CHAPTER 12 ASSIGNMENT-HR MANAGEMENT

SpecialReport

NO FIXED SCHEDULES.

INSIDE BEST BUY'S RADICAL RESHAPING OFTHE WORKPLACE

SmasJiing The Qock

BY MICHELLE CONLIN

ONE AFTERNOON LAST YEAR, CHAP ACHEN, WHO OVERSEES online orders at Best Buy Co., sluit down his computer, stood up from his desk, and announeed that he was leaving for the day. It was around 2 p.m., and most of Achen's staff were slumped over their keyboards, deep in a post-lunch, LCD-lit trance. "See you tomorrow," said Achen. "I'm going to a matinee."

Under normal circumstances, an early-afternoon depar- ture would have been totally un-Achen. After all, this was a 37-year-old corporate comer whose wife laughs in his face when he utters the words "work-life balance." But at Best Buy's Minneapolis headquarters, similar incidents of strangeness were breaking out all over the ultramodern campus. In employee relations, Steve Hance had suddenly started going hunting on workdays, a Remington 12-gauge in one hand, a Verizon LG in the other. In the retail training department, e-learning specialist Mark Wells was spend- ing his days bombing around the country following rocker

60 I BusinessWeek I December 11. 2006

Dave Matthews. Single mother Kelly McDevitt, an online promotions manager, started leaving at 2:30 p.m. to pick up her 11-year-old son Calvin from school. Scott Jauman, a Six Sigma black belt, began spending a third of his time at his Northwoods cabin.

At most companies, going AWOL during daylight hours would be grounds for a pink slip. Not at Best Buy. The nation's leading electronics retailer has embarked on a radi- cal—if risky—experiment to transform a culture once known for killer hours and herd-riding bosses. The endeavor, called ROWE, for "results-only work environment," seeks to de- molish decades-old business dogma that equates physical presence with productivity. The goal at Best Buy is to judge performance on output instead of hours.

Henee workers pulling into the company's amenity-packed 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 sched- ules. No mandatory^ meetings. No impression-management

LAID BAC Wells, an avid bicyclist, likes to sleep in late and doesn't own an alarm clock

pecialReport

BEST BUY'S 'RESULTS-ONLY WORK ENVIRONMENT btUUNUUTPUT

NOT HOURS. YOU DON'T PHYSICALLY HAVE TO BE AT WORK

hustles. Work is no longer a place where you go, but something you do. It's O.K. to take conference calls while you hunt, col- laborate from your lakeside cabin, or log on after dinner so you can spend the afternoon with your kid.

Best Buy did not invent the post-geographic office. Tech companies have been going bedouin for several years. At IBM, 40% of the workforce has no officiai office; at AT&T, a third of managers are untethered. Sun Microsystems Inc. cal- culates that it's saving $300 million a year in real estate costs by allowing nearly half of all employees to work anywhere they want. And this trend seems to have legs. A recent Boston Consulting Group study found that 85% of executives expect a big rise in the number of unleashed workers over the next five years. In fact, at many companies the most innovative new product may be the stnicture of the workplace itself.

But arguably no big business has smashed the clock quite

62 I BusinessWeek I December 11. 2006

so resolutely as Best Buy. The ofïkial policy for this post-face- time, location-agnostic way of working is that people are fiee to work wherever they want, whenever they want, as long as they get their work done. "This is like TiVo for your work," says the program's co-founder, Jody Thompson. By die end of 2007, all 4,000 staffers working at corporate will be on ROWE. Starting in February, the new work environment will become an official part of Best Buy's recruiting pitch as well as its orientation for new hires. And the company plans to take its clockless campaign to its stores—a high-stakes challenge that no company has tried before in a retaü environment.

