Bill Kerr: What do businesses owe their employees apart from a paycheck? Can they afford to see workers in terms other than unit labor cost? Hubert Joly learned the orthodoxies of Milton Friedman, Robert McNamara, and others in business school. But it was as CEO of Best Buy in the 2010s, facing the ruthless competition of retail electronics, that he refined and applied his human-centric approach. In the course of leading a dramatic turnaround in the company’s performance, Joly proved that purpose, respect, encouragement, and autonomy can boost the bottom line.

Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m your host, Bill Kerr. Hubert joins me today to discuss the evolution of his views on management, his book, The Heart of Business: Leadership Principles for the Next Era of Capitalism, and the role of business in society. I’m also pleased to welcome Hubert as a colleague. After leaving Best Buy in 2019, he joined the Harvard Business School faculty. Welcome to the podcast, Hubert.

Hubert Joly: Well, thank you, Bill. I very much look forward to our conversation.

Kerr: Hubert, we’re obviously very excited that you have joined us here at HBS, and we’re going to talk some about Best Buy, but what do you consider your major career moments going into the Best Buy job?

Joly: Major career moments. Oh, this may be actually 20 years ago. I’d been a partner at McKinsey & Company. I was on the executive team at Vivendi Universal. So I was successful. And yet, Bill, I found emptiness. There was no meaning. There was no joy. So call this my midlife crisis. And this taught me that power, fame, glory, money, these were not good drivers. So that led me to step back and take a look at my life and my purpose in life. And so I went through exercises—meditation, reflection—to discern my life’s purpose. And so it helped me, then, looking ahead in particular when I got to Best Buy, being focused on trying to do something good in the world.

Kerr: And in your book, you spend a lot of time on spiritual reflection. That seems to be really important for your work and your life.

Joly: The way I found my purpose was by doing the spiritual exercises of Ignatius of Loyola—of course, the founder of the Jesuits. When I was at business school at McKinsey, in the early years of my career, I thought that being smart was the main attribute of a great leader. I was a great problem solver. That’s how I would move forward in life. And I would say, following the crisis we’ve been going through and following my life’s journey, this is so far from the truth. As leaders today, I think that’s a big lesson. We need to lead, of course, from our head, but also our heart, our soul, our guts, our ears, our eyes, learning empathy, vulnerability. This has massive implications on how we lead, by the way, how we recruit, how we lead our teams, how we connect with people, this time of Great Resignation.

Kerr: I can agree with that. And let me take you to the point where it’s 2012. You’re evaluating becoming CEO of Best Buy. What was your head saying, and what was your heart saying? The company was struggling to compete with Amazon, among other things out there. And so it was not an easy decision.

Joly: Yeah. So it’s May of 2012. I’m already in Minnesota, because I’m the CEO of Carlson Company, which is a Minnesota-based hospitality and travel company. And I get this call from Jim Citrin, an HBS grad, who is one of the senior partners at Spencer Stuart, who calls me about the Best Buy job. I took the time to do my due diligence. I read everything I could about Best Buy. I did some mystery shopping. I listened, I learned, and I concluded that, actually, the problem was not Amazon. The world needed Best Buy. For some of our purchases, actually, it’s pretty useful to be able to go to a store and talk to somebody and touch the product. If you think about a sound system, you need to hear it. And then the vendors, importantly, needed Best Buy, because they need a place where to showcase the fruit of their billions of dollars of R&D investments. So strategically, we were in a great place. The other good news is that all of our problems were self-inflicted. Our prices were too high. The online shopping experience was miserable. The speed of shipping was terrible. The experience in the stores had gone down. The cost structure was bloated. And so I told the search committee of the board, “I’m not only interested in talking to you, but I want this job. This is going to be a ton of fun.” So that’s why it connects. When I try to make, Bill, a career decision now, it’s not about power, fame, glory, or money. It’s about, is this the opportunity to do something that’s meaningful, impactful, and joyful. And I thought that check, check, check in this case.

Kerr: So there’s a question that comes in many struggling company situations, turnaround situations, of will you significantly cut into employment, reduce wages, and so forth. Talk about how you thought about that process with Best Buy, and how do you get the organization to make those significant changes, but also to your point, respect the human side?

