Essay: Designing change in organisations (Nardelli / Home Depot)

1a) According to Rafaelli when designing change, leaders must make choices that fit the gap in the organization and the set of challenges the change might face. These choices together are the ‘SORT’ of change the organization will need. After careful reading, it can be inferred that the SORT of change that Nardelli is implementing in Home Depot is radical in scope, top-down in origin, a system-wide rollout, and fast in timing.
Incremental changes are those make small modifications to existing organizational systems, processes, and routines, meanwhile, radical changes are those that affect almost every aspect of the organization including culture, assessment measures, etc. With this definition in mind, we can see that the changes Nardelli implemented were more radical. For example, he instituted common metrics that produced ‘companywide’ data in areas that had not been consistently measured before and he integrated new culture into the organization through two-hour Monday morning conference calls with 15 top executives which would later go out to all 1800 Home Depot stores. Going from an organization where managers could mark directives from HQ as “B.S.”, this Monday morning calls that required everyone to be engaged was indeed a big culture move.
The origin and timing of the change in Home Depot are top-down and fast because it was clearly planned with clear directives and goals by the leader Nardelli. We can see this right from the beginning of the case when he hired a trusted colleague shortly after arriving, signaling he was ready to initiate the change right away. Another example of how fast the change was is the “Super Saturday” where the entire structure of the organization was re-organized in just 3 hours 30 minutes. The leaders also initiated this.
The aforementioned examples also demonstrate that the rollout of change at Home Depot was system-wide. It involved all the divisions and branches across the United States.
b i) According to the Burton et al. model, climate is characterized by a readiness to change and degree of tension. When Nardelli arrived at Home Depot they were operating under an internal process which is marked by low readiness to change and high tension.
Some instances that illustrate how Home Depot had a low readiness to change include: “no one wanted an outsider, as Nardelli himself acknowledges that would GE-ize their company and culture”. Much of the top executive team left the company during Nardelli’s first year. And “a year and a half after Nardelli took over as CEO there was still significant opposition within the organization to the changes they were making” (Chamram, pg 3 & 7).
We can see the high levels of tension on page 5 of the case where the author notes that ‘people in merchandising, operations, and stores traditionally distrust each other… the vice president for stores in Home Depot’s southern region recounts that in the pre-Nardelli years a meeting involving these three groups “was basically a food fight.” ’. But these tensions seem to exist on a wider scale and not within the different stores. An illustration of this is on page 1 where the author describes Home Depot as a ‘freewheeling yet famously close-knit’, and also on page 3 where the author further describes the culture as having people that are ‘unusually passionate to the customer and the company”.
However, since Nardelli is rolling out a system-wide change, we can go ahead with the high tension categorization.
ii) An internal process climate is not appropriate for Home Depot because it creates a misfit with the strategic changes  Nardelli plans on implementing. Home Depot was not faced only with low inventory turns and low margins but also with a new competitor, Lowe’s. For Home Depot to avoid a decline in growth and avoid getting beat out by the new competition it needs to be in a climate with high readiness to change and high tension. The tension won’t necessarily be all negative, it should be just high enough to create urgency and drive performance.
Nardelli recognized that the readiness to change at Home Depot was low and would be detrimental to his plans if not tackled which is why he and Donovan set up set up a series of five-day learning forums for district store managers. The goal of this was to put the managers in the shoes of Nardelli and get them to understand and support the changes.
c) Corporate entrepreneurship (CE) strategies are recommended for established firms to solve growth- and economic performance- related problems they experience in competitive environments (Peltola, 2012). Nardelli’s proposed strategic change for Home Depot constituted corporate innovation because it was progressive, proactive and impermanent which are the key elements to CE strategies.
According to Peltola, a progressive strategy is one that proceeds in systematic stages, groups individual events together, establishes a particular order to the process, and justifies ongoing and forthcoming actions. Nardelli’s strategy was progressive in nature because he laid out a three-part strategy: enhance the core by improving the profitability of current and future stores in existing markets; extend the business by offering related services such as tool rental and home installation of Home Depot products; and expand the market, both geographically and by serving new kinds of customers, such as big construction contractors (Charan, 2006).
