Linking 360 Feedback to Business Outcome Measures

Nations #1 Specialty Retailer of Technology and Entertainment Products and Services

Our Vision
Making Life Fun and Easy

Brand Portfolio

Best Buy Canada

Shared Competencies

Map Map

Best Buy Enterprise

Best Buy 528 Stores 48 States Musicland 1,303 Stores 49 States

Media Play Suncoast Sam Goody Small Mkt Sam Goody 76 397 233 597

Magnolia Hi-Fi
16 Stores, 3 States

Future Shop 101 Stores Best Buy Canada 7 Stores

Source: Best Buy Co., Inc.: 2nd Qtr. FY 2003

Best Buy Performance

($ in billions)
$30 $25 $20 $15 $10 $5 $0
FY

19.6 15.3 12.5 7.2 7.8 8.3 10.1

5.1

'95

'96

'97

'98

'99

'00

'01

'02

Revenue

Best Buy Retail

Structure
584 Stores 56 Districts 3 Regions

Leaders Score Carded on Key Financial and Operational Measures Including:

Revenue & Gross Margin Sales of Key Products Customer Loyalty Employee Engagement/Satisfaction

Our Research
360 Feedback Results (June 2002)
38 District Managers (DMs) 573 Store/General Managers (GMs)

4 Key Financial Measures (July 2002)

Revenue Gross Margin Accessory Sales Sales of Product Service Plans

Best Buy 360 Highlights

Administered Annually Retail and Corporate Leadership
Corporate Director level and above Retail Store Manager (GM) and above

Purely Developmental Competency Based Raters = Self, Superior, Subordinates and Peers

Best Buy Corporate Competencies

District Manager Correlations

(n = 38)
Drive for Results Managing Vision & Purpose Organizational Agility Strategic Agility Customer Focus Integrity, Trust, & Ethics Self-Knowledge Building Effective Teams Developing Direct Reports Listening Managing Diversity Motivating Others Revenue -.100 -.213 -.234 -.118 -.252 -.145 -.288 -.099 -.145 -.308 -.391* -.276 Gross Margin -.066 -.155 -.180 -.074 -.235 -.133 -.240 -.057 -.063 -.271 -.370* -.182 Accessory Service Sales Plan Sales .486** .547** .455** .484** .445** .464** .365* .396* .431** .415** .349* .274 .518** .423** .508** .591** .396* .406* .431** .251 .615** .487** .470** .389*

** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05 level (2-tailed).

District Manager Results

Correlations with Gross Margin and Revenue NOT statistically significant for most competencies Managing Diversity negatively correlated with Margin & Revenue
Gross Margin r = -.39 (p<.05) Revenue r = -.37 (p<.05)

District Manager Results

Service Plan and Accessory Sales strongly related to 360 Results for DMs Strongest Relationships with Accessory Sales were
Managing Diversity r=.61 r=.52 Self Knowledge r=.51 Bldg Effective Teams

Strongest Relationships with Service plan Sales were

r=.55 Drive for Results r=.59 Bldg Effective Teams Managing Diversity r=.49

Managing Diversity Items

Attracts and retains employees that represent diverse perspectives, styles and backgrounds Through his/her own actions, fosters an environment that encourages diverse ways of thinking, and discourages intolerant behavior by others Demonstrates an ability to manage people with diverse perspectives, styles and backgrounds

Self Knowledge Items

Accurately communicates personal strengths and weaknesses Actively seeks feedback regarding his/her performance, and responds by adjusting his/her approach Positions him/herself to leverage own strength and mitigate weaknesses

Building Effective Teams Items

Assembles teams with the skills and style necessary for success Defines teams purpose and clarifies roles within the team After assembling a team, provides members with directions to help them perform effectively

Relation of scores to outcomes

14.5 9.0 8.8 14.0 8.6 13.5 8.4 8.2 8.0 12.5 7.8

13.0

Mean JUL Accy %

Mean JUL PSP %

3.00 4.00 5.00

12.0

7.6 7.4 7.2 7.0 3.00 4.00 5.00

11.5 11.0

BU ILD IN G EFFEC TIVE TEAM S

BU ILD ING EFFEC TIVE TEAM S

Store Manager Correlations

(n = 573)
Drive for Results Managing Vision & Purpose Organizational Agility Strategic Agility Customer Focus Integrity, Trust & Ethics Self Knowledge Building Effective Teams Developing Direct Reports Listening Managing Diversity Motivating Others Revenue .192** .116** .079 .151** .176** .177** .188** .174** .154** .196** .177** .109** Gross Margin .218** .133** .086* .170** .194** .193** .201** .191** .171** .214** .184** .102* Acsry Sales .258** .220** .251** .251** .237** .245** .290** .264** .278** .280** .288** .170** Srvc Plan Sales .356** .167** .225** .336** .319** .325** .355** .330** .340** .385** .343** .137**

** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05 level (2-tailed).

Store Manager Results

All correlations positive and most statistically significant Again, accessory and service plan correlations stronger than those with Revenue & Gross Margin Overall, correlation coefficients much smaller than for DMs

Why are correlations for Dist. Mgrs larger than for Store Managers?
Frequent movement of Store Mgrs Sophistication of Raters Quality of items included in the survey

Sample Items: Drive for Results

District Mgr. Items Focuses attention and energy on factors critical to success Sets high standards and expectations for him/herself Consistently meets aggressive timelines as established by self or others Mobilizes others as a way to accomplish difficult tasks Consistently follows through on his/her commitments

Store Mgr. Items Creates and executes plans to improve store performance Has a sense of urgency, passion, and energy Accepts nothing less than our best effort every day; strives for excellence

Summary/Learnings
360 does relate to important Company outcomes especially those more directly impacted by manager behavior Rigor in item development pays off later Dont assume the process is purely developmental identify outcomes most likely to be impacted and build a measurement plan early Shape best practices to work with culture