Competing on Culture

The CEO of Best Buy expands on Buckingham's vignette -- and how an employee-centric strategy can lead to customer-centric performance.

In his new book, The One Thing You Need to Know...About Great Managing, Great Leading, and Sustained Individual Success (Free Press, March 2005), Marcus Buckingham advises leaders to "find an edge -- one edge -- and talk about it all the time." Buckingham says Brad Anderson, CEO of Best Buy, has done exactly this by identifying the consumer electronics retailer's edge -- its people, especially the "blue shirts," or frontline employees, in its stores -- and then focusing on it relentlessly. As Best Buy implements its "customer-centricity" strategy, which calls for each store to focus on one or two customer segments (soccer moms, say, or small business customers) in order to serve them better, Anderson is promoting a people-centric culture, too. Rather than merely concentrating on the surface-level changes in the stores, Anderson is pushing on leadership development and employee engagement to enable the transformation. In two separate interviews, Anderson spoke with Fast Company about Best Buy's new strategy. Below are some of the highlights.

Fast Company: Why have you decided to focus so much on development at a time when the company is trying to make such a radical transformation?

Brad Anderson: I've found that times of great turmoil and change are actually the places where opportunity is created for people who might not otherwise be able to see it. I just have this overall theory that there's a lot of folks who have an enormous contribution to make who either don't know how or can't find a way to get into the right place to be able to make the contribution. Change helps from an organizational standpoint. It helps you reevaluate what you're doing so that normal organizational lethargy doesn't stop people from making that contribution. I'm a real zealot about that.

FC: Is there any downside to focusing so much on the development of Best Buy's people at the same time that you're trying to cause such massive change? Does it slow you down at all?

Anderson: My experience told me the opposite. I believe most of us behave much more on emotional needs. Especially in this country, we've got all the basic needs for food and housing, but [what's] often missing are the things that connect us to other people or that make us just feel satisfied as a human being. If companies can't figure out how to address that, they actually reduce their productivity rather than increase it. I believe it accelerates your capacity as opposed to diminishing it.

FC: So it sounds like part of your strategy is that in order to put your customer at the center of all of your operations, you have to put employees' needs at the center, too. How did this thinking begin?

Anderson: It started long before we ever got to customer centricity. A lot of it has to do with being a believer in some of the work that's been done on strength-based leadership. Marcus Buckingham is a good friend. If we could build an organization that instead of looking at every human being like they were the same, looked at them as though they were completely individual, we would be in harmony with reality as opposed to fighting reality. We could choose almost every endeavor and have a much higher likelihood of winning.

FC: This employee-centered approach has to be applied to corporate-level employees too, right? Not just Best Buy's "blue shirts"?

Anderson: This is the part of the issue that hasn't been solved yet. One of the parts of the problem [of developing leaders at the corporate level] is that once you begin to do this, you'll actually find a lot of business opportunities. Once you unlock the talent and begin to freshly engage with the customer, you'll find lots of good things you can do with your resources. That's really what freezes up large organizations. They've got all the money and talent in the world, but they can't figure out how to spend it. Once you begin to do that, the instinct is to do the same thing a large company would, which is to define it and boundary it, and that becomes so compelling that you actually forget about the thing that got you there. Right now that's the challenge we're facing as an organization.

For me, the heart and soul of it, the way I evaluate whether or not this thing actually works, is less in the outcome -- though that's critical because if it doesn't give us an outcome it isn't worth doing -- but more in seeing whether the core engine is healthy. Is the employee engaged with the customer? If that engine is healthy, then I'm not worried about this at all. But if that engine begins to atrophy then I get very worried.

FC: What has surprised you as you've rolled out this strategy?

Anderson: One of the things you [need to] know when you embark on this kind of work is that you don't know where the seed will blossom. When we initially started [changing over some of the stores to the customer segment format], the initial premise was that it doesn't matter where you do it, that all the stores are at about the same readiness to be able to implement the strategy. That turned out to be wildly false. Where we had [a region] already in tune with the point of view I described earlier -- in other words, a place that actually recognized the uniqueness of the human capital to begin with -- it was way ahead in terms of its capacity to be able to implement the strategy. If it wasn't there, it had no capacity whatsoever to be able to implement the strategy. The community that really did it first was our community in California, where we had a leader that had been trying to develop his very disparate group of people with this central approach of really cherishing the uniqueness of the human capital and the uniqueness of the way they operate the stores. They just absolutely went to the moon with these things. Now, they've come back and have been challenging the rest of us with what it actually takes to deliver.

