Management: Evaluation of Changes at Home Depot

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Table of Contents

Introduction
Directive approach to changes
Conclusion
References

Introduction

Changes within the business environment can happen through two types of approaches. They could be either directive or participative. A directive approach happens when senior management initiates the transitional change, deciding when to initiate change, what the change shall be, how to implement said changes, and who would be responsible for it. This is usually a top-down management-driven process. This paper shall examine the top-down change process in the example of Home Depot.

Directive approach to changes

Home Depot has always had an entrepreneurial culture and an independent approach to running its stores. Purchasing and hiring decisions were made by local store managers as opposed to being centralized by the head office. Once the company faced increased market competition, the board of directors hired a new CEO and supported their decision to implement changes (Brown, 2011). The top-down approach involved centralized purchasing, standardized personnel practices, and resulting cost reduction.

Centralized purchasing enabled Home Depot stronger purchasing power, thus negotiating better prices. As well as that, the inventory was unified and spread across the stores equally. However, that decision backfired in the long run. Centralized purchasing enabled it to cut costs significantly, completely overlooking the needs of local stores (Brown, 2011). This left the stores with low levels or wrong types of inventories, which led to customer complaints and lost sales.

Standardized personnel practices also enabled cost reductions. Top management was able to get rid of expensive veteran employees, replacing them with inexperienced but cheap staff. The thing that the management failed to foresee is that expensive employees were experienced and knowledgeable. Customers were used to dealing with professionals, and inexperienced staff led to more customer complaints. Moreover, veteran employees had a sense of ownership of the stores, which new staff lacked (Brown, 2011). This also led to indifferent service, which customers were not used to, resulting in lost sales and more complaints.

Another point that made the changes in Home Depot successful in the long run, is the fact that the CEO failed to cut his own pay. By the time it was obvious that the company was struggling to regain market share and profits, the salaries of the top management remained obnoxiously high. When it was finally recognized and the board of directors asked the CEO to decrease his salary, he failed to appeal to them and left the company (Brown, 2011). Therefore, noting one more drawback of the top-down managerial approach. When cutting costs and the uniqueness of Home Depot, where it was not necessary, the CEO selfishly failed to recognize and cut obvious costs that had to be cut.

Conclusion

Whereas the cost-cutting approach was effective in the short run, resulting in increased profit levels for Home Depot, in the long run, they failed. Customer satisfaction levels dropped significantly, as well as sales. This shows that a top-down approach to change implementation is not always effective. With the initial entrepreneurial culture and independent practices in the stores, indifferent directive changes were bound to fail. Centralized purchasing enabling to cut costs in the short run, failed to recognize individual differences and inventory needs among the stores. Standardized personnel practices also enabled cost reduction by firing expensive employees and hiring inexperienced but affordable staff. However, this resulted in low customer satisfaction levels. While enabling cost reductions, customers were used to rely on staff expertise, which was not there anymore. All in all, it could be considered that the top-down managerial approach to changes can be successful in cost deductions in the short run, the long run approach has to take cultural differences of the organization into account.

References

Brown, D.R. (2011). An Experiential Approach to Organization Development (8th Ed.) Upper Saddle River, NJ: Pearson Prentice Hall.

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Management: Evaluation of Changes at Home Depot

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