Like all bureaucrats, the buffoons on the Best Buy board have acted in their own best interests at the expense of the best interests of the company.
Best Buy is the embodiment of the classic American entrepreneurial success story. The company was founded in 1966, by two prototypical entrepreneurs, Richard Schulze and Gary Smoliak, as a specialty audio store under the name Sound of Music. During the next 40 years the company orchestrated a medley of exceptional growth, profitability and success. By 2006 the Best Buy brand (the name was adopted in 1983) had become the dominant player in the consumer electronics field. With almost 1,000 stores nationally and producing billions in revenue and profits, Best Buy had become one of the most admired companies in the country.
Just to offer some perspective on the success of Best Buy; consider that at the end of its first year in business (1966), the company generated $173,000 in gross sales and by the end of 2011 revenues exceeded $50 billion and profit was a tidy $1.28 billion.
But we are not here to talk about the success of Best Buy, rather the intent is to use the company to illustrate that, no matter how improbable or difficult success may be to achieve, that challenge pales by comparison with perpetuating success.
Success creates its own set of distinctive challenges and new realities. Most people are so focused and obsessed with the quest to achieve personal or business success, that when it is realized,they are ill-equipped to deal with it.The current travails of Best Buy Co. Inc. prove once again, as if we needed another example, that success is often more difficult to retain than to attain; that there is, in fact, an “agony of success.”
In the Beginning
Chances are good that when a company – against the odds – achieves remarkable levels of success, it does so as the result of a unique culture of entrepreneurial spirit that was imbued in the company by its early leaders. However, this “spirit of success” is fragile and will exist only so long as the leadership of the company allows it to exist. When that fails to happen, not only does the spirit that drove the original success of the company evaporate, but the very soul of the company is lost.
What most fail to understand is that once an organization attains a critical size, it is more important (and difficult) than ever to protect and keep alive a “culture of success.” Sustaining an entrepreneurial company culture is the key to continued achievement because, as the culture developed, it created an environment that was open to change and stimulated a constant search for innovation. The decline of a successful organization is often the offspring of a failure to continue to innovate and change. Without constant renewal, the ideals of the past fade, only to be buried by the present and forgotten by the future.
Unfortunately, it is a well-worn path from creation to growth to ultimate decline and demise. The best is in the past for a company when the entrepreneurial culture begins to be eroded by a management focused more on preserving what has been accomplished, than what could still be achieved; when companies begin to view process and procedure as more important than performance and achievement.
The deterioration of a “culture of success” is almost imperceptible at first. But like the interminable movement of a glacier down a mountainside, it has the power to destroy everything in its path.
The path of Best Buy is the latest – but certainly not the only – example of a company suffering from the malady of the “agony of success.” (Companies like Apple and Starbucks also come to mind.) In simple terms, the entrepreneurs and the spirit of success they epitomized have been replaced by bungling bureaucrats and the concept of process and procedure they embody. Those who were not afraid to risk it all have been replaced by those unwilling to take any risk at all. In the most basic sense, the “street-smart guys” who built Best Buy have been replaced by the “gray corporate guys” and consultants who see the future in the form of matrix and management, not risk taking, innovation and creativity.
The Best Buy Board Just Doesn’t Get It
You might think that the Best Buy board of directors would understand and own up to their responsibility to resist this deterioration of the culture by doing all they can to enhance the entrepreneurial success and value of the company. You would think that, but you would be wrong. Based on its composition and the recent actions of the board, it is clear that they are more the problem than the solution.The Best Buy board is not a melting-pot of entrepreneurial experience; rather, it is made up of a group of life-long corporate bureaucrats, staff managers and human resource mavens. Not one of them seems to have ever started their own company or made a living as a true entrepreneur.Acting more like numskulls and nitwits than leaders or entrepreneurs, the steps taken by the Best Buy board in recent weeks have clearly broadcast just how much of the entrepreneurial culture of the company has been eviscerated, polluted and discarded.
For example, after a recent shareholder meeting – without prior announcement – the board voted to change the corporate by-laws of Best Buy; raising the percentage of ownership – from 10 to 25 percent – a shareholder needed to control in order to call a shareholder meeting.
Only one individual was targeted and impacted by this change – Richard Schulze, the company founder who owns 21 percent of the company.
What motivation could the board possibly have for taking actions to freeze out the individual who knows the most about the company and has the most at stake in the company’s continued success? Since Schulze has called for a shake-up of management and the board, it would not be much of a stretch to conclude that the numskulls and nitwits on the board took this action – not in the best interests of the company and shareholders – but in their own selfish self-interest to save their highly compensated (directors receive on average slightly over $200,000 per year) cushy jobs.
An even more blatant example of how little these faux-leaders on the Best Buy board understand about a successful entrepreneurial culture, was offered in the Minneapolis StarTribune (June 27), which reported that, “The board of Best Buy has decided to collectively pay the company’s four top executives $2 million in cash to cement their ties to the retailer …” Amazing! Incentive is an important and positive part of entrepreneurialism, but it is based on reward for performance. Nothing exhibits the insecurity and base ineptitude of these directors and the disintegration of the culture at Best Buy, then to believe that the solution to the company’s decline is to offer millions in incentives to corporate executives – not to do anything other than to stay at work. This is a classic example of bureaucrats who are open to be bought; not understanding that loyalty is earned not purchased.
And the Moral of the Story …
To persist as a winner, an organization needs to work even harder to retain success than it did to achieve it. The organization must be even more focused and constantly vigilant – not so much from the threats of others – but rather, from the threats of its own success. As the driving spirit and culture of any successful organization matures, it will be exposed to a creeping corporate virus that manifests itself in the form of bureaucracy, complacency and entitlement causing an “agony of success.” And failure is always the curse of succumbing to the “agony of success.”
The chief reason people stop learning is the belief they know all they need to know. The chief deterrent to striving to do more is the belief that what has been done is all that needs to be done. A high performing organization can never let up, not only because you never know where the next competitor will come from, but mostly because the most dangerous enemy is the very success it has achieved.
It does not have to be that way, but unfortunately if the members of the Best Buy board continue to act as bureaucratic numskulls and nitwits, rather than leaders and entrepreneurs, Best Buy may be the next great company to fall victim to the “agony of success.”