Home Depot went through many changes as a result of new CEO Frank Blake and Vice President of Human Resources, Tim Crow. The culture inherited by both Executives from their predecessors went through a transformation process for the business to thrive once again. Blake and Crow justified laying off 1,200 workers as a result of their vision to enhance Home Depot’s position in the market and to go back to the organizations foundations embedded by founders Arthur Blank and Bernard Marcus. Specifically, a closer look at the Human Resources function in the organization was focused on in order to align an HR strategy with the business model. This paper will discuss the strategic initiatives taken by Blake and Crow and how they created a sustainable competitive advantage at Home Depot by focusing on strategic HR. Further, this paper will examine John Kotter’s Eight-step Change Model, the Organization and People Strategy, the “outside-in” HR approach, and Lepak and Snell’s HR Model.
Organizational change became a necessity at Home Depot when the business failed to increase shareholder value and rivals were outperforming the company. Change at Home Depot started at the top with new CEO Frank Blake and Vice President of Human Resources, Tim Crow. Specifically, Blake and Crow transformed the way Human Resources contributed to the organizations success. Blake and Crow’s approach is comparable to a change model put forth by John Kotter—the Eight-steps Change Model. This model focuses on driving organizational changes through analysis, management, and communication. The first step in Kotter’s model is to establish a sense of urgency (Esther & Green, 2009). That is, looking at conditions within the organization to see where adjustments are needed. In Home Depot’s case, HR and its strategic role needed some attention; hence it was analyzed and modified to meet business needs. In the second step, Kotter’s suggestion is to find groups of people who can work together (Esther & Green, 2009). At Home Depot, the Store manager and HR manager were not working “together”. There seemed to be a barrier as one HR manager, overwhelmed with tasks, could not produce at the highest level. The third step in the Eight-step Change Model elaborates on creating a vision (Esther & Green, 2009). Both Blake and Crow had a vision when they took office.
What is more, both Executives wanted to go back to Home Depot’s core principles to see what changes should be made for the business to out-perform its rivals. Moving forward, the fourth and fifth steps in Kotter’s model talk about the importance of communication (fourth step) and empowering the vision onto others (fifth step) (Esther & Green, 2009). This step at Home Depot was critical—Tim Crow communicated his vision to Frank Blake and others in the company and drove them to change the way HR performed in the organization by eliminating positions that were not efficient. Step six in Kotter’s model recommends creating short-term goals (Esther & Green, 2009). Blake and Crow set realistic short-term goals and shared why taking away an HR manager from each store would be a beneficial move. That is, the Store managers gained 3 HR Generalist instead of one HR manager (Mello, 2010). Step seven in Kotter’s model rewards employees for promoting the change and step eight defends the organization’s position on how the new change leads to corporate success (Esther & Green, 2009). Home Depot has taken initiatives discussed later in this paper to carry out steps seven and eight. By using John Kotter’s Change Model, Home Depot went from not having an effective Human Resources presence to employing an operational HR strategy. Right now, Home Depot’s current state of HR is embedded with the company’s overall corporate strategy.
The organization has HR professionals who are true business partners, something Tim Crow planned and worked towards during the Human Resources Planning (HRP) stage. Moreover, Crow has taken a strategic approach, one that compares to the Organization and People Strategy. The strategy focuses on three key areas: Reward and Recognition, Talent Management, and Organizational Effectiveness (Armstrong, 2011). Reward and Recognition programs at HD consist of the following: Success Sharing for stores that achieve sales targets (paid out $63 million in 2007), Homer Badges for employees who exemplify company values, and the Product Knowledge Recognition program to reward learning initiatives (Crow, 2008). As far as the Talent Management aspect of the strategy, Home Depot has a Master Trade Specialist program in place that hired 3,000 trade specialists who are licensed electricians and plumbers (Crow, 2008). What is more, the company has HR managers who are more involved than their predecessors with Store managers and the company has its own insourced call center to address employee concerns. To accomplish the third component of the Organization and People Strategy—Organizational Effectiveness, Home Depot has the Aprons on the Floor program, action based training modules, and an Aware Line telephone service for individuals to call and comment on particular situations (Crow, 2008).
Before Blake and Crow took over Home Depot, it was led by former CEO Robert Nardelli and his regime. Nardelli and his choice of Executives turned the Home Depot culture upside down. That is, company officers were at the top, employees in the middle, and customers on the bottom of the pyramid. It took Crow’s strategic mindset to turn the pyramid back to its original position. Further, Blake played a significant role by making employee morale and career development a strategic priority (Crow, 2008). Blake and Crow did not turn the corporation around overnight. Instead, it was an ongoing process that needed commitment from everyone in the company. The reduction in force was the first step. The layoffs assisted Home Depot to take an “outside-in” approach to focus on strategic HR. This type of approach starts with analyzing the customer, competitor, and other challenges faced by the business (Armstrong, 2011). Further, the “outside-in” approach tackles ineffective HR practices that should be revisited and aligned with corporate strategies. To integrate corporate and HR strategies, Home Depot replaced Human
Resources managers from each store with additional Sales Associates (Mello, 2010). As Home Depot moves forward with strategic HR in the organization, the focus is on both the technical and managerial strategies. Technical strategies deal with the mathematical and behavioral methods of forecasting HR needs while managerial strategies consist of ways decision-makers tackle human resource issues (Reilly & Williams, 2006). Examples of technical strategies at Home Depot are the reduction of 1,200 human resource positions and establishing fresh roles for new HR teams. From a managerial standpoint, instead of having one Human Resource manager inundated with tasks, the three new Human Resources Generalist each are responsible for one function only—staffing and development, associate relations, and performance management (Mello, 2010). Both technical and managerial HR strategies are helping create a sustainable competitive advantage at Home Depot. When Crow decided to eliminate positions, resistance was inevitable. However, the cuts were an advantage to HR at Home Depot because organizational resources were not being allocated in the most efficient way. The trade-off of having a Human Resources manager in each store was the lack of manpower on the floor and that meant shifting away from selling merchandise.
By eliminating the HR manager position and creating regional HR teams, the organization went back to focusing on its core competence of providing customer service and increasing sales. Revenue growth at Home Depot suggests HR regional teams are better than one Human Resource manager in each store. Further, Home Depot’s reasoning behind changing the function of Human Resources can be examined closely by using the Lepak and Snell Model. Lepak and Snell have four quadrants in their model which classify Human Resources configurations. Right now, Home Depot appears to fall under the second quadrant. That is, the focus is on Job-based Employment and the company has Productivity Based HR (Mello, 2010). However, Home Depot is striving to reach Quadrant I: Knowledge-based Employment and Commitment-Based HR by having programs such as the Master Trade Specialist and a robust HR system in place. Overtime, Home Depot can drive their HR strategy to reach Quadrant I to get the most out of their business objectives.
Home Depot is an example of how strategic HR can influence growth, productivity, and success in an organization. It starts with the willingness of the organization’s leaders to drive change. When Black and Crow eliminated 1,200 employees, the move was alarming to current workers and others in the industry. However, to revamp the HR strategy, layoffs were a necessity. By using theories similar to Kotter’s Eight-step Change Model, the People and Organization strategy, the HR “outside-in” approach, and Lepak and Snell’s HR Model, Blake and Crow turned around Home Depot’s culture to focus on customer service—its core business competence. Further, the company now has HR business partners who act as liaisons to Store managers to have an effective HR presence in stores. Home Depot is headed in the right direction as a result of its strategic HR focus.
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