Another thing about this experiment: It wasn't imposed from the top down. It began as a covert guerrilla action that spread virally and eventually became a revolution. So secret was the operation that Chief Executive Brad Anderson only learned the details two years after it began transforming

his company. Such bottom-up, stealth innovation is exactly the kind of thing Anderson encour- ages, The Best Buy chief aims to keep innovating even when something is ostensibly work- ing. "ROWE was an idea born and nurtured by a handftil of passionate employees,"' he says. '"It wasn't created as the result of some edict."

So bullish are Anderson and his team on the idea that they have formed a subsidiary called CultureRx, set up to help other companies go clockless. CultureRx expects to sign up at least one large client in the com- ing months.

The CEO may have bought in, but there has been plenty of oppo- sition inside the company. Many execs wondered ii' the program was simply flextime in a pret- tier bottle. Others felt that work- ing on-site would lead to longer hours and destroy forever the demarcation between work and personal time. Cynics thought it was all a PR stunt dreamed up hy Machiavellian operatives in human resources. And as ROWE infected one department alter the other, its supporters ran into old- guard saboteurs, who continue to plot an overthrow and spread warnings of a coming paradise for slackers.

Then again, the new work structure's proponents say it's

helping Best Buy overcome challenges. And thanks to early successes, some of the program's harshest critics have become true believers. With gross margins on electron- ics under pressure, and Wal-Mart Stores Inc. and Target Corp. shouldering into Best Buy territory, the company has been moving into services, including its Geek Squad and "customer centHcity" program in which salespeople act as technology counselors. But Best Buy was aiïUcted by stress, burnout, and high turnover. The hope was that ROWH, by freeing employees to make their own work-life decisions, could boost morale and productivity and keep the service initiative on track.

It seems to be working. Since the program's implemen- tation, average voluntary turnover has fallen drastically, CultureRx says. Meanwhile, Best Buy notes tliat productivity is up an average 35% in departments that have switched to ROWE. Employee engagement, which measures employee satisfaction and is often a barometer for retention, is way up too, according to the Gallup Organization, which audits corporate cultures.

ROWE may also help the company pay for the customer centiicity campaign. The endeavor is hugely expensive because it involves tailoring stores to local markets and training em- ployees to turn customer feedback into new business ideas. By

the Minneapolis sculpture garden

letting people work off-campus. Best Buy %ures it can reduce the need for corporate office space, perhaps rent out the empty cubicles to other companies, and plow the millions of dollars in savings into its services initiative.

Phyllis Moen, a University of Minnesota sociology profes- sor who researches work-Hfe issues, is studying the Best Buy experiment in a project sponsored by the National Institutes of Health. She says most companies are stuck in the 1930s when it comes to employees' and managers' relationships to time and work. "Our whole notion of paid work was devel- oped within an assembly line culture,'" Moen says. "^Showing up was work. Best Buy is recognizing tliat sitting in a chair is no longer working."

One giant wireless kibbutz JODY THOMPSON AND CALI Ressler are two HR people you actually don't hate. They groan over cultish corporate slogans like "Build Superior Organizational Capability." They disdain Outlook junkies who double-book and showboating Power- Pointers. But it's tlextime, or Big Business' answer to overwork, long commutes, and lack of work-family balance, that elicits the harshest verdict. "A con game," says Thompson. "A total joke," adds Ressler.

Flexible work schedules, they say, heap needless bureau- cracy on managers instead of addressing the real issue: how to work more efficiently in an era of transcontinental teams and multiple time zones. They add that flextime also stigmatizes those who use it (the reason so few do) and keeps companies acting like the military (fixated on schedules) when they should behave more like MySpace (social networks where real- time innovation can flourish). Besides, they say, if people can virtually carry their office around in their pockets or pocket- books, why should it mauer where and when they work if they are crushing their goals?