Joly: Yeah. This is such a fundamental point, Bill, because all of the advice I was getting from analysts and investors was the traditional advice in turnarounds: Cut, cut, cut. You’re going to have to close stores, lay off people. If people were the problem—we talk about human resources. For me, people are not a resource. They’re the source. The entire approach to the initial stages of the turnaround was very human-centric. My first week on the job, I actually spent it working in a store in St. Cloud, Minnesota, listening to the frontliners. And my job was super easy: listen, take notes, and do as I’m told, because they had all of the answers. So start with people at the front line. Start also with building the right team, of course. We know this. If you don’t have the right team, you’re not going to go far. So that was a key priority in the initial phases. Then, in terms of economic levers, instead of head count, we focused first on growing the revenue line, the top line. We also knew we had to take cost out. Our cost structure was bloated. But there, the first thing you do is you focus on what I call “non-salary” expenses. Bill, this is everything that has nothing to do with people in the company. And by the way, at most companies, this is the majority of the cost structure. To take an example of that, at Best Buy, we sell a lot of TVs. They’re large. They’re thin. So they break. So we would break about $200 million worth of TVs every year, if you can believe this. If you can reduce the TV “junk-out,” as we called it, by working with the vendors, with the supply chain, and the customers on how to carry them, install of them, and so forth, or maybe do that for them, you have a good chance of cutting this in half. So we call this “waste and inefficiencies.” And by now, Best Buy has taken more than $2 billion off cost out. I think it’s about 70 percent of that cost cut had nothing to do with people. Now, sometimes revenue growth and non-salary expense reduction is not enough for the economic equation you’re trying to solve. So you go there last. But then you’re wise. The first thing we did, we said, “We’re not going to touch headcount on the front line.” I wanted the frontliners to be focused on the customers. But sometimes you reduce layers. You close departments that are not strategic. But even then, you try to redeploy people in the business because of turnover and opportunity. So it’s start with people, finish with people. It’s all about creating energy. In physics, we learned that energy is a finite quantity. In a company, in an organization, it’s not, because a company is a human organization made of individuals working together in pursuit of a goal. So you can actually create energy. How do you create energy? By co-creating a plan. By the way, the plan doesn’t need to be perfect. So co-create something, and then get going. I call this the “bicycle theory”—much easier to direct a bicycle that’s moving than a bicycle that stands still. Celebrate the early wins. If something is not working, by the way, just say it.

Kerr: Beyond those micro-level interactions and playbooks, which is fantastic advice for leaders, you also work to try to take some of the headwinds, like Amazon, and create more opportunity out of them. So what did you do to kind of overcome some of the strategic cost pressures that are being placed on Best Buy?

Joly: When we decided to match Amazon prices, to take price off the table, because we thought that this was foundational, the investors still told me, “Hubert, that makes sense, but you’re still going to die, because your cost structure is too high.” And I said, “Well, we’re going to take cost out.” They said, “Nah, it’s still not sufficient.” So there was an idea that was inspired by, in fact, my experience in the travel industry. Sometimes a business can be a two-sided business. You have your customers as customers. But in that case, the vendors could be customers, because we had a real value-add that we could bring to them, because if you are Samsung or Apple or Microsoft or Sony, you spend billions of dollars in R&D to create new products. You need to showcase these new products. If they’re just in a box on a shelf or even online, you’re not going to be able to see what that product can do. So in December of 2012, J.K. Shin, who was the CEO of Samsung Electronics, came to see me, to see us in Minneapolis. And over dinner, we struck a deal, which in a matter of months he would have 1,000 stores within the Best Buy stores. Instead of building his chain of stores like Apple was doing or Microsoft or Sony, in a matter of months, he had 1,000 stores within our stores. Good for our customers who could see in a beautiful way the products from Apple, but also Samsung, good for Samsung, as I just mentioned, good for us, because, of course, we got some money out of that, and they helped refresh the stores. So the lesson, the leadership lesson, from that is, other than the Covid pandemic, Bill, there’s another pandemic in the world, which is the pandemic of zero-sum games. Instead of twisting the arms of our vendors, we decide to collaborate with them. And so, now all of the world’s foremost tech companies, including Samsung, Apple, Microsoft, including Amazon, including Google, including Facebook, have a place in our stores where they can showcase the fruit of their billions of dollars. So we turned the tables on showrooming. We invented showcasing. And the leadership lesson, other than the zero-sum game thing, is sometimes people will obsess about a competitor like Amazon. No, no! Obsess about the customers. And by the way, see everybody as a customer, and see what you can do for them. Look at competition sideways, but not as the main point.

Kerr: I’m going to have to fast-forward five, six years here. So you’re leaving Best Buy in 2019. Tell us a bit about the transition and then what inspired you to write your book, The Heart of Business?

