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Talk about letting customers and shareholders down. Robert Nardelli, the former CEO of Home Depot, is walking away with a $210 million severance package. Not bad for a company whose stock fell 8% during the boss's six-year tenure.
And this occurs concurrently with Home Depot's policy of cutting payroll hours, reducing overtime hours, and generally cutting back on customer service. And what message does this send?
According to Scott Burns' recent Universal Press Syndicate column, "...the messages also come from current and former Home Depot employees. As one put it, 'If you think being a customer at Home Depot stinks, try being an employee.'"
Messages from Home Depot employees at locations across the country and in Canada tell the same story: The bonus system for managers is geared to cutting payroll hours. So that's what line managers do.
As a result, whole departments are ludicrously short-staffed, with reported instances of a single employee to cover multiple departments. Overtime is verboten. The problem is compounded by short-staffed checkouts.
For you and me, the result is simple: Home Depot maintains its return on shareholder equity and pleases Wall Street. It does this by reducing what one consulting firm calls Shopper Return on Investment — SROI. We value our time, but Home Depot's management metrics have systematically devalued it, just as Home Depot treated employees as liabilities rather than assets.
This is a sad state of affairs for a company founded by Bernie Marcus and Arthur Blank with a vision to, "to give the best customer service in the industry."
Now, the new guy is trying to turn things around. Burns' column goes on to say, "Frank Blake, who replaced the disastrous Robert Nardelli as chairman and chief executive, answers (in message 3,860) that he is sorry 'for all the stories you have shared.' He admits that Home Depot has let its customers down."
Then he tells us that it is already increasing staffing at its stores and that Home Depot is "'launching a nationwide program to recruit and hire skilled master tradespeople to staff our stores.'”
Time will tell. It is a bit confusing that a company this big could take its eye off the customer-centric ball, then reward the boss for a job poorly done.
MSNBC story is here.
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Comments
Elaine: I was really curious to get your take on how this compares with Circuit City's move last week to eliminate 3,400 top-line sales staff in an attempt to save $250 million in costs over two years?
David Carr, in the NY Times, speculated that because customers are so used to a poor shopping experience at CC anyway, not only would this not matter but the whole story would likely fail to get even any major media or market play because of it.
Posted by: Ryan Turner | 04.03.07
Thanks for writing, Ryan. I happened to be shopping for something at CC the day the store closings hit the media. The staff told me about it and I empathized. How sad. It seems that the Chairman, President and CEO, Philip J. Schoonover made a nice sum of $4.5 million in 2006 and still has over $5.4 million in stock options. Of course, it pales in comparison to The Home Depot CEO severance, but nevertheless, many CC employees who are supporting families will be unemployed unless they choose to apply for the open jobs at a lower salary. I still find it hard to imagine supporting any family on $8-9 an hour in this day and age.
Before joining the company, Schoonover was executive vice president, customer segments at Best Buy Co., Inc., from April 2004 until September 2004. He joined Best Buy in 1995 and previously served as executive vice president, new business development from February 2002 until April 2004; executive vice president, digital technology solutions from February 2001 until February 2002; and senior vice president, merchandising for five years. Best Buy is CC's #1 competitor.
CC is also outsourcing to IBM to manage its data-center operations, store support services, service desk operations, e-commerce hosting operations, network services, desktop support and other IT functions. Looks like these cost-cutting measures will help it improve its bottom line, and although that does show accountability to its shareholders, it does suck for the employees who were committed to the company.
I realize that profit margins on many electronic products are very low that revenue depends on volume sales. I'm not familiar with this industry, but I can imagine how costly it must be to operate large retail square footage and the infrastructure it takes behind the scenes.
If David Carr says customer service was poor before this, imagine the higher staff turnover rate for lower-wage earners. I imagine that the customer experience will deteriorate even further, and I wouldn't be surprised if they go under at some point.
I wonder how many people at the executive office got the axe?
Posted by: Elaine Fogel | 04.03.07
Thank you much for filling in those holes, Elaine. It makes me feel even less sympathy for CC's top-level woes, and more pain for their employees' misery.
No one will be axed at the top, and what's more, some will even be rewarded for turning around the very problem they helped to create in the first place.
You raise so many great points, centered on customer service experience, retail space, and infrastructure.
I'm thinking, specifically, of how Toys 'R' Us sealed its own demise with its stupid "supersize me" store concepts, filled with limited options, failing to keep up with trends like niche gaming and education toys, and losing ground to Zainy Brainy and Discovery Channel; online competitors; much less Wal-Mart with its better supplier channels and distribution system.
Even the basic store layout hadn't changed since the 70s. The corporate focus had been on growth (including overseas), instead of balancing customer and supplier satisfaction (shock!), and their sad story should serve as a cautionary tale.
What's so galling about both De(s)pot and CC is that they seem to be so used to expectations of bad consumer expectations about them that it has to feed into morale and an environment of poor customer service, poor quality, poor supplier relations, poor shareholder value.
It doesn't have to be this way, but if management rewards-- heck even celebrates-- poor performance, that's what the image is, no matter what else they may try to market. The dissonance can be defeaning and damning.
Posted by: Ryan Turner | 04.05.07
In comment to your post preaviously.
Interseting read about HD today 05/05/2008. Thursday your answer came about. How did HD do? It tanked my husband's job FdL WI. Terry was ans even still is majorly devoted to the company he is working for and will be till doors lock. He is much more understanding than I. And two bets workers like his dedication are the ones they loose and the "Young Adults" with out a strong work ethic will be transfered t other stores. What a crazy mixed up world.
Trish
Posted by: trishfishtraut | 05.05.08