You Have to Laugh. If You Don't Cry First.

Earlier this week, the Wall Street Journal ran an article (subscription only) on the way that Home Depot, in the wake of CEO Bob Nardelli's departure, is trying to woo back customers with improved service. 

During his tenure, Nardelli worked hard to reduce costs (except, of course, for his own titanic compensation, but never mind that for right now) through efficiency increases and -- no surprise here -- layoffs of skilled, experienced floor staff.  As the article explains,

Home Depot grew to become the world's largest home-improvement chain largely on the strength of its skilled workers, many of whom were former plumbers, electricians and carpenters who were eager to impart their knowledge to do-it-yourselfers. They took pride in helping customers find just the right shade of latex paint or an elusive-size screw.

Then, in an effort to lower overhead,

the company started hiring more part-timers and added a salary cap that drove off the more seasoned workers. The retailer also moved about 40% of workers to overnight stocking positions, ostensibly to clear the aisles of clutter. But it left customers searching in vain for someone in an orange apron to ask about picking out the proper power tool.... Before long, the company had a morale problem. Instead of waiting eagerly on customers, workers too often would be found huddling in an aisle griping about management.

But wait. It gets better. According to the article,

in the past year, Mr. Nardelli realized that he had shortchanged the stores. He appointed a chief customer officer inside headquarters to improve customer service.  Each week, a team of Home Depot staffers scour up to 250,000 customer surveys rating dozens of store qualities.

So let's recap: with sales not quite meeting expectations, the company fired experienced employees because they cost too much.  Presumably the company had to pay some sort of severance.  Then, sales slumped more because part-time and inexperienced staff couldn't provide adequate service, so the company hired back some of the same people it had just laid off.  (I'd imagine that some of their former employees were not available because they hired on at Lowe's.)  Finally, with customer service ratings in the toilet and shoppers staying away, the company invested in a "chief customer officer" and wades through 250,000 customer surveys (a week?  a month?  a year?).

Ten points and a free autographed poster of Bob Nardelli to anyone who counted all the muda: there's the financial muda of paying severance to people that were rehired, and paying for a "chief customer officer."  There's the time and effort muda of firing people and rehiring them -- did the HR staff have nothing better to do?  There's the rework muda of reading, analyzing, and reporting on 250,000 customer surveys, when if they just did the job right the first time, they wouldn't have to deal with.  And then there's the staggering waste of squandered customer loyalty -- not technically one of the 7 wastes, but significant nonetheless.  I only wish someone could calculate how much this little exercise cost the company and the shareholders.

If the story weren't so tragic for the people who lost their jobs, you could have a really good laugh.  But the human cost makes it a very sad tale indeed.

Comments

[James Swain]

FYI - You can get free online access to Wall Street Journal and other subscription sites with a netpass from: http://news.congoo.com

This was in several blogs last week

[Mark Graban]

One of the things the new CEO has done is eliminated some of the NVA measurements so managers and employees can focus on customers instead of metrics.

I have mixed feelings about that. There's nothing inherently bad about metrics, but it sounds like Nardelli's Home Depot was completely managing the metrics rather than the process, which IS a bad management practice.

[Graham Hill]

Dan

I think you are wrong. Squandered customer loyalty is a form of Muda; the eight Muda identified by W&J of knowledge disconnection or underutilization of resources. If customers become alienated by shoddy business practices they become disconnected from the company and stop wanting to be involved in the many forms of co-production. Muda pure and simple.

Graham Hill
Independent CRM Consultant
Interim CRM Manager (at Toyota)