Home Depot: On the Road to Becoming Customer-Friendly Again?
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Case Code: BSTR324 Case Length: 20 Pages Period: 2000-2009 Pub Date: 2009 Teaching Note: Not Available |
Price: Rs.400 Organization: The Home Depot Inc. Industry: Retail, Home Improvement Countries: USA Themes: Customer Service, Culture, Management Style, Change Management |
Abstract Case Intro 1 Case Intro 2 Excerpts
"Nardelli's strategy to expand into the contractor supply business, while cutting costs and streamlining operations in 1,816 U.S. stores, has pushed customer service down the company's priority list... But the company appears to be waking up to bubbling discontent among customers and employees."
- BusinessWeek, June 19, 2006.
"That kind of deterioration would be a challenge for any newly minted chief executive...But trying to recast the company's image in the middle of the worst housing downturn in decades multiplies the challenge."
- Fortune Magazine, November 25, 2008.
Introduction
In February 2008, a report was released by the University of Michigan's American Customer Satisfaction Index (ACSI). According to the report, The Home Depot Inc. (Home Depot), the second largest retailer in the US and the largest home improvement retailer in the world as of 2008, had scored 67 points on a 100 point scale. The score, about 4% lower than the previous year's score, was the lowest among all the US retailers. On the other hand, its arch rival Lowe's Companies, Inc. (Lowe's) score remained the same at 75 points as earlier.
Home Depot was started in 1978, and it became a popular choice for home improvement and home builders within a short span of time. It came to be known for do-it-yourself projects and knowledgeable store employees, who provided solutions to all kinds of civil work related problems of the customers. The company witnessed tremendous growth in the 1980s and 1990s, primarily because of excellent customer service. The business grew rapidly and a lot of innovations were incorporated.
However, the operation was not organized and the company suffered from several operational inefficiencies which acted as impediments to further growth. With the aim of bringing in a more centralized management and systematic approach to the business, the founders Marcus and Blank appointed Robert L. Nardelli (Nardelli) in the role of a new president, CEO, and a board member. Nardelli brought in a new culture to the organization, laying more stress on data and processes, rather than on people and services. As a result of his autocratic style of management, both employees and customers began to suffer. He brought in a 'culture of fear,' by applying strict number driven measures to calculate employee productivity. He even reduced manpower drastically. As a result, the morale of the employees took a beating and eventually, customer service suffered...
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