Best Buy outside the box

It is a truism that if a company cannot beat its competitors on price or product, then it must beat them on processes. Best Buy Co. Inc. (NYSE:BBY) cannot gain much advantage over Wal-Mart Stores (NYSE:WMT) and Target Corp. (NYSE:TGT) on either price or product selection. So Best Buy has chosen to focus on businesses processes -- how it actually does what it does. Over the past year, Best But has gradually instituted a policy known as ROWE = Results-Only Work Environment. Employees at Best Buy's Minnesota headquarters are no longer required to adhere to a fixed work schedule. Many are not even required to show up at work. Despite misgivings from many managers who were afraid that "unleashed workers" would not be productive, they feared more that the corporation would find out that there is less of a need for managers in a post-geographic office. After some months of ROWE, Best Buy has found that employees involved in the program are 35% more productive, voluntary turnover is significantly down, and the potential savings on office space costs will help to pay for Best Buy's enhanced customer service programs.

ROWE is beginning to catch on in other large companies such as AT&T Inc. (NYSE:ATT), International Business Machines (NYSE:IBM) and Sun Microsystems (NASDAQ:SUNW). ROWE focuses on output and results, not on hours worked, not on managerial impressions, not on sucking up. Rather than measuring attendance, ROWE measures how much got done. But ROWE is not the only workplace initiative Best Buy is implementing. Unlike many large companies in which budgets are handed down from on-high to be routinely cursed at by front-line managers, Best Buy has begun soliciting collaboration from its 850 store managers in the budgeting process. Best Buy is trying to create accurate and relevant budgets by bridging the gap between what corporate wants and what operations knows. The timely flow of accurate information in both directions on the corporate food chain has shortened the budget planning cycle and laid the groundwork for rewarding managers who create actual value for the company.

A comparison between Best Buy -- whose stock closed on 2 March at $46.35, and which has enjoyed several splits these past 3 years -- and the stock of Circuit City Stores (NYSE:CC), still wallowing around in the $20 range, will give savvy investors reason to want to perform due diligence on Best Buy.