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 / Spring 2005 / Issue 38(originally published by Booz & Company)


Winning Hearts and Minds at Home Depot

Then there were the iconic founders, idolized by both investors and employees for their innovative retail ideas and their irreverence. Home Depot was famous for its warehouselike stores, where shoppers were expected to find their own way around. If they got lost, all the better, Home Depot’s founders believed, because then the shoppers would come across more things they needed to buy.

Home Depot was a haven for independent-minded employees just like “Arthur and Bernie” — people who got things done, but didn’t always play by traditional corporate rules. Store managers were actually encouraged to make decisions independently of headquarters. According to Home Depot old-timers, if employees received a memo from Atlanta, they would tear it up. Voice mails from head office executives were often immediately erased. The company embraced with zeal hip management philosophies like flat and nimble organization and worker empowerment.

Home Depot was widely viewed as a fun place to work. Indeed, this is a company especially rich in amusing corporate lore. Legend has it that Ross Perot, the larger-than-life Texas businessman, former presidential candidate, and founder of Perot Systems, had been ready to furnish $2 million in seed money for Home Depot, until he heard that Mr. Marcus wanted to use his four-year-old Cadillac as his corporate car. The blunt Mr. Marcus told the blunt Mr. Perot to go jump in a lake. Home Depot employees still chuckle over the billions Mr. Perot would have made had he only kept his automotive opinions to himself. The seed money would now be worth about 70 percent of Home Depot.

In a culture where employees revered the founders’ casual personal styles and leadership, no doubt a new CEO from a perfectionist company like GE must have seemed threatening. People working at Home Depot in 2000 say the tension upon Mr. Nardelli’s arrival was palpable. “You’ve got to realize what energy and excitement there was at Home Depot back then,” says Tom Taylor, currently Eastern division president. “Store employees would talk about Bernie and Arthur as if they were their grandfathers. You’d hear managers ask their workers: ‘How do you think Bernie and Arthur would feel about that?’ Just the question would keep everyone in line.”

The suddenness of Mr. Nardelli’s courting by Home Depot didn’t help. Mr. Nardelli received a call from a headhunter for the home improvement chain only a few days after Jack Welch told him he wouldn’t be the next CEO of GE. Mr. Nardelli, who had spent nearly his entire career striving for General Electric’s top job (his last post was as head of GE Power Systems), was stunned. But he did not stay down for long. On the following Tuesday, Bernie Marcus flew to meet with Mr. Nardelli at GE Power Systems’ offices in Schenectady, N.Y. He and Mr. Blank had already been quietly looking for someone to whom they could hand over the reins of the company because they saw trouble brewing beneath the retailer’s glossy surface. So they swooped down to grab Mr. Nardelli before someone else did.

The news came as a shock to Home Depot employees. “Arthur was still young, in his 50s, and we had no reason to think he would leave,” Mr. Taylor recalls. “If any of us had vaguely considered that one day there’d be a new CEO, we would have expected an internal hire.” Indeed, few companies have inspired the kind of commitment to a vision that Home Depot has. There was a clear Home Depot way of doing things, and the less those ways made sense to outsiders, the more workers clung to their company traditions.

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  1. Edward E. Lawler III, “HR on Top,” s+b, Summer 2004; Click here. 
  2. Chuck Lucier and Jan Dyer, “Creating Chaos for Fun and Profit,” s+b, Spring 2003; Click here.
  3. Gary Neilson, Bruce A. Pasternack, and Decio Mendez, “The Four Bases of Organizational DNA,” s+b, Winter 2003; Click here.
  4. Bruce Constantineau, “Home Depot Lures Upscale Shoppers,” Vancouver Sun, October 1, 2004
  5. Andrew Ward, “Home Depot Reports 15 Percent Profit Rise,” Financial Times, November 17, 2004
  6. Warren St. John, “New Hope for the UnHandy,” New York Times, December 5, 2004
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