Imperial era ends at Home Depot

Politically astute CEO takes reins from authoritarian leader

February 09, 2007|By Michael Barbaro | Michael Barbaro,New York Times News Service

For six years, it was a perk Home Depot's chief executive, Robert L. Nardelli, could not do without: a catered lunch for his top deputies, served daily on the 22nd floor of the company's headquarters in Atlanta.

But several days into his tenure as Nardelli's successor, Francis S. Blake quietly abolished the free meal, telling senior executives to take the elevator down to the first floor and, on their own dime, eat with the company's rank and file in the cafeteria, according to an employee.

It is the kind of symbolic gesture that has come to define Blake's short time as head of the nation's largest home improvement retailer, as he tries to distance himself from the tumultuous reign of Nardelli, who was ousted several weeks ago over his sky-high pay package and authoritarian style.

Blake's message, however, could not be any less subtle: The era of the imperial chief executive at Home Depot is over.

To underscore the point, Blake has distributed an old company icon, called the Inverted Pyramid, that lays out the retailer's hierarchy, with customers and employees above the chief executive on the bottom. The image, which fell out of favor under Nardelli, has begun popping up in store break rooms and office cubicles across the company.

"It's not about me," Blake has told investors and analysts in introductory meetings, according to people who have attended the sessions.

But for all his humility, Blake, 57, is making his presence known in a hurry.

In under 40 days, he has sharply cut his own pay, put an activist investor on the board, nudged out four former General Electric executives recruited by Nardelli.

He also has left hints that he could eventually sell off the $12 billion wholesale supply business that he himself helped build, according to people briefed on the matter.

The common theme? Returning Home Depot to its humble retail roots and erasing the widespread perception that it has lost its focus on selling hammers, light bulbs and paint brushes.

These are unexpected developments from a chief executive many analysts saw as Nardelli Lite. After all, Blake followed Nardelli from General Electric to Home Depot. But the similarities end there.

Nardelli, a bullish, impeccably dressed former football player, spent nearly his entire career climbing the corporate ladder at GE.

Blake, by contrast, has the skill of a diplomat, having served as deputy secretary for the U.S. Department of Energy and general counsel for the Environmental Protection Agency.

A soft-spoken, slight man who carries a beat-up leather briefcase, he appears to be emerging from Nardelli's shadow, as a disciple who rejects the style of his former boss.

There is a lot riding on Blake's ability to correct Home Depot's course. The company booked revenue of $90 billion last year, but sales at stores open at least a year have fallen well behind those of its rival, Lowe's, as Nardelli cut employee hours and alienated the older, experienced workers who gave the chain its reputation for helpful, expert staff members.

And analysts worry that its fast-growing supply business, focused on professional builders, rather than do-it-yourself shoppers, has siphoned resources and attention from its far bigger retail division. Both issues have weighed on the stock price, which has remained stagnant for four years.

Blake has discussed with his colleagues whether he should consider selling the wholesale supply business, Nardelli's pet project, according to a person outside the company briefed on the matter.

And Blake subtly hinted at that prospect in meetings with some investors when he asked them their opinion of the supply business and its value, according to people familiar with the sessions.

Blake declined to be interviewed. But people who have met with him since he became chief executive, or have been briefed on these meetings, said he planned to improve the retail business by focusing on employee morale and customer service in the chain's 2,000 stores.

He has also worked to change the tone of communications from Home Depot's headquarters.

Under Nardelli, the Store Support Center, as it is called, often served as the bearer of bad news - of sales goals missed and complicated new programs to put in place. Blake has told analysts he wants to return the office to its supporting role in the business, rather than a main office relentlessly barking orders to stores.

Blake's starkest break with Nardelli appears to have emerged over Home Depot's wholesale supply business. Nardelli, arguing that the consumer home improvement market was becoming saturated, spent $7 billion to buy dozens of companies that catered to professional contractors. The new division's sales were broken out each quarter, granting it a stand-alone status within the company.

But profit margins in the wholesale business are much lower than those in retail and the cost savings promised by the new business have not materialized as quickly as investors had hoped.

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