideof Best Buy? What is your dream?
You would write it down inthe break room. He said,
my job is to help you achieve your dream.
And the work is for all of us leadersto be clear about what drives us,
what is our purpose in life, be curiousabout the purpose of people around us,
(21:39):
and then see how you can connecttheir purpose with their work.
The second thing is aboutauthentic human connections.
My compatriot,
René Decartes of Decarsianphilosophy famously said,
I think therefore I am. He saidit in Latin cogito ergo sum.
If you want to know, I thinkhe was wrong. It's I am seen,
(22:03):
therefore I am. I remember visiting astore. I met with a young associate.
He told me that his lifechanged the day a manager
recognized him from initial training andtook an interest in him and focused on
helping him grow.
So making sure that everybody onthe team feels that they belong,
that they're respected, that theymatter, is part of the secret sauce.
(22:28):
The third one is aroundpsychological safety.
People feel that if they speak up or ifthey make a mistake, they can recover.
Very important one is autonomy andempowerment. Think about ourselves.
Do we like to be told what to do? No,
we don't like to be toldwhat to do except by my wife.
But that's a different discussion.She's the decision maker in my life.
(22:51):
But for the most part, peopledon't like to be told what to do.
And so this has leadership implicationsat Best Buy. For example, Scott,
we had done a great job
spreading out how to sell a TV, how tosell a computer, what questions to ask,
how to do the demo and so forth. It wasreally well done except the blue shirts,
(23:12):
the sales associate, they just hatedthat because it was too mechanical.
And so we empowered them. We gave themthe notion as part of our strategy work,
that our positioning as a companywas to try to be an inspiring
friend to customers and to each otherby the way. And to treat everybody,
(23:32):
the customers and our colleagues ashuman beings. Everybody understands that.
And so we empowered the blueshirts to treat each other and the
customers as if we were aninspiring friend to them.
And there's wonderful storiesof how much of a better outcome
(23:53):
this leads to. And then the other onesaround creating a learning environment.
And it's about developingone associate at a time,
meaning mass training is interesting.
But if you imagine that maybe RogerFederer and I are the same coach,
I play tennis, it's not true. But imaginehe and I would have the same coach.
I can guarantee our coach wouldnot focus on the same things.
(24:16):
The coach would tell me there, youneed to lose another 10 or 15 pounds.
That's not what we wouldneed to tell Roger.
So we developed individualizedcoaching by the sales
supervisors every week in the storesfor every one of the associates.
And then the last one is about the growthmindset, imagining what's possible.
(24:36):
And so these are significantleadership implications, Scott,
because it means the role of the leaderis not to be the smartest person in the
room and tell others what to do, havethe vision of the leader as a gardener.
So in gardening, you needlandscaping. You described the frame,
but then it's about making sure the siteis fertile and that the people on the
(24:57):
team can blossom and becometheir best, which is,
so it's all about creating the rightenvironment for others to be successful.
So many more stories in the book,
but that's what I learnedduring my time at Best Buy,
is how to unleash that magicby using these key ingredients.
Speaking of stories in the book,The Heart of, Heart of Business,
(25:20):
you share a fascinating story aboutthe data breach and will you talk about
that? And will you share when that wasand what you learned and maybe what the
leadership and culture was like thatallowed you all to move through that?
So it's
end of November, early November,end of October, early November,
(25:43):
I think in 2014. The authoritiescontact us and tell us,
we think that you've been breached.
And there have been multiple storiesof large retailers including Home
Depot and Target, who had a data breach.And of course, if you're Best Buy,
if you're any retailer,but Best Buy in particular,
you don't want to have a data breach ever,
(26:05):
but certainly not twoweeks before Black Friday.
And so the day after we learned this,
of course we have acrisis management team.
So I gather the crisis management team,
and as I'm going to theoffice, I think about,
I think I'm going tohave to open the meeting.
(26:26):
What am I going to say? And of course,
that's a question that everyonelistening can ask themselves.
How do you open a meeting like thiswhere it's potentially so dramatic?
And here's how I opened the meeting.
I remember this as if thiswas yesterday. He said, look,
nobody would dream of having a databreach two weeks before Black Friday.
(26:48):
Let's be clear. And thispotentially can have dramatic
consequences, of course.Now having said that,
I couldn't be more proud and moreexcited than to have the opportunity
to try to go through this with this team,
given the skills wehave and the dedication.
(27:09):
And I know that we're going to doour best to navigate this challenging
situation.
And so now over to you and I turnit over to the person in charge of
this particular process.
Note that I didn't ask whoforgot to close the back door
or try to find the blame.
(27:30):
But back to this idea of facing reality,
but also being even keeled inthis thermostat and try to be
upbeat and positive irrespectiveof the circumstances with the view.
It's a mindset shift or it's a mind shift.
It's the idea that pressure is privilege.
