Home Depot’s Autocracy Holds Annual Meeting

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As if all the other things about HD weren’t enough, Bob Nardelli of Home Depot ruled with an iron fist over their annual meeting the other day. Reports are that he controlled all the discussion, allowed no dissent, and brushed off concerns over his massive pay package.

Not a single member of the board showed up.

Perhaps most shocking however is that not a single member of the board (or at least the compensation committee) showed up. That’s right, one of the most over-paid CEO’s in America holds an annual meeting and no member of the paymasters decides it’s worth their time to see what the owners think. Sad.

Apparently it went so poorly that HD’s PR team issued a release saying that the company “apologizes if the absence of the board offended anyone” (or something like that). I guess even the most strident generals realize when they get caught with their junta down.

Home Depot’s Nardelli Gets What is Coming

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Well Bob, it worked. This great PR offensive (see these posts about it here and here) worked wonders, the board bought all this stuff, and they rewarded you handsomely. In the last five years, you’ve received some $200 million in salary, bonus, stock, stock options, and other perks. In 2005 alone, you got a stunning $38.1 million in total compensation. Nicely done.

But in case you missed it, the Home Depot board has guaranteed Bob Nardelli a “bonus” of $3million. Read about it in BusinessWeek online.

one lucrative element of the package is not as well-known: Nardelli’s guaranteed minimum annual bonus. Of course, many CEOs are eligible for a bonus each year, usually if they hit certain financial and operating targets. Others have more limited guarantees, such as an assured payout in the first year of service. But Nardelli’s employment contract shows that $3 million of his annual bonus, defined as the “target amount,” is a sure thing. “For each year during the period of employment,” says the agreement, “the executive will receive an annual bonus of no less than the full target amount.” Last year, Nardelli earned a total bonus of $7 million.

Guaranteed bonus? Isn’t that an oxymoron? Aren’t bonuses supposed to be a reward for good work you did, not compensation for work you are going to do?

And as writer Brian Grow notes in that article, it’s not like he’s returned anything to shareholders.

To the ire of many investors, however, Home Depot’s total return to shareholders, a key benchmark of corporate performance, is down 13%, according to Institutional Shareholder Services (ISS).

Gee, Bob, hope you share some of it with the PR team.

Home Depot’s “Culture Change” Offensive

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Not long after Home Depot‘s Bob Nardelli unleashed his silly PR offensive designed to get him more money (see the post here), he managed to get someone to whip up an article designed to show he reads management articles too.

The Harvard Business Review‘s Ram Charan wrote a puff piece on “Home Depot’s Blueprint for Culture Change” in the April 2006 issue. I’d love to give you a link to the article, but the HBR is subscription only content (you can, however buy this article for $6 here).

This article is PR work at it’s finest. Sure the HBR requires there to be some real content, and even perhaps some kind of learning about how to do thou likewise. But the miracle here is the stench of spin. You can smell it in the lead in:

Deep, lasting culture change requires an integrated approach that remodels a company’s social systems. The leadership team of Home Depot employed a remarkable set of tools to do that.

The remarkable set of tools was “boot camp”. See my blog entry on that here.

But, to be fair there are some really interesting ideas in the article about how to catalog change, and monitor what is happening. The problem is, it didn’t work at HD. And I know why.

This culture change didn’t “take” because it didn’t go deep enough.

This culture change didn’t “take” because it didn’t go deep enough. It was decided by the top 17 executives at an offsite meeting. It was rolled out in a “huge event” to another 1,800 more. But Home Depot has over 345,000 employees in over 2,000 stores. That means fewer than one-half of 1% of the employees even got briefed on this big change. And 0.005% of the employees had input. No wonder they hate the required Monday morning “BobCasts”.

Bob, sir, forgive me, but even in the military you have to explain things to people, get their buy-in, heck even consider that private’s opinion. This fancy “culture change” ain’t working, and no amount of force-feeding’s going to make it work. But you don’t care, you’re off to the bank.

PS – The author, Ram is to be forgiven — he was the consultant working on the project for HD. He’s just trying to get a little PR for himself. You can be sure he didn’t get anything like Bob’s pay package

Home Depot’s Army Mentality

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Back in March Home Depot unleashed what could only be called a PR offensive [ed: pun intended]. There was this great BusinessWeek cover story, a couple of other minor articles and mentions, and then a Harvard Business Review piece, all about how Bob Nardelli was wonderful. Heck, the BusinessWeek article was even titled:

Renovating Home Depot
Skip the touchy-feely stuff. The big-box store is thriving under CEP Bob Nardelli’s military-style rule.

But the problem is, it’s a PR crock. By any measure Home Depot is not thriving, the people there hate it, and it shows — all the way through to the check-out line.

Sure the article(s) talk all big about ex-marines, and “tough under fire”, and all that junk. But the point of fact is the retailer is not the military, people don’t like being treated like that, and the stuff doesn’t work.

Walked into a Home Depot lately? It’s a nightmare.

Walked into a Home Depot lately? Tried to find help? Tried to find someone who cared? Tried to find something you went in wanting to buy? It’s a nightmare.

Just for fun, pull an orange apron aside and ask them what they think of the place. But only if you have an hour to spare. They will rant all over you, and endlessly — like they have nothing better to do. Ouch. And the BW article even alludes to this: “Some describe a demoralized staff and say a “culture of fear” is causing customer service to wane.” Executive turnover is rampant. And Bob’s pay package can’t help (see this entry).

Customers see it too:

The University of Michigan’s annual American Customer Satisfaction Index, released on Feb. 21, shows Home Depot slipped to dead last among major U.S. retailers. With a score of 67, down from 73 in 2004, Home Depot scored 11 points behind Lowe’s and three points lower than much-maligned Kmart.

And perhaps just as importantly, it doesn’t work in the market, either. HD’s results are pitiful: Since the day before Nardelli’s arrival on Dec. 14, 2000, Lowe’s split-adjusted share price has soared 210%. Home Depot’s is down 7%

So, tell me again how great this military stuff is, Bob?