Home Depot and Robert Nardelli

Robert Nardelli served in The Home Depot from December 2000 to January 2007. Prior to that, Nardelli had risen to become one of the top four executives at General Electric. Here, I want to discussed about various control measures taken by him at Home Depot to execute his vision. Like the article said: Nardelli's strategy to expand into the contractor supply business, while cutting costs and streamlining operations in 1,816 U.S. Stores. What kind of motivation let him realized that achieving better process controls from decentralized company into a centralized corporation that could add consistency and get more profit for the company? What is the impact to the Home Depot's organization behavior after Robert Nardelli take the CEO position?

First, I think that he is task-oriented leader who provide the employees with direct and clear instruction. He makes the decision making more centralized and take away the autonomy that the store managers enjoyed at Home Depot. For example, he replaced many thousands of full-time store workers with legions of part-timers to cost-cutting program. What's more, he changed the Home Depot's return policy. In the past, customer can return the any item purchased at a Home Depot without a receipt. Now, the policy is to refund cash only for goods returned with a sales receipt within 90 days. This policy reduce the company cost for millions each year.

Second, he assured that the Home depot use central purchasing power so that it become more efficient and more uniformity throughout the organization while help Home Depot to fulfill well defined processes thereby getting some kind of discipline that makes the company can have positive growth. For example, he embarked on an aggressive plan to centralize control of the company such as he invested more than $1 billion in new technology, including self-checkout aisles and inventory management systems that generated reams of data. In addition, he declared that he wanted to make sure the company is controlled by himself.

Just like I said before, Robert Nardelli is directive leaders who provide specific directions to their employees.This also ensured that decision making power is centralized and store managers are supposed to follow orders which will help in controlling costs better to save the company money and ensure better efficiencies.

However, by using centralized method to manage the Home Depot, Robert Nardelli do not notice that there are some drawbacks for using centralized method. In order to reduce the cost, Robert Nardelli cut the great, knowledgeable salespeople or full-time employees who were so helpful to customers. The result was higher profit due to lower employee overhead. But it also dramatically changed the Home Depot brand because store staffing was sparse, the employees were not as motivated and customers struggled to find what they needed in the do-it-yourself stores.

In the end, I want to ask that is centralized method really good for company even though they know they will lose some customers? But centralized can make sure company can have dramatically gross margin growth and meet the stakeholders expectation. How can a good CEO do the best decision for the company?

Reference:

1. http://www.businessweek.com/magazine/content/06_25/b3989044.htm

2. http://www.msnbc.msn.com/id/16469224/ns/business-us_business/t/out-home-depot/

3. http://www.thelatimergroup.com/aboutus/newsversions/spotlight_v5issue2.html

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