Nardellli’s Tear-Down Job

Home Depot used to be about the people.

    I was sadly reminded of this during the hullabaloo over the abrupt departure of Home Depot CEO Bob Nardelli earlier this month. The focus of most news coverage was on Nardelli’s excessive compensation, his even more excessive $210 million departure package, and his pugnacious, imperial style.

    All of that may be true, but all of that also misses the point. Nardelli may have been overpaid, but from my perspective, his failure was rooted in his decision to take a hammer to the people-oriented culture that was the essence of the Home Depot experience.

    In the old, B.N. days (before Nardelli), Home Depot stores were filled with experts in orange aprons roaming the aisles and ready to help with whatever you might need. In fact, they generally found you before you even realized you needed them. It was the personal touch rarely found anywhere else.

    All that changed after Nardelli became CEO in late 2000. He decided that all those experts really weren’t needed, so he got rid of many of them, reduced the hours of others, and hired more part-timers in order to cut costs. Seemingly overnight, Home Depot went from a place with great customer service to one where it became difficult to find anybody who could help you.

    Slashing staff is a time-honored tradition of new executives. For many, it’s the first thing they do when they come on board, mainly because it’s easy and gives the sense that someone is taking charge and making things happen. It also makes the new executive appear decisive and confident.

    But, as basketball coaching legend John Wooden once said, don’t confuse activity with accomplishment. And mindlessly slashing staff without considering the big-picture perspective is frequently just that—lots of action that is more show than strategy and, ultimately, may hurt the operation more than it helps.

    In my experience, slashing staff and running roughshod over people is the province of weak managers who have few real skills they can fall back on. They often dismiss the need to be more subtle or strategic in dealing with people, and are dismissive of people who are, because managing people is difficult and hard to quantify.

    No one can accuse Bob Nardelli of being an inexperienced executive when he joined Home Depot, but many now question whether he was the right guy for the job, considering his background under Jack Welch at General Electric—a very different business environment where frontline staff just weren’t as important.

    “GE people are good at getting structure, system and strategy right, but they don’t always understand soft issues like culture,” Boris Groysberg, an assistant professor at the Harvard Business School, told The New York Times. That’s the “GE Way” that has been made famous by Welch. Many have tried to follow the Welch formula, particularly the “rank and yank” system of eliminating the bottom 10 percent of the workforce each year.

    The problem I have always had with the Welch formula is, well, that it’s a formula. Managing people is much more complicated than that and can’t easily be reduced to a formulaic approach if you want to be successful and do it right.

    That’s where Nardelli got into trouble. Yes, he was paid too much and frequently acted like an arrogant jerk (Remember the last annual meeting he presided over, where he told the board to stay away, then wouldn’t answer any questions about anything?), but his legacy will be what he did to the service culture for which Home Depot was so famous. He brought the GE playbook with him when he took over as CEO, but he failed to recognize that he was leading an entirely different team.

    One size does not fit all. A formula for success in one environment may be a recipe for disaster in another. The lesson we can all learn from Bob Nardelli is that people still do matter, especially in a people-oriented business culture.

    Too bad it’s a lesson that many companies, in their search for a quick fix or shortcut to success, have chosen to ignore.

Workforce Management, January 15, 2007, p. 34 — Subscribe Now!