Contrast this with the culture in the company around 2003, when the new CEO, Nardelli was three years into his change strategy in the company using one or more appropriate frameworks from the literature. Within your answer attempt to draw conclusions on whether the prevailing culture contributed to the problems that the company started experiencing in the late 1990's.
When Bernard Marcus stepped down as CEO in 1997, Home Depot had a distinctive culture, based on personal rapport and involvement he and co-founder Arthur Blank had with employees. Marcus and Blank are opposites in many ways. Marcus is gregarious and outgoing, whilst Blank is a detailed number man (Johnson 1998). The two both emphasised customer service, however, encouraging sales staff to help customers with their hardware problems instead of just trying to sell them a tool(Johnson 1998).
To accomplish this, most sales people were plumbers, contractors, carpenters, or others with similar handy experience (Johnson 1998). Marcus and Blank believed this expert advice would help empower homeowners to do their own work, and subsequently would grow Home Depot's potential market, a strategy that proved successful (Johnson 1997).
Culturally Home Depot was described as a laissez-faire or cowboy culture from its founding through 2000 (Pascual 2001; Sellers 2002). Individual sales people were encouraged to make decisions, even if it meant making a mistake (Johnson 1998). Local managers made many of the decisions for their stores independently of the main office. Buying was similarly left up to individual regional managers, who each negotiated separate supply contracts, resulting in different terms from region to region and in some cases from store to store (Pascual 2001).
The co-founders used to boast that the chapter on merchandising in Home Depot's policy manual didn't have a single word in it (Sellers 2002, 93). Almost all jobs above entry level were filled internally, causing a system of personal networks to dominate communication within the company (Stein 2000). This was further reinforced by senior management, who managed by regularly visiting stores to develop personal relationships with workers and check store operations (Stein 2000).
Co-founders Marcus and Blank trained every manager personally (Sellers and Woods 1996). Employees were encouraged to buy stock, and offered it at a discount price, to give them personal investment in Home Depot's success (Sellers and Woods 1996).
By the time Blank succeeded Marcus as CEO in 1997, Home Depot was becoming too large for its informal culture. Blank tried to rectify this situation by adding an additional level of executives directly below himself and above the six division heads, a move questioned by many (Johnson 1998). He tried to maintain Home Depot's traditional culture, whilst formalising decision-making and communication systems, a plan that was unsuccessful. In his three years in charge, things went from bad to worse.
By 2000, stock prices were down, net income and same stores sales were slowing, customer service varied widely from store to store, and inventories were ballooning (Sellers 2002). Because Home Depot has simply continued to expand without adjusting its internal systems, the main office was not able to either monitor or support the increasing number of stores (Johnson 1998). Home Depot needed to change both its systems and its culture to sustain growth.
Culture is what solidifies a company's identity as one organization; without it, a company lacks direction, values and purpose (Goffee and Jones 1996). It is the way people relate to each other in a given community. Like families, villages, schools, and clubs, businesses rest on patterns of social interaction that sustain them over time or are their undoing (Goffee and Jones 1996, 134). Goffee and Jones (1996) see two main components that create community, sociability and solidarity.
Sociability is the communication and sincere friendship relationships between community members, whilst solidarity is how quickly and effectively the community can and will pursue its common objectives. Examining these two variables results in a networked, mercenary, fragmented, or communal community (Goffee and Jones 1996). Importantly, none is necessarily better than the other, but each has been found to be more effective in specific situations.
The culture at Home Depot before Nardelli took over was what Goffee and Jones (1996) would call a networked community. Managers had little accountability, worked things out on their own, and depended on social contacts for getting much of their jobs done (Upbin 2000). There was not enough investment in company-based initiatives; headquarters lacked clout to implement change in many stores (Upbin 2000). Networked communities provide a flexibility that allows employees to cut through or circumvent bureaucracy, something that can be helpful in a rapidly growing company if not taken to extremes.
However, because there is little commitment to shared business objectives, employees in networked organizations often contest performance measures, procedures, rules, and systems, the very things Home Depot needed by the late 1990s due to its mammoth size (Goffee and Jones 1996, 138). Trying to maintain this networked community whilst introducing its antithesis, systems and structure, was Blank's undoing. Such actions typically consolidate workplace friendships but do little for organizational solidarity, and often cause political cliques to form against the person or persons trying to implement change (Goffee and Jones 1996, 138).
Home Depot's culture can also be considered through a Force Field analysis, which reveals several components of its culture likely to work against change (Johnson and Scholes 2002). As stated earlier, almost all of Home Depot's employees above entry level had been promoted from within, leaving the company with managers and executives who not only excelled in its loose environment but most likely preferred it (Stein 2000). Many had worked at Home Depot for years, moving up through the ranks, and were heavily invested in its culture (Stein 2000).
Not surprisingly, when Nardelli began making changes in the early 2000s, many employees were unwilling or unable to follow, and the company lost nearly two-thirds of senior managers, who either quit or were fired (Seller 2002). Nardelli then bucked company culture by hiring outside personnel to replace them, allowing him to make needed changes in the company's culture and systems. Force Field analysis dictates that making personnel changes such as these would greatly reduce the cultural deterrents to change at Home Depot, an analysis that proved true (Johnson and Scholes 2002).
Robert Nardelli began to make changes almost immediately after he took over in late 2000, attempting to both make the company more efficient and economically viable and to move its culture from a networked community to a communal one. A communal community is much like a networked community in that it has high sociability amongst its members, but unlike a networked community it also has high solidarity, which allows community members to focus on common goals and accept changes necessary to reach those goals (Goffee and Jones 1996).
Nardelli altered the cowboy culture at Home Depot by changing the emphasis to discipline and efficiency, implementing and centralizing systems throughout the company and installing a formal chain of command for handling situations (Pascual 2001; Tsao 2002). He brought quality control measures from his prior experience at General Electric, such as Sigma Six, to Home Depot and demanded a higher level of customer service and job performance (Sellers 2002). Instead of emphasizing his personal relationships with employees, as Marcus did for example through personally training managers, Nardelli developed systems, in the case of training instituting a leadership training institute at the company (Sellers 2002).
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