How Best Buy Slays the Turnover Beast

(MoneyWatch)  Turnover at Best Buy fell eight percentage points to 60 percent last year, according to the company's recent earnings call. "The improvements in turnover were nationwide and at all levels ... and the most encouraging aspect of this progress is that these results came from specific, locally created strategies," said Brian Dunn, the Minneapolis electronics retailer's president and chief operating officer.

One hundred percent churn isn't unusual among retailers, and that's where Best Buy was in 2001. What changed? Around the time turnover first began to fall, in 2003, Best Buy started testing "customer centricity," which approaches sales by customer profiles rather than product categories and teaches every employee metrics like return on internal investment. As the approach took hold, sales and share have risen -- and workers, newly engaged in the process, have decided to stick around.

Here's how it works: Employees, from the floor up, figure out ways to extract a bigger share, such as feeding data from Best Buy's loyalty program into a "What If?" tool. On the earnings call, Shari Ballard, EVP of retail channel management, described how zip code analysis at a store in Clarksville, Tenn. found low market share in neighborhoods that workers reported were high in military families. The store increased sales by adding heavy-duty laptops and cases, finding new ways to connect families with service members overseas, and changing its labor matrix to match customer traffic.

Turnover has also been addressed at Best Buy headquarters through ROWE, or Results-Oriented Work Environment. The program measures productivity by outcomes rather than number of hours spent at work, enabling employees at the corporate offices to work in the middle of the night, in coffeehouses, or in their underwear -- as long as they meet their numbers. According to Best Buy, ROWE lowered churn in one group from 18.5 percent to 2.31 percent over two years, saving Best Buy nearly $3.1 million in turnover costs during the test. Voluntary turnover (good people leaving) fell, while involuntary turnover (pruning the deadwood) rose.

According to Motley Fool reporter Alyce Lomax, Best Buy now has ROWE under trial at the retail store level, where the obvious need for in-person staffing makes it a lot more challenging. Meanwhile, the two Best Buy employees who thought it up, Cali Ressler and Jody Thompson, have been spun off into Culture Rx, a consulting practice that offers the method to other companies.

Ballard calls Best Buy "a demand-driven culture, one where employees in large part pull what they need to serve customers versus having solutions pushed at them." It boosts ROI and improves service, she said during the call, "because we are getting them what they need, not what we wish they needed." Apparently, when you behave as if customers matter, employees start to believe they matter, too.