Home Depot CEO Bob Nardelli's Militaristic Management Style Out of Date

Reader Craig Anderson, CEO of Global Performance Systems, Inc., a firm devoted to helping companies qualify for a Malcolm Baldrige National Quality Award, emailed the following report about Home Depot:

2005 was the first year that the American Consumer Satisfaction Index (ACSI) added health and personal care stores to its measurement of the retail sector, which includes supermarkets, department and discount stores, specialty retail stores, and gas stations. Of the companies in this new sector, Home Depot posted the biggest decline, with an 8.2 percent drop to 67. Lowe's, its major competitor, gained 2.6 percent to 78, and now leads Home Depot by a whopping 14 percent. When the index first measured both companies in 2001, they each scored 75. Analysts attribute falling customer satisfaction with Home Depot to store-based quality problems.

"Home Depot's state-of-the-art quality techniques are more focused on internal systems for operational efficiency and productivity," says Jack West, a past president of the American Society for Quality. "These things are largely transparent to the customer and would take a while to be reflected in perceived quality ratings, if they're ever noticed by the customer at all."

Business Week recently ran an article about Home Depot CEO Bob Nardelli's "climate of fear and intimidation," using the practice he adopted at GE of hiring as many people from the military as possible. http://www.businessweek.com/magazine/content/06_10/b3974001.htm

His "command and control" style is counterproductive in an era in which collaboration trumps intimidation in getting the job done – and that means collaborating with customers as well as with employees and other stakeholders.

Nardelli claims that Home Depot will reach $100 billion in sales by 2007. Present momentum may bring that to pass, but if it does happen, it may well be the last year for a long time that Home Depot breaks the 10-figure mark. Unhappy workers produce unhappy customers.

The Business Week story urged readers in its sub-headline, “Skip the touchy-feely stuff. The big-box store is thriving under CEO Bob Nardelli's military-style rule”. However, the article reported that since the day before Nardelli's arrival on Dec. 14, 2000, Home Depot’s fast-growing biggest competitor Lowe's split-adjusted share price has soared 210%. Home Depot's is down 7%.

At this rate, it won’t be long before stockholders begin to get antsy about Nardelli’s drill sergeant style of management. Nardelli's management philosophy is so 20th century.

DBW

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