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Playing Hardball at Home Depot

In: Business and Management

Submitted By mayer87
Words 1295
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CHAPTER CLOSING CASE
FROM CHAPTER ONE: PLAYING HARDBALL AT HOME DEPOT
BRIEF SUMMARY:
This case was mainly about Home Depot’s turning point on its sales increases after the new CEO Robert Nardelli had taken charge of the corporation. The way which Nardelli applied to change the old fashion of running the business was highlighted in the text. Described as command-and-control, the method he used which can be traced back to 1950s was simple and straight and it can be characterized as emphasis on a military-like discipline and obedience.
Being centralized again, Home Depot became a more standardized-machine like place where effectiveness and efficiency were laid utmost stress on. Then, Nardelli’s principles are illustrated as follows: First, centralize control over functions. Second, follow slow growth. Third, control by measuring every input and output instead of relying on instinct. Fourth, ruthlessly eliminate underperforming managers.
Besides cost cutting, he also made radical progress on wholesale supply to contractors, service offerings and potential new hirings.
However, “soft” topics such as corporate culture and employee empowerment are largely neglected, which diminished the better development of this management skill.
CASE QUESTIONS: 1. The four principles Nardelli has adopted to improve the performance of the business can be served as examples of his planning phase. When he conducted his plan into practise by assigning tasks for his employees, as in transmitting his thoughts and ideas to subordinates, he was actually organizing. At the time he implemented and made actions based on his own decisions, he was leading his followers. After the above processes being done, he was monitoring and examining to see whether the previous goals had been achieved, which is controlling. 2. The different managerial roles Nardelli played were: Interpersonal role(leader), Informational role(monitor, disseminator), Decisional role(entrepreneur). The management skills he used were: conceptual, diagnostic, decision-making. 3. In my opinion, Nardelli placed more emphasis on the art of management. Most of his decisions were made based on his past experience.
After the announcement that Home Depot had hired a CEO with no retail experience, Nardelli tried to squelch concerns. In January 2001 he told Fortune that his personal management style fit in with Home Depot's corporate culture and that of all the companies he had looked at "Home Depot most mirrored the way I like to operate." In answer to a question about imposing GE-style management on Home Depot, Nardelli replied that "to move from one social architecture and operating system and assume it's 100% portable and the platform of understanding is there at the new place—that's a terrible mistake." In response to a question about GE executives who were unsuccessful as outside CEOs, Nardelli told Patricia Sellers in a March 2001 Fortune story that those executives "didn't realize they were in a different environment. They did not have the respect of the culture and weren't sensitive to the pride of the employees." Nevertheless, most of the 250,000 Home Depot employees had never heard of Bob Nardelli, and some company veterans were openly hostile. His first day on the job, Nardelli was astonished to discover that Home Depot lacked the infrastructure to send a companywide e-mail. Its stores did not have automated inventory systems; shipments were logged with clipboard and pencil. Home Depot stores were run-down and had a reputation for poor customer service.
Nardelli believed that better processes led to better quality and higher profits. He increased information technology spending by 20 percent. In 2003 he spent $400 million on inventory shipping and tracking systems. He substituted 157 different employee evaluation forms with two. Salaried personnel from the CEO down were to be rated by coworkers, above and beneath them, and salaries were based on the scores. At a time when Home Depot was planning to hire about 100,000 new employees, Nardelli did not necessarily fire those with poor scores. He first sought the advice of others and told underperformers exactly what they were doing wrong. Nardelli created a leadership institute, modeled on GE's, to groom high-potential managers, teaching them all aspects of merchandizing, management, and, of course, Six Sigma. Although Home Depot had tried to implement Six Sigma earlier, it rarely had been used for retail businesses.
RESTRUCTURED THE COMPANY
Although efficiency had never been a big priority at Home Depot, it was Nardelli's operating principle. The company had outgrown its laissez-faire "do-it-yourself" management style. Nardelli replaced Home Depot's decentralized structure of local store managers with a technologically sophisticated command center. In his first six weeks he eliminated an entire management layer. He combined divisions and reassigned or eliminated group presidents, with all U.S. division presidents reporting directly to him. Of the 39 senior managers, 24 left and were replaced by managers—many of whom came from GE—with no retail experience

CONCENTRATED ON CUSTOMER SERVICE
In 2001 Nardelli introduced his Service Performance Initiative, which called for increased night restocking to avoid forklifts in the aisles and freed up personnel for customer service. Employees began to spend 70 percent of their time on customers rather than on restocking. "Racetrack managers" at each store circulated through the high-volume aisles to improve service.
Nardelli spent $250 million refurbishing Home Depot stores. Self-checkout systems were installed in 800 stores to reduce customer lines and free up salespeople. Two-way cordless scanners allowed products to be price-scanned in the shopping cart, thereby shortening lines. Nardelli began eliminating low turnover items and permitted stores to tailor their offerings to local markets. Lowe's was considered to be more "female friendly" than Home Depot, so Nardelli upgraded stores and merchandise to appeal to women. Design Place home-decor departments opened in more stores, and small appliances, lighting, and lamp selections were expanded in an attempt to attract more female customers.
EXPAND THE BUSINESS
Supplying professional builders and contractors—who spend three times as much as do-it-yourselfers—became a top priority for Nardelli in 2002. He introduced "pro desks" and PRO stores to compete with independent wholesalers. Centralization enabled Home Depot to service corporate accounts. It began selling to Disney and gained exclusive rights to carry Disney furnishings and paints.

MANAGEMENT STYLE
Nardelli brought to Home Depot his strong personality, aggressiveness, and GE discipline. In 2001 the analyst Donald Trott told Jennifer Pellet of Chief Executive : "With Bernie and Arthur, the approach culturally was, 'We're part of the troops like you guys and we're going into battle with you.' But Nardelli does not look comfortable in that orange apron. His body language is more 'I am the general up on the hill with the binoculars; you guys go take on the enemy.'" Calling his executives in for weekend meetings, Nardelli reminded them that it was not a job but a life. Whereas Blank and Marcus had motivated employees with hugs and cheers, Nardelli sometimes motivated them by instilling fear.
Motivating the sense of pride in employees, bringing information technology into the corporation, ruthlessly getting rid of incompetent managers while hiring potential new ones, restructuring the company with higher efficiency, centralizing customer service, expanding business sales and lastly, instilling personal managerial style into the company. These are what some of the basic management skills Nardelli has used to turn Home Depot into a brand-new corporation. Although there are still limits in improving some of the “soft” topics " such as company culture, employee satisfaction, Nardelli has made a relatively progressive change for the company.

Reference List
Home Depot Mirrors the Way I Operate," Fortune , January 8, 2001, p. 87.
Pellet, Jennifer, "Mr. Fix-It Steps In," Chief Executive , October 2001, pp. 44–47.
Robert L. Nardelli, 1948-. Encyclopeadia of Business, 2nd ed. Retrieved from
http://www.referenceforbusiness.com/biography/M-R/Nardelli-Robert-L-1948.html

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