Thompson, 49, and Ressler, 29, met three years ago. The boomer and the Gen Xer got each other right away. Wlien they talk about their meeting, it sounds like something out of Plato fiv HR, or two like minds making a whole. At the time. Best Buy was still a ferociously face-tinie place. Workers ar- riving after 8 a.m. on sub-zero mornings stashed their parkas

Off The Leash What happened when Best Buy allowed staff to work wherever and whenever they want

VOLUNTARY TURNOVER SINCE

2005 (DIVISION)

DOT-COM

-90% LOGISTICS

- 5 2 % SOURCING

-75%

AVERAGE RISE IN

ROWE WORKER PRODUOTIVITY

SINCE 2005

+35% December U, ?006 ' BusinessWeek ! 63

SpecialReport in their cars to foil detection as late arrivals. Early escapees crept down back stairwells. Cube-side, the living was equally uneasy. One manager required bis MBAs to sign out for lunch, including listing their restaurant locations and ETAs. Another insisted his team track its work—every 15 minutes. As at many companies, the last one to turn out the lights won.

Outside the office, Thompson and Ressler couldn't help noticing how wireless broad- biuid was turning tbe world into one giant work kibbutz. They talked about how man- agers were mired in analog-age inerda, often judging perfbmiance on how much they saw you, vs. how much you did. Ressler and Thompson recognized the dangerous, life- wrecking cocktail in the making: Tbe always- on worker now also had to be always in.

The culture, not exactly Mitinesota-nice, was tlireatening Best Buy's massive expan- sion plans. But Ressler and Thompson knew their solution was too radical to simply trot up to CEO Anderson. Nor, in the beginning, did they feel they could lobby their executive supervisors for official approval. Besides, they knew the usual corporate route of im- posing something from the top down would bomb. So they met in private, stealthily strategizing about how to protect ROWE and then dribble it out under the radar in dny pilot trials. Ressler and Thompson waited patiendy for the right opportunity. • • • • i

It came in 2003. Two managers—one in the properties division, the other in communications—were desperate. Top performers were complaining of unsustainable levels of stress, threatening business continuity just when Best Buy was rolling out its customer centricity campaign in hun- dreds of stores. They also knew from employee engagement data that workers were suffering from the classic work-life hex: jobs with high demands (always-on, transcontinental availability) and low control (always on-site, no personal life).

Rossler and Thompson saw their opening in these two vanguard managers. Would they be vtilling to partake in a private management experiment? The two outlined their vi- sion. They explained how in the world of ROWE, there would be no mandatory meetings. No times wben you had to physi-

Flextime: Honing the Balance

oody Allen famously said that 80% of success is showing up. Thaf's no joke in fhe corporafe world, Show up early. Stay late.

Look busy. Acting the part of fhe devoted employee has earned many a middling performer solid reviews.

Flextime agreements, combined with a greater focus on performance metrics, were supposed to help change all that. As of last year, says human resources consulting firm Hewitt Associates Inc.. 75% of companies offered some kind of flexible work arrangement. But so far, these policies have had mixed results. Working remotely can leave employees feeling isolated and managers feeling fhey lack control. And flexf imers often find themselves squeezed into policies that are anything but flexible. "The work-life movement has always had a heavy layer of one-size-fits-all-ism," says Stewart D. Friedman, who runs the Work/Life

Integration Project at the Wharton School. That complaint is prompting many

companies to revamp their policies, says Hewitt's Carol Sladek, who leads the firm's work-life pracf ice. Now more and more managers are using a femplate of questions to help them design the most fitting arrangement. "There's definitely a focus away from the structure" of rigid flextime policies, says Sladek.

In a sense, flexibility is becoming more flexible. At Deioitte & Touche, years of stagnant enrollment in formal flexibility programs have led managers to help teams create flexible schedules among fhemselves. Staffers fill out a survey that helps them set goals as a group (reducing the number of times they interrupt co-workers off- hours, for instance) and jointly keep track of people's schedules so they know, say, when someone has reserved f ime with their kids. Deioitte is also experimenting with something called "mass career

cally be at work. Performance would be based on output, not hours. Managers would base assessments on data and evidence, not feelings and anecdotes. The executives liked what they heard and agreed.

