Tune in as Hubert encourages listeners to consider how much the leadership model has transformed, his belief that the journey to success is led by having “purposeful, caring leaders who are authentic and vulnerable and are there to create an environment in which others are successful.”
After a distinguished career as Chairman, President and Chief Executive Officer at Best Buy since 2012, Hubert led the company through a successful turnaround entitled the “Renew Blue” transformation, which resulted in improved customer satisfaction, market share gains, revenue growth and improved margins. Hubert Joly has been recognized as one of the top 100 CEOs in the world by the Harvard Business Review, one of the top 30 CEOs in the world by Barron’s and one of the top 10 CEOs in the U.S. by Glassdoor.
It is our privilege to present this episode of Leadership Reimagined “The Future of Capitalism: Leading with Purpose and Humanity” with Hubert Joly!
The Future of Capitalism: Leading with Purpose and Humanity
Tune in as Hubert encourages listeners to consider how much the leadership model has transformed, his belief that the journey to success is led by having “purposeful, caring leaders who are authentic and vulnerable and are there to create an environment in which others are successful.”
After a distinguished career as Chairman, President and Chief Executive Officer at Best Buy since 2012, Hubert led the company through a successful turnaround entitled the “Renew Blue” transformation, which resulted in improved customer satisfaction, market share gains, revenue growth and improved margins. Hubert Joly has been recognized as one of the top 100 CEOs in the world by the Harvard Business Review, one of the top 30 CEOs in the world by Barron’s and one of the top 10 CEOs in the U.S. by Glassdoor.
It is our privilege to present this episode of Leadership Reimagined “The Future of Capitalism: Leading with Purpose and Humanity” with Hubert Joly!
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SHOW NOTES: HUBERT JOLY
Hubert Joly on diversity as an imperative
I think that for many people, diversity is essential to business success. I think organizations do well when everyone at the company feels that they belong, that they are seen, that they are respected, that they can be the best, biggest, most beautiful version of themselves. So we start with each individual. But then, of course, you have to look at systemic issues around gender and race and ethnicity in particular. It’s so obvious that your leadership team and your team in general need to reflect your customers and the communities in which you operate. And it’d be complete madness, from a business standpoint, to want to recruit only from a quarter of the population of the country. Why would that make any sense? For example: if you operate a store, in some parts of Chicago, if your blue shirts don’t speak Polish, you’re not going to sell much. So whatever dimension of diversity you’re talking about, it is really critical. And, of course, since the horrible murder of George Floyd, the level of intensity around, in particular, the racial dimension has gone up. And I think we have to be real here. It’s obvious that as a country, and as a set of corporations in particular, on the racial dimension, black diversity, we’ve not made enough progress. It’s one thing to talk about it. But to quote Nike, you just have to do it. Now that we know – because it’s unavoidable to realize – that this is a business imperative, a human imperative, a societal imperative, it’s now more about doing it. In the corporate world, once we’ve decided that something is a priority, we know how to deal with it. That’s what we do all day long. So on this diversity front, I think we’re now seeing companies starting to do the work. Companies have to make the diagnosis: “if our workforce is not diverse from a gender or racial standpoint, what are we missing?” Do the diagnosis and determine what changes you need to implement.
We’re all seeing more and more courageous actions. I love the fact, for example, that the general counsel of the Coca Cola Company has written to all of their law firms and said, “okay, over the next 18 months, I’m going to evolve our portfolio. And I want to make sure that the firms we work with are diverse from a race standpoint. We’re going to put together some milestones. And if you miss the milestones, I’m going to reduce your fees by 30%, every quarter. That’s catching their attention. I feel very, very strongly about this: it’s about doing, not just saying.
Hubert Joly on stakeholder capitalism
I think it’s obvious to all of us today that the world we are in is facing a multifaceted crisis. We have a health crisis, of course, an economic crisis, a societal crisis, a racial crisis, an environmental crisis, and a geopolitical crisis. What’s the definition of madness? It’s doing the same thing and hoping for a different outcome.
There are two people on my personal “FBI Most Wanted” list. The first is Milton Friedman, with his focus on shareholder primacy. And the other one is, Bob McNamara, the former Secretary of Defense, who invented, in a sense, top-down, scientific management, where you take a bunch of smart people, and tell other people what to do, and then they’re tracked and rewarded accordingly. These things don’t work. So we need to rethink how we want to run businesses. My core thesis is that a business can be a force for good. And it starts with pursuing this noble purpose. At Best Buy we said, “we’re not a consumer electronics retailer. We’re a company that’s here to enrich lives through technology by addressing key human needs,” which vastly expanded our addressable market. It was also very inspiring for our employees and our customers, and today, employees and customers are demanding from companies that they be forced for good.
