All Hands on Deck:
Best Buy Fights for Traction
October 1, 2013
All Hands on Deck: Best Buy Fights for Traction
Best Buy was incorporated on October 20, 1996 and is a multinational retailer of consumer electronics, computing and mobile phone products, entertainment product, appliances and related service (Reuters, 2013). In the early to mid-1990s, Best Buy was growing aggressively throughout the United States; however, as they grew the company had grown too big to function effectively (Gibson & Billings, 2003, p. 10). Net store operating profits were not keeping pace and stocks were dropping (Gibson & Billings, 2003, p. 10). Most of this was ...view middle of the document...
Hubert Joly, Best Buy’s current Chief Executive Officer (CEO), assumed command over the organization in 2012. Joly was previously the CEO of Carlson Wagonlit Travel (a worldwide hospitality and travel company) and he was successful in growing its sales from $8 to $25 billion from 2004 to 2008 (Best Buy, 2013). However, when he assessed the current state of Best Buy’s financials, he knew changes were needed to keep the company alive.
Since the introduction of e-commerce, Best Buy competitors (i.e. Newegg, Amazon, Tiger Direct, etc.) have been attracting customers from all over the world without even having a physical store sell their merchandise. Interestingly, these customers will stop at their local Best Buy store in order to view, test and play with merchandise before ordering it online at a slightly lower cost. This type of behavior is known as “showrooming.” One reason showrooming has grown is that people are more comfortable with comparing prices and buying products online or with a smartphone (White, 2012). Showrooming had created declining sales for the Best Buy Corporation and its current organizational structure was questioned. This paper will analyze the organizational change of Best Buy and how external and internal factors brought the organization back from the brink of financial disaster.
Initially, Best Buy had offered a flexible work schedule that allowed corporate employees to develop their own schedules for work; however, it was not authorized for employees who worked in the retail stores worldwide. This flexible work schedule is based on a program (launched in 2005) known as Results Only Work Environment (ROWE) (Lee, 2013). The company evaluated employees solely on work performance versus the time worked and office attendance (Lee, 2013). This type of corporate work environment appeared to produce a relaxed business culture that led to dysfunctional operations.
In 2012, Best Buy’s CEO Brian Dunn had stepped down and Mike Mikan became the interim CEO until Joly’s visa cleared. Mikan communicated the upcoming changes within the organization through numerous meetings; to include, video statements for the entire organization. Mikan started to develop a new vision for Best Buy and was focused on making it long-term (Welch, 2012). Mikan began laying the ground work for change by telling employees and stakeholders that the path to the future will involve innovative ways to reach out to customers while improving performance (Welch, 2012). Even though Mikan communicated how he was going to have Best Buy gain momentum, stakeholders became skeptical and resistant to such change. Best Buy’s stock dropped over 10 percent, to close at $18.16 per share, the day after the news broke (Welch, 2012).
Once Joly analyzed the current culture of the organization, he began to realign how corporate employees would participate in change. Initially, Best Buy terminated 400 corporate employees under the former...