The experiment quickly gained social networking heat. Waiting in line at Best Buy's on-site Caribou Coffee, in e-mails, and during drive-by's at friends' desks, employees in other paits of the company staned hearing about this seeming anti- dote to megahour agita. A curious culture of haves and have- nots emerged on the Best Buy campus, with those in ROWE sporting special stickers on tbeir laptops as though they were part of some cabal. Hance, the bunter, staited taking conference calls in tree stands and exchanging e-mails from

bulf's-eye

customization" that redefines flexibility over the course of a career rather than by the hours in a week, helping employees adjust their pace, workioad. schedule, and work roles during various life stages.

Another common complaint from early (iexibility adopters is that the off-site existence can be a real morale killer. IBM tound that out the hard way. While the company had saved millions in real estate costs by getting 40% ot its workers to toil off-site, by 2002, many of its telecommuters felt out of the loop. Just over half of the folks in Daniel S. Pelino's central region reported favorable levels of engagement, "People felt really disconnected." says Pelino, now genera! manager of IBM's Global Health Care & Life Sciences business.

In response. Pelino started an initiative. "Making IBM Peel Small." to reconnect remote workers. Nomads who drop by the office now find a space designed with their needs in mind. Faxes and copiers are in familiar spots from one office to another, and conference room walls have been replaced with glass so colleagues will know when their co-workers are on site. After Pelino brought the

lnitiativetoseniormanagement. IBM revitalized IBM Clubs, which bring together colleagues for parties, picnics, sports events, and other extracurricularactivities. Making IBM Feel Small has since spread to more than 33 locations worldwide.

Over at Sun Microsystems Inc., another f lextime pioneer, managers found the company's "Open Work" program could be. well, too open. About four years ago,

as better communications technology attracted more people to the program, a growing number of employees began electing to work from home without checking with their bosses. "A lot of managers were uncomfortable with 'out of sight, out of mind,' " says Ann Bamesberger, the vice- president leading the program. In response, her team added an online test that helps managers find good candidates for the program. Employees are assigned broad profiles that reflect how they work, including such nicknames as "Mobile Collaborator" or "Design Specialist." Managers and their reports are expected to hash out a solution that offers flexibility and control. "There are certain types of jobs where a free-for-all doesn't work." says Bamesberger. Then she catches herself, warning: 'A free-for-all never works." -Jena McGregor

his fishing boat. When Wells wasn't following around Dave Matthews, chances were he was biking around Minneapolis' network of urban lakes, and digging into work only after night had fallen. Hourly workers were still putting in a full 40, but began doing so wherever and whenever they wanted.

At fiist, participants were loath to share anything about ROWE with higher-ups for fear the perk would be taken away or reversed. But hy 2004, loftier and loftier levels of management began hearing about the experiment at about the time opposition to it grew more intense. Critics feared ex- ecutives would lose control and co-workers would forfeit the collaboration bom of proximity. If you can work anywhere, they asked, won't you always be working? Won't overbear-

ing bosses start calling you in the middle of the night? Won't coasters see ROWE as a way to shirk work and force more dedicated colleagues to pick up the slack? And there were generational conflicts: Some boomers felt they'd been forced to choose between work and life during their careers. So ev- eryone else should, too.

Shari Ballard, Best Buy's executive vice-president for hu- man capital and leadership (an analog title if ever there was one), was originally skeptical, altliough she eventually bought in. At first she couldn't figure out why managers needed a new methodology to help solve the work-life conundrum. "It wasn't hugs and smiles," she says of Ressler's and Thompson's campaign. "Managers in the old mental model were totally

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SpecialReport

PLAYBOOK: BEST PRACTICE IDEAS

Let Them lio Tips for creation of a post- geographic workplace

/ • MEASURE '• Before unplugging

workers, metrics are key to ensure that

productivity, engagement, and turnover improve.