I've been put in thisposition of leadership and I
(27:53):
get to decide how I'm going to show up,and I'm not going to complain about,
oh, it could be bothermy friends, right? No,
this is all about what we're going todo. So of course, I have to be centered.
I've to go back to my leadershippurpose, my principles,
my values, think about the impactI'm trying to have in the world,
(28:15):
what's going to be my NorthStar guiding us in this journey?
And the leadership principles,
this is about not being thesmartest person in the world,
but leveraging the team and then doingour best. The only thing you can do,
by the way, Scott, in thisuncertain challenging environment,
increasingly difficultto control the outcome,
(28:35):
what I can do is be thebest version of myself.
It was a phenomenal chapter. In fact,
there wasn't a data breach at the scaleor scope that the FBI thought, great.
You tell the story in a great way andyou talk about how you can't control your
circumstance. What you cancontrol is your mindset.
Obviously Victor Frankl wrote a lotabout this, including our choices.
(28:58):
I'd love to pivot becauseour time is coming to an end.
You share some fascinating storiesabout almost friending your competition,
figuring out how you worked withSamsung and Apple and Amazon and others.
Would you share maybe one or two of thosepartnerships? I love the story about,
I think it was Samsung and the hundredthousand stores in his stores because I
(29:19):
think it's such a great reminder toleaders that maybe they need some
counterintuitive thinking.
Instead of taking your competitorsor your suppliers at harm length,
you bring them in.
Take that wherever you'd like to goabout the power of partnership and how it
was so instrumental to Best Buy success.
Yeah, Scott, other than Covid, there'sbeen another pandemic in the world,
(29:40):
which is the pandemic of zero sum games.
The only way this conversation can gowell is if you're brilliant and I'm
terrible. No, thatdoesn't make sense, right?
Or the only way we can make profitis if we squeeze our vendors and our
employees. That makes no sense.
So I'm a big believer inlooking for win-win-wins.
And so dealing with our vendorswas a good example of that.
(30:03):
And so I have to give somecontext for the strategy.
So we had to say to match Amazon prices,
we had to take price off thetable. But when we did this,
the investors said, weunderstand why you're doing this,
but you're still going to die becauseyour cost structure is higher than Amazon
and Walmart and what have you. Andso of course we took some cost out,
(30:25):
but still it was going to be a problem.
But what we discoveredis that our business was actually a two-sided business,
meaning we were servingthe needs of our customers,
but we also had the opportunityto serve the needs of our vendors.
Because if you think about the Samsungsand the Microsoft and the Sonys,
the Apples of the world, theyspend billions of dollars on R&D.
(30:48):
They come up with these great products,
they have to showcase the fruit oftheir billions of dollars of R&D
investments,
and a vignette on Amazon or abox at Walmart doesn't do the
job. So we thought that wecould provide a service to them.
And the first one was Samsung.
I had indicated in the media that Iwas open to partnerships and J.K. Shin,
(31:10):
the then CEO of SamsungElectronics visited us in December
of 2012. So these were thedark days in Minneapolis.
And Samsung didn't have Samsungstores in the US and he had a
choice.
He could build a chain of stores likeApple had been doing or he could partner
with us. And over dinner, we did adeal whereby in a matter of months,
(31:33):
you would have 1000 stores, aSamsung store in each of our stores,
which was good for the customers becausethat's way they could see the beautiful
Samsung products and comparethem with the Apple products,
good for the customers,
good for Samsung because the pain andsuffering of building their own chain of
stores have taken a lot of time and goodfor us because of course there was some
(31:54):
economics for us, as you can imagine.
And so the day weannounced that partnership,
I think the share price went up 23%.
And then of course everybody wantedto follow. So we did with Microsoft,
with Apple, we reinforcedthe partnership with them.
We even did a partnershipdeal with Amazon of all
(32:16):
people, the people whowere supposed to kill us.
We sold their eco products inour stores and in a beautiful
display.
And we also did a partnership wherebyAmazon gave us the exclusive rights
to the Fire TV TVs andthat were exclusively sold
at Best Buy and by Best Buy on Amazon.And when we announced the deal,
(32:38):
Jeff came to one of our storesin Bellevue, Washington,
and he said to the media that werethere, look, it's very simple.
A TV is a considerate purchase.You need to see the product,
the best place where to seethe product is at Best Buy.
That's why we've done thispartnership. And of course, the media,
their jaws just dropped
(33:00):
and it was a win-win-winoutcome. So the encouragement,
there's a broader lesson, right?
Last century businesses could just focuson the four walls of their business,
their employees, their customers,and their shareholders. Today,
I think it's increasingly, we haveto look at all of our stakeholders,
of course, the employees, thecustomers, but our vendors,
(33:21):
the communities in which we live,the planet, and the shareholders.
