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Laurence Haughton: Where Nardelli Went Wrong

Now that Bob Nardelli is out at the Home Depot the armchair quarterbacks and hindsight pundits are full of theories about “the fatal flaws” and the “mental errors” that caused his sour (albeit lucrative) exit.I think they all (so far) have missed the most significant factor. It wasn’t primarily that Nardelli’s “political” skills were lacking or that his strategy was wrong ( or even the curse of Six Sigma). In fact at the root of his predicament was something that most people would call a strength not a weakness. (And it’s a strength you, Bob, and I probably share).

The big reason Nardelli was, from the beginning, never going to win at Home Depot was that he recognizes the need for change very quickly and acts on it.

I know that seems contradictory so let me explain.

In the late 1990s I spent almost five years writing and researching the reasons that companies move too slow. One of the biggest obstacles I had to address was the powerful urge to hold on to the status quo and the incredible unwillingness among many people to let go.

As a result I, along with a lot of other executives, worked on strategies to open up when hearing new ideas and to embrace change more quickly. From what I’ve read Nardelli had done much the same during his tenure at GE.

But as the experts explain, “good things often have unintended (negative) consequences.”

What unintended consequence comes from learning to recognize the need for change quickly and act without delay? It’s often a huge blind spot.

Many early adapters and fast acting managers have a hard time imagining that others do not see what they see and they therefore radically misinterpret or underestimate what it will take to get the majority of their associates to buy-in.

From the beginning there were signs that Nardelli didn’t have enough buy-in at the Home Depot. People in the stores were whispering, “Nardelli has no retail background” and “The board is paying him too much money.” “He doesn’t get it,” senior executives grumbled, “Everything he’s doing is counter-culture.” Even Wall Street didn’t buy-in. “The market’s getting saturated,” one expert wrote. “I wouldn’t be in a rush to buy it [Home Depot’s stock].” (This was at a time that Nardelli’s turnaround efforts were barely off the drawing board.)

Now as someone who embraced change and acted quickly in the past Nardelli saw these people sitting on their hands and making negative comments and decided that was proof positive that they were the wrong people for the new situation.

And he was partly right. About 20 percent of the average company won’t ever pitch in and try new ideas or innovations.

But that leaves a large group of people who may be right for the job but who stay on the fence longer that the leaders expect. They look like immovable resisters, but they’re not. They are simply more average folks, people who need to see that the change is safe and likely to succeed before they will give a strategy their buy-in.

This is the critical lesson I’ve learned in the last three years as I’ve been researching the art of execution. Not enough buy-in one of the four big reasons why half of all the best laid plans fail. But it’s not callousness or stupidity that causes executives to underestimate the challenge and assume the worst. It’s that many of us have the eyes of the early adapter. We’ve opened our minds to what we see as an obvious need for change. And we assume that resistance is irrational (or sinister). We lose good people and take a big step back. In the end that causes us to miss our announced milestones and disappoint our stakeholders.

So now we have an opportunity to learn from the mistakes of another (a great way to gain experience for cheap). Here’s the lesson: Every well thought out strategy need an equally well thought out plan to get enough buy-in. That plan starts with realizing that everyone isn’t like us. Many are slower to buy-in. But if they see the path is safe and likely to succeed they will (also) follow through.

Add comment January 8th, 2007

2007: Will The Leadership Crisis Continue?

This past year U.S. News teamed with the Center for Public Leadership at Harvard’s John F. Kennedy School of Government to evaluate the state of leadership.

The results were dismal:

More than half of Americans—56 percent—say they’re not proud of the country’s leaders. Two thirds and more say the country is in a leadership crisis. Nearly three quarters say the nation will decline without better leadership.

Eighty-three percent of Americans said corporate leaders are more concerned with the bottom line than with running their companies well, 93 percent say political leaders spend too much time attacking their opponents, and only 39 percent say leaders have high ethical standards.

What’s new you ask? Well, the study, led by Warren Bennis and David Gergen, also dug up a few authentic leaders — rating the nominees from to 1 to 5 based on how well they met the following criteria:

Sets Direction (25%)

• By building a shared sense of purpose
• By setting out to make a positive social impact
• By implementing innovative strategies

Achieves Results (50%)

• Of significant breadth or depth
• That have a positive social impact
• That are sustainable
• That exceed expectations

Cultivates a Culture of Growth (25%)

• By communicating and embodying positive core values
• By inspiring others to lead

Unfortunately, not many business leaders made the cut.

No mention of Branson, Gates, or Jobs.

Business leaders making the grade include Warren Buffet, A.G. Lafley, and Marilyn Carlson Nelson.

Read all about it >>

1 comment January 1st, 2007

Fuqua: Offshoring about Talent, not Cost

Here’s a report you’ll be interested in: The Globalization of White-Collar Work: The Facts and Fallout of Next-Generation Offshoring from Duke’s Fuqua School of Business and Booz Allen Hamilton.

The news? Apparently offshoring is no longer “all about moving jobs elsewhere; increasingly, it’s about sourcing talent everywhere.”

And: “…what used to be a tactical labor cost-saving exercise is now a strategic imperative of competing for talent globally. White-collar work can be performed where it makes the most sense and saves the most cents. More important, a looming shortage of technically trained talent, such as engineers and computer scientists, in advanced economies will require the ability to source and manage such talent globally.”

Here are the 5 main points:

1. Labor arbitrage is giving way to accessing talent as the primary driver of next-generation offshoring.

2. Offshoring high-skilled functions does not replace jobs onshore.

3. Companies look elsewhere because they can’t get it at home.

4. Where you offshore depends on what you offshore.

5. The obstacles to successful offshoring are increasingly internal and organizational.

The reports also says that higher skilled jobs (like R&D, Marketing, and Design) won’t go away because of this growing global talent shortage. Instead firms will compete globally for brain power, regardless of location.

Sorry, I don’t buy that. China’s working hard on educating the next generation of designers, and in India you’re going to see the next generation of innovation. (I’ll get John Hagel to talk about this soon.)

Add comment December 25th, 2006