July 24, 2008
Home Depot Co-Founder Sees a Company Renewed
By George Anderson
Home Depot CEO Frank Blake sees a housing market rebound ahead. Company co-founder Bernie Marcus already sees a rebound taking place within the home improvement chain under Mr. Blake’s leadership.
The two men appeared together on the CNBC morning Squawk Box show.
“People love what they are doing,” Mr. Marcus told the show’s hosts. “The culture [co-founder Arthur Blank] and I created has come back.”
Mr. Marcus said the company had gone into a tailspin under former chief Robert Nardelli and that he had personally stopped visiting stores. He said morale had sunk to extreme lows as the company got rid of its best, most experienced people in the name of cost cutting.
According to Mr. Marcus, Home Depot under Mr. Blake’s leadership has refrained from cutting jobs, invested in upgrading stores and begun to revive the chain’s missing culture of service.
Mr. Blake indicated that a housing market turnaround and, in turn, Home Depot were getting “close” but that “it’s still a very tough market.”
Discussion
Questions: How much progress would you say that Frank Blake has made in reviving
the organizational culture that made Home Depot a success? Is the “old” Home
Depot good enough in today’s business climate?
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If Home Depot has addressed “the missing culture of service” then why not prove it by publishing its employee turnover statistics? Anecdotes mean very little. The best run retailers have low staff turnover. If Container Store and Costco showed their staff turnover against Home Depot or Macy’s or Walmart it would make front-page news.
After Nardelli left, the retailer had nowhere to go but up. An acquaintance who joined a nearby EXPO store for several years after selling his family’s carpet business quit in disgust a few years into Nardelli’s tenure. He went to work for another carpet retailer, but didn’t like the atmosphere. He’s now back with HD and says morale is up, the workers have the experience the customers relied on for so long and management is focused on developing the staff so they can sell the products the shoppers need, not just on cutting costs.
I have to say that there is an element of “service” back in some of the H.D. stores I have visited. That may be the #1 issue for H.D. to address since many shoppers require and need in store advice and help in their shopping and home repair needs. This was refreshing to me and very noticeable as past trips led to frustration when I couldn’t find what I needed and then needed someone to help me with questions. In store support people would simply tell me which aisle to go to then I was on my own.
That changed on my last trip and I hope it continues because, if it does, I am back to being a H.D. fan and giving them my business again.
As far as a housing market turn around…..well let’s all hope so but I remain skeptical on that estimate for the near term.
I’m glad to see that some stores are improving their service culture. Unfortunately, my experience has been the same with associates avoiding customers and a general lack of basic product knowledge. With the housing meltdown and 11 months of housing inventory, as reported on CNBC today, it’s difficult to believe that service will improve in a cost-cutting environment. Wages are still too low at Home Depot which used to attract specialists within the industry such as former contractors or craftsmen.
Living in one of the fastest growing cities in America, I’ve seen construction come to a virtual halt and funding dry up. I should also mention the fact that Lowe’s just started penetrating the market here. Does anybody truly believe that a turn around is occurring at home improvement retailers in the worst housing market since the Great Depression?
Home Depot is off the mark here. The real estate market is not coming back yet (and today’s news supports this) and no one can determine, with any accuracy, when it will. The market is still decreasing and HD’s perceptions are tainted by their own stores sales (and hopes for a turn around). HD can still be turning around their organization through some of the tried and true basics of the retail industry (better customer service, eliminating OOSs, and reducing shrinkage), but this is a dynamic proposition that they really need to be examining as an organization. These changes require longer to implement since they are strategic in nature and require tactical implementation company wide in order to manage the effects.
I believe it is wishful thinking about a housing rebound. However, the DIY segment may increase as people stay put and improve their homes. We are certainly seeing this in demand for our seasonal, hardware and tool items, which are flowing into the West. Service improvements are needed and winning is not only about price. HD needs to get its sourcing right, value its supply chain and improve its customer service.
I, too, believe service is improving somewhat.
In addition, it appears as though the floors have been sealed at my local HD. That may seem like a small thing, but it makes for an easier-to-clean floor, which in turn makes for a less dusty environment.
Some associates are quite good. Some are the same they always were. I think they still have a product issue – private label merchandise quality is still inconsistent.
But overall, a definite improvement.
No data to share on this one, but the annual summer sojourn to the farm this year brought the usual and customary multiple trips to HD. I found more associates on the floor and a more helpful attitude than I remember in recent years. Same store and, at least in some cases, same personnel. That has to be related to a change in the employees attitudes toward HD. That has to be good. (On the other hand, almost $9 for an 8 ft 2X8 has got to be BAD!!!) Let’s hope building materials costs come down the way high quality power tool costs are falling.
Home Depot still has a ways to go in bringing back lost customers. The mantra of ‘You can do it. We can help.’ has lost most of its luster under Nardelli and it will take a long time to win those lost customers back.
