The Secret Ingredient of Thriving Companies? Human Magic.

There is no longer much debate that companies must be about more than maximizing profits. Yet while many companies are articulating their purpose, much remains to be learned about how to create environments that can help turn intentions into reality. Nothing grows in bad soil, no matter how good the seeds and water are. Similarly, no company purpose, regardless of how well it is defined, can materialize unless the company environment is fertile. A fertile environment is one where employees have a spring in their steps in pursuit of a noble purpose, and where everyone can become the best, biggest, most beautiful version of themselves. It is the kind of environment that can unleash what I call “human magic” and result in inordinately great results, like what we experienced at Best Buy as part of the company’s resurgence.

In 2019, for example, I received a firsthand testimonial of human magic at work when a senior executive at an event I attended shared with me how shocked he’d been after a recent visit to a Best Buy store. He’d found sales associates genuinely engaged and interested in helping him, he said, whereas a few years earlier, shopping at Best Buy left him frustrated, as no one in the stores seemed to either care or be able to provide a great service and experience. Had Best Buy changed its entire sales force? Or concocted a better system of incentives? No and no. What we had done was create an environment where employees were excited to express their untapped individual and collective potential. It’s in that environment that Best Buy’s purpose of improving lives through technology has been able to materialize and blossom.

The traditional corporate approach to motivating people has been a combination of carrots and sticks: a system of financial incentives designed to mobilize everyone around a plan designed by a few smart people at the top. The problem with this approach, as executive coaching pioneer and author Sir John Whitmore once pointed out, is that if you treat people like donkeys, they will perform like donkeys. Multiple studies have confirmed that, for any work involving cognitive or creative skills, financial rewards do not drive motivation and performance.

So, what does? In my experience, it takes several mutually reinforcing elements to create an environment that unleashes the kind of human magic necessary for a company purpose to take root and flourish. Use the following six ingredients to create your company’s unique recipe for human magic.

Meaning

One of my most memorable moments at Best Buy was an executive team dinner where we shared what drove us personally. By reflecting on how this connected with our work, we realized that our individual aspirations to do something good in the world connected and converged, which helped us define the company purpose.

It’s the link to individual drive that gives a company purpose soul and legs. Encouraging every employee to reflect on and share what drives them, as well as articulating and constantly feeding the connection between that personal purpose and the company’s, is therefore one of the most crucial roles of any leader, from top executives to store managers.

When I was still CEO, I visited one of our stores near Boston, hoping to find out why it performed better than others. I found out that the manager asked every single person on his team, “What is your dream?” He’d then work with each of them to help achieve it, largely by linking their personal dream to the company’s purpose. That link made each employee feel personally invested in the company’s purpose and gave everyone the energy that, combined with their skills, drove much of the store’s superior performance.

Authentic human connections

When thinking about how crucial human connections are to human magic, I always remember a young sales associate who recounted the district manager’s visit to the store where he worked. The manager, who had met him when he was hired, recognized him and remembered his name. The young sales associate realized that he wasn’t just one of thousands of frontliners. He was an individual, who was known and who mattered. Years later, he still considered this one of his most meaningful experiences at Best Buy. While my compatriot René Descartes famously said, “I think therefore I am,” I believe that a more relevant formula today is, “I am seen, therefore I am.”

Authentic human connections start with treating and valuing everyone as an individual and making sure everyone feels they belong, which is the very heart of diversity and inclusion. It also means encouraging vulnerability. When Kamy Scarlett, then Best Buy’s head of human resources, shared on the company blog that she had battled with severe depression, her story not only resonated with many other people and unleashed a flood of support, but it also signaled to everyone that it was OK not to be OK.

The Covid-19 pandemic has highlighted how essential it is to see employees as individuals with unique talents, needs, and challenges. Attracting talent is far more about listening and understanding who people truly are and can be than about their qualifications and experience. While many companies are experiencing the impact of the Great Resignation, Corie Barry, my successor as CEO, recently pointed out that employee turnover at Best Buy is lower than it was pre-pandemic, which she attributes to employees feeling valued.

With so many people working outside the office and far from their colleagues, encouraging authentic human connections has become even more important — and challenging. A Microsoft survey has revealed that the move to remote work during the pandemic shrunk people’s networks within organizations, making companies more siloed. This is an invitation for leaders to learn to genuinely connect remotely. In these challenging times, I’ve seen leaders hold digital coffee breaks with colleagues and organize video meetings with no agenda with direct reports, just to connect. They also apply this to new employees to help onboard them and make them feel they belong.

Psychological safety

No one will risk being themselves and being vulnerable unless they trust that they won’t be penalized or ridiculed for showing their true selves, speaking up, or making mistakes — what Amy Edmondson, my colleague at Harvard Business School, calls psychological safety. It’s a key ingredient to unleashing human magic. In fact, a study at Google revealed that psychological safety was the most important driver of team effectiveness. When Alan Mulally first became Ford’s CEO, no one on the senior operations team dared to admit that there was any problem in their respective area for fear of being fired — even though the car manufacturer was in trouble. When one person finally said during a meeting that he needed help solving a manufacturing issue, Mulally clapped, signaling that asking for help was not only safe but actually encouraged.

