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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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
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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.
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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...
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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
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