by Victoria Brodie

Home Depot: Leadership Lessons from the Field

Home Depot had faced record growth as a disruptor in the home improvement industry.  Growing to a $46 billion company in the span of 20 years the organization was starting to experience challenges from its entrepreneurial structure. Due to the organizational culture allowing and even encouraging autonomy at the store level, there was little systemization or structure at an organizational level (Charan, 2006). This created missed opportunities in terms of buying power as well as a lack of talent curation to sustain the organization. The “stack it high, watch it fly” core business attitude which drove Home Depot to success in its first 20 years was not going to be able to create sustainable future growth (“Dramatic change at Home Depot: success to further success,” 2006). The board knew they needed someone to come in to create a standardized business structure that would allow Home Depot to remain competitive within a growing industry.

Actions Speak Louder than Words

Nardelli discerned that the way to grow Home Depot was to create systemic foundational changes within the organization. His three part plan focused on: improving profitability, extending the business offerings, as well as expanding geographically and demographically (Charan, 2006). His focus on standardizing the business practices to allow more centralized control of Home Depot helped to leverage tremendous buying power, taking it out of the hands of the individual stores. He hired a GE colleague to head up HR and began shifting the organization from intuitive decision-making to a data driven assessments. This included how employees were held accountable (“Dramatic change at Home Depot: success to further success,” 2006). Although these changes appeared to be necessary, they were met with resistance, clashing with the deeply-rooted culture of Home Depot.

The Culture Conundrum

Home Unimprovement: Was Nardelli’s Tenure at Home Depot a Blueprint for Failure, described the Home Depot culture as entrepreneurial and extremely customer focused, stating, “…the way of operating was decentralized. Managers had a lot of discretion and there was a free-flowing, exciting feel to working there” (para. 4). When Nardelli stepped in from GE, a company known for being driven by performance, there was a clear clash of cultures. Although Nardelli understood the culture differences, he chose to move through his changes in a way that did not acknowledge and/or respect the deeply ingrained culture he was visibly trying to shift.  The pace at which he was asserting the new changes as well as the scale of those changes was overwhelming to the employees which created resistance and friction.

Home Depot Today

Home Depot’s organizational culture today is what CEO, Craig Menear, refers to as the inverted pyramid, customers first, employees second, leaders last (Moore, 2016). This cultural resurgence from their origins coupled with savvy business strategies has resulted in Home Depot continuing to excel in their industry. As stated by Morningstar, “…with fourth-quarter same-store sales growth of 7.5% and operating margin expansion of 20 basis points, to 13.4%”, they are anticipated to continue this trend into 2018 (Katz, 2018).

Culture and Change

Change is difficult. Although this case study lauds Nardelli’s efforts, it was clear from the subsequent actions of Home Depot that his leadership was not as effective as they had hoped. The board brought in a change agent who had the core skills and competencies they wanted to integrate into Home Depot. On a surface level, they engaged an expert based on where they saw Home Depot going. The challenge was that, although Nardelli was knowledgeable when it came to the organizational structures of GE, he was not as astute as to the deeply-embedded culture he was moving into and trying to change. If we look at this change through William Bridges’ change model including the three stages of change: ending, losing, letting go; neutral zone, and new beginnings, some challenges emerge. With the pace of change happening rapidly and dramatically, there was little time to move through the feelings of loss to emerge into a “new identity” (Stragalas, 2010). This was indicative of the loss of employees within the first year of his tenure. After Nardelli left, it was generally acknowledged that Home Depot had seen a substantial increase in their numbers but his hyper focus on processes “swept aside the elements that made Home Depot special” (Home Unimprovement: Was Nardelli’s Tenure at Home Depot a Blueprint for Failure, 2007, para. 6).

References

Charan, R. (2006). Home Depot’s Blueprint for Culture Change. Harvard Business Review, (April).
Dramatic change at Home Depot: success to further success. (2006). Strategic Direction
Home Unimprovement: Was Nardelli’s Tenure at Home Depot a Blueprint for Failure?. Knowledge@Wharton (2007, January 10)
Katz, J. (2018) No Let Up in Home Depot’s Merchandising Prowess. Morningstar.
Moore, J. (2016) CEO: Culture continues to drive Home Depot’s success. Emory Business.
Stragalas, N. (2010). Improving Change Implementation Practical Adaptations of Kotter’s Model. OD Practitioner