When Frank Blake took over in Home Depot in 2007, there were a lot of skeptics since his training was primarily as a lawyer. In 2005, Lowe’s was outperforming Home Depot by many counts (e.g. Lowe’s sales increases was bigger by a factor of two). But now Home Depot is back on top. What did Frank Blake do?
This was the first thing he did when he took over:
“Day one, literally, we had an internal TV broadcast. The first thing Frank did [was] read from Built from Scratch (Marcus and Blank’s memoir) … and the only visuals he showed were the Values Wheel* and the Inverted Pyramid**. It was a huge signal—a bell ringing inside the company.” (Arthur Page Society: Corporate Character).
Blake, building on the founders’ vision, had recognized that “you’ve got to let associates own the culture.’”
*Values Wheel: Customer Service, Strong Relationships, Respect for People, Shareholder Value, Giving Back, Taking Care of Our People
**the Inverted Pyramid shows customers at the top, with associates just below and the CEO at the bottom.
Additionally, during his first day, he called Home Depot’s founders because he wanted to “reclaim the cultural distinction of business” and continue the culture set by the founders.
“The truth of the matter is if it had been my job to create the culture at Home Depot in 2007, I’m pretty sure I would not be here today,” Blake said. “The benefit I had was that the culture at Home Depot set by our founders was a pretty strong culture. We actually wanted to reclaim the cultural distinction of business.”
Bernie Marcus, one of the founders, told him to “get into the stores. Get the associates to talk to you, to trust you. Get them to understand that if you see something wrong in the store, you’re not going to have them fired.”
So Blake undertook a series of “undercover missions” by walking through HD stores posing as a regular customer to understand just how people are treated. While his predecessor, Nardelli, was a command-and-control leader focused on cost-cutting and “alienated customers just as thoroughly as he did employees,” Blake invested in training and supporting his employees through a values-based approach.
Blake benefited from the fact that most employees were quite familiar with the founders’ culture since they had been there for a long time. “The average store manager’s tenure is 14 years,” Blake said, pointing out those people dated back to the “Bernie-Arthur” era. “Almost 75 percent of them started out as hourly associates. And every single one of our division presidents started out as hourly associates.”
To further demonstrate leadership’s commitment to staying in touch with associates and keeping them at the top of the hierarchy, Blake instituted a program in which each quarter, a number of the company’s top officers work one day a week at a store. The Home Depot has built into the model “success sharing”—a form of profit-sharing for frontline store associates.
He had some help from Home Depot’s board.
“One of the things the board is great at is pulling me up and helping me look out over the horizon on where the business is going over the next five to 10 years,” Blake said. “When you are bouncing down the side of a mountain, you are more focused on grabbing a branch than gazing over the valley.”
Last but not least, Blake has been keeping a “moron list” of things that his successor would call him a moron for doing. Blake said, “The easiest one on the list is that 4 percent of our customers drive 30 percent of our sales, and 0.4 percent account for almost half of that. I should be writing birthday cards to those people. Too often we don’t even know who they are. If I were stepping into my shoes, I’d say: ‘Can you believe this?’”
“The best advice, period, was given to me the first day on the job from my wife, Liz: ‘Don’t forget, it’s not about you,’ ” Blake recalled.
Blake understood that true leadership begins with understanding the experiences of those whom you lead and whom you serve (it’s no wonder then that according to a recent study that the strongest predictor of ethical leadership is empathy). He has created practices (top officers work one day a week at a store each quarter) that reinforce core beliefs (inverted pyramid), and has integrated the pyramid into the bottom line with “profit-sharing for frontline store associates.” Investing in people instead of just cutting costs, going on undercover missions, calling the founders for culture-help — all of these actions are risks that he took because he understood the basic “how” principle which is that if he got right “how” employees treated customers and “how” employees behaved towards each other, profits would naturally follow.
This article was heavily informed by Paula Rosenblum’s Forbes article.