Home » Blog » Case Studies » #25 Nardelli Predicted

#25 Nardelli Predicted

by Steven Cerri on January 15, 2007

Nardelli Is Fired

“Nardelli is fired from Home Depot”

Good evening!

Well, it’s finally happened. Bob Nardelli, CEO of Home Depot has been fired.

I knew it was going to happen, I just didn’t know when. When I saw his picture on the cover of BusinessWeek a year ago, with the magazine bragging about his “tough” management style, I knew it was only a matter of time. Then I predicted he had a year or two left. Well he had a year, apparently.

Why was I so sure Nardelli would fail or at the very least have a very difficult time of it? Because he wasn’t practicing something I call “Contextual Management and Leadership”©, CML for short. Now it’s true, I’ve developed this program myself, but it’s based on what I believe leads to a better way to manage in any given situation.

My approach to this whole management/leadership choice thing is based on the idea that the best management or leadership style is tied to the situation at hand. Therefore, the manager or leader is most effective if he or she selects a management or leadership style based on the parameters of the given situation.

(Now I know that everyone “thinks” they do this. I know that most managers and leaders think they are modifying their style based on the situattion as they see it, but I don’t think so. When you read further, you’ll see that my idea of adjusting your management style to the situation is very different. By the way, the given management or leadership situation is what I call the “context”.)

Now Nardelli came from GE in large scale manufacturing and went to Home Depot, a retailer. He attempted to use the things that worked in manufacturing in a retail business. But I’m getting ahead of myself. Lets look at two ex-GE guys and look a little deeper into STCI/CML© to see exactly what I mean.

STCI/CML© is based on the idea that there is a best way to manage or lead in any given situation and that best way is based on six parameters. The parameters are the following:

1. Who has the expertise, the manager or the employees?

2. What is the project’s risk?

3. What is the project schedule?

4. What is the manner in which the employees want to be managed?

5. What and how does the manager want the employees to learn?

6. What are the complexities and interfaces of the task or project?

The current state of the project, task, or organization with respect to these six parameters will lead the manager using STCI/CML© to the best management style for the given situation.

So now lets look at two different approaches used by two different ex-GE managers who went to new companies they knew very little about. The two ex-GE employees are Robert J. Nardelli and James W. McNerney. Both were past over by Jack Welch when he selected Jeffrey R. Immelt to succeed him. Nardelli left GE and ended up as CEO of Home Depot. McNerney left GE and ended up as CEO of Boeing Co. Now lets look at how both of these men measured up with respect to the six parameters I’ve listed and how they handled their respective jobs and what the results have been so far.

With respect to Parameter #1: Who has the expertise, the manager or the employees?

In both cases the expertise lies with the employees. Nardelli had never been in a retail business and McNerney had never headed up an airplane manufacturer. Both men were on the short end of the straw when it came to understanding what they had taken over. McNerney understood this fact and spent the first six months talking to employees, building consensus, and attempting to understand the business.

Nardelli was certain he had the answer and everyone else didn’t. By his own statements, the people of Home Depot didn’t know what was going on and he was there to fix it. He was there to fix a business he had no experience in.

With respect to Parameter #2: What is the project’s risk?

In both cases the risk was relatively low. Home Depot was not in any serious trouble even though the stock price had been flat for a while. It’s probably fair to say that Nardelli had no where to go but up.

McNerney was also in a relatively stable environment. Even though, when he took over Boeing it was reeling from some ethics problems and the European airplane manufacturer was beating Boeing in sales, McNerney was also taking over a company that could probably be said to have a potentially bright future. So this parameter is not a significant one with respect to the selection of a management style in either case.

With respect to Parameter #3: What is the project schedule?

In both cases the schedule is not a serious consideration. Therefore, this parameter is not a significant one with respect to the selection of a management style in either case.

With respect to Parameter #4: What is the manner in which the employees want to be managed?

In both cases this is a big deal. Both companies, Home Depot and Boeing had a history of a unique, entrenched, and important culture. To ignore this culture or to make war with it is a huge risk. McNerney embraced the Boeing culture, giving respect to the engineers, manufactures, and to all employees for their ability to contribute.

Nardelli seems to have had contempt for the Home Depot culture he inherited and didn’t hide his feelings. Big mistake!

With respect to Parameter #5: What and how does the manager want the employees to learn?

Nardelli wanted the Home Depot employees to learn discipline, a reasonable goal. McNerney seems to have wanted the Boeing employees to learn to focus. Another reasonable goal.

However, the learning goals here are not important drivers in the selection of an optimum management and leadership style.

Finally, with respect to Parameter #6: What are the complexities and interfaces of the task or project?

In both cases this is a big deal. While Boeing had many complexities and interfaces with their products and vendors, Home Depot had many complexities and interfaces with respect to their stores and suppliers, as well. In both cases, the complexities of the interfaces coupled with the lack of knowledge of these businesses by the CEOs, leads to the conclusion that the expertise, once again, rests with the employees.

In summary of these six parameters, both men took over very similar situations. They both had very similar environments they stepped in to, at least as they relate to the six STCI/CML parameters. In looking at the six parameters, there are only two parameters that stand out as drivers for the selection of the best management style and they are:

Parameter #1: Who has the expertise, the employees or the manager?

Parameter #4: The manner in which the employees want to be managed?

These two parameters drive the preferred management processes toward a participative management style. When the knowledge rests with the employees it is foolish for a manager to pretend he or she can dictate what the “right answer” is. And with an entrenched, long standing culture, it is equally foolish for a manager to assume that he or she can turn the culture over quickly without a great deal of “blood-letting”. In both cases, Home Depot and Boeing, the STCI/CML contextual evaluation would lead to the selection of a participative, collaborative management style.

The participative, collaborative style is what McNerney picked at Boeing and we can certainly see the results of that. Boeing is doing very well indeed.

The directive, authoritative style is what Nardelli picked at Home Depot and we can certainly see the results of that. Home Depot got rid of him.

You don’t have to be tough to be successful, unless it’s called for, and in some cases it is. But in all cases you have to be smart.

It only remains now to see what Nardelli’s successor does. Stay tuned, (and drop me a comment).

Be well

Steven Cerri

Previous post:

Next post: