Dallas Morning News Columnist Scott Burns has written several times about Home Depot. In this recent column he compares the bold action Henry Ford took with the action Home Depot’s new CEO, Frank Blake has taken. Scott reports that Frank is going to hire 15,000 new workers after his predecessor, “the disastrous Robert Nardelli,” as Scott refers to him, had cut back on employee staffing to reduce costs. Scott goes on to report that this is an expansion of a mere 5% in HD’s work force.
Scott points out that Henry Ford:
…chopped the workday down to eight hours. He doubled workers’ daily wages. He did not do this out of compassion. He had no desire to share the wealth. He made a hardheaded business decision.
Absenteeism plummeted. Worker turnover virtually disappeared. So did the number of accidents. Ditto the number of manufacturing defects. Productivity soared. And the automotive age was born.
Bob Nardelli is gone. The straw that broke the camel’s back was that he rebuffed his board when they asked to tie his compensation to stock prices. He said he couldn’t control them. Had he invested in his employees and continued HD’s emphasis on customer service, he wouldn’t have wanted to control stock prices because they might have been rising out of sight.
Instead, BusinessWeek reported that “Home Depot stock prices have been sluggish in a rising economy.” What if Mr. Nardelli had invested more in hiring and training his employees? What if he had positioned Home Depot to be the Nordstrom’s of the DIY sector? I believe the stock would have been much higher, and Lowe’s wouldn’t have captured as many HD customers as it has.
Despite the fact that my sons are shareholders in Home Depot (they each own one share-thanks, Granddad!) we no longer shop there. I’ve become a Lowe’s customer as have many others who used to shop at HD. Why? The stores are cleaner; the employees are more accessible.
Remember, Generally Accepted Accounting Principles (GAAP) does not measure customers who don’t come back. Nor does it measure the number of customers who walk out of stores in frustration without buying anything.
In nearly every profession, employees are the number one asset. If you’re thinking of reducing staffing, think about Bob Nardelli and Frank Blake. But most of all think about Henry Ford and what he did.