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Leadership Style at Home Depot -
May 4th, 2011
The Home Depot or simply Home Depot (NYSE: HD) is an American retailer of home improvement and construction products and services. The Home Depot operates 2,248 big-box format stores across the United States (including all 50 U.S. states, the District of Columbia, Puerto Rico, the Virgin Islands and Guam), Canada (all ten provinces), Mexico and China. (12 store chain). The Home Depot is headquartered from the Atlanta Store Support Center in Atlanta, Georgia.
In terms of overall revenue reported to the U.S. Securities and Exchange Commission, The Home Depot is the largest home improvement retailer in the United States, ahead of rival Lowe's, and the fourth largest general retailer. The store operates out of large warehouse style buildings averaging 105,000 ft˛ (9,755 m˛) with megastores operating in larger facilities (the company's largest store, located in Union, New Jersey is 225,000 ft˛).
If you believe in situational leadership you may feel that Bob Nardelli’s style is an appropriate one for Chrysler, following the Cerberus takeover
The bloodletting at Chrysler is not going to be pleasant. It calls for a special kind of leadership to avoid worse outcomes than might have been possible. There have been business leaders in the past who relished the prospects of being in charge in such a crisis. They had earned their reputations as uncompromising men willing to made the big decisions in a slash-and-burn situation.
Uncompromising men? It’s just that there are fewer stories about equally ruthless business women, because they haven’t had as many opportunities. A few years ago there was Linda Wachner, America’s first Fortune 500 female boss, whose high-handed management style was blamed for the bankruptcy of clothing company Warnaco. And I have little doubt that if Margaret Thatcher had found herself in change at Chrysler at the moment, she would have entered into the spirit of things with her legendary energy and decisiveness.
Heroes and villains
In times of crisis, it is tempting to portray events as dominated by the actions of great villains or heroes depending on your view of capital market mechanisms. The leader as hero rescues what can be saved, and in the process accepts that casualties as a vital part of winning the battle. That might be called the unconditional free-market view. Opposed to that, is notion of the leader brought in to a company in trouble is a villain, a mercenary, a ruthless bounty-hunter contracted to deliver what is required, ‘dead or alive’ in order to earn his own booty on behalf of a powerful rapacious corporate raider. That’s the unconditional anti-capitalist view.
Young people around the world learn of their national heroes and traitors in terms rather like these. Cultural forces sustain the views, as part of each culture’s ‘national heritage’, regardless of efforts at history teachers to offer a more nuanced explanation of events and of the impact of individuals.
Many years ago, Thomas Carlisle took the view that great leaders could be excused human flaws. Assuming they have something special which achieves great results, we must beware of belittling them for being all too human. That’s one argument. Carlisle warned against what he called valetism. (‘No man is a hero to his own valet’).
One of various objections to Carlisle’s idea is the way in which heroes suddenly become villains (the hero to zero effect), but in either case are granted exceptional abilities. It anticipated the more technical studies of leadership in search of the right stuff, the essence of leadership.
It took us a hundred years of work to suspect that the impact of great leaders was to a considerable degree based on the perceptions of followers. That’s why I am rather keen to promote the suggestion that we get the leaders we deserve, and that they are to some degree the creation of our collective imaginations.
Remember Chain-Saw Al?
Before returning to Chrysler, it may be worth recalling the rise and fall of other leaders once hailed great, and then trashed. ‘Chain saw’ Al Dunlap comes to mind. Older subscribers will remember Al as hero of Wall Street, the wizard of down-sizing. Al was in demand for a company in need of the slash and burn treatment. Al kept producing the goods, metaphorically. He eventually was found not to be producing the goods literally, and had been engaging in all sorts of creative accounting.
Morer recently, we witnessed had the rise and fall of Sam O’ Neal at Merrill Lynch. Sam had been lauded as Sam the Man who had shaken Merrill Lunch out of its strategic slumbers. He had also presided over the company at the time when it hit the buffers as one of the biggest losers in the sub-prime markets this year. Exit Sam with some $16 million compensation for his efforts during the good years.
Once the performance of Merrill Lynch fell, Mr O’Neal’s contribution, and his leadership style were called into attention. He was autocratic. He would not listen to advice. He could be very difficult to work with. And so on.
Which brings us back to Bob Nardelli
When Nardelli left Home Depot, earlier this year, the consensus was that
Home Depot faces a well-known dilemma. It has long passed a growth phase when its stock was rising in sensational fashion. Efforts to maintain the growth led to a decision to bring in new and dynamic management. When the desired growth was not achieved, the leader was deposed. Nardelli’s demise was made easier by his management style and a skill at extracting extremely favourable personal rewards. It should be noted that this might suggest he was a difficult boss, but not a stupid one
When Cerberus acquired Chrysler, they turned to Nardelli.
Why? Private Equity business deals require leaders to be able to follow a plan, stick to the numbers. They may or may not be ‘good with people’. If they are, it’s a bonus.