Joly: In the back half of 2018, I’d been the CEO of Best Buy for six years, six, seven years. I started to think about what’s going to be the right time and the right way to pass the baton? We had had Renew Blue from 2012 to 2016, then Building the New Blue, which was much more growth oriented, much more purposeful, 2016 to 2019, 2020, and then which was going to be the next iteration. And so I felt this may be the time. And we were fortunate. We had invested significantly in the development of our executives. We had at least a couple of great candidates internally. So eventually, I spoke with the board, and they picked Corie Barry, who is an amazing leader, and she’s carried it forward and continued to improve.

Kerr: As we unpack parts of your book, I’m guessing people listening to this podcast kind of rightfully infer you’re a pretty nice guy. But you also in your book describe killing Milton Friedman. So I want you to square with us a little bit of the message you have for leaders that involves killing Milton Friedman.

Joly: I felt that so much of what I had learned, Bill, at business school or at McKinsey or in my early years as an executive was either wrong, dated, or incomplete. In fact, during the pandemic, even though I’m the eternal optimist, I had to, at some point, slow down and say it out loud: “The world we live in is not working.” It’s not a secret. We have a health crisis, of course, an economic crisis, big societal issues, racial issues, an environmental time bomb, geopolitical tension. It simply is not working—maybe working for a couple or three people, but not for the rest of mankind. And yes, on my FBI Most Wanted List, there’s two people: Milton Friedman and Bob McNamara. And Milton Friedman, it’s the obsession about profits. Profit is an outcome; it’s not the goal. And while for the last 50 years we’ve been raised to believe that this is what mattered, it can be poisonous. For example, the quality of your workforce, that’s not on your balance sheet—even though we talk about human capital, that’s not on a balance sheet. Your carbon footprint, that’s not on your P&L. So there’s many missing pieces. But even more fundamentally, one of the beliefs I have is that, if your employees are motivated, well equipped, and want to give it their best, and if you have happy customers who want more, and it’s managed well, you’re going to get a great financial outcome. But you have to manage it in that sequence. And part of the reason for writing the book—or the main driver for writing the book—is that I think we need an urgent re-foundation of business. It’s about putting people at the center, as the source, creating an environment that can unleash human magic in support of the noble purpose, embracing all stakeholders in a declaration of interdependence, and in treating profit as an outcome, not the goal. Now I would say, Bill, today, when you look at surveys, probably 80 percent of leaders, businesses, believe this is the right direction. There’s a big gap between intention and reality. And the reason is because it’s hard, because it’s so different. It’s hard for two reasons. One, it is different from how we’ve been raised. And two, intrinsically, it’s hard because it requires us to reinvent pretty much every facet of management, how we lead, how we motivate. So I’ve written this book based on the 30 years of reflection and action, and also with the help of the credibility of the Best Buy turnaround. And I wanted to write this book for leaders who are keen to move in that direction, keen to lead from a place of purpose and with humanity, and are going to value some help and some practical tools, some practical examples. So that’s the essence of the book.

Kerr: So, Hubert, continuing on that noble purpose of work, tell us a little bit about how you did apply this into Best Buy?

Joly: Yeah. So after the turnaround—so we had stabilized the business, we had fixed what was broken, we decided to turn the page and start a new chapter, which was about growth and about deciding what we wanted to look like when we would grow up. Every quarter we would get together as an executive team for an offsite—like everybody does—to work on our strategy, our plans, our progress. And one time I had asked everyone of the executives to come to the offsite with a picture of themselves when they were little, two or three years old. And believe me, Bill, we saw some really cute pictures. And then, during the evening over dinner, we shared with each other our life story and our purpose in life. There was two things that came out. Number one, everybody on the executive team was a human being—not just a CFO or a CHRO or a CMO, but a beautiful, quirky, messy human being. And two, with a couple of exceptions, pretty much all of us shared the same kind of purpose in life, which is the Golden Rule. As we were working on defining more precisely the purpose, so where we landed after a lot of research—so we used left brain and right brain—we said, “All right, we are actually not, Bill, a consumer electronics retailer.” So you have a scoop here. Best Buy is not a consumer electronics retailer. We are a company that’s in the business of enriching lives through technology by addressing key human needs. And the beauty of redefining a company, re-imagining a business around a noble purpose is that a) it’s inspiring, but also, it vastly expands the addressable market. Because all of a sudden, I’m not limited to what I can do for you in the stores or even online. I can think about ... health is a human need, of course. All of a sudden, we’re doing this. Now, I can help aging seniors stay in their home independently longer by placing sensors under their bed, under their sofa, in the kitchen, in the bathroom. And with remote monitoring and AI in a care center, I can detect if my 90-year-old mother, who lives alone, is struggling with something and then trigger an intervention. That’s a service that actually is not sold through the Best Buy stores. It’s sold through insurance companies, but it serves our purpose and leverages our capabilities. And you see many companies today defining and articulating a purpose. For me, a corporate purpose, you find it at the intersection of what the world needs, what you’re uniquely good at, what you’re passionate about, and how you can make money. The book is not simply about Best Buy. It’s a bigger book. But it takes the steps that are necessary to go from a noble purpose to everybody at the company writing themselves into that story and feeling that they can be the best, most beautiful, biggest version of themselves, and connects what drives them with the work and with the purpose of the company.