.' TAILOR Imposing new work

rules rarely pays because managers and workers need to tailor

schedules to their needs.

TRUST Inevitably, some

untethered workers /ill slack off. Managers need to trust—then

rely on data to assess

•.. performance. ,.-*

.•• E D U C A T E ••.

•' Location-agnostic work is a hard

concept to grasp, So refresher courses are a

must for managers and workers,

/ • GATHER When workers are nomads, regular

gatherings, in person or by Videoconference,

help retain a team dynamic.

irritated." In the e-leaming division, many of Wells's older co-workers {read 40-year-olds; the average age at Best Buy is 36) expressed resentment over the change, insisting that work relationships are better face-to-face, not screen-to-screen. "We have people in our group who are like, Tm not gohig to do it,' " says Wells, who likes to sleep in and doesn't own an alarm clock. '"I'm like, 'that's fine, but I'm outta here.'" In enemy circles, Ressler and Thompson are known to tliis day as "those

NO EDICTS CEO two" and "the subversives." Anderson praises Yet ROWE continues to spread the stealth rollout ^^^^.^^ ^he company. If intrigued structure^ ^°^ nonparticipants work for progressive

superiors, they usually talk up the program and get their bosses to agree

to trials. If they toil under clock-watchers, they form under- ground networks and quietly lobby for outside support until there is usually no choice but for their boss to switch. It was only this past summer that CEO Anderson got a full briefing, and total understanding, about what was happening. "We purposely waited until the tipping point before we took it to him," says Thompson. Until then he wasn't well-versed on the 13 ROWE commandments. No. I; People at all levels stop doing any activity that is a waste of their time, the customer's time, or the company's money. No. 7: Nobody talks about how many hours they work. No. 9 : It's O.K. to take a nap on a Tuesday afternoon, grocery shop on Wednesday morning, or catch a movie on Thursday afternoon.

That's the commandment Achen was following when he took oft that day to see Star Wars Episode III: Revenge of the Sith. Doing so felt abnormal and uncomfortable. Achen felt guilty. But Ressler and Thompson had told him to "model the behavior." So he did. It helped that Achen saw in ROWE the potential to solve a couple of nagging business problems. As the head of the unit that monitors everything that happens after someone places an order at BestBuy.com, including manually reviewing orders and flagging them for possible fraud, Achen wanted to expand the hours of operation with- out mandating that people show up in the office at 6 a.m. He had another issue. One of his top-performing managers lived in St. Cloud, Minn., and commuted two and a haU hours each way to work. He and Achen had a gentleman's agreement that he could work from home on Fridays. But the rest of the staff didn't appreciate the favoritism. "It was creating a lot of tension on my team," says Achen.

Record job satisfaction RESSLER AND THOMPSON had convinced Achen that ROWE would work. Now Achen would have to convince the general manager of BestBuy.com, senior vice-president John "J-T." Thompson. That wasn't going to be easy. Thompson, a for- mer General Electric Co. guy, was as old school as they come with his starched shirt, booming voice, and ramrod-straight posture. He came of age believing there were three 8-hour days in every 24 hours. He loved working in his office on weekends. At first, he pushed back hard. "I was not support- ive," says Thompson, who was privately terrified about the loss of control. "He didn't want anything to do with it." says Achen. "He was all about measurement, and he kept asking me, 'How are you going to measure this so you know you're getting the same productivity out of people?' "

That's where Achen's performance metrics came in handy. He could measure how many orders per hour his team was processing no matter where they were. He told Thompson he'd reel everyone back to campus the minute he noticed a dip. Within a month, Achen could see that not only was his team's productivity up, but engagement scores, or measuring joh satisfaction and retention, were the highest in the dot- com division's history.

For years, engagement had been a sore spot for Thompson. "I showed J.T. these scores, and his eyes lit up," says Achen.

