Lessons From Home Depot's Bob Nardelli--Why Command And Control Is So Bad.

Bruce Nussbaum

I just got back from a long stay in Sante Fe to gather my thoughts on innovation and design to see what I consider to be one of the great enemies of innovation--Home Depot's CEO Bob Nardelli--bite the dust. Nardelli is a classic, GE-trained Six Sigma, command-and-control CEO and he imposed his mechanical process on a company that was known for its great fuzzy-front-end, pro-consumer culture. At a time when companies are learning that they are in the business of building tools to empower customers to create their own, personal products and services, Home Depot was literally in that space decades ago. It faltered and brought in a systems guy--trained in 1990s GE--and made the classic mistake that other companies make. Unfortunately, the new guy replacing Nardelli is another GE-alumnus. Let's hope he's more like Jeff Immelt than Nardelli.

Nardelli came into Home Depot with a managerial style that was already obsolete and being replaced at GE by Immelt with his emphasis on eco-imagination. Autocratic top-down, command and control works great when you focus on process--cost and quality. Six Sigma measures all that stuff wonderfully. Nardelli couldn't see beyond this. He hired dozens of command-and-control military guys to manage. He shifted Home Depot away from retail to a new contracting business that could more easily be controlled and measured. He was comfortable with this low-margin, wholesale business because it fit into his managerial style. When you live by measurement and numbers, that's what you build--things you can easily measure--such as whole contracting operations. Nardelli gutted the retail side by cutting the great, knowledgeable salespeople who were so helpful to customers. Seth Godin gets it right when he says that consumer complaints about Home Depot soared under Nardelli. He alienated his customers, his employees and ultimately, his shareholders, who were infuriated at Nardelli's huge compensation while the stock languished. Nardelli's arrogant behavior at the last annual meeting seemed to seal his fate. His compliant board which gave him so much money despite that lagging stock price, finally bought him out with an outrageous package. They really should be following Nardelli out the door themselves.

The truth is that in the new global businss culture, process controls and metrics are critical to any big company but they are now sediment, one of the things that is commoditized and laid down on the corporate structure to make way for the discipline and process of innovation. Immelt gets this at GE. But the graduates of GE who learned their management styles in the 90s often do not get it.

Partnering with your consumers, innovating with them, managing insights, raising the level of risk-taking, pursuing high-margin, new products, leading collectively and through example--these are some of the traits for 21st century CEOs. Nardelli had few of them. It's time for Home Depot to get back to its DNA before it's too late. Another round of 20th century GEism and the company will get sold to the private equity guys.

Before it's here, it's on the Bloomberg Terminal.