In this case analyses we have a good example of different kinds of leadership and how leaders can change their organization’s preferences. This report gives a detailed example about two CEOs for Home Depot; Bob Nardelli and Frank Black. The previous Leaders for Home Depot before these two CEOs did very well by challenging the market and exploring the customer needs and the way of grabbing the customer attention. They established special character to Home Depot and their employees, which created a smooth relationship between the customers and the Home Depot employees.
The company was and still is expanding very quickly which formed the need for a new system to carry on with the same level of success. Home Depot needed to update and renew the machines and added more lines of new products all to help in improving the stores structures and to make it more a new look and approaches. Since things started to change, a new vision was needed. in the end of year 2000 a new leader, Bob Nardelli, was hired as a CEO for Home Depot. Bob Nardelli got a MBA degree from University of Louisville in 1975. He was the president and CEO of GE Power Systems, and the senior vice president of GE from year 1995-2000.
When he took the lead of Home Depot Company he tried to apply his new vision and plans to improve Home Depot’s system. However, there was a problem: Bob Nardelli came from a company has a different way of operations and functions from Home depot. GE sells it service to the customers through other stores, otherwise Home Depot deals with customers directly. So Bob Nardelli leadership was the experience which illustrated an example of leadership chosen for the wrong place; it could cost Home Depot the loss of the whole business during his 7 years as CEO of Home Depot which spanned 2000-2007.
We will compare his leadership another leader CEO Frank Blake who was hired after Bob Nardelli. Frank Blake received his bachelor degree from Harvard in 1971. He then received his JD from the Columbia Law School in 1976. Prior to Frank Blake position in 2007 as the chairman of The Home Depot; he served as vice chairman of the Company. He joined The Home Depot in 2002 as executive vice president. Frank previously served as deputy secretary for the U. S. Department of Energy. Before that, he served in a variety of executive roles at General Electric.
His experience also includes having served as general counsel for the U. S. Environmental Protection Agency, deputy counsel to Vice President George Bush and law clerk to Justice Stevens of the U. S. Supreme Court. Now in this report we will discuss the two opposite cases of leadership that have been demonstrated by CEO Bob Nardelli and CEO Frank Blake by analyzing the reasons caused Bob Nardelli to fail in keeping Home Depot as one of the top home improvement retailer businesses in the world. Frank Blake helped Home Depot to get back on track.
We will go over what CEO Frank Blake changed to get the business back to the original strategies which led Home Depot to its best economic situation, Frank Blake was the new CEO of the wounded Home Depot; the new leader, who was going to rescue the company from collapsing. Bob Nardelli was hired as CEO of Home Depot in December 2000. Again, the reasons behind his hiring were the need for improved efficiency, better resources usage and more operational discipline.
His polices started with the centralization of merchandising he began by closing a few merchandising offices which were far from headquarters and hired 12 merchandising vice presidents to work in the headquarters. That was to increase purchasing power, put the payments terms, and put the exclusive deals across all Home Depot stores. But the centralization of merchandising caused some problems. For example centralization was hard on the stores Managers; they were not trained to work with centralized leadership. It took away their freedom, stopped them from practicing their management skills in their stores, and ruled their work creativity.
Also the customers’ needs differ from place to place, that made the exclusive deals not usable for some customers. Bob Nardelli Also bought a new IT network. He spent about $1 billion on IT enhancements. From self-check-out registers, more accurate check-out, and cordless scan guns were added in many of Home Depot stores. Yet, the system was old-fashioned and did not work well. Stores networking were not connected with the main headquarters. Because the new network was so simple and outdated; the main use of it was just to order merchandise.
So any human mistakes were causing delays. For that, some Home Depot stores ran out of key items because of the lack of automation, delivery, and tracking software. Nardelli tried to improve labor productivity by standardizing and automating the whole process. One of the rules Bob Nardelli used in Home Depot was Metrics. It was a system to assess the managers in all departments, which was a lot of paper work, analysis and metrics to track. This system was designed to help the employee to understand their duties and how to be knowledgeable about their company’s system.
But this system distracted the employees away from being in the store all the time. By giving Home Depot employee lots of reading and preparation was leading them to be somehow careless and not organized in the store. Also employees would stay away from assisting the customer who is the most important thing for the business. Thus Home Depot customers became less interested to go there began going to competitor stores like staples. The worst mistake of Mr. Nardelli’s leadership was that he worked hard to make Home Depot a money maker and ignored the customer needs which are the base of any successful business.
He did everything to increase the profit. He tried to decrease the expenses such as replacing expert employee by part-time employee, and increase the centralization. The standardization also changed retained policy to be more complicated. He fired a lot of people and also used part time employees with poor training. By cutting that much of expenses he doubled the profit of the company. But then again the sales started to drop until Home Depot in one day had 28% less than the normal days and the shareholder’s started to be anxious about the company.