Edmondson’s work further highlights what it takes to create psychological safety, including: setting the stage (framing the work, emphasizing purpose), inviting participation (practicing inquiry, setting up structure and processes), and responding productively (expressing appreciation, destigmatizing failure, sanctioning conduct violations).

Autonomy

Few people enjoy being told what to do. The next ingredient that contributes to unleashing human magic is giving people the freedom and ability to shape what they do and how they do their work. At Best Buy, we greatly benefited from pushing decision making as far down as possible in the organization and adopting more agile ways of working.

The importance of autonomy has become even more evident as companies try to figure out their back-to-office strategies. With remote work creating new opportunities and expectations, employees have been leaving their jobs voluntarily in droves or are considering doing so (especially those working in midsize companies). As they consider their next career move, flexibility is at the top of their priorities list. This means employees want to have the autonomy to decide where they work, with most preferring a hybrid of home and office. This is the kind of autonomy that companies like Adobe are embracing.

Autonomy is not a free for all, however. It must exist within the frame of the company’s purpose and values and account for what each team and job needs. Choosing whether to work from home, for example, is off the table in many jobs; in fact, only 37% of jobs in the United States can be performed entirely at home — a proportion that varies greatly across cities and industries. Autonomy also requires strong accountability and clarity about who is responsible for making which decisions. Autonomy isn’t one-size-fits-all, either; different people require different levels of autonomy, often depending on the nature of the work and their level of experience. For example, a new recruit is likely to need more guidance than a seasoned employee.

Learning environment

Becoming great at what we do best is fundamentally satisfying and motivates us as human beings, which is why it’s an essential ingredient of human magic. When I was still at Best Buy, I visited our operations in Denver to understand why sales associates in the region had been hitting it out of the park over the previous year. The wizard behind this human magic was the regional manager, who had started using associates’ individual sales data to drive highly individualized sales coaching in every store. Once a week, every associate met with their manager one on one. Together, they reviewed the associate’s numbers over the previous week, decided what to improve over the coming week and what that week’s target should be, and worked on practical skills in real-life situations. They also discussed longer-term career opportunities. The frequent and sustained personalized coaching fired up employees, boosting their skills and performance.

Besides encouraging lifelong learning through individualized coaching, fostering mastery also means eschewing the traditional top-down, bonus-linked and grading approach to performance assessment. According to Gallup, only 14% of employees feel that their performance reviews inspire them to improve; in fact, traditional performance reviews are often so bad that in about a third of cases, they make performance worse. This is hardly the way to unleash human magic. Once I decided to change how I would approach these reviews with my direct reports, I found that conversations based on self-assessments (informed by feedback from colleagues) that focus on developing strengths are much more likely to yield mastery and improve performance.

Growth

“Growth is the only evidence of life,” Cardinal John Henry Newman once remarked. I believe this to be true for business, too. Companies must grow — growth creates space for promotions, improving productivity without losing jobs, taking risks, and investing. Business growth fosters individual growth and drive, too, which in turn feeds innovation and further business expansion.

To me, Satya Nadella, Microsoft’s CEO, embodies this growth mindset. Every year, Microsoft organizes a summit of some 200 CEOs of the largest U.S. companies. When I attended before Nadella became CEO, the only technology in sight at the summit was Microsoft’s own. The demos of the company’s software would always be on its own hardware, even smartphones — not an area where the Microsoft star shined the brightest. Systematically focusing on how well the suite of Microsoft products worked together, which suggested that they should only operate together, narrowed the company’s perspective. When I attended the summit again in 2014, Nadella, who had become CEO a few months earlier, demonstrated Microsoft’s new software on an Apple iPhone. Suddenly, the company’s horizons had opened up to the universe of iOS and Android, far broader than the market share of Microsoft’s own phones. That kind of spirit has the power to transform people, and therefore companies.

But what if your company operates in a mature or shrinking market? This was the kind of headwind Best Buy was facing in 2012. Consumer electronics were becoming increasingly commoditized, and online retailers were threatening brick-and-mortar stores. Chains like Circuit City and Radio Shack were either already out of business or about to be. If the wind is not in your favor, then you must change tack. In other words, focus on your company purpose and the underlying human needs it seeks to address to rethink what your market truly is. Once we defined Best Buy’s purpose as enriching people’s lives through technology — rather than selling TVs and computers in stores — we redefined our market and put the wind at our back. Similarly, when faced with the significant challenges and constraints that the Covid-19 pandemic created, many companies have widened their perspective and opportunities by focusing on their company purpose and the human needs it seeks to address, using this lens to reimagine the range of products and services they have to offer.

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Every company pursuing a purpose needs its own potion to create human magic; this is the environment in which its purpose can materialize. Although not in itself sufficient to turn intention into reality, an environment that ignites human magic is nonetheless vital. It provides the oxygen that allows the company purpose to come alive. Although the ingredients above are universal, it’s up to each company and team to develop the exact formula that best serves its situation, including the choice of ingredients and their sequencing.