FC: What specifically were they doing in that region?

Anderson: When you got to the core, their whole focus was on the employee's experience. One manager said I literally didn't come in and look at the numbers, I was looking at what is the health of the team. It's a much more organic look of what's underneath what you're trying to do as opposed to what are we trying to do tangibly. So if I've got a very enthused, energetic group of people who are passionate about the work that they're doing, the numbers are going to be fine. The kind of leadership that takes -- that my primary job as a leader is to provide the right sort of emotional support or relief -- is more of a different point of view than I think we recognized. They had an enormous amount of faith in what [the frontline employees] were doing, which is then really reciprocated by the staff.

FC: Do you spend more time in stores with this new strategy?

Anderson: Actually I've spent less time in stores than ever. This strategy [is] so challenging to the infrastructure of the company, so the first work is to get the infrastructure ready to embrace it. Key concepts like servant leadership [have to be enforced] that are very different from the examples we've set over a lot of years. That first has to get modeled at the hub of the enterprise.

One of the things I hate about all this terminology is that it has standard meaning which tends to denude the value of the principle. At the fundamental level, at the core, servant leadership is seeing -- whatever your job and whatever your title is -- that you're actually in service to the people you lead. That the real measurement of whether you're effective is if you helped increase the energy of the people who you're engaging with and leading. If you've done that -- if the energy level is higher than it was when you started -- than you're probably evidencing some servant leadership.

This could be coming in and recognizing an achievement somewhere else, or sometimes, it's coming in and holding someone accountable for not supporting the process that energizes those around them. So I don't see it as namby-pamby leadership; I think it's pretty tough leadership. It measures productivity and energy of the environment as a whole. I really care about measurements at Best Buy like our employee engagement score. If I had to pick a single measurement, that's the one I'd care most about: how engaged are employees? If they're really engaged, there should be other things that I should be able to see in the numbers, but that's really the centerpiece of the job. Part of the reason the California stores we talked about just excelled is that they've got some stunningly engaged employees.

FC: That culture that has been created in California, how do you transfer that culture to other areas? Is that one of the reasons you've been slow to expand the new store formats to other parts of the country, or announce when you'd do so?

Anderson: That's exactly why we don't talk about it. Usually in my history, I've been someone who's pushing for more, more, more. In this case, I'm much more inclined to be arguing for less, less, less, less. This is really about people's hearts and minds. You can't just dictate that by Jan. 13 you're going to be ready to engage your employees in a completely fresh way. That just doesn't happen. It has to be in that genuine, individual point of view about the world. That's really hard to fit.

FC: Where do you think your belief in these ideas comes from?

Anderson: It's part of a core point of view, that for me, comes out of spending so many years in the stores. [Anderson started out in sales at Best Buy.] If you take the top five [executives], the top does not know what's going on. If you have them go out to solve a problem, you're in deep trouble right from the beginning. They don't have access to all the organizational knowledge that's sitting there, and even worse, in most cases, they're not even aware that they don't have the knowledge.

FC: In the end, how crucial is your focus on people to the success of the customer-centricity strategy?

Anderson: My central premise is that when you're trying to look at competitive edges, you're looking for what's your unique point of view that not everybody else is doing. If it's something everybody else is doing, you won't be able to break apart unless you've already got such a commanding skill set that it's virtually impossible for somebody else to [copy]. One of the advantages and disadvantages of the industry we're in is that if you have one of those compelling differences, it's usually highly transitory. Samsung is in [the Time Warner building at Columbus Circle]; Sony's [retail space is] in the building across from Trump Tower. I'm sure if Sony was doing it today they'd be in this building instead of where they are because this is right at the hub. The latecomer has got the advantage. If you're really looking for sustained competitive advantage, it better be something that's a lot. At the core, rather than looking for things like strategic edges you can build in, I'm looking for a cultural edge that regenerates, that allows you to be always dissatisfied and always reinventing. In our industry, with the amount of innovation that's going on, I don't think there's another choice.

FC: That has a nice ring to it, "a cultural edge that regenerates."

Anderson: Thank you. Let's hope it works.

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