1. The Home Depot Tiffanie Harrison

2. Overview BackgroundProblemAnalysisRecommendationsContingenciesIdentify Analyze Recommend

3. Background IdentifyAnalyzeRecommendContingencies Timeline 1990’s Positive Culture Remarkable Growth Marcus & Blank Step Down 2001 Nardelli as CEO Profitability Improves Customer Service Drops

4. Background IdentifyAnalyzeRecommendContingencies ACSI Index 2001-2005

5. Background IdentifyAnalyzeRecommendContingencies Net Earnings 2001-2007

6. Background IdentifyAnalyzeRecommendContingencies From Nardelli  Blake 2006 & Beyond $350m invested to improve cust. satisfaction Blake Replaces Nardelli Investment in 5 key areas MSN Money complains & Blake’s response ASCI increases by 11 points by 2011

7. Background IdentifyAnalyzeRecommendContingencies Problems  Assuming that employee engagement has a direct correlation to customer satisfaction…  Focusing on the bottom-line and not customer satisfaction  Employee recognition and incentives sending mixed messages  Store manager behavior goes unchecked

8. Background IdentifyAnalyzeRecommendContingencies Orangeblooded Culture

9. Background IdentifyAnalyzeRecommendContingencies Inverted Triangle of Home Depot Customers Front-Line Associates Field Support Corporate Support CEO

10. Background IdentifyAnalyzeRecommendContingencies I Put Customers FIRST  Find a customer; find the product.  Inquire. Ask open-ended probing questions. Ask, “How can I help you?”  Respect. Be polite, professional and positive.  Solve their problems.  Thank the customer. Say, “Thank you for shopping with us. We appreciate your business.” “I was greeted by 5 people when I walked in but could not find anyone when I actually needed help finding something.” -Customer

11. Background IdentifyAnalyzeRecommendContingencies In Addition to Customer Service… 1. Execute Power Hours 100% 2. Order & Pack-Down for your area 3. Follow-up on all out-of-stocks 4. Don’t allow a customer to leave dissatisfied due to an out-of-stock 5. Keep aisles uncluttered and easy to navigate 6. Execute MAP standards 7. Ensure that the ad is 100% set in your area each week

12. Background IdentifyAnalyzeRecommendContingencies Employee Rewards  Success Sharing  Incentive program for hourly store associates driven by individual store performance.  What effect would this have on morale? Why are you getting a bonus if I do all of the work?  Homer Awards  Individual awards given to associates for outstanding customer service.  Stock Grants  Starting at the assistant store manager level

13. Background IdentifyAnalyzeRecommendContingencies Inverted Triangle of Home Depot Customers Front-Line Associates Store Management Field Support Corporate Support CEO

14. Background IdentifyAnalyzeRecommendContingencies Strengths Blake as CEO Brand recognition Entrepreneurial spirit Strong history in terms of sales Weaknesses Employee dissatisfaction Convoluted employee incentives Poor rapport with customers Poor rapport with employees Opportunities Employee incentives that actually interest employees Capitalization of employee strengths Placing employees according to ability Threats Lowe’s & other competitors Competitors that have the ability to work with professionals on a contract basis

15. Background IdentifyAnalyzeRecommendContingencies Recommendation Overview Focus on Store Management Clarify Reward Criteria Lighten the Load of Hourly Employees

16. Background IdentifyAnalyzeRecommendContingencies Focus on Store Management  Include store-level management in the pyramid for accountability  Make criteria for incentives clear & standardize  Dale Carnegie training @ $1,350 per manager for a 2-day session. If 2 managers were sent from every store that would be approximately $5.9 million  This cash might be better invested in developing and/or refreshing existing programming  $45K for 55 hours a week. Increase salaries as a possibility. Approximately $22 million cash outlay

17. Background IdentifyAnalyzeRecommendContingencies Make Criteria Clear for Rewards  Back off of the Success Sharing program over time  Reallocate the 50% of the annual $63 million payout to individual incentives  Can we expect hourly and part-time employees to fully buy-in to sales goals?  Success Sharing will grow with time as store managers are held accountable and trained

18. Background IdentifyAnalyzeRecommendContingencies Lighten the Load  At one point in time, HD invested $2 billion into new hires for ample support  Customers still complained that even though there were more employees, there was still not enough help to go around  Moving forward, hire for strengths  Allow sales employees to have a singular focus  Place people strategically  “Own the Pro”, Merchandising Execution Teams, etc.  This should come at no cost to the company

19. Contingencies