The Leadership Model and Vital Skill that Turned Around Home Depot

I have some idea how Frank Blake felt when he took over as chairman of Home Depot eight years ago. Employees, the board and investors were all unhappy with the previous chairman, Bob Nardelli, who had downplayed the importance of customer service and expanded in inadvisable directions.

Blake inherited a whole mess of problems to deal with when he took over. That’s pretty much what I do for a living as the Turnaround Authority. In fact, I’ve referred to myself as a janitor. I clean up messes.

Blake recently stepped down as CEO although he will continue as chairman for several months. He is credited with turning the troubled company around, and putting the focus back on customer service. He even kept his cool when the company suffered a massive security breach this September, immediately taking responsibility for the breach and issuing two apologies in five days, one from him personally.

He obviously did a lot of things right to get the $78 billion-dollar company back on track. He sold stores in China. He changed the bonus system to reward customer service and greatly increased the bonus pool even as earnings were collapsing. Last year he increased profits by $5 billion, without adding new stores, and during his tenure the company’s share price increased 127%.

I believe a major key to his success was reinstituting a leadership model that the co-founders Bernie Marcus and Arthur Blank had used – the inverted pyramid. According to an article on, less than a week after he took over, he said, “The right way to look at this is me on the bottom. My job here is to clear away the things that get in your way.”

And how did he clear the way? By not shying away from conflict and listening to people to determine where the problems were. As Carol Tomé, the CFO, said, “He invited conflict into our decision-making. We were conflict-hesitant. Frank asks a ton of questions that make you say what is working and not working.”

He was interviewed in the AJC this week in the column “5 Questions for the Boss” and said, “one of the toughest things in the job is having people speak candidly to you, telling you what’s going wrong.”

He learned the right way to ask a question — by assuming there is a problem, “which gives license for people to be more forthright. You can start the question with, ‘Gee, I understand we’re having real problems with the new process we’re rolling out.’ If you ask it that way, you can start to understand the issue.”

You have to give people a license to say what is going wrong. Otherwise, everyone is smart enough to realize that their career isn’t made by identifying problems. Listening is an active process and requires effort. Follow-up questions are important.”

When Blake took over Home Depot, he had little retail experience. I often become interim CEO of businesses and industries I have just passing familiarity with. But I do as Blake did, as pointed out in the Fortune article. “What Blake lacked in experience, he made up for by listening.”

Short-Term Pain, Long-Term Gain

For almost 40 years, I’ve been working with distressed businesses to create value for stakeholders. Unfortunately, the one common theme is that at some point during its life cycle all companies will experience financial difficulties caused by our economy or by management making the wrong decisions. Some companies will experience these difficulties more than once.

It’s how the companies deal with these issues that determine whether they survive or become a statistic of another failed business. The same could be said for individuals — how we deal with adversity can determine our survival or success.

I come from a humble, poor background. We were so strapped for cash that we had to borrow money to bury my WWII veteran father in 1964. Thanks to Social Security, my sister and I received death benefits until we were 21. To make additional money, I mowed lawns at age 12, sold peanuts at football games and had a paper route. The entire family chipped in to help with finances.

Many families also implement survival strategies for the greater good of its members. Some cut out dinners in restaurants so their daughter can go to cheerleading camp. Others drive their cars for 200,000 miles so the family can live in a nicer home. One parent works a day shift while another works at night so they can always have one parent with the children and save on daycare.

We deal with short-term pain for long-term gain.

The same concept goes for the companies I work with. My job is to educate people at these failing companies and implement survival strategy. It’s a tough, stressful job because it does involve people’s lives. I know what it’s like to struggle financially and I don’t wish to take anybody’s job away.

However, generally a turnaround does involve cutting jobs, reducing pay, closing plants, changing products or product lines, and sometime firing senior management that made the wrong decisions. Companies must change direction to survive.

Just look at all of the companies throughout the years that have changed for survival — Coca Cola, GE, Home Depot, General Motors, Chrysler, banks, insurance companies, probably even your company. All of these businesses have made tough decisions for survival. Unfortunately, some don’t. What ever happened to the buggy whip and wooden wheel businesses?

