Gap Outlet: Second Retailer Adopts Results-Only Work Environment Strategy

Art Peck, president of Gap Outlet, a division of Gap Inc., in San Francisco, no longer hears about employees’ doctors’ appointments or parent-teacher conferences. And he couldn’t be happier. For the past year, Gap Outlet has piloted a Results-Only Work Environment (ROWE), the first major company to do so since Best Buy pioneered the practice six years ago. The pilot program included 137 headquarters employees and executives in merchandising, design, production, finance, HR and IT. Retail store employees are not eligible to participate.

ROWE is a corporate culture initiative designed to significantly improve employee productivity, accountability and engagement. Under a ROWE, employees are empowered to work whenever and wherever they want as long as the work gets done.

Rationale for Initiative

Eric Severson, vice president of HR, believed the culture and the demographics at Gap Outlet were primed for a solution like ROWE. “We are in one of the worst commute cities and in one of the most expensive places to live,” he explained. “We have a 76 percent female workforce with an average age of 34.”

The organizational structure at Gap Outlet is flat and lean, and the culture is entrepreneurial even after 14 years. Jobs are large in scope, and people have a lot of autonomy and empowerment, he said.

“The downside to all this entrepreneurial [spirit] and empowerment is burnout,” said Severson. “So work is fun and challenging, but work/life balance was terrible and turnover was high. People in exit interviews would say to us, ‘I love my job, but it’s just not worth it anymore.’ We were spending years investing in female leaders only to lose them after maternity leave because they couldn’t figure out how to swing both work and family.”

That’s bad news for a retail organization with intense global competition and a weakened economy. “In our business, merchandisers spend years developing expertise and the gut instinct to predict fashion trends,” added Severson. “To see that knowledge and talent walk out the door is devastating.”

Leap of Faith

In 2004, Gap Outlet engaged in a multiyear strategy to remedy its work/life balance issues. HR started with no-meeting Friday afternoons, seminars on conducting meetings effectively, work/life balance tools and distributed laptops so people could work from home. Work/life balance scores inched up year by year to 72 percent—still lower than other divisions in Gap Inc.

Severson believed that to reach the next level of an innovative work culture he would have to do something more radical. He had heard about the Best Buy experiment, which also excludes retail store workers, and its results and believed it was time to test it out on a team at Gap Outlet.

In February 2008, Severson launched a ROWE pilot program within Gap Outlet’s production and technical services teams. The pilot produced significant results: Production’s turnover dropped by 50 percent, and employee engagement scores improved 13 percentage points, the best in the division.

Based on the success, Gap Outlet expanded the pilot in September 2008 to include 79 additional employees across the Gap Outlet and Banana Republic Factory Stores product and store support teams. HR laid the groundwork by implementing the following:

Training. Before the pilot, HR trained Gap Outlet participants in the ROWE philosophy and best practices; during the pilot, participants were supported with additional training and HR coaching.

Change management. In addition to training and ongoing HR counseling, the pilot was supported with ongoing communication via a ROWE participant web page and dedicated ROWE e-mail box as well as by a ROWE change agent team consisting of business leaders from the pilot teams.

Measurement. Gap Outlet measured the results of the pilot by comparing the outcomes of pre- and post-pilot employee and stakeholder surveys. The return on investment bar wasn’t set high as Gap Outlet’s financial investment in ROWE was minimal—$8,000 for training materials.

Positive End Results

A post-pilot assessment conducted in February 2009 revealed that productivity increased 21 percent and quality improved 15 percent among the pilot group. Turnover plummeted 18 percent, down to 5 percent in 2008 over the year prior. Engagement scores spiked from 67 percent in 2007 to 86 percent in 2008, and work/life balance scores rose significantly from 72 percent to 82 percent.

ROWE Participant & Manager Pilot Survey Results

Jodi Thompson and Cali Ressler, the two HR executives who designed ROWE for Best Buy and now consult for other companies through their Minneapolis-based firm, CultureRx, think Gap Outlet’s experience proves that this initiative can work in other organizations. “It’s not just a Best Buy thing; another large company can do this and quickly see results,” said Thompson.

