Nardelli

Bob Nardelli, in contrast to other CEOs, has faced multiple failures. During his younger
years, he tried entering the military and football world, but failed due to his lack of physical
prowess. But perhaps, Nardelli’s greatest failures came during his time at GE and Home Depot.
After being rejected for the position of CEO at GE, he was immediately tapped by Ken Langone
to assume the CEO position at Home Depot. But things did not go smoothly for him either. Due
to the array of decisions that caused confusion, intimidation, and anger among his employees, it
eventually led to his downfall.

Curse of the Corporate Culture Clash: GE Meets Home Depot

It is essential to understand that alongside the appointment of Nardelli as CEO comes with
it the entry of another culture that is possibly incompatible with the current one. And unfortunately,
this was the case for Home Depot. This happened because Nardelli superimposed the “GE way”
and failed to recognize that Home Depot’s corporate culture couldn’t accept the “GE way.” Nardelli
spent 20 years under the perfectionist culture in GE, which doesn’t tolerate failure of any form.
Mediocre performance was unacceptable in GE and each year the bottom 10% were fired. The
“GE way” is a culture that emphasizes on deal-making, cost cutting and efficiency. It was a culture
ruled by competition, both externally and internally. Loyalty was determined by performance,
communication was direct and confrontational, and it was believed that leadership came from
individuals, not group or teams. Nardelli was ingrained in this harsh, competitive business
environment wherein Home Depot is more of a soft and friendly culture.

Applying the “GE way” in Home Depot

From the “customer is king” service model, Nardelli immediately implemented the
“enhance, extend and expand” model, which resembles GE’s commercial and manufacturing
business. The new model involved enhancing the core business, extending into new businesses
and expanded into new businesses outside Home Depot’s usual trade. Nardelli instantly hired GE
managers and GE engineering practices such as “Six Sigma” and other GE programs, which
immediately transformed Home Depot as a business run by numbers. His strategy was asserted
on efficient process execution, cost-cutting and achieving the targets.

In line with Nardelli’s strategy, Home Depot started to acquire supply and service
businesses. Home Depot’s business model started to shift away from retail into businesses which
he could comfortably control and measure. For the retail stores, he cut costs, streamlined
operations, centralized authority and decision making, and prompted uniformity, which initially
produced favorable results. Earnings per share more than doubled and made the company look
better in paper. However, apart from the measurable metrics, other factors such as retail
prerequisites, employee morale and motivation, proficiency, suffered.

Considering the eight principles that lay at the base of a culture created by Marcus and
Blank, we could detect that they are in direct conflict with the “GE way:”

Excellent Customer GE made products and offered services to corporations and

Service manufacturers. There are no retail consumers shopping at GE. But
for Home Depot, the focus was exclusively on the customer.
 Take Care of the GE valued competition and only rewarded top performers. If an
Employees employee underperformed, they are at the risk of losing their jobs.
While for Home Depot, Blank and Marcus motivated employees
and made them feel important. However for Nardelli, he motivated
the employees by instilling fear in them.

Galvanizing, As mentioned a while ago, GE valued deal-making, cost cutting

Recognizing, and and efficiency. Plans and endeavors go through the persuasive
Promoting Six Sigma Process. Under Marcus and Blank, they ran a
Entrepreneurial Spirit decentralized, entrepreneurial company.

Respect for all People GE valued confrontation, and Six Sigma determined worth and
value. The forced ranking performance review systems created
intense competition and at times warfare among employees. One
of the first things Nardelli did when he arrived at Home Depot was
to instill the GE performance review system. However, this system
created immense pressure to the employees which forced some of
them to leave the company

Do the Right Thing GE was infamous in engaging in activities that are borderline
against the law in order to secure a profit. Their utmost priority is
to maximize shareholders wealth. At Home Depot, doing the right
thing not only encompassed laws, but also doing right by the
customer and employee.

Giving Back GE only rewarded high performers. One needs to work hard in
order to be rewarded. Other aspects of an employee’s
performance are not taken into consideration. In contrast, Home
Depot associates gave back to the community, customer and their
company.

Creating Shareholder At Home Depot, the employees were shareholders so increasing

Value shareholder wealth means increasing employee wealth. At GE
shareholder wealth meant Wall Street wealth.

Entrepreneurial Spirit At GE, all decisions had to go through deliberate statistical or

quantitative processes. No hunches were allowed. At Home
Depot, the decentralized, entrepreneurial “do the right thing”
culture was incorrectly perceived by many outsiders as being out
of control.

In assuming the position of CEO, Nardelli failed to assess the most critical aspect of
strategic change, the organization’s environment or culture. If Nardelli completely understood
Home Depot’s culture, he could have developed a more concrete strategy instead of
implementing the “GE way.” Frank Blake on the other hand, who succeeded Nardelli after his
voluntary resignation as CEO from Home Depot, knew otherwise.