Kerr: That’s great. And I think a number of companies will have done something similar at the executive level to that kind of small-group setting. But as you think about applying this out to a workforce as large as Best Buy, how did that actually then get implemented to the frontline employees, those that are in the retail stores? A lot of people in this podcast are very interested in kind of employee training, career development. What were some of the key things you took out from Best Buy across the broad workforce?

Joly: Yeah. And that’s essential, because if it just stays in the executive suite that doesn’t do anything. And we talked about Bob McNamara earlier. The whole approach of top-down cascading of a strategy, that simply doesn’t work. So the bulk of the work is about creating the environment where people can connect. Let me take a few examples to illustrate the kind of work that we’re talking about. One thing we did, instead of this cascading down, is one day in June, we closed all of the Best Buy stores for a few hours on a Saturday morning, and we organized some workshops. No PowerPoints, no videos from me, the CEO, or anything like this. But we went into small groups. And we were asked to do two things: one, is share with each other our life story, and two, talk to each other about an inspiring friend you have in your life. And we picked the inspiring friend, because we thought, at the end of the day, our positioning as a company was to be an inspiring friend to customers. We’re going to try to treat each other and the customers as other human beings, and we’re going to try to treat each other and the customers as if we were an inspiring friend to them, not as a walking wallet. And then, because the Golden Rule is there in everybody’s heart, I can see how I can pursue my own purpose and connect it with the work and the purpose of the company. So that was one thing. Now, of course, we have all been to training programs. And then you go back, and then you are in a poisonous environment. And so nothing happens. A big lesson is that, as important as the strategy work, as important as training, as important as values, is the creation, is to make sure that you create this environment where you can unleash human magic. Create an environment where there’s genuine human connections, where we can be ourselves. I remember a young associate who shared with me once that his life changed the day a manager recognized him and took an interest in him. It’s the people. As a leader, if you can make sure that everybody around you feels seen, in that you know who they are, their life story, and their purpose in life, and then you take an interest in saying, “I’m going to help you achieve your purpose in life.” And you create an environment, again, these human connections about vulnerability. Kamy, our head of HR, once disclosed with the entire company, she’s the CHRO of a Fortune 60 or whatever company. And she says, for years, she suffered from depression. Who talks about this? Aren’t we supposed, Bill, to be superheroes who know everything and are super strong? That was a game-changer. Autonomy is another one.

Kerr: Hubert, you have developed this approach and philosophy over 30 years. And yet, we find ourselves over the last 18 months focused on a pandemic and the challenges that it’s brought. And now we’re in the context of what some have called the Great Resignation. Can I ask you to project a little bit of that into advice you give to leaders right now as they’re trying to keep people’s trust in their organizations and overcome the challenges that Covid has brought about?

Joly: One of the things I’ve learned during Covid is that if you could not go outside, it was good to go inside. And what do I mean by this? That means as leaders, we first need to know how to lead ourselves. So that means spending time with ourselves—whether it’s meditation, prayer, a walk around the lake, time with your personal board of director, with your spouse, whatever it may be—and trying to discern what kind of a leader do I want to be. At HBS, doing the new CEO program, we ask the new CEOs to write their retirement speech. And my wife, Hortense le Gentil, who is an executive leadership coach, she goes even one step further. She asks our clients to write their eulogy. How do we want to be remembered? So that’s your first piece of advice. This second piece of advice is, again, take care of yourself. So keep taking good care of yourself—again, exercising, meditation, walking, whatever the case may be. That’s the foundation. As it relates to coworkers, I think one of the things we’ve seen during Covid is their humanity. If we had not seen that they were human before, it’s inescapable. When they’re on Zoom, we can see their spouses, their kids, their dogs, their cats, their WiFi problems. Or if they are frontliners, we can see the health risks they are taking, we can see how mental health issues have significantly increased. So we can feel the humanity of people around us. We can feel their struggles. And now, in the face of this Great Resignation, the great advice I think is the great re-recruiting. When we recruit somebody, we get to know them, we get to understand what their dreams are, and then we can see how we can connect what we can offer with their dreams. I know a lot of CEOs who are spending time doing listening tours.

