Home Depot Calls Division Presidents Home
By George Anderson
The world’s largest do-it-yourself retailer, Home Depot, announced it is moving its Southern, Northern and Western divisional presidents to the company’s Atlanta, Ga. Headquarters.
According to a company press release, the move is being made to “enable the company to execute merchandising and operational initiatives with greater consistency, efficiency and speed.”
The chairman, president and chief executive of Home Depot, Bob Nardelli, said in a released statement, “Over the past four years we have consolidated our U.S. Home Depot store division offices from nine to three. Based on the progress to date with these changes, we are confident that this next step will produce even greater benefits for our associates, our customers and shareholders. Tom (Tom Taylor, EVP, The Home Depot) and I look forward to having division presidents Bruce Merino, Paul Raines and Troy Rice in Atlanta. They will work closely with the rest of the Atlanta leadership team and drive consistency with our strong organization of regional vice presidents, district managers and store managers to assure customer-focused execution.”
Moderator’s Comment: What are the advantages/disadvantages of centralized organizations versus those that give the field greater autonomy? What retailers
best exemplify the strength of strong centralized operations and those that have done well with less central control? –
George Anderson – Moderator
Bad, idea in my opinion. Keep them close to their stores and (as Ryan said first off) to their customer. Centralizing brings a significant risk that these leaders will less strongly feel the beat of their divisional operations while they execute initiatives “with speed and consistency” in Atlanta.
A debate over the location of divisional presidents’ offices seems hardly the point, although this announcement is symbolic of current management philosophy. And I agree with Ryan and others above that any decision made for the administrative convenience of management, not the benefit of the customer, should be suspect on its face.
I’m more interested in the extent to which the company meets the varied needs of different customer groups and geographies. Divisional presidents do little hands-on merchandising. If their right-hand guys, the EVPs, are still in the regions with their teams, this may be preserved under the new scheme.
Circuit City took a similar step a few years back, moving their presidents to a centralized location. Gee, that worked great, didn’t it? This is a terrible idea for Home Depot. Why remove the leader from daily contact with the led?
Home Depot has always wanted to be the “Wal-Mart of Home Improvement” (with all of the positive and negative things which that comparison means), so of course this is a natural move. Lowe’s is pretty much the “Target of Home Improvement,” but that is another story…
As in most things, balance is the right answer. Neither centralization nor decentralization are bad. Too much emphasis on centralization can be uninspiring and morale killing. Too much decentralization can result in chaos and inefficiency.
The ideal model centralizes those things that can benefit from the support of a large organization, such as buying, administration and high-level strategy. Decentralize those things that permit that same large organization to act quickly in response to local customer and competitive issues, such making available discretionary promotional budgets, giving stores the ability to refine product assortment and giving business units the ability to experiment.
A problem is often a choice between two desired outcomes. HD wants their chief leaders in close connection with the hope for quick decisions and innovations. That’s a good thing. Now having them live together doesn’t guarantee a wonderful energizing dynamic – that will be determined by their team relationships.
Having regional leaders actually in the region has the desired outcome of immediate customer and employee contact. That’s a good thing. But having them out in the field doesn’t guarantee that this contact will be effective.
Seems to me the question is: Who can overcome the distance issue better – senior HQ leadership or employees and customers? Surely it should be senior executive leaders. The warning flag for me is that when you start doing things for your own internal convenience rather than the convenience of customers and employees, you are heading to the slippery slope.
Both options have value and, with a little more insight, Home Depot can have it all.
Advantages of centralization are consistency and lower execution cost. Duplication in thought process, management and implementation all contribute to lower cost. Division of decision making reduces risk of a bad decision, meaning if 3 people have to make the same decision, hopefully they all not make the same mistake. The greatest disadvantage to a central approach is that the local or regional differences are likely to get lost. For Home Depot, this has the greatest impact as seasons start and stop on different weeks throughout the country. Florida does not need snow shovels and they can start selling lawn products months before the Northeast. The best model appears to be a blend of both. Certain product categories are central and others are regional. This is the best method of including favorite regional supplier products in the stores.
This seems to tie into the topics yesterday about employee training. Here is another example of a big company trying to save money and missing the point that empowering the people at the local level to be involved in the decision-making process will make for happier and more productive employees. The discussions yesterday seemed to agree that happier and more involved employees result in happier customers that come back to a retailer and spend more per visit.
I agree with Ryan. If the company’s goal is to be more internally efficient at the risk of distancing themselves from their customers, go for it. It makes it easier for top management to have quick and frequent meetings with their divisional bosses, but it does put more distance and less frequent contact with the field.
It has seemed obvious that Home Depot has been going in a different direction for some time. The message that I receive in my Home Depot is that cost control is the order of the day and the customer should just put up with the inconveniences and be thankful we have a Home Depot. It’s impossible to find anyone to help you on the floor and checkers have been virtually eliminated. The self-scan lanes have increased and are jammed with customers having problems checking out. The contrast between Lowes right across the street and Menards also close by are dramatic. I asked the checker the last time I was there and she said the staff had been reduced because they have built so many new stores close by that they had to reduce due to sales being down. We agreed that at this rate they will be doing further reducing for the foreseeable future.
Centralized management leads to centralized thinking — hardly a great way to get close to the customer, which I keep thinking is the name of the game.
This question has a biological parallel.
For Centralization: Organisms and organizations that have a lot of room to reproduce and grow, but who face substantial competition or predation will tend to follow an “r-strategy” that tolerates a lot of lost individuals (or failed outlets) by emphasizing maximum reproduction rate (think Subway sandwich stands). These organisms tend to be small in size and lacking in parental investment.
For Decentralization: Those more limited by the carrying capacity of their environment than by competition tend to follow a “k-strategy” emphasizing retention of the individual with the trade off of slower growth. These organisms and organizations will have high internal diversity to exploit variances in local environments. They tend to be larger in size than the r-strategists and they make a large parental investment in their offspring.
Isn’t it the same old corporate flip flop?
Company decides to centralize in the interest of consistency; then decides to regionalize to stay close to the customer. Everyone says “brilliant.”
Company decides to expand in new markets and leverage its expertise in related areas; then decides to consolidate and focus on its core competency. Everyone says “brilliant.”
Maybe I’m jaded, but I’ve seen this too many times with too many companies to think anything else but “The Pendulum Always Swings Twice.”
Just FYI, read about customer service at Home Depot online (and in print) in the 3/18/05 edition of the Atlanta Journal-Constitution on www.ajc.com (click on business tab and Home Depot). I cover the company for the daily paper here and thought you might want to see what people have to say in print, too.