The other idea is to embrace all stakeholders. In Minneapolis, when the city was on fire after the murder of George Floyd, could those businesses open their doors? No, you cannot run a business if the community is on fire. Similarly, if the planet is on fire, you cannot run a business. So you have to embrace all of your stakeholders, including your shareholders, I see no trade-off between stakeholder capitalism and shareholder capitalism. We have to embrace all stakeholders and serve them. And it’s all through people that you do this.
I think our role as leaders has changed dramatically; our mission has changed. It’s not just about shareholder value creation, it’s about doing some good in the world. The scope has changed: it’s not just the business, it’s all of the stakeholders. The model of the leader as the superhero, the smartest person in the room, who knows everything? That’s gone. We need purposeful, caring leaders who are authentic and vulnerable and are there to create an environment in which others are successful. It’s not a minor change. During the French Revolution, when Louis XVI asked one of his advisors, “is this a revolt?” Rochefoucauld replied, “no, Sire, it’s not a revolt. It’s a revolution.”
Hubert Joly on his three business imperatives: people, business, and finance
Most people agree with this in principle because frankly, it’s hard to argue against. The thing is that it’s easy to say and easy to understand, but it’s really hard to do. My book is a guide for any leader who is eager to abandon the old ways and embrace this idea of leading from a place of purpose and humanity. People, business, and finance – I learned that from a client when I was a consultant years ago. He told me that the purpose was not to make money; profit was not the imperative. He said that in business, you really have three imperatives: the people imperative, which is that you have to have good people with the right tools and the right motivation; the business imperative, which is you need to have customers or clients who are happy and want more; and then the financial imperative, which is that you need to make money, but you treat it as an outcome. He made it very practical, so here’s a very concrete piece of advice that he gave me 30 years ago: when you do your monthly business performance review with your team, don’t start with the financial results, finish the meeting with the financial results. Your CFO will make sure that there is enough time spent on that. Start with people and organization, continue with customers and products and business, and then finish with the financial results. If you do it the other way around, you won’t have time for customers and people. But if you start with people and customers, you will have time, and then you’ll be focused on the real drivers. Because, again, profit is a result. In fact, in French the word for profits is resultats, which literally means “results,” and that’s exactly what they are. If you need a doctor to take your temperature, do you want the doctor who puts the thermometer in the fridge or in the oven as needed? No, you want somebody who is taking the real temperature, looking at the real drivers of your health, which are your people.
Hubert Joly on his first steps as CEO of Best Buy
In 2012, I got the call about the CEO job at BestBuy. At the time, I was happily employed at Counseling Companies, another great Minnesota company. So I told Jim Citron, the headhunter, “Jim, you’re crazy, right? I don’t know anything about retail, and this thing is a mess.” He said, “they don’t want a retailer, they want somebody who can provide a fresh perspective. Please do me a big favor and look at it.” So I did, and what I saw was that, very simply, the world needed Best Buy, because as consumers as customers, for some of our electronic purchases, it’s good to be able to touch, feel, see the products and be able to ask questions of a human being. So the customers needed Best Buy, and the vendors needed Best Buy as well, because they needed a place to showcase the fruit of their billions of dollars of r&d investments. So there was no strategic problem. The problems were self-inflicted in that the quality of service had gone down. The online experience was horrible, the prices were not competitive. The good news is that when the problems are self-inflicted, you can fix them. So we didn’t need to start with strategy, we needed to start by fixing what was broken. When that’s the case, the priorities follow naturally. The first priority was making sure we had the right team at the top. I’m a bit of a Maoist, so I believe that the fish rots from the head [laughs]. You always have to make sure you have the right team but in a turnaround, it’s particularly urgent.
Then we focused on operational progress. Our approach there was interesting, because a lot of people were telling me “cut, cut, cut, you’re going to have to close stores, fire people.” And that’s, in a sense, the opposite of what we did. People were key to the turnaround. My first week on the job, I worked in stores to listen to the frontliners, and they had all of the answers. Our role as leaders is to come up with answers and create energy. In this case the first part was easy – we just had to listen to the frontliners – so then it was about creating energy. Making sure that we co-created the plan, then getting going, implementing changes, having people make a lot of decisions, celebrating successes, talking about the difficulties and working together to solve them. Cutting headcount was really the last resort. My view is that in turnarounds, your first priority is to grow the revenue. It’s amazing what revenue growth can do. If you’re going to go after cost, first focus on what I call “non-salary expenses,” which are all of the elements in the cost structure that have nothing to do with people, which at most companies, is the vast majority of the cost structure. You have to optimize benefits. In the US, we are self-insured from a healthcare standpoint. So if you improve the health of your employees, you reduce your healthcare costs.
