Barclay College Digital Forensics of IoT Devices Paper please check up the doc and follow the instructor.
please check up the doc and follow the instructor.
please check up the doc and follow the instructor.
thank you TAVIS COBURN
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. by Ram Charan
W
hen Robert Nardelli arrived at Home
Depot in December 2000, the deck seemed stacked
against the new CEO. He had no retailing experience and,
in fact, had spent an entire career in industrial, not consumer, businesses. His previous job was running General
Electric’s power systems division, whose multimilliondollar generating plants for industry and governments
were a far cry from $10 light switches for do-it-yourselfers.
e
r
u
t
l
u
C
Change
april 2006
61
YEL MAG CYAN BLACK
HOME DEPOT’S BLUEPRINT FOR
H o m e D e p o t’s B l u e p r i n t f o r C u l t u re C h a n g e
Nardelli also was taking over what seemed to be a
wildly successful company, with a 20-year record of
growth that had outpaced even Wal-Mart’s – but with latent financial and operational problems that threatened
its continued growth, and even its future, if they weren’t
quickly addressed.
To top it off, Nardelli’s exacting and tough-minded approach, which he learned at General Electric, set him on
a collision course with the freewheeling yet famously
close-knit culture fostered by his predecessors, Home
Depot’s legendary cofounders, Bernie Marcus and Arthur
Blank. It was this culture that Nardelli had to reshape
if he hoped to bring some big-company muscle to the
cooled from the breakneck pace of the late 1990s, the
company continues to enjoy robust and profitable growth.
Revenue climbed to around $80 billion in 2005, and earnings per share have more than doubled since 2000. Just
as important, a platform has been built to generate future growth.
I worked with Bob Nardelli, Dennis Donovan, and
other senior executives during that period, and I know
that these changes in the business would not have happened without a real and observable change in the culture. Home Depot’s experience shows – in perhaps the
best example I have seen in my 30-year career–that a cultural transition can be achieved systematically, even
n sales
i
n
o
i
l
l
i
b
0
zero to $5
m
o
r
f
t
o
p
ome De
What got H
wasn’t going to get it to the
next $50 billion.
entrepreneurial organization (which, with revenue of
$46 billion in 2000, was sometimes referred to as a “$40 billion start-up”) and put the retailer’s growth on a secure
foundation.
Not surprisingly, Nardelli tackled the challenge partly
through personal leadership, mixing encouragement with
ultimatum and fostering desired cultural norms like
accountability through his own behavior. But he also
adopted and adapted an array of specific tools designed to
gradually change the company’s culture – many of them
initiated, coordinated, and implemented by an unlikely
lieutenant.
Shortly after arriving, Nardelli hired an old colleague
from GE, Dennis Donovan, as his head of human resources. By placing a trusted associate in a position
known for its conspicuous lack of influence in most executive suites – and by making him one of Home Depot’s
highest paid executives – Nardelli signaled that changing
the culture would be central to getting the company
where it needed to go.
Over the past five years, Home Depot’s performance
has indeed been put on a stable footing. Although its
share price is well below the peak it achieved shortly before Nardelli arrived, and the rate of revenue increase has
Ram Charan has advised senior management and the boards
of directors at numerous companies, Home Depot among
them. He is the author of many articles and books, including
“Conquering a Culture of Indecision” (HBR January 2006)
and Know-How, coming in October from Crown Business.
62
under less than favorable conditions, not simply through
the charisma of the person leading the change but
through the use of mechanisms that alter the social interactions of people in the organization.
The effectiveness of this approach was perhaps most
dramatically displayed when a group of Home Depot employees, in a public and spontaneous way, threw their support behind the change in an incident guaranteed to give
even the toughest CEO goose bumps.
An Entrepreneurial
Environment
Home Depot is one of the business success stories of the
past quarter century. Founded in 1978 in Atlanta, the company grew to more than 1,100 big-box stores by the end of
2000; it reached the $40 billion revenue mark faster than
any retailer in history. The company’s success stemmed
from several distinctive characteristics, including the
warehouse feel of its orange stores, complete with low
lighting, cluttered aisles, and sparse signage; a “stack it
high, watch it fly” philosophy that reflected a primary
focus on sales growth; and extraordinary store manager
autonomy, aimed at spurring innovation and allowing
managers to act quickly when they sensed a change in
local market conditions.