I’ve observed a few new store openings in Toronto and South Florida and the service element has been put back in but I’m finding existing, older stores are still offering little to no service. It boils down to HD cutting staff when the customer is actually demanding more service. Having a platoon of staff is great for newer stores but one person in the garden center on a Saturday? Come on! This is not a strong commitment to customer service. HD needs to look at things through the customer eyes and not a balance sheet – especially in this economic situation. Lowe’s (now in Canada) and a host of other chains will be there to pick up the pieces if HD does not do something to woo (not win) the customer back in.
Yes, some improvements are being noticed, but many more still need to be made. Service is still very ‘hit and miss,’ with too many staff showing signs of indifference.
The biggest opportunity may be in their specialty departments (kitchens, millwork, flooring, appliances) where a better skilled workforce would make a huge difference in their performance. Customers in these departments both need and expect a high level of service and skill. If Home Depot wants to ‘play’ in these areas, they will need to step up their game.
No business may remain unchanged and expect to flourish. Home Depot wasn’t wrong in their desire to see new operational efficiencies implemented; the problem was in picking the wrong guy at the wrong time. Nardelli didn’t take into consideration how the cuts would impact a key element of HD success, namely customer service and associate loyalty and drive.
While I don’t agree with the optimistic comment on the housing industry comeback, HD has always been about DIY and in down-turning markets there exists the opportunity to really exploit the DIY angle which can help to offset the professional downturn.
However, DIY today isn’t what it was 5 years ago. DIY has to be supported by new product and product services, because this too has changed.
The work behind the scenes is starting to pay off. At an HD concept store in Burlington, ON (opened 2007), the store is brighter with clear overhead signage to identify areas, merchandising that allows the shopper to examine items and signboards to learn about the products. Pamphlets are prominently displayed for take home usage, and related items for installation are in proximity. Aisles are wider; clear of clutter displays well done. And most importantly, service people are close at hand and knowledgeable.
Believe that HD stores are collectively improving their service levels, while packaging and merchandising in a way to make things easier to locate. HD is developing and executing plans for target consumer segments to create a better shopping experience for the hard-core DIYer’s as well as those considering projects large and small, and still maintaining focus for their contractor business as well. Going forward, execution will be critical with a tight economy delaying many larger home projects and solid competitors in many markets.
I made two trips to HD this summer. One trip for a replacement toilet and one for a replacement water heater. Both turned into disastrous multiple trip adventures due to ironically both purchases including damaged products in the carton. There was little or no choice in variety in selection. The associates, while not totally unhelpful, were of little help on the initial trips.
Hats off though to the two associates in the parking lot who, on my third trip for a water heater, finally helped load it into my car. It was little consolation after searching for 20 minutes with no assistance for a cart just to get it to the car.
Between the arrival of Wal-Mart and HD in this struggling local town, all small business are gone and the consumers have little choice. That’s not to say they didn’t make their own choice. Sadly, they made the wrong one.
HD is a great concept store. However, they have yet to pull off having it be my store of choice if there was another choice left to be had. I almost felt sorry for their associates. Maybe the leaderships’ efforts will filter down, but I haven’t seen it yet. It would be a welcome change.
Every company with a good foundation needs to stay true to its public image while continuously making adjustments and tweaks as to how it reaches consumers in constantly changing times. The fine-tuning should be a relentless process behind the scenes, however any changes must evolve seamlessly where customer perception is concerned.
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If Home Depot has addressed “the missing culture of service” then why not prove it by publishing its employee turnover statistics? Anecdotes mean very little. The best run retailers have low staff turnover. If Container Store and Costco showed their staff turnover against Home Depot or Macy’s or Walmart it would make front-page news.
After Nardelli left, the retailer had nowhere to go but up. An acquaintance who joined a nearby EXPO store for several years after selling his family’s carpet business quit in disgust a few years into Nardelli’s tenure. He went to work for another carpet retailer, but didn’t like the atmosphere. He’s now back with HD and says morale is up, the workers have the experience the customers relied on for so long and management is focused on developing the staff so they can sell the products the shoppers need, not just on cutting costs.
I have to say that there is an element of “service” back in some of the H.D. stores I have visited. That may be the #1 issue for H.D. to address since many shoppers require and need in store advice and help in their shopping and home repair needs. This was refreshing to me and very noticeable as past trips led to frustration when I couldn’t find what I needed and then needed someone to help me with questions. In store support people would simply tell me which aisle to go to then I was on my own.
That changed on my last trip and I hope it continues because, if it does, I am back to being a H.D. fan and giving them my business again.
As far as a housing market turn around…..well let’s all hope so but I remain skeptical on that estimate for the near term.
I’m glad to see that some stores are improving their service culture. Unfortunately, my experience has been the same with associates avoiding customers and a general lack of basic product knowledge. With the housing meltdown and 11 months of housing inventory, as reported on CNBC today, it’s difficult to believe that service will improve in a cost-cutting environment. Wages are still too low at Home Depot which used to attract specialists within the industry such as former contractors or craftsmen.
Living in one of the fastest growing cities in America, I’ve seen construction come to a virtual halt and funding dry up. I should also mention the fact that Lowe’s just started penetrating the market here. Does anybody truly believe that a turn around is occurring at home improvement retailers in the worst housing market since the Great Depression?
