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HOME DEPOT’S BLUE PRINT FOR CULTURE CHANGE

FOR LDR-626

BY SUJIT KUMAR

GRAND CANYON UNIVERSITY

09/11/2010
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ABSTRACT

The Article basically talks about the cultural changes that took place in Home Depot and also
about all the efforts they put on to get every level of employees n the same page. It explains how
the new CEO Nardelli took over the charge, reviewed the organizational operations and structure
and explains all the efforts and mechanisms used to implement the change process for the
betterment of the organization. So overall it gives the in and outs of the operating mechanism of
then CEO Nardelli.
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INTRODUCTION:

Any organization to undergo a cultural change needs very effective mechanisms and tools. In the case of
Home Depot, it already had remarkable managerial tools and techniques that took them to the number
1 position in home designing industry. But there was still something big to be done to take the Home
Depot as an Organization to the next level. They need a tremendous leader who could transform the
organization and teach them new laws of ruling the industry. So the cultural change took place when the
founders Blank and Marcus left the organization and Nardelli took over as new CEO. He was the person
with no retail experience but a lot of experience in production industry and above all he was the product
of GE culture. He entered into the organization with an agenda to reshape the complete structure from
top to bottom and take the organization into the new markets and grow up to a new position.

To begin with, he started with a most common strategy of almost every top executives of getting his
own team of trusted executives in every key department to strategies them in accordance with their
Master Blue Print. Another logic that worked for Nardelli was that he believed in cultural transition is
achievable not just through charismatic leadership but through several tools and mechanism. To start
with, he borrowed some of the classic characteristics of Home Depot such as warehouse feel of the
stores, low lighting and cluttered isles. At the same time, he also eliminated few unproductive activities
such as managers being on the floor with the customer and avoiding all the paper based activity and
rather led them work more on all forms of data and information that is being provided on papers to
improve their business performances. To keep the momentum of managers and all level of employees,
he introduced the career development program through trainings, meetings and many other features.

Some of the key issues which he took care during the process of reshaping the organizational culture
were identifying and solving every problem from the root cause such as poor inventory turns, low
margins, weak cash flows etc., So to overcome every single hurdle in shaping the new culture, he
designed a three-part strategy as

 Enhance the core of the organization (Customer service)

 Extend the Business (value added service)
 Expand the market (geographically and new market)
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To hit the goals, the next steps were the tools and mechanism to implement and achieve these strategic
plans and the most prominent one was the centralization of departments like purchasing, relying on the
formulated data but intuitions etc. Some of the alternative tools for the culture change were collective
approaches, betterment of human behavior like beliefs, interactions, decision making etc. As a part of
the same strategy, there has also been few systematic categories as

 Metrics which is basically been introduced to exercise the activities on the basis of
Data and more accurate measurements. Under this category, employees been
behaving collaboratively and showing a lot of accountability. It also allowed every
level of employees to understand the numbers game at their level and how does
their performance going to create an impact on it
 Process has been the most predominant tool for Nardelli in creating an atmosphere
of accountability and a culture of cooperation. In this category the emphasis was
more on empowering people with knowledge and people skills.
o SOAR which is Strategic operating and resource planning Process dealt with
formulating future investments to generate better profits in every means.
 Programs were of more humanistic process which was all related to training and
role playing exercises. It trained employees into three generic categories as
o Leadership training programs
o Store leadership program
o Merchandising leadership program
 Structure was the process created with an emphasis to shape top-down hierarchy
with the right person with right attitude and training were a whole new organization
been structured through new people, new roles and responsibilities

In the overall activity of reshaping, the other key people were the personnel had problems with all these
changes and but their involvement in resolving their own problems allowed them to understand the
process and perform even better.

One of the drawbacks of Nardelli’s Game plan were it was dominantly Military style of operations. Even
though the organization was showing increase in profits and number of stores, more revenues but then
ROI and EPS were the biggest drawbacks and let the investors down every time.
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In 2007, with the mismatch attitude between CEO Nardelli and the investors let him down and made
him resigned. The next Successor was the then vice chairman Frank Blake and he took the charge as the
new CEO who shared a similar background as Nardelli. He was an ex-GE employee with very little retail
experience. The time he took over as CEO was the time for Housing Slump which was deteriorating
housing market. Though they had similar profile but the leadership style was the differentiating factor.
Where Nardelli followed more of military dictatorship style, Blake showed more lenience towards
collaborative and collectivism.
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References:

a) Charan, R. (2006). Home Depot's blueprint for culture change, Harvard Business Review,
84(4), pp. 60-70. http://library.gcu.edu:2048/login?
url=http://search.ebscohost.com/login.aspx?
direct=true&db=bth&AN=19998877&loginpage=Login.asp&site=ehost-live&scope=site
b) http://www.businessweek.com/magazine/content/06_10/b3974001.htm
c) http://www.businessweek.com/bwdaily/dnflash/content/jan2007/db20070103_536329.htm?
campaign_id=homedepot