Bob Nardelli: Home Depot Despot

We did a post last March calling attention to a Business Week article that urged readers to “Skip the touchy-feely stuff. The big-box store is thriving under CEO Bob Nardelli's military-style rule.” Well less than three months later, Biz Week is telling a different story.

That article lauded Nardelli's command and control, despotic style of management. But as my maternal grandfather would say were he alive, "That dog don't hunt." Command and control managment is as out of date as a 10 cent first class postage stamp.

If you want a quick lesson in how to destroy shareholder value in short order, read the June 19 Business Week story, “Home Depot: Last Among Shoppers.”

Home Depot’s share price has dropped 24% during the biggest home improvement boom in history despite an outstanding financial record over the past five years. However, that record is deceiving. It has been created by cutting into consumer service and taking the Wal-Mart route of lowering wage cost by raising the percentage of part-time workers.

Nardelli has reaped short term gains with a huge long term costs. And investors are catching on – the reason for the sharp decline in shareholder price.

Said the Biz Week article:

The University of Michigan's annual American Customer Satisfaction index shows Home Depot dead last among major U.S. retailers, 11 points behind Lowe's. Home Depot employees, who were encouraged to "make love to the customer" under co-founders Bernard Marcus and Arthur M. Blank now sometimes treat them like bad dates. "I don't want to say one bad apple spoils the bunch," says Curt D. Bridges, an electrical engineer from Decatur, Ga., who used to be a die-hard Home Depot fan. "But sometimes some [store clerks] almost blow you off."

Nardelli’s management style is the very antithesis of the stakeholder relationship management (SRM)) style of management, or if you will, the FoE (firm of endearment) way.

While you are at the Biz Week site check out two other stories with the same theme. The first is about Dell, while the second is about Northwest Airlines. And be sure to read readers' comments on all three stories. This one from a former Northwest pilot is typical:

As a former pilot for NWA, I can attest to and confirm with first-hand knowledge, that Northwest Airlines' management promotes a culture that completely disregards their employees, their customers, and the safety of the passengers aboard Northwest Airlines aircraft! Sad, but true!

Indeed, sad but true.

DBW

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Brent

Did you read the Harvard Business Review article on the Home Depot Culture Change published in April of 2006? I picked it up at the library thinking it was about the new leader and then saw it was from 2006.It gave a different picture of Nardelli's leadership. I'd be interested in hearing from others also on why there was such a difference between the perspective of the article and more recent opinions of his leadership.

[George F. Handel]

The original Home Depot mantra is LOST!

With greedy/arrogant Nardelli gone, can that original mantra be regained?

Only time (with the new guy?) will tell.

My current motto: LOWES whenever I can !

[David Wolfe]

Brent

Belatedly I'm responding to your lengthy, but quite informative comment. It was a real service to our readers. Thanks very much.

David

[david o]

I could not agree more. Brent expressed exactly why I left Home Depot after 16 years of service. They took the company and job that I once loved and turned it into something I dreaded every day. I now manage 11 chicken houses, working with my wife every day.(it's a dirty job but somebody has to do it) Besides, I'd rather walk in it than have it throne in my face.

[Robert Stogner]

I PURCHASED A RYOBI BT3100 TABLE SAW FOR MY SON LAST YEAR, THE ARMATURE BRUSH PLATE CAME OF THE MOTOR ARMATURE RESULTING IN MOTOR FAILURE, I ATTEMPTED TO CONTACT HOME DEPOT CONCERNING THIS AN THEY SAID NOTHING THEY COULD DO I NEEDED TO CONTACT RYOBI, I DID SO, I GOT A SERVICE DEPARTMENT LOCATED 80 MILES FROM ME AN THEY ORDERED THE MOTOR, I AM STILL WAITING ON THE MOTOR SEVERAL MONTHS AFTER IT WAS ORDERED, THE SERVICE COMPANY STILL HAS NOT RECEIVED THE MOTOR TO REPAIR MY SON'S SAW, MY SON USES THIS SAW TO DO SMALL JOBS TO HELP SUPPORT HIS WAY THRU LOUSIANA STATE UNIVERSITY (LSU), WHY WOULD HOME DEPOT SALE A PRODUCT THAT HAS SUCH POOR WARRENTY REPAIR PRACTICES. IF YOU WISH TO CONTACT ME, HA-HA, MY CELL NUMBER IS 225-721-0918 OR EMAIL ME AT [email protected]

[David Burts]

As a Home Depot employee I can safely say that almost no one is sorry to see our corporate "thief" leave. As Brent Davenport stated, he (Nardelli) enriched himself at the expense of his employees. But their is still just one problem....the board. These are the same guys who "approved" what Bob did. Bob Nardelli probably looked at Walmart and said that's what we should be doing too.
Bob Nardelli is guilty of pure and simple greed and he must be a man without a conscience as well.
So what does that say about the Board? I think it's pretty obvious!!

[Brent Davenport]

I read with some amusement that Bob Nardelli, Chairman and CEO of The Home Depot, resigned amid calls for his ouster by stockholders and board members who were upset over the amount of compensation Nardelli received during the past six years [in excess of 200-Million USD] while the company's stock, sales, and retail position languished.

I guess congratulations might be in order for the major stockholders and board members responsible if only it hadn't taken them so long to get around to firing the guy who started screwing stuff up almost immediately after taking over in 2000. What's more, they should have pulled the plug a couple of years ago when it readily became apparent [to most store-level employees anyway] that Nardelli knew actually very little about actually selling retail products in a retail environment.

I suppose they didn't want to act too hastily.