Matching the situation and the leader
Situational leadership suggests that different situations call for different leadership skills. In one well-known leadership formulation, leaders are invited to assess situations and seek an appropriate style. In Chrysler’s situation, the temptation for the new owners is to regard a directive style as appropriate. That’s how it’s worked in the past. Hello, Bob, I think we’ve got just the job for you …Yes, a bit like Al., but we don’t want any financial tricks. Remember what happened to Al.
So is Nardelli likely to be a good leader for Chrysler?
There are no easy answers in a case study like this one. Conclusions have to be supported by argument and indications of the assumptions being made. So far, I’ve been putting forward a qualification that it is not possible to put leaders into one of two boxes ‘good or bad’. This is based on the evidence that leaders may have a style that suits them to some circumstances better than others.
The next point to consider is good for what and for whom. In evaluating Nardelli’s impact at Chrysler we may wish to take the broad view that Chrysler appears to be in need of drastic and painful change, and that Nardelli was attracted with a deal in which he is generously rewarded for carrying out the painful operation of change.
I suspect he has some of the characteristics of the tough-minded leader required to meet the short-term financial objectives of Cerberus. I don’t know if he will succeed in the wider challenge of creating something permanent that will be recognised as the New Chrysler. Sadly, among the biggest losers at Chrysler will be tens of thousands of workers who will be without jobs over the coming months. The unconditional free-marketeers will Maybe argue that the alternatives would likely have led to even more job losses at Chrysler further down the line. Maybe a tough approach now will create more jobs elsewhere, than a more ‘humane’ and collaborative approach which fails to bring about changes in market prospects of the ailing corporation.
Chairman and CEO of The Home Depot, Frank Blake, discussed his own unique leadership style with MGT students and others as a part of the Third Annual Thomas R. Williams Distinguished Lecture series. Held in the LeCraw Auditorium in the Management building, the event drew a number of students, faculty and Home Depot employees.
The Williams Lecture is a special event of the IMPACT Speaker Series, organized by Georgia Tech’s Institute for Leadership and Entrepreneurship. It is named in honor of Thomas R. Williams, a 1950 graduate of Tech who died in 2002.
The talk was moderated by Dean of the College of Management, Steve Salbu, and began with an introduction by Rachel Gates, third-year MGT major. Gates gave a brief background about the history of the Home Depot company and its experience in philanthropic and youth-focused activities.
According to Gates, The Home Depot brings in over $66 million in revenue and is ranked 29th on the Fortune 500 list. She also said that Blake is known for his quiet-mannered leadership style, though Blake refuses to take the credit.
“I have learned a lot of things [about management] from many people,” Blake said. “I have worked for a lot of extraordinary leaders, who have each left a mark on my ability to lead.”
Salbu asked Blake several questions relating to career paths, resumes, and general career direction. Blake offered a unique perspective to the students in attendance as a former attorney with experience in many different fields.
“Don’t worry about titles,” Blake said. “People can get too path focused. Careers are a progression of solving more and more difficult problems. Look for those challenges and work in an area that excites you. Participate in something that you are passionate about.”
Gaining insight from former bosses, Blake has worked with a variety of famous leaders, including George W. Bush Sr. and John “Jack” Welch, business guru and former Chairman and CEO of General Electric. Blake worked for Bush when Bush was Vice-President and learned the power of recognizing excellent work from him.
“At the start of each day, [Bush] would spend an hour a day typing out notes to people. The feeling after receiving one of those notes was indescribable. He showed me how much we all thrive on recognition.”
From Welch, Blake learned to emphasize simplicity in each and every business interaction in the company.
“[Welch] always said that if you can’t express something simply, then you don’t understand it completely. Now, around the office, I say that a manager must be able to absorb simplicity up and drive complexity down.”
Blake has taken these lessons and applied them to his current business model, radically challenging the existing business model that was in place when he took over the role of CEO three years ago.
“Customers are our company’s lifeblood—and the sole reason we have been able to build such a successful company is because of their support,” Blake said in response to numerous complaints about customer service raised in a 2007 MSN Money article by Scott Burns. “The only way we’re going to continue to be successful is by regaining [the customers’] trust and confidence…and we will do that.”
In concordance with that promise, Blake has made some significant structural changes to address the new challenges that face The Home Depot. The Home Depot owned several different business lines, targeting government contracts and large-scale industrial buyers. According to Blake, these businesses were all sold to offer a course correction, allowing The Home Depot to focus solely on improving their brick-and-mortar retail store experience.
The Home Depot has instituted a new measure to help improve customer service. A veritable “power hour,” associate stores are required to spend approximately four hours each weekday and every weekend to do nothing but customer service.
“About half of our operating hours is spent ‘tasking,’ or doing what is necessary to keep the store running,” Blake said. “Associate stores are required to spend a minimum amount of time not tasking, but instead focusing on meeting the needs of customers.”
With a unique background spanning a variety of different fields including government, law and energy, Blake brings a unique perspective to a competitive company.
“Hearing Mr. Blake speak was a great pleasure,” said Douglas Cox, a first-year ME major. “It was easy to tell that he is a very down-to-earth man in spite of being Chairman and CEO of such a large company. It was also very fascinating to hear how his resume spans the many fields, making him an extremely knowledgeable and versatile leader.”