Question: When Bernie Marcus and Arthur Blank opened the first Home Depot store in Atlanta in 1 9 7 9 , they forever changed the hardware

When Bernie Marcus and Arthur Blank opened the first Home Depot store in Atlanta in 1979, they forever changed the hardware and home-improvement retailing industry. Marcus and Blank envisioned huge warehouse-style stores stocked with an extensive selection of prod-ucts offered at the lowest prices. Home Depot has a history of powerful leaders who helped the company become a mega-corporation. Home Depot is one of the largeshome-improvement retailers in the world, with over $110 billion in annual revenue. Because of Home Depots leadership, the company continues the tradition of doing things on a grand scale. Marcus and Blank were successful leaders who built a strong culture at Home Depot based on the concept of the inverted pyramid: placing customers and store associates at the top and executives at the bottom. Home Depots store-centric culture puts emphasis on the satisfaction of the customer and the associate, which led to Home Depots many successful years in business. However, the company encountered a period of challenges when the founders decided to bring on a new leader who would grow Home Depots infrastructure and technology. When Blank stepped down and joined Marcus as co-chairman of Home Depot, Robert Nardelli, a high-level executive from General Electric (GE), became the CEO. The store-centric culture of Home Depot was very dif-ferent from the performance-focused culture of GE. This cultural divide became an issue when Nardelli tried to run Home Depot in a way similar to how he ran his branch of GE. Rather than follow the inverted pyramid established by founders Blank and Marcus, Nardelli took a top-down approach to running Home Depot: executives at the top and customers and store associates at the bottom. During Nardellis tenure, many resources were invested into implementing new technology to streamline Home Depots operations. However, with the technology improvements in the storefront came staffing cuts. These staffing cuts demonstrated to stakeholders that the inverted pyramid was no longer a focus of Home Depot. Nardelli was also critical of associates and store managers, leading employees to fear for their jobs if they did not follow his directions perfectly. Because of Nardellis strict manage-ment style, he replaced store managers with former mili-tary officers, a tactic he learned during his time at GE. With these changes, Home Depot went from a relatively laid-back work environment to a militant work environment. Staffing cuts also led to consistent customer complaints regarding customer service. Former managers at Home Depot blamed the companys service issues on a culture that operated under principles reminiscent of the military. The new Home Depot culture created a hostile work environment for executives as well. Nardelli announced that he would measure everything that happened in the company and hold executives accountable for their num-bers. There was a large turnover of executives during this timeboth from termination and resignation. Executives who did not meet their goals were often fired and replaced with former GE executives. Other executives, such as former Chief Marketing Officer John Costello, often quit because of the in-your-face management. Nardellis tenure at Home Depot was not all negative. Sales doubled from $46 billion to $81.5 billion over a five-year period, and many successful technology initia-480 Part 6 Controlling tives were implemented. The board was pleased with these results; however, the negative feedback from stakeholders and the cultural shift led to Nardellis termination. Frank Blake became the new CEO. Blake immediately distanced himself from Nardellis militant ways. After a short time as CEO, it was clear that Blake would bring Home Depot back to the founders original vision. Blake quickly refo-cused on the inverted pyramid and began to restore the customer experience. Not only was Blake responsible for restoring the original culture of Home Depot, but he was also tasked with lead-ing the company through the housing crisis. While staffing cuts were inevitable, and almost 11,000 employees were laid off, Home Depots management tried to minimize the loss for current associates by keeping wages and bonuses consistent. To do this, Home Depot executives centralized the company and refocused on Home Depots most profit-able business: existing retail outlets. Home Depot invested in its people. To regain associates trust, Home Depot often consulted with Blank and Marcus to make sure the current vision of Home Depot was on par with the original vision. Homer Awards were brought back to reward employees for hard work, and assistant store managers were granted restricted stock. It also became easier for store employ-ees to win bonuses. Slowly but surely, morale was being restored. When Nardelli was fired from Home Depot, customer satisfaction was at an all-time low.

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