“People argue that they are already flexible and don’t need a ROWE,” said Ressler. “Gap recognized that telecommuting isn’t the answer and tweaking schedules isn’t innovative. You can’t just take baby steps.”

Hello, Anyone There?

The fear of an experiment like ROWE is that employees will hide in the forest and never show up for work. Meetings will go unattended, calls will go unanswered, and deadlines will come and go without anyone there to notice.

“That just doesn’t happen,” said Severson, who works 9:30 a.m. to 7 p.m. to avoid rush hour and uses his mornings to exercise. “People need feedback on projects and will come to meetings to get sign-offs. Some people still work 9 a.m. to 5 p.m. every day, and that’s fine. ROWE is your choice.”

Lia Bush, inventory manager for the Japan market, said ROWE requires her to set clear goals and objectives. “You can’t rely on ‘drive-bys’ to give directions to direct reports because they might not be in the office,” she said. “It requires you to plan ahead and clearly communicate.”

Bush has worked at Gap for 13 years, two of those years at Gap Outlet. She has two young children in day care and commutes to work on mass transportation roughly 45 minutes each way. She works from home at least two days a week. “I can leave work early to spend time with my family,” she said. “If I need to, I can get work done after the kids go to bed, and I’m not resentful for that because I chose to leave work early.” Her newfound freedom allows for more time to exercise, decreasing her stress levels.

ROWE also is self-policing, Severson discovered: People ferret out those not doing the work because everyone is highly protective of the initiative. “There are very few talent management programs that don’t create a sense of entitlement,” he said. “This is an agreement between the employees and the company that in exchange for the most incredible freedom to do your job in a way that makes sense for you, you will perform highly.”

No one must qualify for ROWE nor is it taken away if you don’t meet your goals. If you don’t perform, it’s treated as a performance management issue. The no-excuses, results-only environment is a relief to managers who don’t have to ignore someone who works hard in terms of hours logged at the desk but still doesn’t hit targets.

“If people have inaccuracies or drop the ball, we don’t ask why,” said Severson. “We say, ‘Don’t do it again’ and ‘How can we help you?’ We don’t ask, ‘Did you miss work for an illness, or were you working with your child in the room?’ That’s none of our business. Our business is results. End of story.”

It’s also relieved HR from its disciplinarian role. “My job is much more fun because you end up in a coaching role, not a supervisory role,” said Eva Sage-Gavin, executive vice president of HR at Gap Inc. “You can’t come to me with excuses for not getting the work done if you have flexibility to balance your work and life.”

How ROWE Can You Go?

For companies considering a ROWE experiment, Gap leaders emphasize preparing the culture, doing the research, acquiring the right technology and going slow. “The culture has to be right first with a high degree of trust,” said Sage-Gavin.

Although Severson was gung-ho to flip the switch on ROWE overnight, Sage-Gavin said he was smart to go slow. “Eric worked through a baseline plan with phases,” she said. “He engaged employees and evaluated a lot of options. He nurtured the pilot group to see what support was needed and worked out the kinks. Finally, he built knowledge to create advocacy for the program among executives.”

Gap Outlet plans to roll out ROWE to the rest of its workforce while other divisions within Gap are looking at its results with keen interest and considering ways to expand their own flexible work arrangements.

“If I were speaking to another CHRO, I would say that in this economic environment, it is critical to look into ROWE,” said Sage-Gavin. “Check your culture, look at your demographics and if all those are green, then what’s the risk in trying it? Go slow, pilot it and check the results.”

Severson doesn’t understand why more companies don’t try ROWE and is actually conflicted by that fact. “Part of me loves that they don’t because of the competitive advantage it gives us,” he said. “The humanist in me, though, is sad that most people don’t have the freedom to work this way.”

But he’s quick to put the humanist aside in favor of winning the talent game. “When the economy comes out of the recession, we will be the only retailer in the Bay area that offers this competitive advantage, and we’re very excited about that.”

Adrienne Fox is former managing editor of HR Magazine.

Related Article

Clocking Out, HR Magazine, June 2007