MNGT4400 Home Depot Case Overview
MNGT4400 Home Depot Case Overview MNGT 4400
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This 3 page Class Notes was uploaded by Peyton Oglesby on Sunday April 10, 2016. The Class Notes belongs to MNGT 4400 at Auburn University taught by Lucian Bifano in Summer 2015. Since its upload, it has received 26 views. For similar materials see Organizational Change in Business, management at Auburn University.
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Date Created: 04/10/16
Organizational Change The Home Depot Case Background o December 2000 Robert Nardelli takes over as CEO Robert Nardelli Entire career was in the industrial sector No retail experience Ran GE Power systems 1 of 3 contenders to replace Jack Welch (GE CEO) Very well respected Home Depot: 2000 o 1,100+ big box stores o Growth record outpaced Wal-Mart o Freewheeling entrepreneurial culture Known as “$40 billion startup” Strong aversion to bureaucracy and hierarchy Founders held in high regard by employees Valued store manager autonomy o Financial and Operational challenges Poor inventory turns Weak cash flow Low margins Issues o Poor investor returns o Lack of accountability o Focus on sales over profitability o Intuition versus hard data in decision making o Inability to capitalize on economies of scale o Store manager autonomy valued over consistency o A shortage of experienced store and district managers o Strong competition from Lowe’s Naredelli’s Strategy 1. Enhance the core by improving current and future store profitability 2. Extend the business by offering related services 3. Expand the market – geographically and by serving new types of customers 4. Introduce metrics, processes, programs and structure into the company Key Initiatives o Centralization of key functions - purchasing and merchandising o Consistent store layout and signage o Data-centric decision making o Improved human resources management practices Annual performance reviews and assessments Improved training and development programs Weekly management conference calls Weekly employee video-casts Broader participation in planning and employee task forces April 2006 o The Harvard Business Review published an article on Nardelli’s successes at Home Depot o After the article: Home Depot’s stock performance during Nardelli’s tenure as CEO was disappointing The stock of Home Depot’s main competitor Lowe’s performed during that same time period was better o Nardelli left Home Depot in 2007 after a dispute with the board primarily over compensation Overview: o The company’s initial success traces back to its founders who devoted themselves to building a close advisory relationship with customers o The corporate mantra was “Whatever it takes” o The company was a major success story from its founding in 1978 until 2000 o In 2000 the board of directors hired Robert Nardelli to address a number of issues o Nardelli moved quickly to created a strong command-and-control environment o By early 2006, 98% of the company’s top 170 executives were new to their jobs and 56% of new headquarters managers had come from the outside o Home Depot lost its “frontline obsession” and had stalled out o Nardelli and his team neglected customer relationships in favor of boosting quarterly profits o Many long-serving full-time employees were replaced by lower- paid part-time workers - “Do it yourself” some people joked was now “Find it yourself” Frank Blake 2007 replacement o On his very first day on the job, Blake spoke to all employees and quoted extensively from founders Marcus and Blank’s book Built From Scratch o He highlighted their core values and the company’s front line where customers and employees interact o Blake reduced complexity, restructured the business and closed money-losing stores – shrinking to grow o He increased the employee bonus pool by a factor of seven, rehired some veterans and asked store managers to return to the pre-Nardelli policy of recognizing employees who had been exceptionally attentive to customers o By the end of 2015, as a result of Blake’s renewal of the founders’ mentality, Home Depot had reenergized its employees and re-personalized its customer experience o The company stock rose from $25.00 per share in 2009 to more than $130.00 by December 2015