Urgency With Optimism: The Hubert Joly Turnaround Doctrine of Human Magic
Best Buy’s market cap during the tenure of Hubert Joly. Stock data from Yahoo Finance.
THE WHOLE ARTICLE IN ONE PARAGRAPH
From 2012-2019, Hubert Joly led Best Buy from the precipice of bankruptcy to a 3X increase in market capitalization, in one of the most remarkable turnarounds in corporate history. He did so by shredding the conventional turnaround playbook and implementing a doctrine of ‘human magic’ which depended on empowered, energized solidarity among Best Buy’s workforce. The doctrine of human magic should be the primary resource for anyone who is responsible and accountable for leading through a crisis. I break down its central tenets in this article.
The Suicide Mission
In 2012 an executive recruiter approached the former CEO of Carlson, Hubert Joly, with what seemed like a suicide mission: Lead the turnaround of Best Buy as its new CEO. At the time Amazon was growing 27% each year, forcing Circuit City and Radio Shack into bankruptcy. Best Buy seemed locked in the same death spiral. The continued disruption of Big Box retail by e-commerce seemed like an unstoppable force that would eviscerate the venerable retailer, and the poor soul who served as its next CEO.
Despite the daunting enormity of the job, Joly accepted the mission. Over the next seven years he orchestrated one of the most remarkable corporate turnarounds in history. Joly shredded the turnaround playbook of mass layoffs and replaced it with a doctrine of ‘human magic’ which depended on an all-in, empowered, energized solidarity among Best Buy’s workforce.
Turnarounds are different when you’ve survived them
When I first read “The Heart of Business,” Joly’s memoir of the Best Buy turnaround, it felt like a ray of sun breaking through the management consulting/ Ivy League MBA/ investment banking clouds. (Which is ironic, because Hubert Joly is an alumnus of McKinsey and a professor at Harvard Business School.) His experience reminded me of all the moments in my career when change was urgent, failure was not an option, and it was my job to fix it. Like the aftermath of an acquisition, a new entrant stealing market share, a massive economic crisis, and activist investors. I always felt that the conventional tools and conventional advisers in these extreme situations treated the emotional intensity of the moment as an inconvenient externality. My job, as far as they were concerned, was to ignore the people whose livelihood, dignity, and team was stripped from them and to implement the PowerPoint deck as prescribed by the corporate politburo. But, over time, I realized the conventional playbook didn’t work. The only strategy that did work was a fired up belief that we would move mountains together if we looked out for each other. The job of leading a turnaround, I learned, is to nurture the energy of urgent optimism and protect the team from everything that threatens to extinguish it.
Joly calls this ‘human magic.’ “Human magic is what happens when each individual within the company is energized and achieves more together than they ever thought possible…. Human magic results in irrationally good performance.” For Best Buy, human magic reversed its seemingly imminent death. Its stock nearly tripled in value during Joly’s 7-year tenure. It doubled its e-commerce market share for consumer electronics. And its price-matching guarantee drove people off of websites and into Best Buy stores, where they could speak to a human in a blue shirt, who was energized and engaged.
Here are the pillars of Joly’s ‘human magic’ turnaround doctrine:
Stop the bleeding. For Joly this was a 4-pillar strategy. First, grow the topline. For Best Buy this meant matching Amazon’s prices, and converting stores into e-commerce fulfillment centers. Second, reduce non salary expenses. Third, optimize employee benefits by aggressively renegotiating with insurers and other vendors. And fourth, if absolutely necessary, reduce headcount by eliminating bloat like Chiefs of Staff and middle managers.
Leaders are in the trenches - not the Ivy Tower. Joly trusted his frontline workers in the stores and warehouses to tell him what was broken and how to fix it. The search engine, floor plans, inventory management, and reporting requirements to headquarters were all broken. The only way to learn how badly they were broken, and how to fix it was to speak to the front-line, hourly wage workers who had to live with the consequences. Joly surrounded himself with C-suite executives who were gritty and got messy. He encouraged them to throw on a blue shirt as often as possible and work in the field.
The best strategy is good enough. Joly knew that ownership and execution of the strategy by Best Buy’s workers was more important than the strategy itself. 300-slide PowerPoint decks, and performance dashboards with 40 KPIs were reduced to two priorities for every store: grow sales and grow profits. Everyone was empowered to eliminate waste, and break rules that were obviously stupid in pursuit of those goals.
“This is hard for me to talk about” - Joly went out of his way to encourage vulnerability and authenticity. He understood that human magic was an unfair competitive advantage that couldn’t be replicated by the Amazon algorithm. Moments of truth, where people said things that were hard to say, and others listened, built trust and connectivity. When people were vulnerable, energized, and engaged they connected with their peers and customers in a way that was deep and distinctive. Profit and growth was a lagging indicator of deep chemistry.
Radical candor is completely compatible with radical optimism. Joly had to set an example of recognizing the company’s amazing assets in the face of objectively scary challenges. A core pillar was asking for help when he knew the destination but not the path. He pushed hard outcomes down into the company and trusted the team to find the answer. It made people know it was safe to be stuck.
There’s one more thing: never underestimate the obstructionists. One thing Joly doesn’t explicitly address is all the people who wanted things to stay the same and tried to thwart the turnaround. He mentions how he needed to resolve the tension between him and Best Buy’s founder Dick Shulze. He also had the benefit of urgency: stagnation wasn’t an option if the company was going to survive. But, most people leading urgent change in a mature company will encounter resistance. Some of this resistance will be healthy and resonable. Other times it will be obstructionism rooted in self preservation and self promotion. It is a feature, not a bug, and it behooves you to anticipate it and develop a strategy for working through it. I talk about how to overcome obstructionsim in this article.
The people who lead businesses through massive disruption and growth often have totally different strategies than the thought leaders and consultants who never had to live with the consequences of their advice. In the trenches, the job is about sustaining optimism and managing emotions in the face of fear. It’s about overcoming obstructionism from people who are motivated by self-preservation. And it’s about capitalizing on the urgency of the situation to invite people to step up and flourish in ways they’ve never been empowered to before. Human magic, like what Joly describes, is the difference between the leaders who’ve led a successful turnaround and those who’ve observed it.
DO YOURSELF A FAVOR
Subscribe to this newsletter. If you want more actionable insights, as well as advance VIP access to our events and courses, then subscribe here.
Join our community. You can be one of the next 25 people to join Punks & Pinstripes, a community of entrepreneurs who left corporate leadership to launch new ventures. Membership is capped at 200. The next application window is Dec. 4-18.
We’re looking for 20 people to join the Urgency with Optimism Masterclass Pre-Launch - This class is for those leading a massive change in an organization with messy emotions. We’re rolling it out in Q1 2024, but need brilliant leaders to test it before we go live. Email greg@punksandpinstripes.com if you want in.
