This document presents a discussion about the ROWE Program at Best Buy. Best Buy Co., Inc. is a specialty retailer of consumer electronics in the United States, accounting for 19% of the market. It also operates in Mexico, Canada, China, Turkey and the United Kingdom. The company’s subsidiaries include Geek Squad, Magnolia Audio Video, Pacific Sales, and, in Canada operates under both the Best Buy and Future Shop label. Together these operate more than 1,150 stores in the United States, Puerto Rico, Canada, China, Mexico, and Turkey.
On March 9, 2009, Best Buy became the primary electronics retail store (online and bricks and mortar) in the eastern United States, after smaller rival Circuit City went out of business. Fry’s Electronics remains a major competitor in the western United States. Many locations feature in-store pickup, which can be arranged through the company’s website.
The Culture of Best Buy
Best Buy has embraced the use of social media to empower its employees and reaped massive productivity gains as a result. Traditionally, we associate companies like this with classic top-down management approaches. Top management points out that as their business challenge shifted from simply distributing product to ensuring customer delight under countless usage scenarios, only a method that tapped the wisdom of everybody made sense.
Three of the social media tools they use are: The ‘Loop Marketplace’ which replaces the suggestion box with a market where employees can submit and share ideas, and often get them funded. A prediction market which was apparently dead on in predicting Christmas sales, and an internal social network called Blue Shirt Nation which they use to solve corporate problems from how to increase use of the company’s pension scheme to changing IT systems.
The results: 40% more employees enrolled in the 401k pension scheme, millions of dollars saved on a new in-store IT system and employee turnover reduced by over 50%. Underpinning the success of these tools is a strong corporate culture and very visible support from the CEO. A strong culture is born from strong values that everyone can see embodied in the everyday words and actions of senior management.
The Best Buy’s values are: have fun while being the best, learn, from challenge and change, show respect, humility and integrity and unleash the power of our people.
Strong values are essential to guide employees for corporations who are serious about empowering the edge. This is also true in small companies, where having a strong positive culture is a big driver of success. There are some differences at small companies; it is not usually necessary to have a written set of values and the culture will change more quickly as the business grows, but the same basic logic applies.
The approach to organizational change that the ROWE program illustrates
Best Buy used to be known for its killer hours, herd-riding bosses, and high turnover. Now it is home to a workplace revolution called ROWE, for “results-only work environment,” that seeks to demolish decades-old business dogma that equates physical presence with productivity. According to a recent article on ROWE in Business Week (“Smashing the Clock“), the goal of the program is to judge performance on output instead of hours spent at the office or in meetings.
In practical terms, ROWE lets Best Buy employees get up and leave in the middle of the workday to attend a matinee or Little League game. Workers pulling into the company’s headquarters at 2 p.m. aren’t considered late. Nor are those pulling out at 2 p.m. seen as leaving early. There are no schedules. No mandatory meetings. In short, work is no longer a place where you go, but something you do. As long as the work gets done and get’s done well, it’s okay to take conference calls while you hunt, collaborate from your lakeside cabin, or log on after dinner so you can spend the afternoon with your kid.
The crazy thing is that ROWE wasn’t authorized by the CEO, Brad Anderson, but began as a “guerilla” initiative nurtured by innovative employees that eventually transformed the company (to be sure, Anderson encourages such bottom-up, stealth innovation).
The results of ROWE speak for themselves: since the program’s implementation, average voluntary turnover has fallen drastically, while productivity is up an average 35% in departments that have switched to ROWE. Overall employee satisfaction is up too, according to the Gallup Organization, which audits corporate cultures.
The resistance that the ROWE program had to overcome
ROWE is not for every company (though ROWE consultants will insist it is!), but it can make a big difference in productivity and employee satisfaction in the firms that implement it. After a research, you would be surprised by resistance from some staff who appeared to be flexible and resilient. It is also amazing, how well this works in many of our areas. The goal is to have it work well everywhere and Best Buy is trying to get there.
Having migrations take place over two years is a challenge because staff are in so many different places in the change (some migrated, some not) but they have gained great skills in handling just about any issue that comes along. One surprise is the number of “converts” that we see: people who really didn’t like ROWE but have completely changed their minds.
Based on that research, we find out some “cons” of the ROWE program: for some people can be difficult to manage, besides that, employees who are not disciplined find it difficult to work in this type of environment and there is an internal push back from some employees.
Sources of stress that is apparent in the case
Although every company will respond to ROWE differently, the core tenets are unchanging and non-negotiable. Best Buy has developed and copyrighted the strategy that helps an organization overcome inertia and move forward. The strategy is based on three things: the power of time, the judgments that people make about time in the work environment, and how work needs to happen.
The approach may be radical, but it’s right on target for today’s employees, there is a real need for a flexible program such as this that eliminates stress and engages workers. On March 2010, a research took the emotional temperature of 400,000 U.S. employees annually and has found that stress is increasing. In 2006, 31% said they find it difficult to balance work and personal responsibilities, compared to 25% in 2005. Forty-three percent now think their workload is excessive, up from 39%, and 46% are bothered by excessive pressure on the job, up from 41%.
Best Buy clearly show concerns around stress, workload and work-life balance. This goes to the heart of what ROWE is addressing, says one of the logistics managers. But while employers need to be more flexible, they also should beware of letting employees become detached. With traditional telework, there are some risks that workers will feel less connected to the company. The goal should be to keep stress low and engagement high.
According to this, Best Buy has evidence showing companies that have taken care of their employees’ stress and engaged them in their work enjoy the biggest financial benefits. In contrast, companies that just get one of those right, for example, they engage employees, but stress them out, do not realize optimal results.
Has the organizational culture helped with the change?
Using ROWE, 80% of Best Buy’s corporate staff now come and go as they please as long as the work gets done on time. The premise of ROWE is that employees are paid for results rather than hours worked. This provides both freedom for employees and results for employers. ROWE is based on the assumption that employees will do more and better work when given the latitude to decide how and when it is done.
ROWE is employee controlled not management controlled. ROWE requires accountability and clear goals, while flextime requires policies and guidelines. ROWE has unlimited options and is fluid, while flextime has limited options and ultimately is inflexible. Most importantly, ROWE is based on the work and not the hours.
The concept of ROWE is a bit like college where you decide when and where to study and write papers. In most workplaces today, employees are treated more like grade scholars with strict policies on when to show up, where to sit, how to do the work and when to leave. No wonder recent graduates become disillusioned when entering the “real world.”
Now that aging Baby Boomers are mixing with Generations X and Y, it seems a perfect time to initiate a different approach to how work is performed. We certainly have the technology (teleconferencing, emailing, text messaging, and cell phone calling) to extend the workplace location and flexibility on when to do the tasks. Now it’s just a matter of will.
ROWE is not an entirely new concept. Piece work, where workers are paid a fixed rate for each unit produced or action performed, has been around for more than a century. And then there is performance-rated pay, where money is paid directly on how well a worker performs in the workplace. A commission-based sale is a form of this type of compensation.
ROWE builds upon other models to provide employees with more opportunities to do the job their own way and this can lead to greater employee engagement and higher productivity. But ROWE is not without its challenges. Measuring output for some jobs (overhead, administration) can be very difficult. Some people have a hard time working with others if they are not face-to-face. And overall management can be challenging.
Nevertheless, ROWE is proving to be effective returning an average of 35% increase in productivity while reducing voluntary turnover by as much as 90%. In addition, research by the Flexible-Work and Well Being Center at the University of Minnesota found that more ROWE employees than comparable employees:
• Have greater organizational commitment
• Report higher job satisfaction
• View the culture as family friendly
• Report increased job security