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• Brought in a group of non-retail people, including marketing and ﬁnance ofﬁcer roles and Dennis Donovan from GE (at a salary of $2.4 million), to head up a revamped HR function. In terms of people Nardelli and Donovan have initiated: • A revamped performance management and reward process. (Home Depot used to have 157 appraisal forms; now there are two for 295,000 employees.) • 360 appraisal, using common grades such as ‘gets results’, ‘develops people’, ‘drives change’ and ‘displays character’. • Succession planning, where the CEO participates in performance reviews of each of Home Depot’s 130 senior managers. • A leadership institute at Atlanta headquarters that’s modelled on GE’s Crotonville. (‘They’re building the most systematic teaching organization that I’ve seen in a retailer,’ says Noel Tichy, a management professor at the University of Michigan Business School, who once ran the Crotonville facility. ‘Wal-mart does a great job training people in the stores, but at Home Depot there’s more of a mind set to build leadership throughout the organization’.) As for growth, Nardelli is continuing with the 200 stores a year opening programme, piloting Home Depot Pro stores for the $200 billion professional market, building a corporate business selling timber, lighting and other products to any company that builds or operates facilities. He has done deals with Disney on branded merchandise, and with Dunkin’ Donuts to provide in-store restaurants. He also sees a major ($180 billion) market in home services (e.g. appliance repair, home security, pest control and home improvement ﬁnance). There has been some overseas expansion in South America and there are rumours that he is looking at acquiring B&Q in the United Kingdom. So much change resulted in huge disruption. Products were out of stock. Customer complaints rocketed. Same-store sales went negative. The share price more than halved during 2002 (having risen from $39 when Nardelli took over in 2000 to $53 in 2001, then slipped to $40 in 2002 and $21 in 2003). Nardelli was accused by analysts of ‘tinkering with one of the world’s most successful retail formulas . . . with near disastrous results’ and of doing too much too fast. ‘But it wasn’t a matter of too fast,’ he insists. ‘Quite honestly, we should have done more, better. My error was, we didn’t execute well enough’ (Financial Times, 8 July 2003). And by centralizing the chain’s purchasing function and cutting down the number of suppliers Nardelli has increased gross margins by one percentage point. He inherited and has maintained a strong balance sheet (Fortune, 21 January 2003). The company message now is that the biggest changes are complete:
‘The Home Depot is beginning to gain traction from the transformational initiatives launched last year,’ said Bob Nardelli, chairman, president and CEO. ‘We introduced new products, increased the overall inventory levels in our stores, and introduced a cohesive, nationwide marketing program. Collectively, these initiatives helped us perform through a tough environment. Our store reinvestment strategy is delivering a cleaner, brighter shopping environment as we continued with our store resets and