Hubert Joly on the Renew Blue transformation
The book is not, per se, the play-by-play of the Best Buy turnaround, it’s about the philosophy that was behind our resurgence in this Renew Blue transformation. The first step was saving the company, which is what I was just talking about. And then there was a second phase where it was about accelerating the growth and defining what kind of company we wanted to look like when we grew up, which is when we spent a lot of time on purpose as a company. Then we had to create the environment where we could, as I said, “unleash human magic.” Frankly, I learned so much from leaders on the frontline.
Hubert Joly on transformational moments in his career
My story is one of a significant transformation because I went to one of the leading business schools in Europe; I was a McKinsey consultant. So I was trained, like many, to believe that being smart was really important, that leading with your brain was the way to do it. That’s how you progressed. And there were some turning points or milestones in my journey as a leader that I want to highlight. One of them we’ve already talked about, which was listening to and learning from that client who told me that profit was not the goal. Around the same time, two friends of mine who were monks asked me to work with them on writing an article about the philosophy and theology of work. Why do we work? What is work? Is work a curse or punishment because some dude sinned in paradise? Or is it something we do so that we can do something else more fun? Like watching the Vikings beat the Green Bay Packers in football – a rare occurrence, but it’s always fun. Or is it part of our fulfillment as human beings? Is it part of our quest for meaning? Like in the words of the Lebanese poet Khalil Gibran, “work is love made visible.” It’s a choice, how we see work, it’s magical if we can work in a place where we can connect what drives us with the purpose of the company. Understanding that was a game changer for me.
Hubert Joly on the power of executive coaching
Skipping ahead in time, another milestone was starting to work with a coach in 2009. Before that, if somebody had told me that Jack or Mary was working with a coach I would have said, “what’s wrong with Jack or Mary? Are they in trouble, are they going to get fired?” But then you realize 100% of the top 100 tennis players in the world have a coach. Same with the football teams, basketball, you name it. And as an executive, working on getting better and having the humility to ask my team for feedback to help me get better was a big game changer. Again, we don’t need leaders who are superheroes, we need leaders who are humans, who are able to say, “my name is Hubert, and I need help.” So the last milestone I would highlight is at Best Buy when I saw the power of leaders on the front line creating an environment where they were able to unleash this human magic, that really taught me something.
I’ll just tell a very brief story, the story of one of our store managers in the Boston market, who would ask every one of his associates, “what is your dream? At Best Buy, outside of Best Buy, what is your dream? Okay, write it down in the break room. My role now as the store GM is to work with you to help you achieve your dream.” If, as leaders, we can be curious about what drives people around us and can work with them to connect what drives them with the purpose of the company, I think it’s magical and transformational.
Hubert Joly on his legacy at Best Buy
One of the great things that you can be proud of as a leader is when performance continues to improve after you leave. Then you can say, “okay, we’ve created something that’s sustainable and durable.” I think with the culture at Best Buy today, Corie Barry, my wonderful successor, is doing a fabulous job. It’s a culture that’s very purpose driven – we’re here to make a positive difference in the world. And it’s a very human culture. That’s why I wanted to capture that in my book. It’s a recipe, and there are ingredients that we describe in the book that can create irrationally good performance that benefits all stakeholders. I’m so excited, so proud of the team at Best Buy, and I wanted to share some of our secrets.
Hubert Joly on his “Five Be’s of leadership”
The most important decision we make as leaders is who we put in positions of power. I must admit that for too long during my career, I was placing most of the emphasis on expertise and experience. I now believe that who the person is, what kind of a leader they are, is so, so critical.
We have these Five Be’s. The first one is “Be purposeful leaders,” which means be clear about their own purpose in life, be curious about the purpose of people around them, and how it all connects with the purpose of the company.
Number two, we want them to Be clear about their role as a leader, which is not to be the smartest person in the room, but more to create an environment where others can blossom.
The third is: Be clear about who they’re serving. I told all the officers at Best Buy, “look, if you’re serving yourself, or your boss, or me as the CEO, it’s okay, I don’t have a problem with that. It’s okay, except you cannot work here, we’re going to promote you to customer. And we’re going to take good care of you as a customer, but you cannot work here. On the other hand, if you’re here to serve the frontliners in the organization, then we’re good.”
The fourth is about Being values-driven. Of course, integrity is essential.
The fifth “Be” is about being an authentic leader, which means, be human, be yourself, your full self, the best version of yourself. Be vulnerable, because that’s how you connect with other people. And that’s how you get the spark in the organization.
