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Home Depot Missing Recruiting Tools
BY Mike Frommelt
Principal, KeyStone Search
The recent "resignation" of the former CEO of Home Depot, Robert Nordelli, came as a shock to outsiders. On the inside, Nordelli's penchant for angering employees, shareholders and even board members, made his exit the catalyst for at least a few "high fives" in stores across the country. The nifty $210 million dollar severance package Nordelli negotiated on his way out is creating outrage, inside and out.
When Home Depot first hit our market, I loved shopping there; The aisles were well stocked, the employees were generally helpful, and the stores were clean and appealing. Being a home improvement enthusiast and "tool collector," I often went in just for fun. Lately though, the stores seem to be slipping, and I find myself progressively more frustrated with every experience. Reading the reactions on the business wire to Nardelli's forced resignation, I now understand why my loyalty to Home Depot has been eroding.
Nardelli is an ex General Electric executive, who garnered many accolades leading the GE Power Systems business. Employed by GE for just a whisker under 30 years, Nardelli was, of course, a Jack Welch protégé. In fact, when Welch was choosing his successor, Nardelli was one of three being considered for the role. When Home Depot snared Nardelli in 2000, it was considered a great coup, and most analysts on Wall Street raved about the move.
What went wrong? From heralded executive with a history of creating growth, profitability and shareholder return, to a goat, expelled just under six years later. Did Nardelli change his stripes? Did he go soft?
The truth is that nothing about Nardelli has changed. He is exactly what he has always been. At Home Depot, he was a fish out of water; He simply didn't fit the culture. Those who know the General Electric corporate culture, acutely feel it is focus on constant improvement, continual cost reduction and creating near perfect efficiency. In the GE culture everything is measured… everything. The tenets of Six-Sigma, although not created at GE, were perfected there, and became world renowned because of GE's phenomenal success. In a true Six-Sigma world, people (employees) are considered a moving part, a cog in the machine. Leadership and talent are emphasized, but are just as systematically evaluated as any other process. Home Depot on the other hand, was built on an open, employee friendly, "don't sweat the details" kind of system. This is much more akin to the personalities of the founders, Bernie Marcus and Arthur Blank.
Obviously, the two cultures are extremely different, espousing nearly polar opposite core values. To illustrate, the founders of Home Depot, famously preached to employees that they should "make love to the customer". Nardelli on the other hand, stated early in his tenure at Home Depot that "facts are friendly".
So, why hire Nardelli? The analysts and business wonks who seem to drive most business decisions these days purported that Home Depot was in need of greater rigor; their loosey-goosey style could not continue to promote growth. Naturally, a GE alum, particularly one of Nardelli's status, would be the perfect choice to instill this rigor. The best of both worlds, a traditionally customer service oriented company with a new focus on efficiency. Growth would surely follow.
Of course, Nardelli proceeded to do what he knew best. Among other things, he replaced full time workers with part-timers, lowering wage and benefit costs. He also installed self-service checkouts, minimizing the number of clerks. These changes made immediate impacts on the bottom line, but over time, customer service suffered and Home Depot's "claim to fame" began to luster. Employees started to feel they were working for a heartless slave to Wall Street. Customers observed them becoming just like any other big box retailer, with lots of product and no people.
How could the board of directors make such a hiring gaffe? Shouldn't boards of companies this size be more sophisticated when it comes to cultural fit? Maybe they felt that Nardelli would change and adapt, showing more deference for the existing culture at Home Depot. Or maybe they were just star-struck and wanted to believe he was the right person for the job.
To think that Nardelli would be anything other than what made him successful for the last 30 years is naïve, maybe even ridiculous. Most psychologists accept that all people have only a handful of core values, or drivers, that determine their behaviors. These are derived through our upbringing and our life experiences. Nardelli had plenty of experience to solidify his code of behavior. Really, would you change your style if that very style made you a multi-millionaire? Besides, he wasn't being asked to change, he was just being asked to lead. Nardelli wasn't a bad person; he was just the wrong person.
The good news for all of us home improvement junkies is that the Nardelli years are over and he is being replaced by his capable number two, Frank Blake. Blake has an impressive track record as an Executive VP and Corporate Counsel for… wait a minute….General Electric.
Mike Frommelt is Principal and Co-founder of KeyStone Search. KeyStone is a retained executive search firm, placing emphasis on cultural fit.
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