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


Winning Hearts and Minds at Home Depot

Yet inside Home Depot in 2003, a positive shift in attitude was beginning to take hold. Just days before Mr. Nardelli was to face analysts at the company’s annual presentation in Atlanta, the CEO gave a pep talk at a training session for store managers from the company’s Eastern division. According to several people who were there, the effect was galvanizing. The CEO was surprised to get a telephone call from Mr. Donovan with news that the group of store managers was coming to the analyst meeting. When Mr. Nardelli expressed his reluctance, Mr. Donovan responded: “No, you don’t understand. They’re not asking; they’re coming! They’re so charged up, nothing will hold them back.”

At 8:00 in the morning, just as the meeting with analysts was getting started, 200 store managers wearing Home Depot’s trademark orange aprons spilled into the aisles of the auditorium, clapping and cheering for Mr. Nardelli. One woman took the microphone to defend the CEO, and tell analysts how firmly workers were behind him. Surprised analysts began to take a different view of the company. “It was the turning point for us,” recalls Mr. Donovan.

With most of the Home Depot work force on his side, Mr. Nardelli felt freer to pursue his agenda for change. Mr. Donovan and other managers were there with plenty of information to guide their data-driven chief executive.

Mr. Nardelli’s love for numbers was nothing new. At GE Power Systems, he had been legendary for his managerial thoroughness and attention to figures. “I remember Bob had this big screen in his office with a map of his global network of suppliers,” says Jack Welch. “An order for a $50 million turbine was a big deal, and Bob was determined not to let anything go wrong.” Mr. Nardelli would glance at his computer-based map of suppliers and immediately know where parts were coming from, whether it was valves from Turkey or piping from Atlanta, and their status in the pipeline. “He’d have a complete, updated analysis of the system on people’s desks every week,” Mr. Welch recalls. He says at a time when the Power Systems unit was growing at 300 percent and had 15,000 suppliers, Mr. Nardelli never missed a shipment.

Nothing Sacred
Mr. Nardelli applies the same quantitative process management discipline to achieve results at Home Depot that he used at GE. Although attracting, retaining, and developing managers for a fast-growing home improvement retail operation is a far cry from overseeing a global turbine supply chain, Mr. Nardelli believes managing by metrics is the best way to guarantee fairness in judging a person’s performance. But the CEO doesn’t think getting the right people in the right jobs requires following Jack Welch’s famous mantra: Get rid of the bottom-performing 10 percent. “We have to let some people go, but there’s nothing sacred about the 10 percent,” says Mr. Nardelli.

That doesn’t mean everyone’s guaranteed a permanent job once they’re in, however. “There will always be people who just aren’t cut out for it,” Mr. Nardelli observes. “You find out in exit interviews that people say ‘I don’t like to work weekends’ or ‘I don’t like people.’ Well, why did they go into retail in the first place?” Still, “if you fire someone, it should never come as a surprise. There should be a substantial record outlining why the employee didn’t come up to scratch.”

Mr. Donovan is also obsessed with having the facts and numbers at his disposal. He talks in headings and subheadings, as if he is reading from a chart in his mind. Numbers, he says, can be your best friend when others are attacking you. Recalling those tough moments at the 2003 analyst meeting, he reflects, “When analysts were accusing us of losing our most experienced people, luckily, I had the numbers. Only 5 percent of those leaving had been with the company five years or more. So I was able to refute their charges.”

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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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