Mon, 28 September 2020
Hubert Joly is the former Chairman and CEO of Best Buy. Currently he is a professor at Harvard Business School, he is on the board of two companies--Johnson & Johnson and Ralph Lauren. He is coaching and mentoring a number of CEOs and senior leaders and he is writing a new book which is set to come out next May titled: The Heart of Business: Leadership Principles for the Next Era of Capitalism.
Hubert was elected a Global Leader for Tomorrow by the World Economic Forum. He was honored as one of the 25 most influential executives of the business travel industry in 2006 and 2009 by Business Travel News Magazine. He was voted one of the top 100 CEOs on Glassdoor in 2017 and 2018. And he was named one of the best CEOs in the world by the CEOWorld Magazine.
He didn’t always dream of being a leader. In fact, when he was 10 years old he wanted to be a vet and then in high school, he felt his career would be in economics. After college, he spent 12 years at McKinsey & Company as a consultant before ultimately realizing he wanted to lead a business. And he has led quite a few companies through turnarounds and major digital transformations.
How Hubert Transformed Best Buy
When Hubert was first approached about the position of CEO at Best Buy the company was struggling. It was on the brink of closing. Most people would have run away as fast as they could, not wanting to be attached to a failing company. But Hubert did his due diligence, he visited several locations, spoke with employees, and thought about what could be done to turn the company around. And he ultimately took the job.
He realized early on that while everyone gets excited about technology and gadgets and love using them, a lot of times we need help figuring out how to use them. So Hubert knew Best Buy had to be able to help people solve technology issues and answer questions.
Hubert also saw the need for displaying actual working products on the shelves instead of boxes with products inside. Looking at shelves of boxes is not inspiring, people need to be able to see and experience the products for themselves.
So he saw a lot of opportunities to improve Best Buy. He says, “I felt that there was an opportunity. That we have enough assets and that because the problems were self inflicted, we could effectuate a turnaround. So I told the recruiting committee of the board, look, I want the job and here's my eight page memo on what I'm going to do if you guys recruit me and I never looked back.”
Hubert says there are four levers in a turnaround. They are to grow the revenue line, cut costs, optimize benefits, and then if the first three are not enough, as a last resort you go after the headcount or redeploy people.
The three ways to cut costs before cutting your headcount
A lot of leaders first starting at a struggling organization probably would have thought about cutting back on the headcount first to save money. But Hubert not only didn’t take that route, he actually put more money into training, incentives, wellness, etc…
As he shares, “I'm not the cut, cut cut guy. I'm a big believer that in business you have three imperatives in business. One is the people imperative, you need to have good people well trained, well equipped. Then you have the customer or business imperative, you need to have happy customers to whom you sell, you know, compelling services. And then you, of course, have a financial imperative, which is you need money. But the financial performance is an outcome of excellence on the customer imperative, which itself is an outcome of excellence on the people imperative. So it's people, business, finance, and you treat profit as an outcome, not as your singular focus.”
Hubert truly believes that leaders should treat humans as a solution to the problem, not as a source of the problem. And we should use headcount reduction only as a last resort.
How to balance profit and purpose
Hubert is a big believer in being focused on purpose and humanity in business and killing the idea of shareholder primacy. The sole purpose of a company can not be just to make money. He still understands that companies need to take care of shareholders, but taking care of them should be an outcome, not the first priority.
People should be at the heart of the business. They are the engine that allows the business to work. So how did Hubert convince the board members and shareholders at Best Buy that purpose and people mattered just as much as profit and revenue?
He shares that part of the issue with past management is that they would tell shareholders a lot of exciting stories about what could be done, but they never delivered actual results. When he laid out his plan for the shareholders and board members at Best Buy he focused on what he calls the say-do ratio--the ratio between what they said they were going to do and what they actually did.
There were plenty of opportunities, but the shareholders needed to see that they could actually be executed. So every quarter Hubert would give them progress reports with tangible results. Leaders need to keep shareholders in the journey. Give them hope and confidence that things are going to work, but be honest and open with them and keep them in the loop.
As long as you are delivering and focusing on that say-do ratio you should keep your eye on the prize. Don’t let shareholders sway you too much. Hubert says, “I think management teams that use the short term focus of the investors as an excuse to not do the right thing, I think are completely misled. I have found that if you go to the investors, and share with them, what you're doing, the investments you're making, the return you're expecting, they'll believe you and follow you. And then in the end, during our second phase, I actually told our investors our purpose is not to make money.”
When leading Best Buy Hubert believed the purpose of the company was not to make money, it was to enrich lives through technology by addressing key human needs. He made it clear that they were not in the business of selling TVs, they were in the business of understanding what it is people are trying to do in their life and being there to advise and support them. But when you run your business with that mindset, the money will be the outcome.
The danger that leaders need to avoid
In the past people looking to become leaders were taught that being smart was really important. It was believed that if you wanted to be a great leader you had to know it all, have all the answers, you had to be able to solve any problem, and show others that you are intelligent.
Hubert sees that as a danger for leaders. Having this mindset makes it easy to fall into the trap of power, fame, money and glory. While these things on their own are not necessarily bad, they are easy to get wrapped up in. Leaders who make decisions based solely on gaining more power, fame, money or glory usually end up in scandals and disasters.
Instead leaders should lead with humility, integrity, transparency and empathy. Leaders no longer have to know everything, they can look to the people around them for ideas, solutions, and results.
The five Bs of purposeful leadership
In order to avoid the traps of power, fame, money, and glory Hubert says leaders need to reset. And he gives 5 Bs that leaders should focus on in order to truly be purpose driven and centered on their people.