Influx

The latest issue of Business Week has a great article highlighting the rise and recent fall of Bob Nardelli at Home Depot.

It shows some of the challenges involved for CEOs who want to turn things around and make big sweeping changes.

Lesson No1- Sales and Profits aren’t the Ultimate Metrics

You can turn sales and profits around, but if Wall St doesn’t get it, you haven’t done your job. Nardelli did a fantastic job with revenue growth and profitability, but Wall St didn’t recognize it and boost Home Depot’s share price accordingly.

Lesson No 2- Mess with the Culture at your Peril

Home Depot is a relatively young company, it was founded in 1978, the founders are still around and their influence is considerable. If you start butting heads with the culture, it can come back to bite you. Nardelli made a number of enemies inside the company, many who subsequently left the firm, but the bitterness festered.

Lesson No 3- Look After Your Shareholders

Nardelli tried to ignore the shareholders and famously at a recent annual general meeting, he limited questions to one minute, after which, the microphone was cut. He did this because he was worried about questions about his salary package. He also told the board not to attend. Some shareholders dumped the stock after the meeting.

Lesson No 4- It’s the Customer, Stupid

A core part of Home Depot’s early success was its emphasis on customer service. The average homeowner could go into the store and get information on their home improvement projects from people who knew what they were talking about. Nardelli replaced the experts with part-time students and customers were soon disappointed.

Nardelli was focused on-sales performance, profitability and efficiency, which he measured obsessively. However, ignoring the share price, employee morale and customer satisfaction, cost him his job. In addition, in final negotiations, he refused to tie his compensation to the stock price performance, an arrogance that was too much for most.

There’s no doubting Nardelli was and probably still is one of the finest corporate executives around, but corporate culture and Wall Street are two extremely powerful forces to try and compete against.