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Managing Strategic Change: Home Depot - Essay Example

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This paper “Managing Strategic Change: Home Depot” gives a brief background of the events at Home Depot leading up to the resignation of Robert Nardelli, its Chairman and CEO in early 2007. There are two major challenges facing the in-coming CEO…
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Managing Strategic Change: Home Depot
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Download file to see previous pages In early 2007, Home Depot was the second largest US retailer after Wal-Mart however; its share price was lower and stagnant in comparison to its competitors such as Lowe’s, a customer satisfaction survey rated it at the bottom of the heap of major U.S. retailers in customer service and its staff felt alienated by the new culture introduced by Robert Nardelli during his five-year reign as Chairman and CEO. On the other hand, Robert Nardelli’s had a string of successes that enabled Home Depot increase in profitability and streamline its operations. Nardelli streamlined Home Depot’s operations through cost reduction tactics such as centralizing purchasing and merchandising, increasing the number of part-time employees and increasing organizational efficiency through the adoption of Six Sigma approach and modernizing the retailer’s technological infrastructure and IT systems (Ton & Ross, 2009).
The problem though was that all through his tenure, Nardelli had failed to reassure Wall Street to the extent of improving Home Depot’s share price. The board, presumably, acting on behalf of the firm’s shareholders adopted the classical agency theory approach of tying CEO pay to the performance of the company stock. Nardelli who was not happy with this proposition, opted to resign and left Frank Blake the new Chairman and CEO with two major challenges.
The challenges facing the new Chairman and CEO were firstly, and more importantly, Nardelli had changed Home Depot’s service encounter triad from contact-personnel domination to service organization domination. This left employees feeling alienated and customer service fell. Secondly, Nardelli had begun a strategic shift in Home Depot’s target market from its traditional consumer retail to now focusing on selling to professional contractors through HD Supply.
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