Home Depot is off the mark here. The real estate market is not coming back yet (and today’s news supports this) and no one can determine, with any accuracy, when it will. The market is still decreasing and HD’s perceptions are tainted by their own stores sales (and hopes for a turn around). HD can still be turning around their organization through some of the tried and true basics of the retail industry (better customer service, eliminating OOSs, and reducing shrinkage), but this is a dynamic proposition that they really need to be examining as an organization. These changes require longer to implement since they are strategic in nature and require tactical implementation company wide in order to manage the effects.
I believe it is wishful thinking about a housing rebound. However, the DIY segment may increase as people stay put and improve their homes. We are certainly seeing this in demand for our seasonal, hardware and tool items, which are flowing into the West. Service improvements are needed and winning is not only about price. HD needs to get its sourcing right, value its supply chain and improve its customer service.
I, too, believe service is improving somewhat.
In addition, it appears as though the floors have been sealed at my local HD. That may seem like a small thing, but it makes for an easier-to-clean floor, which in turn makes for a less dusty environment.
Some associates are quite good. Some are the same they always were. I think they still have a product issue – private label merchandise quality is still inconsistent.
But overall, a definite improvement.
No data to share on this one, but the annual summer sojourn to the farm this year brought the usual and customary multiple trips to HD. I found more associates on the floor and a more helpful attitude than I remember in recent years. Same store and, at least in some cases, same personnel. That has to be related to a change in the employees attitudes toward HD. That has to be good. (On the other hand, almost $9 for an 8 ft 2X8 has got to be BAD!!!) Let’s hope building materials costs come down the way high quality power tool costs are falling.
Home Depot still has a ways to go in bringing back lost customers. The mantra of ‘You can do it. We can help.’ has lost most of its luster under Nardelli and it will take a long time to win those lost customers back.
I’ve observed a few new store openings in Toronto and South Florida and the service element has been put back in but I’m finding existing, older stores are still offering little to no service. It boils down to HD cutting staff when the customer is actually demanding more service. Having a platoon of staff is great for newer stores but one person in the garden center on a Saturday? Come on! This is not a strong commitment to customer service. HD needs to look at things through the customer eyes and not a balance sheet – especially in this economic situation. Lowe’s (now in Canada) and a host of other chains will be there to pick up the pieces if HD does not do something to woo (not win) the customer back in.
Yes, some improvements are being noticed, but many more still need to be made. Service is still very ‘hit and miss,’ with too many staff showing signs of indifference.
The biggest opportunity may be in their specialty departments (kitchens, millwork, flooring, appliances) where a better skilled workforce would make a huge difference in their performance. Customers in these departments both need and expect a high level of service and skill. If Home Depot wants to ‘play’ in these areas, they will need to step up their game.
No business may remain unchanged and expect to flourish. Home Depot wasn’t wrong in their desire to see new operational efficiencies implemented; the problem was in picking the wrong guy at the wrong time. Nardelli didn’t take into consideration how the cuts would impact a key element of HD success, namely customer service and associate loyalty and drive.
While I don’t agree with the optimistic comment on the housing industry comeback, HD has always been about DIY and in down-turning markets there exists the opportunity to really exploit the DIY angle which can help to offset the professional downturn.
However, DIY today isn’t what it was 5 years ago. DIY has to be supported by new product and product services, because this too has changed.
The work behind the scenes is starting to pay off. At an HD concept store in Burlington, ON (opened 2007), the store is brighter with clear overhead signage to identify areas, merchandising that allows the shopper to examine items and signboards to learn about the products. Pamphlets are prominently displayed for take home usage, and related items for installation are in proximity. Aisles are wider; clear of clutter displays well done. And most importantly, service people are close at hand and knowledgeable.
Believe that HD stores are collectively improving their service levels, while packaging and merchandising in a way to make things easier to locate. HD is developing and executing plans for target consumer segments to create a better shopping experience for the hard-core DIYer’s as well as those considering projects large and small, and still maintaining focus for their contractor business as well. Going forward, execution will be critical with a tight economy delaying many larger home projects and solid competitors in many markets.
I made two trips to HD this summer. One trip for a replacement toilet and one for a replacement water heater. Both turned into disastrous multiple trip adventures due to ironically both purchases including damaged products in the carton. There was little or no choice in variety in selection. The associates, while not totally unhelpful, were of little help on the initial trips.
Hats off though to the two associates in the parking lot who, on my third trip for a water heater, finally helped load it into my car. It was little consolation after searching for 20 minutes with no assistance for a cart just to get it to the car.
Between the arrival of Wal-Mart and HD in this struggling local town, all small business are gone and the consumers have little choice. That’s not to say they didn’t make their own choice. Sadly, they made the wrong one.
HD is a great concept store. However, they have yet to pull off having it be my store of choice if there was another choice left to be had. I almost felt sorry for their associates. Maybe the leaderships’ efforts will filter down, but I haven’t seen it yet. It would be a welcome change.
Every company with a good foundation needs to stay true to its public image while continuously making adjustments and tweaks as to how it reaches consumers in constantly changing times. The fine-tuning should be a relentless process behind the scenes, however any changes must evolve seamlessly where customer perception is concerned.