Other mistakes Bab Nardelli did at Home Depot included he alienating employees and angering stockholders by firing long- time Home Depot executives and bringing in GE alumni, he also increased the number of unknowledgeable part time workers, which led to diminishment of customer service. Home Depot originally depended on high customer service. When one of the customers came to return tiers the only thing the manager asked him how much were the tiers when he bought them to give him money back.
So this kind of leadership CEO Bab Nardelli didn’t work for Home Depot because of these different reasons. In January 2007 the directors of Home Depot called for a meeting and decided to assign Frank Blake as the new CEO of Home Depot retail stores. At that time Mr. Blake had a little experience in retail, he never been a CEO before and Wall Street questioned what is special about hiring new CEO who never been in this place before.
Frank Blake graduated from Harvard University and Colombia University, career highlights, law clerks to U. S. Supreme court Justice John Paul Stevens. Jobs at General Electric included general counsel and senior vice President of business development, Deputy Secretary for the Department of Energy and counsel at the Environmental Protection Agency. Frank Blake’s first move as a CEO of Home Depot was to inverse the pyramid, associates and customers in the top and he put himself at the bottom of the pyramid. His strategy was to spend most of his time in the stores, learning and watching the employees and the customer’s activities.
He met with the employees on a regular base and got their ideas about the best way to improve quality of customer service and gave them the chance to participate in assessment processes. Blake’s strategies of replacing the top executives with retail veterans gave every employee the dream to be promoted and in order to get the promotion they need to show the effort, to be creative and develop excellent care for all customers of Home Depot Stores. Employees started to feel that hard work was being rewarded in a generous way.
Some get the employee of the month others get promotions so the change started to affect the stores in a way or another, which makes Home Depot, look better and a good place for their old customers. One of the most important things Blake started to develop is the IT by setting up training programs and getting the new equipment to the stores. This made less chance for errors and a more efficient way to do transaction that helped the employees and the customers. Blake established a growth strategy for Home Depot.
This strategy was reaching the point of using every square foot to maximize sales, IT and system. Thus, gaining back the customer trust and appreciation became garneted. After a few months, Blake started to get rid of the HD supply to be able to replace it with retail supply that customers really needed. This caused the sales to decrease at the beginning because the HD supply unit was the fake cover of the bad consequences caused by Nardelli’s strategies. Moreover that happened in difficult times, when the Economy went very bad all over the world.
Blake’s idea was to show the Home Depot employees the real situation and that more strategies had to be put to increase the sales. Customer service in Home Depot was always and still is the first priority since the company was established in the late seventies. When CEO Frank Blake took over he did an important change, flipping the employee importance triangle making the customer service in the top. Home Depot is the biggest home improvement retailer in the world. One reason for the big successes is the customer satisfaction.
This excellent service led Home Depot to gain a high reputation. In order to ensure the highest customer satisfaction Home Depot is using all the ways of technology and information systems such as EXPO expert design and top- quality and Sequel ink to keep the stores updated with innovated products to satisfy the Home Depot customers. After a few months Blake’s plans started to make changes, more customers and more merchandise, meant higher sales. Blake then proved the efficiency of his strategies.
I think CEO Nardelli’s strategy was not good, because he built his business without taking care of the customers and thought that providing products was more important than providing customer services. That strategy failed. On the other hand CEO Frank Blake, by taking care of the customer satisfaction was able to build the trust between the Home and the customer, which is the real key to successful long term business. If I become the CEO of the Home Depot, first thing comes to my mind that this company owners put their trust in me and I have to live up to this trust.
So I will make the changes to get the productivity to the best level. I will have a good impact on this company. In order to accomplish this goal, I have to establish a leading team from the best trustful company employees who have a good reputation to lead on behalf of me. That will give me the time to visit all the stores and not to be engaged just with one place. In my opinion a good CEO is one who makes sure to secure his home stores then he moves to the international business, because a global perspective is important to any company.
As a company CEO I have to keep in mind that our business has a direct contact with individual customers. That makes individual customers our highest priority, because the company’s success depends on customer satisfaction. In the Home Depot case this was what really Nardelli’s policies missed. Even he had experience, but his experience was in a company that doesn’t have a direct contact with the customers. Therefore, he missed the value of a satisfied customer. On the other hand, I’m with Mr. Blake, when the customer reaches to that level of satisfaction we need he will feel that he is as an owner for this store.
This gives the customer the responsibility to be loyal to this company. The other thing I will take care of is employee satisfaction. A satisfied employee gives the company a higher performance work. I will be close to my employees and I will not isolate myself in a high tower. And I will let them know that a hard work will be rewarded. Moreover promotions will depend on accomplishments. This will encourage the employees to give all their creativity. The equation is: satisfied employee + satisfied customer = company success. This is the level of perfection I will be seeking as CEO of this company.