Somewhat overshadowed by the Yahoo ‘no remote work’ policy discussion that has led to thousands of posts online in the past few weeks is the announcement that Best Buy has ended its ambitious results-only work environment (ROWE) effort of recent years, which was limited to headquarters staff.
ROWE is a set of principles, grounded in a humanistic orientation toward management, predicated on the idea that workers are adults, want to do their jobs well, and can manage their own time so long as their responsibilities are clearly defined and their ‘results’ — their work goals and products — are well understood. Among other elements of ROWE, this means people can manage their own schedules, and choose where to work to be most effective, and to balance work with life.
Hubert Joly, the new Best Buy CEO who joined the company in 2012, has announced that — with few exceptions — Best Buy HQ staff will now be working 40 hours weeks in the office. This comes along with fairly drastic cost cutting plans, like the termination of about 400 people from the Richfield MN headquarters.
Is this just short-term thinking, where Joly is making points with investors and his board by cutting the burn but causing longer-term problems? Monique Valcour thinks so.
Monique Valcour, The End of “Results Only” at Best Buy Is Bad News
Why on earth, then, would Joly cut this program? What killed ROWE at Best Buy was the same phenomenon that occurs frequently when a cost-cutting leader is appointed to turn around a struggling company: a short-term “get tough” mindset that favors rapid shocks over the slower, more difficult — but ultimately much more powerful — work of developing and communicating a strategy and harnessing the talent and creativity of committed, engaged employees to implement it.While Al Dunlap-style management can boost stock price in the short term, it lays waste to human capital value — the very resource that is most critical in firms like Best Buy, whose fortunes depend on providing excellent customer service.
Research including my own has shown that the culture of work-life support in a company is the most powerful predictor of employee work-life balance as well as a key element in job performance, organizational commitment, and intention to remain with the company. But top management exerts the strongest influence on culture, and nothing undermines a supportive work-life culture more quickly than a leader who believes and communicates that flexible work and work-life initiatives are nothing but frills that serve to coddle employees.
Joly made a very revealing comment following an investors’ meeting in November. “In a turnaround transformation,” he said, “you need to feel disposable as opposed to indispensable.” He is far from the only “Theory X” leader who believes that stressing employees makes them perform better, while boosting their satisfaction makes them lazy. This underlying belief persists despite enormous research evidence to the contrary because, quite frankly, it is simpler to comprehend and less behaviorally demanding of managers.
John Hagel and his colleagues at Deloitte’s Center For The Edge have analyzed short-term staff reductions as a reaction to economic downturns, and their analysis is that they don’t get at the root causes of declining performance. This is an excerpt from Deloitte’s Shift Index, where the researchers characterized the economy as going through a Big Shift, where new competitive pressures act as ‘stressors’ forcing companies to adopt new strategies:
Layoffs are not a Sustainable Solution to Improving Long-Term Firm Performance
Unemployment is a hot button topic in political discourse, media coverage and around the dinner table. The social effects of unemployment have been covered from many angles. A less-discussed topic, however, is the impact on firms. Why are firms laying off workers? What is the effect on firm performance? Are these employment trends sustainable in the long run?
Head count is one of the key levers firms use to improve performance, particularly in poor economic climates. While companies have long used layoffs as a means to cut costs, the practice has become especially prevalent in more recent economic downturns. Employment has constituted an increasingly larger portion of Real GDP loss in each subsequent recession since the event of 1973-1975. Firms’ decisions whether or not to lay off workers during these recessions dictate the degree to which employment bears the brunt of the downturn and the degree to which firms absorb GDP loss internally, taking a hit to productivity.
However, these short-term responses to longer-term pressures are not sufficient to address the real causes of declining performance. It is only when firms embrace the institutions and practices required to drive scalable learning and tap into the digital underpinnings of the Big Shift will they be better positioned to see a sustainable upward trend in ROA, rather than simply representing cyclical noise.
What Deloitte found is that layoffs of the sort that Best Buy is undertaking cause greater harm to the company in the long run than not undertaking them, because performance and capacity of the business is harmed.
Net net net, I think we will see that Hubert Joly, and other corporate leaders who are reverting from more modern to older and outdated thinking will fail in their turnaround efforts. Theory Y management practices, where workers are considered trustworthy adults who want to excel and competent to autonomously manage their own schedule and interactions with others, are being dropped in a retreat to short-term, slash-and-burn, Theory X approaches: where workers are considered untrustworthy, and juvenile, incapable of adult judgment and needing direct oversight by authoritarian management.
It’s irrelevant to shout ‘It’s an emergency, It’s necessary, we need all hands on deck’ because it won’t work in the long run. The short-term gains will be wiped out — even if realized — because of the loss of innovation and creativity caused by stifling human potential.