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Business Journal
Why Big Lots Customers Keep Coming Back
Business Journal

Why Big Lots Customers Keep Coming Back

The giant retailer keeps prices low -- but its stock value high -- by engaging employees, who in turn engage customers

A Q&A With Brad Waite, executive vice president of Big Lots

At Big Lots, the nation's largest broad-line closeout retailer, the mission is to be the "world's best bargain place." So you'd think the company's chief strategy would simply be to offer the lowest possible prices. Well, low prices are a given, says Brad Waite, Big Lots' executive vice president and member of the executive committee. The question for Big Lots is how to keep customers coming back and buying more in a manner that allows the company to protect its margins.

Waite's executive group has built the retailer into a Fortune 500 giant operating in 45 states, with more than 1,400 stores and 40,000 employees. Last year, Big Lots produced revenues of almost $4 billion, and the company's stock is currently worth seven times more than it was in 1990.

What has Big Lots done differently? The retailer has learned that engaged customers buy more and produce higher margins -- and that engaged employees create engaged customers.

Waite recently discussed Big Lots' strategy with Gabriel Gonzalez-Molina, Ph.D., coauthor of Follow This Path.

Gabriel Gonzalez-Molina: What evidence do you have that human performance drives business outcomes at Big Lots?

Brad Waite: The evidence is evolving. Let me start by saying that we always had a belief that the in-store team made a dramatic difference in the store's outcome. We knew that we could walk into a store and -- once we'd looked around and began talking with the associate team -- immediately feel a big difference from one store to the next. We didn't think it was a coincidence that stores where associates were upbeat, approachable, happy, and interacting with customers and each other also seemed to achieve better business results.

But those were anecdotes. What Gallup brought to us was a science, a way to measure that impression, and a terminology that we didn't really have before. We are talking about HumanSigma, Gallup's process for measuring and managing the human difference in a company's performance. HumanSigma has helped us put a language to something that we knew intuitively but could not prove. (See "Managing Your Human Sigma" in the "See Also" area on this page.)

The advantage lies in providing us with a common language so that we can "move the average." Now, we can talk to managers, share specific measures, and help them improve their results. In terms of actual financial returns, for example, in the past year, we discovered that stores with the highest levels of HumanSigma -- stores that had high levels of employee and customer engagement -- had dramatically higher levels of sales and profitability. In total, if all stores performed at this level in terms of HumanSigma, the financial gain for our company would be tremendous.

Gonzalez-Molina: How has your understanding of the human difference helped you build Big Lots into a very successful company? Often, anything with the word "human" gets relegated to the human resources department, but it seems that HumanSigma is key to measuring Big Lots' overall success.

Waite: Gabriel, starting with the senior executive group, as a team, we are a highly engaged group. We demonstrate the effects of having a high level of HumanSigma in that team. We just didn't know what to call it before we began working with Gallup. And this filters down to the entire organization. We are talking about a group of people who trust each other, work well with one another, communicate well, have a common agenda, and don't play political games. A lot of this is in our roots as a team. We are an entrepreneurial group that always wants to get things done, and we work well with one another. For us, this felt natural because we come from a culture where you rely on each other to get things done.

Gonzalez-Molina: Your stock growth seems to parallel your efforts to build a culture based on the human aspects of performance.

Waite: In 1990, our stock was under $2 a share. It is now trading at between $13 and $15 dollars a share.

Gonzalez-Molina: How does HumanSigma make a difference in your stores?

Waite: At the best stores, where there are high levels of both customer and employee engagement, the manager knows the associates -- knows something about them as individuals and about their families. There is also great communication between managers and associates, and between the associates and the customers. Associates know the customers' names, know what they are interested in, and have a personal connection with them.

Gonzalez-Molina: How do you use your talents to contribute to success at Big Lots? And does being aware of your own talents and strengths help you do your job better?

Waite: Having an awareness of my talents and strengths helps me communicate better with -- and lead -- my staff, and it helps me be a better member of our senior leadership team. As an example, my number one talent theme is Focus; when I interact with my senior leadership team, I know that I can keep us on track, driving toward what we want to accomplish and making sure we don't lose sight of our goals. And I use Relator, my number two talent theme, to help me build strong relationships in the organization with my staff and with others on the leadership team. This has helped me gain credibility and helped us work together to get things done.

Gabriel Gonzalez-Molina is coauthor of Follow This Path.

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