Home Depot’s culture, set primarily by the charismatic
Marcus (known universally among employees as Bernie),
was itself a major factor in the company’s success. It was
marked by an entrepreneurial high-spiritedness and a
harvard business review
H o m e D e p o t’s B l u e p r i n t f o r C u l t u re C h a n g e
april 2006
A Dose of Discipline
Nardelli’s arrival at Home Depot came as a shock. No one
had expected that Marcus (then chairman) and Blank
(then CEO) would be leaving anytime soon. Most employees simply couldn’t picture the company without these father figures. And if there was going to be change at the
top of this close-knit organization, in which promotions
had nearly always come from within, no one wanted, as
Nardelli himself acknowledges, an outsider who would
“GE-ize their company and culture.”
But the Home Depot board had decided that a seasoned
manager with the expertise to drive continued growth
needed to be brought in to run what had become a giant
YEL MAG CYAN BLACK
willingness to take risks; a passionate commitment to
customers, colleagues, the company, and the community; and an aversion to anything that felt bureaucratic
or hierarchical.
Longtime Home Depot executives recall the disdain
with which store managers used to view directives from
headquarters. Because everyone believed that managers
should spend their time on the sales floor with customers,
company paperwork often ended up buried under piles
on someone’s desk, tossed in a wastebasket – or even
marked with a company-supplied “B.S.” stamp and sent
back to the head office. Such behavior was seen as a sign
of the company’s unflinching focus on the customer.
“The idea was to challenge senior managers to think
about whether what they were sending out to the stores was worth store
managers’ time,” says Tom Taylor, who
started at Home Depot in 1983 as a
parking lot attendant and today is executive vice president for merchandising and marketing.
There was a downside to this state of
affairs, though. Along with arguably
low-value corporate paperwork, an important store safety directive might disappear among the unread memos. And
while their sense of entitled autonomy
might have freed store managers to respond to local market conditions, it
paradoxically made the company as a
whole less flexible. A regional buyer
might agree to give a supplier of, say,
garden furniture, prime display space
in dozens of stores in exchange for a
price discount of 10% – only to have individual store managers ignore the
agreement because they thought it was
a bad idea. And as the chain mushroomed in size, the lack of strong career development programs was leading Home Depot to run short of the
talented store managers on whom its
business model depended.
All in all, the cultural characteristics
that had served the retailer well when it
had 200 stores started to undermine
it when Lowe’s began to move into
Home Depot’s big metropolitan markets from its small-town base in the
mid-1990s. Individual autonomy and
a focus on sales at any cost eroded profitability, particularly as stores weren’t
able to benefit from economies of scale
that an organization the size of Home
Depot should have enjoyed.
63
H o m e D e p o t’s B l u e p r i n t f o r C u l t u re C h a n g e
business. The first step would be to deal with immediate
problems that weren’t readily apparent either to employees or investors. In addition to the shortage of experienced
store and district managers and the challenge from Lowe’s,
which was successfully attracting women shoppers with its
brighter stores and a focus on fashionable kitchen, bath,
and home-furnishing products, these problems included
poor inventory turns, low margins, and weak cash flow.
Nardelli laid out a three-part strategy: enhance the core
by improving the profitability of current and future stores
in existing markets; extend the business by offering related services such as tool rental and home installation of
Home Depot products; and expand the market, both geographically and by serving new kinds of customers, such
as big construction contractors.
To meet his strategy goals, Nardelli had to build an organization that understood the opportunity in, and the
importance of, taking advantage of its growing scale.
Some functions, such as purchasing (or merchandising),
needed to be centralized to leverage the buying power
that a giant company could wield. Previously autonomous functional, regional, and store operations needed
to collaborate – merchandising needed to work more
closely with store operations, for instance, to avoid conflicts like the one over the placement of garden furniture.
