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In 2000 Robert Nardelli moved from GE to Home Depot and became the CEO of a phenomenally successful organization. The firm, whose core business is in "stack it high, watch it fly" retail, had enjoyed a twenty year growth, culminating in a revenue of $46 billion in 2000. Nardelli's first move was to say things needed to change.
Perhaps unsurprisingly, the idea was met with raised eyebrows. Nardelli's reasoning was good - the company's decentralized management policy no longer made financial or operational sense. Whereas it once reflected a customer-focused ethos to allow each manager to run their store relatively freely, Nardelli recognized that to secure ongoing growth a company of such high turnover would need a more standardized business practice that was controlled by head office. But employees weren't ready for a culture shock: top executives were used to a freewheeling but tightly-knit environment and store staff got away with ignoring directives from above.
At that moment, Nardelli faced a situation that managers in every kind of firm have to face when they decide to initiate any kind of substantive change - in a word, resistance. Eric Beaudan, a Principal with US consulting firm Healthy Companies, points out that this is a crucial moment. All too often executives concentrate wholly on the actual ideas and reasoning behind change, and don't sufficiently plan on how to see them through so they are received well and last. To avoid unearthing opposition to new ideas and even total failure, Beaudan highlights the importance of leadership, communication, focus and sustainability.
Nardelli's approach demonstrated all these things: winning his workforce over demanded close communication to explain what needed to happen and why, energy from above to inspire people and a sense of accountability to make sure that employees understood they had to take the changes in culture on.
Tide of change
The first signal that things were going to be shaken up was the appointment of old GE colleague Dennis Donovan into the role of head of human resources. Donovan became one of Home Depot's highest paid executives, and instantly the message was sent out that HR was moving out of the periphery and toward the centre of board activity.
What Donovan and Nardelli did was to start to...