Yes, it’s always tough when people lose their jobs. But I learned to view those necessary job cuts in a different way. Years ago I was driving my son Sam to school. He asked me what I was doing that day. I told him that I had a rough day ahead of me because I was going to Philadelphia to lay off 200 people and close a division of a company. He looked at me like I was an ogre and asked how the kids of those laid-off parents would be able to afford camp, get baseball gloves and enjoy candy (now with kids of his own his concerns still lie in these three areas).

I told him that by laying off 200 people and closing one plant, I was saving 600 jobs and keeping the company alive. Certainly what I had to do was terrible for some people, but it was for the greater good. If I didn’t let 200 people go today then I’d have to let 800 go next month.

The strategy worked. Less than a year later, the chain was merged into a national retail chain and jobs were restored as the footprint expanded. It was another case of short-term pain for long-term gain

Another analogy of a turnaround is that of being in an accident and going to the emergency room. The dedicated doctors and nurses sole goal is for you to survive. Hours of surgery, many stitches, amputation of extremities may be in order. Later, the patient goes to the plastic surgeon, buys a wig or obtains a prosthetic. But, we survive thanks to these dedicated folks. Short-term pain for long-term gain.

All of us individually have made decisions that involved short-term pain for long-term gain. And companies have to do the same.

You Work Together, You Play Together: Surviving the Holidays

I saw a funny card recently that read, “My family is temperamental. Half temper and half mental.” The actor Jim Carrey once said, “Maybe there is no actual place called hell. Maybe hell is just having to listen to our grandparents breathe through their noses when they’re eating sandwiches.”

Yes, we love our families. But sometimes the holidays can mean a little too much togetherness, bringing more opportunities for family conflict. A recent survey on the travel website Hipmunk showed that 18% of people travel during the holidays to avoid their families.

Keeping peace on earth during the holiday season can be particularly challenging when you own or work for a family business. Problems can arise when difficulties around the conference table make their way to the dining room table and tensions emerge during family get-togethers. It can be tough to leave the working world behind.

Here are a few tips to keep the holidays merry and bright and ensure you enjoy your family, even those you see every day at the office.

1. Agree to Keep Certain Topics Off the Table

The last week before the holidays, during a meeting or through an email, suggest that the family agree to not engage in certain discussions until work resumes in the new year. Acknowledge that while some pending issues may be important, the holidays are a time to take a break from work.

If anyone attempts to bring up potentially divisive topics, defer them. Food is always a good distraction. Say something like, “Let’s discuss that in the office on Monday. How about we get a slice of Aunt Martha’s coconut cake?”

2. Plan Outdoor Activities or Group Games

If you have a large family and everyone is stuck inside for long periods of time, people may become irritated from the close quarters. If possible, take the action outside where kids can run around and the adults are able to move freely without knocking over a plate of appetizers. Buy a small fire pit and gather people around that for warmth. We all feel better if we can spread out a bit and engage in physical exercise if possible.

If the weather is not conducive to going outside, try some group games like charades or one of my new favorites, Telestrations. This one is guaranteed to get the group laughing. Rather than griping over the sloppiness of Uncle Fred’s expense reports, you can laugh at his sloppy drawings during the game.

3. Spend Some Time on Home Improvement

No, I don’t mean head to Home Depot and start working on those shelves in your basement. This suggestion comes from a quote by businessman Bo Bennett, who said, “Spend some time this weekend on home improvement; improve your attitude toward your family.”

You may not be able to change your family, but you can resolve to change how you react to them. Try not to let their annoying habits or complaints get you down. One thing is for certain, every family dinner eventually comes to an end and you’ll be able to go home again.

Remember what Lee Iacocca said: “The only rock I know that stays steady, the only institution I know that works, is the family.

Radio Interview with Bernie Marcus and Lee Katz on the Michael Hart Show

It’s been a long time coming, but at long last here’s the radio interview I promised you. I was on the Michael Hart show with Bernie Marcus, retired founder of The Home Depot, and here is the audio of that conversation.

As you may notice, the interview is in large part with Bernie Marcus, and it was absolutely my pleasure to get to accompany him. I really enjoyed being a part of the discussion about the government and business as well as how to create more jobs in this country.

Please let me know if you have any thoughts or questions!

Radio Interview with Bernie Marcus & Me