Home Depot's Cultural Evolution - A comparison of the Company's Culture Under ITS Founders and BOB Nardelli

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Case Details:

Case Code : HROB063
Case Length : 11 Pages
Period : 1978-2004
Pub Date : 2004
Teaching Note : Available
Organization : Home Depot
Industry : Retail
Countries : USA

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

Startup Mode for 22 Years

Home Depot was managed by its founders for over two decades. Marcus and Blank had tremendous influence within the company and played an important role in shaping Home Depot's culture. Analysts compared Marcus with Wal-Mart's Sam Walton. He was an internal icon, and many aspects of his personality were incorporated into the culture of the company.

Under its founders, Home Depot's culture was characterized by exuberance and informality. There were no 'processes' so to speak of, and rule-of-thumb was applied to most situations. The organization was also highly decentralized, and most decisions were taken at the local level by store managers.

An example of decentralization was the company's purchasing policy, where buyers from the company's nine regions met suppliers individually and established independent terms of purchase with them. It was later observed that suppliers often charged different rates from the different regions for the same products, leading to higher costs for Home Depot...

The Nardelli Influence

"There's more change ahead for the company over the next two to three years than there's been over the past ten," said J.P. Morgan Chase & Co. retail analyst Danielle Fox, soon after Nardelli became CEO of Home Depot. In the world of business, Nardelli stands out as one of a few outsiders to have taken over a large successful company's management from its founders. He is also among a select few executives who stepped into the top position at a company in an industry in which they had no prior experience. Nardelli's lack of retail experience made analysts skeptical about whether he would be able to solve Home Depot's problems.

(When Home Depot's board first contacted Nardelli, it had offered to make him president, so that he could learn retailing for a few years. However, Nardelli would not settle for anything less than CEO.) As Home Depot was a company that prided itself on its culture, it was clear that it would not be easy to change it...

Success at a Price

Nardelli made a lot of effort to make the cultural transition at Home Depot as smooth as possible and to gain the acceptance of the employees. While his directness and numbers-oriented management shocked some employees, he tried to overcome the obstacles by adapting to the culture quickly and communicating changes to employees on a regular basis. Despite his efforts, Nardelli faced heavy criticism from some quarters for the changes he made at Home Depot...

Exhibits

Exhibit I: Home Depot - Annual Financials (2002-04)
Exhibit II: Home Depot's Product Categories
Exhibit III: Home Depot's Specialized Ventures