Hubert Joly: ‘The Whole Milton Friedman Thing Is Dead’

Joly made retail magic saving also-ran Best Buy in the age of Amazon. Now a corporate director, first-time author and HBS lecturer, he’s preaching a whole new way to win.

Hubert Joly left Best Buy in 2020 as executive chairman, a year after he completed a highly successful turnaround of the Minneapolis-based tech, electronics and appliance retailer as its chairman and CEO.

Now, the board member of Johnson & Johnson and Ralph Lauren is a senior lecturer at Harvard Business School, where he imparts lessons from a seven-year tenure taking then-struggling Best Buy through a transformation called Renew Blue. Joly oversaw a boost in customer satisfaction, market share gains, revenue growth, improved margins and a revitalized culture.

During that time, Joly also increasingly engaged with social and political issues intersecting with Best Buy’s business, especially inclusion and diversity matters. As chairman, he oversaw a transition in the company’s board to majority-female representation and added three Black directors.

Joly applies these experiences and other lessons in his new book, The Heart of Business: Leadership Principles for the Next Era of Capitalism. Here are excerpts from his interview with Corporate Board Member:

This is shaping up as a boom year. Leveraging the philosophy you explain in your book, how can companies best take advantage?

The fact that we’re bouncing back shouldn’t lead us to believe we’re back to normal, as if nothing had happened— though that’s tempting. It’s not a restart; it’s a reset.

From a leadership standpoint, we’ve gotten to know people working from home in a completely different way, as whole people. But the other thing the crisis has given us is the opportunity to realize the world is not in good shape.

For CEOs and senior business leaders, our role and the scope of our job has changed, and our leadership model has changed. For decades it was shareholder primacy. Now it’s being a force for good and properly treating all stakeholders at the same time, and treating profit as an outcome, not a singular focus.

What can boards learn from what you accomplished at Best Buy?

One thing boards can do that’s so important is to take field trips. Early on, we took our board to the San Francisco market, and then a few years later to the New York market. They could feel how the environment in our stores had changed completely; no spreadsheet lets you do this. As boards, it’s a new responsibility for us to understand how the management team is creating the right environment that’s purposeful and human. You need to take non-traditional approaches to do this.

It means the leadership of the company has to be very vulnerable and open to showing directors things that aren’t already choreographed, and be okay and relaxed with that. And if something bad happens, you say, “Thank you, and now that we know, we can deal with it.”

Why does capitalism require “a new era”?

The world is facing a multifaceted crisis: the pandemic, racial issues, societal, economic. The global system is falling apart with geopolitical tension. Whatever we’ve been doing for the last 35 years isn’t working. We have to rethink business and capitalism. The whole Milton Friedman thing is dead.

My vision, shared by many, is about business being a force for good—doing well by doing good. Having a noble purpose that serves society and human beings.

How can business leaders navigate that calling?

It’s about picking causes, about taking a stance on issues. The only question is which issues and how you decide on your stances. You’ll have hate mail irrespective of what you do. That happens in our personal lives as well, but that doesn’t decide what we do. We’re guided by our compass. It’s the same for a company.

If the country is going to fall apart, you won’t have a business. People can make issues partisan, but as a CEO and a board, you need to be guided by certain principles and values and communicate around them.

If you’re Walmart, for instance, you may take on Second Amendment issues because people died in one of your stores [in El Paso, Texas, in a mass shooting in 2019]; it’s relevant to you. But Nike will have less authority to play on that issue. So you have to pick thoughtfully, using business and moral, ethical criteria, versus partisan criteria.

Let’s B-CLEAR A framework to do good without it going bad

It may not exactly be an acronym, but Joly prescribes a quickly grasped method to guide company leaders choosing to engage on a social or political issue. In his book, The Heart of Business, he outlines a six-step process:

• Relevancy: Is the issue closely connected to the company’s business, brand identity, its purpose, its values, its customers, its employees? For instance, Joly says, it is “relevant for Microsoft to engage on immigration issues because so much of its business relies on H1-B visas. But it may be more of a stretch for this company to take a stance on gun violence.” But relevance is a closer reach than it was just a couple of years ago. “We have more severe problems than we thought, or at least more of a realization that the problems in the world are significant,” Joly says.

• Legitimacy: What is the basis upon which the company has earned the right to speak on this matter? Has the business studied the issue sufficiently to give it enough authority to talk about it? “It’s easy to grandstand and then do nothing,” Joly says. “And that will backfire. And if you’re going to engage publicly and your house is not in order, there should be a red flag.”

• Authenticity: Is the business taking a stance in a way that is genuine and thoughtful versus superficial, purely self-interested or opportunistic? One of Joly’s favorite examples of a lack of such authenticity is Pepsi’s widely panned TV commercial in 2017 starring Kendall Jenner, in which the Kardashian-clan member was depicted stepping out of a rehearsal into a street demonstration, grabbing a cold can of Pepsi and offering it to a cop. When he snapped open the pop-top, the crowd cheered. “You can see that it wasn’t serious,” Joly said. “You can’t be superficial.”

• Congruence: Is the public stance consistent with the actions the business is taking? For instance, is a company making a statement about race also taking concrete steps to genuinely promote diversity and inclusion within its ranks? Joly says it’s not incongruent for a company simply to be committing to a change in direction. “It can be forward-looking,” he says.

• Efficacy: Are the actions the company is taking likely to be impactful? Joly cites an example from 2015, when Salesforce CEO Marc Benioff resisted an Indiana law he believed would lead to discrimination against the LGBTQ+ community, threatening “economic sanctions” against the state after the company had made a major acquisition in Indianapolis in 2013. Politicians had drafted the law for religious-liberty reasons, but they changed it.

• Business impact: What is the likely business impact of the stance being taken? Is there more or less risk in taking or not taking a stance? “You must understand how customers are going to react and how employees are going to react,” Joly says. “But that doesn’t mean you need to be afraid.” As CEO of Best Buy, for instance, Joly internally stood against President Trump’s 2017 travel ban against Muslim countries. “I went out of my way to communicate with Muslim employees that we had their backs and that if someone had a problem with Islam, they knew what my stance was—that we were going to stand with our employees.”