Kerr: You’ve talked at many points on ways to develop the greater purpose and connection with employees and seeing them as people and so forth. Many organizations are rightfully prioritizing right now better racial diversity and equity. Can you tell us a bit about the efforts at Best Buy and then also the things you’ve taken even further from that over the last couple years after George Floyd’s murder?

Joly: Yeah. Rewind to 2016. Every year at Best Buy, like many companies do, we would measure our employee engagement. And frankly, employee engagement scores kept going up. And that was a key driver of our resurgence. But you like to slice it. And I was seeing that there was material differences in employee engagement across race and ethnicity. And so what I did, which is what most people would do, I did focus groups with different groups of employees. And Bill, I was struck. I got a punch in the stomach from listening to the experience of our Black colleagues. Now, as you know, I did not grow up in this country. I grew up in France. And believe me, in France there’s plenty of racism. Believe me. But it’s a different history. It’s a different context. And while I thought that I knew, I had no idea deep down in terms of what it is really like to be a Black man or woman employee in this country. One thing I felt I needed to do was learn more. So our diversity team helped us establish at that time a reverse mentoring program—and you could scratch the word “reverse,” frankly. So I was paired with Laura Gladney, who’s a wonderful African American woman, mother of two. And I learned so much from her. And then one of our board members introduced me to Mellody Hobson, the amazing co-CEO of Ariel Investment. She’s now the Chair of Starbucks. First she said, “You need to see it as a business problem, a business opportunity.” And she was right. If your team at all levels does not represent the customers in the community, you’re going to miss. A concrete example would be at Best Buy in some parts of Chicago, if the sales team doesn’t speak Polish, they’re not going to sell much. Or in Orlando, if they don’t speak Portuguese for, at the time, the Brazilian tourists. So it’s a business imperative. And how crazy would it be to only recruit from one quarter of the population, people who look like me. That’d be stupid. But then what is striking, Bill, is that for many years, diversity, inclusion—it’s a little bit the same with corporate social responsibility—was treated as a nice-to-have, almost as a bragging opportunity. This is everything we’re doing, as opposed to a real business problem to be solved. We were not taking this systematically. And I think that, fortunately, since the murder of George Floyd in May of 2020 in Minneapolis, I think now most companies in the U.S. feel that this is a real problem. We need to solve this. And so then you solve it systematically. So when I stepped down from the Best Buy board a year ago in June of 2020, we had three Black directors, and by the way, a majority of women. And it made a huge difference. One day after a board meeting, we did a town hall with our three African American directors, and the impact it had on the employees, in particular the Black employees, was huge. But then, you have to see recruiting and retaining. Today, many companies have put targets in place. Boards are holding management teams accountable. It gets reflected in the incentives, in the evaluation of performance. So internally, you treat it as a real business problem. And you also leverage your “might” to influence your vendors. You can tell your marketing vendors or your provider of legal services, “Look, don’t bother proposing your services if you’re not able to provide a diverse team. I’m optimistic that there’s enough realization today that this is a problem that needs to be solved, and there’s enough skills that we can make a big difference. I think we can end this problem from a business standpoint in the next several years.

Kerr: That would be wonderful. Hubert, we have a lot of MBA students, a lot of young professionals, that listen to this podcast. So final question: Work is changing. The world of work is changing. Any parting advice for them, for the young professionals?

Joly: Yeah. And, of course, I’m having a lot of these conversations with my MBA students. I mean, I would say several things. One is: Don’t put too much pressure on yourself. Not everything needs to be accomplished overnight. So learn skills and establish yourself. Be kind with yourself. If you’re not perfect, don’t be harsh. Just say, “Yeah, there’s always tomorrow. I can be better tomorrow.” And then try to over time become clearer and clearer about your life’s purpose, what your key values are, what kind of a leader you want to be. In fact, in the MBA program, we’re going to test and pilot a program around putting purpose to work and unleashing human magic. We’re piloting it also in executive education. And the first phase is around reflection of who you are and who do you want to be, because I think a personal quest for meaning can be the foundation for purpose in business.

Kerr: Hubert Joly is the author of The Heart of Business and also a member of the Harvard Business School faculty. Thanks so much, Hubert.

Joly: Thank you, Bill.

Kerr: We hope you enjoy the Managing the Future of Work podcast. If you haven’t already, please subscribe and rate the show wherever you get your podcasts. You can find out more about the Managing the Future of Work Project at our website hbs.edu/managingthefutureofwork. While you’re there, sign up for our newsletter.