Ignore the “People Stuff” At Your Peril
As we all watched the unraveling of Robert Nardelli’s relationship with Home Depot, most of our conversation, half fascinated and half appalled, was focused on his enormous separation windfall.
Nardelli’s failure is particularly surprising, given his GE pedigree (these days, coming from a senior management position at GE is widely considered an ironclad guarantee of superior leadership skills) and given the business improvements he made during the early part of his tenure.
So, what happened? At some point along the way, Nardelli seems to have forgotten that leadership is equal parts business and people, and began to over-focus on the business part, and under-focus on the people part. He’s not alone. During the last decade, Americans have become enamored with the business part of leadership – vision and strategy, acquisition and divestiture, bold decisions and bold action. We also like the purely philosophical aspect of the people part of leadership: we love books about how leaders should be seen by their teams, or how leaders should think about leading people.
At the same time, we’ve relegated the actual nuts-and-bolts people part of leadership – finding great people, bringing them into the organization well, providing them with the skills and knowledge they need in order to support the organization’s success – to a kind of second-class citizenship; it’s there, but it’s not nearly as interesting or sexy. Even though we all nodded wisely when Jim Collins told us, in Good to Great, that the first task of a “Level 5 Leader” is to get the right people on the bus, sitting in the right seats (yes, we knew that! we said to each other), we still behave as though people management is a kind of necessary evil; something that middle managers do when they’re not doing their real jobs. Company sloganeering about “people are our most important asset” and “we grow and develop our people” aside, people leadership is just not that cool these days. Executives even say, disparagingly, of other executives, “Well, I guess he or she is a good manager” – implying that the person is a plodder, not innovative, not much of a leader.
But look at Nardelli as a cautionary tale of what can happen when you take your eye off this particular ball; when you start thinking the “people part” is unimportant. He did some bold things on the business side of leading, investing more than $1 billion in new technology, such as self-checkout aisles and inventory management systems that generated reams of data. But even as he was opening new stores, instituting new systems, and centralizing a variety of functions, he tended to ignore the “people stuff.” There was that huge dust-up, for instance, last spring at a shareholder meeting when he refused to entertain questions from the shareholders about his management decisions. And then there was the constant rumble that his hard-driving imperious style just wasn’t working for many Home Depot managers, who defected in record numbers – since 2001, over 50% of Home Depot’s top 170 jobs were re-filled by people from outside the company. And line employees resented the replacement of thousands of full-time store workers with part-timers, one aspect of a relentless cost-cutting program Nardelli used to drive up gross margins in 2005.
In short: he didn’t listen to his people. He ignored the wisdom and will of his customers, his shareholders, and his employees. He didn’t focus on serving the customer: he forgot to make sure his managers were providing all his employees with the skills and knowledge to create positive customer interactions. He didn’t invite feedback from executives and shareholders (and this is shocking, coming from someone steeped in the GE workout mentality):
What could he have done differently? He could have realized that the business part of leadership – making the business financially sound, assuring the proper mix of assets, and bringing it technologically and systemically up-to-par – was only part of his job. He could have remembered that, in a retail business, you live or die on the basis of every customer interaction. He could have focused part of his considerable energy on making sure that he had enough committed front line employees, with the right skills and the right understanding, to serve Home Depot’s customers in the ways they wanted to be served. And he could have made sure that his store managers had the skills and understanding to assure those front line people were both encouraged and required to provide customers with that kind of service.
And finally, he could have both communicated and demonstrated to all his leaders the critical importance of building a team capable of consistently delivering to customers and running stores efficiently and effectively. How? By hiring and promoting managers who were as skilled at providing great customer service and building strong employee teams as they were at meeting financial goals. If he had done that, he might have taken some of the shine off Lowe’s success; he might still be heading up Home Depot. And everyone might feel he deserved that huge paycheck.