This would be aided by making detailed performance
data transparent to all the relevant parties simultaneously, so that people could base decisions on shared information. The merits of the current store environment
needed to be reevaluated; its lack of signage and haphazard layout made increasingly less sense for time-pressed
shoppers. And a new emphasis needed to be placed on
employee training, not only to bolster the managerial
ranks but also to transform orange-aproned sales associates from cheerful greeters into knowledgeable advisers
who could help customers solve their home improvement
problems. As Nardelli likes to say,“What so effectively got
Home Depot from zero to $50 billion in sales wasn’t going
to get it to the next $50 billion.”
This new strategy would require a careful renovation of
Home Depot’s strong culture. Imagine the challenge:
Clearly, you wanted to build on the best aspects of the existing culture, particularly people’s unusually passionate
commitment to the customer and to the company. But
you wanted them to rely primarily on data, not on intuition, to assess business and marketplace conditions. And
you wanted people to coordinate their efforts, anathema
to many in Home Depot’s entrepreneurial environment.
You wanted people to be accountable for meeting companywide financial and other targets, not contemptuous
of them. You wanted people to deliver not just sales growth
but also other components of business performance that
drive profitability.
Resistance to the changes was fierce, particularly from
managers: Much of the top executive team left during
64
Nardelli’s first year. But some saw merit in the approach
and in fact tried to persuade distraught colleagues to give
the new ideas a chance. Over time, attitudes slowly began
to change. Some of this resulted from Nardelli’s successful efforts to get people to see for themselves why the
strategy made sense. But other, more concrete tools, designed to ingrain the new culture into the organization,
ultimately prompted employees to pick up a hammer and
paintbrush and join the renovation project.
Tools for Culture Change
The mechanisms that Home Depot employed, working in
concert, changed what I call a company’s social architecture – that is, the collective ways in which people work together across an organization to support the business
model. Many of them are familiar operating tools. But
they were employed in such a way that they changed the
human side of the equation: people’s behavior, beliefs, social interactions, and the nature of their decision making.
It was this social element that allowed Home Depot to
achieve – and, more important, to sustain – its dauntingly
large-scale and complex cultural transformation. (For a list
of some of the tools Home Depot used, see the sidebar
“A Culture Change Toolbox.”)
The mechanisms fell into several categories: metrics
(which describe what the culture values and make clear
what people will be held accountable for); processes
(which change how work is done and thus integrate the
new culture into the organization); programs (which generate support for and provide the first demonstration of
the new culture’s effectiveness); and structures (which
provide a framework for the new culture to grow, often by
changing where and how decisions are made). Let us examine each in turn.
Metrics: to emphasize new cultural priorities. One of
the early things Nardelli and Donovan did was to begin
instituting common metrics that produced companywide
data in areas that hadn’t been consistently measured before. These new performance measurements clearly had
an operational purpose, but they also had an important
psychological effect. Initially, these metrics showed employees that things weren’t going as well as many had
thought. For example, data quantifying customer perceptions of the Home Depot shopping experience replaced
anecdotal reports of customer satisfaction. Such data
made clear that some deeply held beliefs about the
stores – the importance, say, of low lighting and other
warehouse-like characteristics–needed to be reevaluated.
At the same time, the metrics made clear and reinforced the collaborative behavior and attitudes that
Nardelli and Donovan wanted to encourage. Take accountability. When Donovan arrived at Home Depot, he
found the company’s performance assessment practices
less than rigorous. Reviews were usually qualitative and
harvard business review
H o m e D e p o t’s B l u e p r i n t f o r C u l t u re C h a n g e
april 2006
A CULTURE CHANGE TOOLBOX
For large corporations to achieve a major – and permanent–change in business performance, they must create
a sustainable change in culture. Aware of this, the leaders at Home Depot identified key aspects of the culture
that had to change for the company to meet the new performance goals. They then adopted a variety of standard
tools in such a way that they strengthened the business
and modified the culture. As the mechanisms took hold,
the energy of employees became positive, further accelerating the change.
