Home Depot Sheds Management Layers, Promotes From Within

October 13, 2006
Home Depot is shedding some layers of management in an attempt to be more nimble, a move that experts say is a good first step toward improving its competitive position and boosting its lagging stock price.

On Thursday, October 12, the Atlanta-based home improvement chain announced that its four division presidents in the U.S. and Mexico now report directly to CEO Robert Nardelli. The four had previously reported to Carl Liebert, executive vice president of Home Depot Stores, who along with Bill Lennie, senior vice president of merchandising, décor, is leaving the company.

"The move is designed to streamline the decision-making and is another step as we continue to increase our focus on the customer," says Ron DeFeo, a spokesman. DeFeo declined to comment on the departures of Liebert and Lennie.

Home Depot also announced that Carol Tome, executive vice president and CFO, will also take over responsibility for supporting store operations—a move that suggested to some observers that she might be a front-runner for Nardelli's job someday.

"She is a great manager, and it makes sense to get her in a role that provides her with more expertise in other areas," says Joe Feldman, managing director at Telsey Advisory Group.

The company announced other promotions: Craig Menear, senior vice president of merchandising, now is responsible for all merchandising initiatives. Roger Adams, senior vice president of marketing, has been promoted to senior vice president and chief marketing officer.

The promotions speak to Home Depot's ability to develop talent, Feldman says.

"The fact that the company could fill those top positions with internal people should help employee morale," he says.

Home Depot has been the target of intense scrutiny during the past few months. The company was besieged by critics concerned about Nardelli's compensation. In his five years as CEO, he has made more than $245 million, while the company's stock declined 12 percent during the same period. Furthermore, the company warned in August that profit and sales for this year would be at the low end of its forecasts.

The reorganizations should help Home Depot be more competitive, particularly against main rival Lowe's Home Improvement, Feldman says.

"Lowe's has been much more centralized, and that has been a competitive advantage for them," he says.

The test will be whether Home Depot actually can make decisions faster and be more flexible in the wake of the move, says Dave Ulrich, a professor of business administration at the University of Michigan.

"Are they able to adapt faster and innovate quicker? That's what investors will be looking for," he says.

Jessica Marquez