And we have to embrace all of themin some kind of declaration of
interdependence and treat themin a way that leads to great
outcome for the shareholders.
But it's also beneficial toeach group of stakeholders.
It's very difficult to besuccessful in isolation.
(33:44):
So might as well make thisdeclaration of interdependence.
Hubert, I want to touch onsomething you mentioned.
You put together a deal with this CEOof Samsung over dinner for a thousand
stores within a stores,
and they magnified theirfootprint in a matter of months.
I'm guessing that was as much aboutmutual trust and respect and relationships
as it was about the economics of thedeal. If that's the case, I'm sure it is.
(34:07):
But talk about how important it wasfor you and he to build trust on an
individual level to put together adeal that hundreds of people would
execute over the next couple ofmonths to turn this partnership into a
trusted relationship.
I would actually give credit to thetrust that had been built between our two
(34:28):
teams over the preceding 20 years.
Of course,
best Buy had been selling Samsung productsand Best Buy has played a huge role
in the history of Samsung,believe it or not,
where in the early nineties, Samsung said,
we're going to be successful whenwe are a big vendor at Best Buy.
And similarly, when we didthe deal with Jeff, my,
(34:53):
our team at Best Buy had been settingAmazon products for quite a number of
years. And so you had built thattrust. I think there is a lesson here.
Sometimes we make businessvery complicated and abstract. It's all about people.
What is the company if it's not ahuman organization made of individuals
working together and they're workingtogether in service of customers who are
(35:16):
other people with vendors whoare a bunch of other people,
and of course making sure that wemeet the needs of our investors,
who themselves are a bunch of individuals.
I know I spent a lot of time with them.
And what is the mission of shareholdersis to make sure that they take care of
our retirement.
So if we think about businessas human relationships,
(35:41):
it makes a big difference. I love theLebanese poet Kahlil Gibran who said,
work is love made visible work is
love made visible. If you think aboutit this way, it may sound very naive,
but it actually works. I mean, just totake financial terms, financial terms,
the share price of Best Buyin the fall of 2012 was $11.
(36:05):
It's gone up to morethan a hundred dollars.
And we did this by focusingon people internally,
by focusing on customers, buildingthese partnerships with the vendors,
making sure we would take care ofthe community and caring deeply
about our customers, excuseme, our shareholders,
but in that sequence.
(36:26):
So work is love made visible.
Okay, last question, sir,
I'm still fixated on the $200 millionworth of broken TVs every year.
Can you tell us how did your teamget that down? What did they do?
How low did you get that?How did you solve it?
I'm sure everybody is interested. I mean,
every company has spoilage and breakageand theft and that, but tell us,
(36:50):
you took it from what towhat and how did that happen?
So we called it waste andInefficiencies. So first, Scott,
we did a survey of customers.
We found that 0% of customers wantedto buy a broken TV, right? Of course.
Didn't have to do asurvey to find this out.
So we had a number of teams thatlooked at these various opportunities,
(37:11):
and they applied goodmanagement practices,
lean management practices, workingon quality. So very concretely,
they worked with the vendorsto improve the packaging.
We're going to make it very concrete.
You had to put a label on the packagebecause the TVs had to be stored,
not horizontally, butvertically. Don't ask me why,
(37:33):
but that's why we also worked onthe design of the TVs to make them
more study.
We also worked with the supplychain in our warehouses to say,
you cannot stack them up morethan three above one another.
We worked with salespeople andour customers to tell them,
because sometimes customers would cometo the store with their pickup truck and
(37:56):
put the TV or in their car and put the TV,
these very fragile TVs and not payattention to them. We say, no, no,
you can't do this,
and we would actually deliver a lotof the TVs for free and install them
and so forth. So you look atevery step in the process,
and you would ask the people closestto this to find the solutions,
(38:17):
work with the vendors. So in other words,
this is not a case where theCEO found any of the answers.
My role was more to frame thingsand say, don't rush to fire anybody.
Let's look at non-salary expenses first,
and let's see how manydollars we can take out.
Hubert Joly,
you have been recognized as one ofthe 100 best performing CEOs in the
(38:42):
world by Harvard Business Review,
one of the top 30 CEOsin the world by Barron's,
and one of the top 10 CEOsin the US by Glassdoor's,
annual Employee Choice Awards.
You're now a senior lecturer at theHarvard Business Review and the author of
the Wall Street Journal, bestsellingbook, The Heart of Business:
(39:03):
Leadership Principles for theNext Era of Capitalism. Hubert,
thank you today for what isa masterclass in leadership.
We appreciate your time.
Scott, thank you so much everyone.Good luck on your own journey.
My best wishes, the worldneeds great leaders. So
this can be the worst times,
but this can be also the best timesto be the leader that the world needs.
(39:27):
Good luck with it.
And we'll see you back here nextweek for a new conversation On
Leadership.
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