A proactive strategy is one that anticipates events, trends, and changes in the market. Although Home Depot was still very successful, they could recognize that if they continued operating the way they were, they would be faced with financial and operational problems. In addition, whenever people made comments that Nardelli was going too fast he would say “Good point. Give me five minutes. I am going to call Lowe’s and ask them to slow down for us”. This shows that Nardelli was not reactive.
Finally, an impermanent strategy is one that is ever-changing and requires constant renewal and modifications. An example of this in Home Depot’s case is with the SOAR planning. Not only was it a new innovation that Nardelli brought into the company, but it was also modified as time went on. For example, people were keeping the good ideas until the SOAR meeting before asking for funding. This was not efficient and was fixed by providing a process for interim approvals if capital requests. Moreover, to stop such happenings from repeating, half a day is now set aside at the end of every SOAR session to evaluate how the process can be refined.
An additional innovation that came with Nardelli’s strategy was the “toll gates”, which was a way of assessing and improving HR function.
2a) After Nardelli’s unsuccessful attempt for change Donovan was able to push again for a change in late 2002 early 2003 by creating a true sense of urgency. He accomplished this by using some of the strategies for increasing true urgency which include giving people important facts and winning hearts and minds (Kotter, 2008 pg 57). He set up a series of five-day learning forums for district managers which included competitive simulation and role-playing exercise where Donovan asked people to view the company from Nardelli’s perspective. He also set up a wide variety of ongoing leadership-training programs such as the Future Leaders Program, the Store Leadership Program, and the Merchandising Leadership Program. With these programs, the employees could feel a sense of urgency and began approving of the changes as well. For example, Liebert had been wanting to replace the manual box count used for tracking incoming goods at stores but he was unsuccessful. However, after he got the workers to become a part of the leadership training programs they were able to institute these changes themselves because they started to feel a true sense of urgency and realized that the bar code system was more efficient. According to Kotter (2008), with a real sense of urgency when people see an opportunity or a problem of significance to their organization, they naturally search for effective ways to get the information to whom it may concern. They come to work ready to cooperate energetically and responsively with intelligent initiatives from others. Donovan was able to stir these attitudes in people. Page 7 of the case notes of the passionate Home Depot worker: “The orange blood kind of starts boiling, and people say, ‘Bring it on’.”
b) To determine whether Nardelli would have been more successful with Tabrizi’s 90-days transformation model vs. Kotter’s accelerate model, we must compare their advantages and disadvantages if any.
Tabrizi’s 90-day model advantages:
– Embraces the critical success factors which include: all-encompassing, integrative, fast, and full passionate commitment and buy-in.
– Provides a framework for accelerating typical transformation efforts.
– Includes a 30 – 90 days pre-transformation period where the goals are to commit the organization to the transformation effort, address initial resistance to the effort, set the stage and create momentum for the 90 days effort, and more.
– Notes that actual full-fledged implementation of the effort will extend well beyond the 90 days (up to 6-12 months) so it prepares you for the ensuing days.
– The implementation period includes the importance of maintaining momentum by addressing resistance, celebrating often, and using a rewards system.
Disadvantages:
– Employees must be prepared to put in extra time and energy which might not be okay with some.
– All the critical success factors mentioned above must be embraced which means there is little room for flexibility or failure.
Kotter’s accelerate model advantages:
– Compared to the 8-steps model the accelerators are concurrent and always at work.
– Underscores the importance of creating a sense of urgency
– Pulls in as many people as possible from the organization.
– Emphasized head and heart and not just head.
Disadvantages:
– Designed to function only as a fluid, flexible and agile network which is completely different from Nardelli’s strategy of creating a centralized system.
From the above analysis, it can be concluded that Nardelli may have been more successful if he used Tabrizi’s 90-day model. Firstly, if there was a pre-transformation period, and momentum/buy-in was created before the change efforts, then Nardelli wouldn’t have had to deal with as much resistance as he did a year and a half into the change efforts. Secondly, the implementation period is very practical it ensures that the change efforts are not undermined. Nardelli would have also benefitted from having a reward or celebration system in place to incentivize more participation. Lastly, the accelerate method may not have worked for Nardelli because it does not fit with his style of leadership which was a more centralized style. For Home Depot to succeed with the accelerate model a different leader may be more suitable to lead with this style.