Home Depot, a business very similar to Bunnings, was the fastest ever US retail start-up to get to sales of US$40b. It had an internal culture that was unique in large retail – close knit, extremely entrepreneurial and customer focussed.
But the culture and success was a mystery to Wall Street and the analysts. They described the company, with implicit criticism, as free wheeling and undisciplined, and referred to a cowboy culture.

In 2000, the board hired former GE star Bob Nardelli to lead the company. The people who got the company from zero to $50b were not seen as able to get it to the next $50b. But Bob brought the wrong toolbox. He thought things that had worked at GE would translate to retail, a field in which he had no experience or expertise. He planned to bring in a dose of GE and the market would define as “discipline” that would uncowboy Home Depot.

Nardelli departed last week with a payout of US$210m, leaving a languishing share price, shattered morale, and alienated customers. When Nardelli left the shares jumped 2.3% on the news, having fallen six per cent in a rising market during his tenure.

Nardelli committed two sins. He certainly angered shareholders, receiving a huge pay package at a time when the share price was struggling and imperiously refusing to answer questions at last year’s AGM. (Already thinking he was overpaid, shareholders are incandescent about the payout). However the greater sin was the alienation of his team at all levels across the company.

The new leader hired former military people and GE alumni. Many who had grown with Home Depot’s rapid growth left the company. He reduced in store costs by reducing full time employees, bringing in cheaper, but unskilled and less knowledgeable, casuals The company, once famous for service, slipped badly.

New Home Depot head Frank Blake is faced with a huge challenge.
There are Australian parallels when executives cross industries and markets. Peter Smedley was perceived as unable to repeat his Shell and Colonial success at Mayne. John Fletcher arguably did better moving palettes at Brambles than he is doing at Coles. But with Nardelli, he not only crossed markets, he tried to change a culture that had been wildly successful.

Bunnings is often compared with HD. Bunnings has grown to $4b in a decade and much of this is because of a risk taking, close knit customer driven culture. But Bunnings can teach the world a thing or two. They now better HD and every other big box DIY retailer in the world on all the key measures used in retail.

Perhaps we should be a little concerned about the news that Wesfarmers (including Bunnings) could be a takeover target, fearing someone who might bring a dose of discipline to a wildly successful retailer.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey