finish the Corporate T&D Best Practices Activity.doc


Companies, People, Ideas

Teaching the Teachers Lesley Kump, 12.12.05

Best Buy keeps its sales humming by making sure its sales force is well trained.

You won't find hard data on what companies spend on training their employees, or the impact such investment has on their bottom line, broken out on their P&L statement or in the accompanying footnotes. That's unfortunate, since in a postindustrial age human capital is supposed to be just as important as capital invested in blast furnaces and conveyor belts. In the eighth installment in our Beyond the Balance Sheet series, which looks at metrics of corporate performance not usually visited by stock analysts, we consider employee training. Our case study centers on Best Buy, the $29 billion (sales) retailer of appliances and consumer electronics. Five years ago Best Buy's managers realized that too many potential customers were walking out of its stores empty-handed because its salespeople couldn't explain the goods in the display cases. Would this camcorder be able to feed into that video-editing program? Which speakers go with that plasma screen? Hey, how do you work a remote? Solution: training for new sales employees. Relative to sales, Best Buy now spends more on employee training than any other retailer. This year it will increase spending on employee training to 5% of its payroll, from 4.1% last year. On a salesperson's first day on the job at one of Best Buy's 759 stores he or she gets a four-hour classroom session that focuses on the required goals, how to fit into the store's sales force and the basics for giving the customer a happy experience. Over the next month comes a course of 12 hours of Web-based training that includes more on customer interaction and a lot on products the employee will be selling. The sales employees must pass an exam on each segment of the course. The book learning over, the rookie salesperson shadows an experienced colleague until ready to be let loose on customers. Subsequently, employees must attend an array of product training sessions every month to keep up to speed on the latest iPod or Xbox, even if those products are not specific to their department. The idea here is cross-selling. Customers are not always sure how a product works or which is best suited to their needs. Employees are being trained on how to show customers new ways of using products. For example, a consumer shopping for an Apple iPod might just be thinking of it as a portable device, not realizing it can also be used with a car stereo or for movies. The training is aimed at showing how a technology can be used for a host of experiences. "An awful lot of places sell what we sell," says Shawn Score, senior vice president of sales development. "The differentiator for us is going to be that we can talk to customers in their terms. The products and solutions are complex, but figuring out how to make them work in the customers' language makes a difference." According to the trade publication Training, Best Buy also does an extremely good job of creating leaders from within its ranks. The company has a six-month program to identify leaders early on and accelerate their development in managerial roles by having them work in small groups to solve real company problems. For employees looking to enter the managerial level for the first time, the company also provides a four-week training program with a specialty coach in a particular focus area as well as job-shadowing opportunities. In a new store that opened in lower Manhattan in April, 34 of the 160 employees have already started their climb up the company ladder. The store has a "promotions wall" to recognize these employees because Best Buy believes leadership development stems from acknowledging employee achievements. One of its better-known strategies comes in the form of the company's personal-computer gurus--also known as the Geek Squad--originally an independent company that was acquired by Best Buy in 2002. These 11,000 "agents" are supposed to be able to solve any and all problems that can attack a PC, and are now stationed in all Best Buy stores in the U.S. and Canada. They are available for 24-hour in-home customer support; basic PC setup service costs $129. To become an agent an employee must be certified in the programming language A+ but is also required to go through the same training as any other new employee. Agents who pay house calls are called "double agents"; they have to pass a much more difficult course and exam than in-store sales reps. Double agents are able to suggest other ideas and components for getting the most out of a home computer. Perhaps Best Buy would be better off using the money it spends on training to reward shareholders by increasing its paltry 0.6% dividend yield or by buying back stock. But it would be hard to argue with the company's results. The company's sales have averaged 17% growth the past five years, and it now generates $897,000 in sales per employee versus $235,000 for Circuit City. During the past five years shares of Best Buy are up 215% versus 122% for Circuit City and a decrease of 11% for the S&P 500.

Page 1 of - Magazine Article