66 I BusinessWeek I December 11, 2006

SpecialReport

EMPTY CUBE Best Buy workers like Weils are free to work wherever, whenever they want—as long as the work gets done

IF BUSINESS GOES SOUTH, DOUBTE' _ANe ^ I UNITY

TO TRY TO FORCE A HASTY RETREAT

Thompson rushed to roll out ROWE to his entire department. Voluntary turnover among men dropped from 16.11% to 0. "For years I had been focused on the wrong currency," says Thompson. "I was always looking to see if people were here. I should have been looking at what they were getting done."

Today, Achen's commuting employee usually comes in once a week. Nearly three-quarters of his staff spend most of their time out of the office. Doesn't he worry that he loses some of the interoffice magic when they don't gather together all day, every day? What about the value in riffing on one another's ideas? What about teamwork and camaraderie? "You abso- lutely lose some ofthat," he says. "But what we get back far outweighs anything we've lost."

Achen says he would never go back. Orders processed by people who are not working in the office are up 13% to 18% over those who are. ROWE'ers are posting higher metrics for quality, too. Achen says he believes that's due to die new office paradox: Given the constant distractions, it sometimes feels impossible to get any work done at work.

Ressler and Thompson say all the Best Buy groups that have switched to the freer structure report similar results. Meanwhile, the two have other big plans for the company. Last month they launched a new pilot called Cube-Free. Ressler and Thompson believe offices encourage the wrong kinds of habits, keeping people wrapped up in a paper, prewireless mentality as opposed to pushing employees to use technology in the efficiency-enhancing way it was intend- ed. Otïices also waste space and time in an age when workers are becoming more and more place-neutral. "This also sets up Best Buy to be able to completely operate if disaster hits," says Thompson. Work groups that go cube-free will be able to redesign their spaces to better accommodate collaboration instead of working alone.

Next year Ressler and Tliompson plan to pilot their bold- est move yet, test- ing ROWE in re- tail stores among both managers and workers. How

exactly they will do this in an environ- ment where salespeople presumably need to put in regular hours, they won't • ay. And they acknowledge it won't be asy. Still, they are eager to try just

about anything to help the company slash its 65% turnover rates in stores, where disgruntlement is common and workers form groups on MySpace with names like "Best Buy Losers Club!"

Best Btiy has transformed its work- place culture in a remarkably short time. Isn't it also true that ROWE could unravel just as quickly? What happens if the company hits a speed bump? Competition isn't getting any less in- tense, after all. Best Buy sells a lot of extended warranties, an area where both Wal-Mart and Target are eager to undercut the electronics retailer on price. What's more, the current boom in flat-panel, digital TVs will peak in a few years.

If Best Buy's business goes south, human nature dictates that the people who always believed the clockless office was a flaky New Age idea will see an opportunity to try to force a hasty retreat. Some at the company complain that produc- tivity is up only because many Best Buyers are now working longer hours. And some die-hard ROWE opponents still pri- vately roll their eyes when they see Ressler and Thompson in the hallway.

But it's worth remembering chat most big companies fail to grow at the rate of inflation. Thaf s true in part because the bigger the company gets, the harder it is to get the best out of each and every employee. ROWE is one of Best Buy's answers to avoiding that fate. "The old way of managing and looking at work isn't going to work anymore," says Ressler. "We want to revolutionize the way work gets done." Admit it, you're rooting for them, too. •

The Untethered Workforce How to kill meetini^: For tips on how to do away wtth time- wasting corporate gatherings, go to www.businessweek. com/extras. Listen in: For Executive Editor John A. Byrne's podcast with Michelle Conlin. go to www.businessweek.com/podcast. On TV To meet Best Buy employees who are thrilled with their "results-only work environment," watch our weekly TV show, BusinessWeek Weekend. Check your local listings or go to businessweekweekend.com to see video clips, or type in your Zip Code to find when and where the show airs in your area.

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68 I BusinessWeek I December 11, 2006

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