Richard M. Schulze

How Best Buy defused a power struggle time bomb

April 3, 2013: 12:07 PM ET

Best Buy CEO Hubert Joly's approach to easing tensions with founder Richard Schulze is a great example for leaders dealing with similar tensions.

By Steven Snyder

Best Buy CEO Hubert Joly

Best Buy CEO Hubert Joly

FORTUNE – Following a drawn out standoff between current Best Buy (BBY) CEO Hubert Joly and company founder Richard Schulze, the electronics chain announced last week that Schulze would be returning to the company as chairman emeritus.

The news came on the heels of a contentious campaign by Schulze to retake control of the company through a leveraged buyout plan, which concluded on February 28 without a final bid.

Markets have reacted positively to the new alliance, and this move brings Joly one step closer to turning around the flagging big-box retailer. While there is plenty of work to be done at Best Buy, Joly's ability to resolve what has been one of the biggest sticking points of his effort thus far should not be understated.

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Joly was hired as CEO with no retail experience and by the same board that had ousted Schulze. Yet, he was able to overcome Schulze's apparent -- and perhaps well-founded -- biases through bold, but thoughtful, action. Joly's approach could be helpful for leaders who face similarly complex and tense situations:

Show humility

Joly had attempted to meet directly with Schulze for several months but was repeatedly rebuffed. When the two finally met just before Thanksgiving, Joly approached the meeting with respect for Schulze. Even though the board had chosen him as the company's CEO three months earlier, Joly handed Schulze his resume and acted as if he were still applying for the job. Schulze would later say that this simple gesture "meant a lot."

So often in negotiations, leaders go through macho maneuvers to claim turf and stake out positions. These actions often backfire and escalate tensions. Joly's simple display of respect paved the way to a conversation to find common ground.

Tap your relationships to defuse tension

Joly had never met Schulze before that November meeting, but he had worked closely with one of Schulze's collaborators, Brad Anderson. Joly relied on this already strong relationship to help win Schulze over. Schulze had great respect for Anderson, a former Best Buy CEO, and with Anderson singing Joly's praises, Schulze softened his resistance.

Leaders often ignore many of the avenues that can set the stage for a collaborative solution. Tapping mutual personal connections can bridge important gaps. But these relationships can't do all of the work; in the end, leaders need to develop and champion the right deal.

A little bit of give and take

In the arrangement announced last week, Best Buy agreed to pay Schulze an annual salary plus an additional $2 million to help prepare a business plan. The agreement also included some symbolic items that honored Schulze's long history with the company, such as giving him his office back and making revisions to a wall depicting the company's history.

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At the same time, Joly restricted Schulze's role in company matters to ensure he would remain aligned with company's strategy. This structure allowed Schulze to return with his head held high but also tapped the energy, knowledge, and experience of several other respected former executives, previously part of the buyout team, who will now serve on Best Buy's board.

Joly still faces enormous challenges in the turnaround of the $50 billion behemoth, but this alliance shows how executives can transform an enemy into an ally and position a struggling organization for long-term success.

Steven Snyder is the founder of consulting firm Snyder Leadership Group. He is the author of Leadership and the Art of Struggle (Berrett-Koehler, March 2013). 

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