I can speak with some authority on the subject because I worked for 'The Depot' at three stores in various capacities for nearly seven years--ending up as an assistant manager for the last three. I left about a year ago when the Nardelli insanity got so bad that vice presidents, district managers, and store managers were being fired at such a breakneck pace you needed a calculator just to keep up. Many of these people had been there for 10, 15, 20 years or more and a substantial number had worked themselves up from lot attendants and stockers to district and even executive-level positions. [One estimate I heard put the store manager/assistant manager firings or resignations at more than five hundred for 2005 alone.] Since Nardelli couldn't blame himself for the company's continued downward slide it was easier to castigate everyone else below him. Somehow, Nardelli must have thought, these retail professionals [who had propelled the company to greatness by the way] were no longer capable of running the place and now needed to be eliminated.

Unfortunately, just the opposite was true.

Having arrived pre-Nardelli--when Bernie Marcus and Arthur Blank ruled the roost--I can tell you HD was the best company I had ever worked for--by far. Customers and associates alike were treated like family in the truest sense of the word, and there was a strong loyalty among both. Many associates regarded the company as a career opportunity with great benefits and a fantastic atmosphere to work in. In the late 1990's, when I signed on, there was a genuine entrepreneurial spirit along with perks like frequent complementary employee barbecues, cash incentives for customer service through the merit badge program, solid opportunities for promotion, excellent starting wages, and a learn-from-your-mistakes mentality that made the place fun to work at and function well. There were very few written rules, too, and a common-sense attitude prevailed. It was a joy to go to work and I'm sure that that contributed substantially to Home Depot's success. After all, if employees feel secure and good about themselves they're bound to show it in their attitude toward customers, right?

Once Nardelli arrived, all that changed. He eliminated many of the perks that the rank-and-file enjoyed, reduced the starting wage from previous levels, scaled down the number of sales associates on the floor, and brought in outside managers who showed contempt for associates who had been with the company for long periods of time. [One receiving associate told me he refused to display his 12-year service badge because he thought he would be targeted for firing due to his higher pay and longer tenure with the company.] I think he was right. It seemed as if Nardelli wanted to eliminate all of the 'old guard' so that [perceived] opposition to his supposed grand vision could be eliminated. At one point he apparently complained to underlings that it was the 'lack of execution' among store level personnel that was causing him the biggest headaches. To me, it all sounded a bit like Captain Queeg in the Caine Mutiny.

To add insult to injury, managers at one of the locations where I worked were instructed to "spin" the bad news so that damage to morale would be mitigated. When the merit badge program was eliminated, for example, I was instructed to put a "happy face" on the fact that employees could no longer earn $20 for getting a good customer report card--having, instead, to settle, for a handsome congratulatory certificate in their file. Right. I'm not sure even Donald Trump could have pulled that off.

There was resentment, too, in the manner new blood was infused into the management ranks--especially at the store level. Nardelli, when at GE, had harvested new talent straight out of the ranks of junior military officers by putting them on a fast-track management program. When he tried this at Home Depot, however, it created a great deal of resentment among many who were upset over the enormous amount of extra pay, perks and training these people received with no better [oftentimes worse] results to show. Typically, new recruits in the 'Store Leadership Program' as it was called were paid fifteen to thirty thousand dollars more per annum than assistant managers who had worked their way up the ranks and who new more--lots more--about the business. In addition these 'ninety day wonders' were issued laptop computers and a company credit card and were flown to numerous training sessions around the country--something unheard of for any of the pre-existing store management staff. One long-time assistant I knew lamented "how much more effective could I be with all those tools?" Good point. Even after training, many of these new hires found the long hours of retail daunting and were frustrated with the chaotic, less-than-clockwork precision of the retail world. Retail is an occupation where managers need to be part psychologist, accountant, carnival barker, mechanic, artist, salesman, spiritual adviser, and PR Rep--all rolled into one--and many of these former military officers couldn't [or didn't want to] make the transition.

Operationally, Nardelli did do a good job in many areas. He implemented new computer systems, significantly reduced expenses in areas such as overnight mail and telecommunications, remodeled older stores to make them more inviting and energy efficient, consolidated the brand and made it more attractive to the female demographic, improved inventory turns, purchased key manufacturing companies so that savings on store-branded products [such as lighting and fans] could be passed along to the consumer, and created strategic partnerships. In the end, though, I suspect he was more comfortable being a numbers-cruncher than a genuine people person. 'Charming but superficial' seems to be an apt description of his personality.

Still, the specter of Nardelli's huge compensation and severance packages looms large [Some $210-Million to leave and about the same for the past 6 or so years he was at the helm.] Rather ironic, I think, for a guy whose mantra was "pay for performance." Had it been "pay for ego" I could have understood.

Nardelli was universally disliked by most employees at the stores where I worked. In a typical comment a co-worker told me three years ago that he thought Nardelli was the type of guy who would "rape the company and leave it in ashes--then go onto something else." While not exactly in ashes, that assessment appears to be prophetic.

It also seemed ironic to me that while most other giant corporations were working so hard to decentralize themselves and encourage team collaboration Nardelli appeared to be doing just the opposite--wanting Caligula-like control over everything--including embarking on a huge PR campaign to show everyone how in control he was.

I have no doubt Home Depot will survive. Hopefully, it will revert [somewhat] back to the old days when "do the right thing" was the guiding principle--practiced by everyone from the lot boy right on up to the CEO--and when each store was managed more like a friendly, local business than a faceless, indifferent corporate giant. [If the new CEO needs a model perhaps he can use Starbucks as a starting point.]

Whatever happened [or didn't] I'm glad Nardelli's finally out.

By the way, here's some advice for the new guy: It probably wouldn't hurt to start saying 'thanks' a bit more to the people who work in those stores everyday, hire some extra help, maybe pay a little better and, while you're at it, throw in a barbecue or two.