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


Winning Hearts and Minds at Home Depot

Today, data drives most of the HR decisions at Home Depot. For example, by examining the performance attributes of store workers from certain demographic groups, Mr. Donovan discovered that senior citizens had, on average, a 14 percent higher score on the entrance test than other applicants. They also tended to stay with their job longer and had fewer absences than other groups. This was clearly a group Home Depot wanted to target. So in 2004, the company signed a recruiting partnership with the AARP, a U.S. advocacy group representing people 50 and older, to attract the elderly and retirees.

Home Depot’s benefits make the program highly appealing to this demographic. “The health and dental benefits, [available] even for part-time workers, were really important to me,” says Peggy Pettit, who in 2004 turned 70 and started her job at a Home Depot help desk. “A lot of people feel uncomfortable with the elderly, but Home Depot doesn’t.” The HR team has also identified veterans, military reservists, and their spouses as a good fit for Home Depot stores; the company now has a partnership with the U.S. government to attract people from the military community.

Mr. Donovan and the teams he leads continue to leverage research to develop more human capital initiatives. Surveys showed that employees like semiannual bonuses better than annual bonuses, so he put them in place. The discovery that the difference between the best-performing stores and the rest “almost always” came down to one variable, the store manager, was what prompted Home Depot to make identification, promotion, and training of these managers a high corporate priority. “The key is to put a good store manager in place,” says Mr. Donovan. “Then you let them worry about the sales assistants. If I have one dollar to spend, I’ll spend 99 cents on getting the right leaders and one cent on everything else. That’s only a slight exaggeration.”

New Attitudes
By 2003, Mr. Nardelli felt confident enough to introduce the once-dreaded Six Sigma. Now, says the CEO, the company is using the concept to guide management actions company-wide. Employee attitudes toward the business are also changing at Home Depot, and so are its customers and market opportunities.

Today’s Home Depot customer — male or female — isn’t the traditional self-sufficient bargain hunter who is happy finding his or her way around the no-frills warehouselike stores. There’s a new, more demanding Home Depot customer who is becoming central to the business. “The do-it-yourself attitude has been replaced by a do-it-for-me attitude,” says Mr. Taylor. “I can see it even in my own life. Things my grandfather fixed around the house I’m more likely to get someone else to do. It’s a question of how much free time you have.”

Home Depot believes that the new generation of customers also want more attractive stores, so the retailer is trying new design formats. Walk into a recently redone Home Depot these days and it’s easy to see the difference. The concrete floor has a nicer polish; signs are prominent and easy to read. “If someone is buying a hose, they’ll be in and out, but if they’re purchasing a kitchen, they could be there all day, so the stores have to be pleasant spots,” says Mr. Taylor. One new store, which opened in the Chelsea district of New York City in 2004, has a doorman donning a classic Manhattan uniform and greeting customers.

Just a couple of years ago, Home Depot also began selling large appliances. Appliances were considered a fringe category in the Marcus and Blank days, but today, Home Depot is the third-largest appliance retailer in the United States (after the new Sears Holding Corporation and Lowe’s).

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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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