Among the tools Home Depot has used are:
Data templates, detailed forms to organize performance data for quarterly business review meetings,
which encourage personal accountability, give employees a deeper understanding of business performance,
and foster collaboration by putting people on the same
page when making decisions.
Strategic Operating and Resource Planning, or
SOAR, which is built around an annual eight-day session
when Home Depot’s 12 top executives work together to
balance priorities and select the investments most likely
to achieve financial and other business targets.
Disciplined talent reviews, conducted frequently –
and consistently from one to the next–which emphasize
the need for candor and fairness in dealing with employee performance.
Store manager learning forums that, through role
playing, simulations, and other exercises, highlighted
the level of competitive threats and made transparent
the company’s future plans, helping attendees understand the need for the new strategy.
Monday morning conference calls, involving the
company’s top 15 executives, during which accountability (for business results and for promises made the previous week) is emphasized, as is sharing information
(about operations, customers, markets, and competitive
conditions).
Employee task forces, staffed by individuals from all
levels of the company, to elicit unfiltered input from the
people closest to a problem and gain their support for
the changes the solution requires.
An array of leadership development programs, including the Future Leaders Program, the Store Leadership Program, and the Merchandising Leadership Program, which raise the bar for performance and ensure
continuity of the culture.
Mapping of the HR process, which identified 300
ways that HR tasks could be improved and highlighted
the importance of instituting processes to sustain cultural change.
YEL MAG CYAN BLACK
subjective, and standards varied from region to region or
even from manager to manager. Donovan would meet
with, say, a district manager to go through the performance of store managers and, after some probing, often
find managers who enjoyed superior ratings but whose
stores were delivering mediocre performance.
Donovan wasn’t surprised, given the subjective nature
of the performance reviews. As he says,“One of the hardest things for a leader to do is to look somebody in the eye
and be honest with them about their performance.” So
Donovan introduced a standard, companywide performance management process that used mostly quantitative criteria. This made it easier for managers to assess
their employees honestly and fairly, enabling them to
make the tough calls and put the right people in the right
jobs. It also, incidentally, reduced the more than 150 employee evaluation forms used throughout the company to
three one-page electronic documents.
Metrics were also used to promote a savvier understanding of the business. For example, with standardized,
detailed business data, people could see the relationship
among revenue, margins, inventory turns, cash flow, and
other measures from store to store and region to region.
Getting managers throughout the company to look beyond sales as the sole business goal spurred them to make
better decisions.
This might seem obvious, but it’s a common problem of
companies in periods of rapid expansion. Carl Liebert,
executive vice president for Home Depot stores, who
worked at Circuit City during a period of high growth in
the early 1990s, says that in such an environment, “you
don’t spend a lot of time thinking about inventory turns.
Instead, you focus on opening more stores because the
customer loves your box.” That’s fine until you suddenly
find yourself with a competitor that has its own lovely
box, as Circuit City did with Best Buy – and Home Depot
did with Lowe’s.
Companywide metrics also provided a platform for collaboration. By making various aspects of Home Depot’s
performance transparent to all employees, managers
could clearly see – in cold, hard facts – the broader financial impact of their own decisions. This prompted candid
discussions about how to improve that performance and
focused employees’ vaunted commitment on taking the
needed actions.
For example, people in merchandising, operations, and
stores traditionally distrust one another, as the individuals who buy the goods, get them to the retail outlet, and
sell them to the customer seek to shift blame for poor performance along the value chain they all share. Paul
Raines, the vice president for stores in Home Depot’s
southern region, recounts that in the pre-Nardelli years
a meeting involving these three groups “was basically a
food fight. We would all blame each other for problems,
and it was very anecdotal: ‘You didn’t send me that trac-
65
H o m e D e p o t’s B l u e p r i n t f o r C u l t u re C h a n g e
tor I needed’ or ‘Your stores are terrible.’ We might throw
a P&L up on the wall, but that was about it.”
Today, the quarterly business review meetings that
Raines runs for his region are hardly polite tea parties.
But the tension is c…
Purchase answer to see full
attachment