Rallying the Home Team

July 24, 2008

A lot of people might have thought twice before accepting the top HR position at Home Depot last year.

    After all, 2007 began with quite a bit of controversy for the Atlanta-based retailer. In January, CEO Robert Nardelli resigned after months of mounting outrage over his compensation—which hit $245 million over five years as the company’s stock price plummeted 12 percent. His handpicked HR leader, Dennis Donovan, followed soon after.

    Tim Crow, whose was then senior vice president of organization, talent and performance systems at the company, says he didn’t bat an eye when the new CEO, Frank Blake, walked into his office and offered him the top HR job. "I thought about it for 30 seconds and said yes," he says.

    Crow, 53, grew up in retail, working at the likes of Sears and Kmart. He says he loves the business because "you never know what each day is going to bring."

    And that’s probably a good attitude to take for a job like his. Home Depot, whose business depends on people buying, selling and improving homes, is contending with the weakest housing market in more than 25 years. On June 5, the Mortgage Bankers Association announced that more than 1 million homes were in foreclosure nationwide.

    In May, Home Depot reported a 66 percent drop in first-quarter profits. Revenue in the quarter fell 3.4 percent and sales at stores open at least a year fell 6.5 percent. As a result, the company announced it would hold off on expansion plans and close 15 of its flagship stores, affecting 1,300 employees. The retailer has said that per-share profit could drop as much as 24 percent this year.

    Despite all of this, Crow says he is completely focused on three priorities: creating a sense of ownership among Home Depot’s 330,000 associates; making sure they have the product knowledge that customers want; and aligning rewards and recognition programs to boost morale. The company has 2,250 stores in the U.S., Canada, Mexico and China.

    To this end, Crow has introduced a new "Success Sharing" program. If stores achieve their sales plans, everyone gets cash bonuses. In 2007, Home Depot paid out $63 million through Success Sharing, up from $25 million in 2006.

    Last year Home Depot introduced "Homer Badges" for associates who are recognized for "living Home Depot’s values," Crow says. (Homer is the company’s mascot, a sturdy-looking guy wearing the store’s orange apron and matching baseball cap.) Associates who earn three badges can get a cash bonus. So far the company has given out 400,000 badges. Home Depot also has launched a restricted stock program for its 8,500 assistant store managers—a rare offering for retail workers.

    Like most heads of HR, Crow gauges his initiatives’ success by monitoring the company’s attrition rates. And although Home Depot won’t comment on exactly what that rate is, the company does note that voluntary attrition among hourly workers is down 14 percent this year from 2007.

    Now Crow is focused on getting more employees onto the floors of its stores.

    Through its "Aprons on the Floor" initiative, all employees are encouraged to find ways to cut costs so the company can spend more on staffing. The company’s goal is to redeploy $180 million from activities that don’t involve customers to employee hours on the floor, Crow says.

    As part of this initiative, Home Depot has cut its HR staff from 2,200 to 1,000 employees. Instead of having one HR manager per store, the company now has 230 teams of four HR managers to oversee six to 10 stores each. While each store has an administrative person to handle scheduling, all other transactional HR-related questions are now routed to a new call center that Home Depot has set up.

"The biggest challenge that we are all facing right now is the economy. I don't remember anything tougher than this in my lifetime. So the challenge is making sure that as an organization we have the right structure in place, given the economic conditions."

    Crow also has scrapped much of the company’s e-learning program and replaced it with a more action-based training program that encourages workers to interact with one another on the store floor.

    Crow recently spoke to Workforce Management New York bureau chief Jessica Marquez about the past year and a half and his hopes for the future.

    Workforce Management: Can you talk about how you have revamped Home Depot’s training program for associates?

    Tim Crow: Learning is a challenge because of the technical nature of what we sell. As an organization, we had gone too far in e-learning. Now, e-learning is great for some situations because it’s fairly efficient from a cost perspective and gets the information across. But it doesn’t drive the passion around product knowledge that we want in our associates. So we launched the Product Knowledge Recognition Program early last year to get associates motivated to learn.

    We have a PK guide for each of our 11 departments, such as plumbing. There are over 100 questions that an associate has to be able to answer to be deemed an expert in that department and get a PK badge. New associates are expected to become an expert within 90 days, and at that time they will receive an increase in their base salary. Once an associate gets a badge for one department there are additional financial incentives tied to becoming experts in other departments. One-third of our associates are certified as experts in one department.

    WM: If associates still have to read the whole guide, how is this program more hands-on than e-learning?

    Crow: The program encourages associates to go out and read about the merchandise on the floor. You can learn a lot from reading the carton. It also encourages talking to other associates and having them quiz each other. That kind of interaction doesn’t happen with the e-learning approach.

    WM: What is your biggest challenge right now?

    Crow: The biggest challenge that we are all facing right now is the economy. I don’t remember anything tougher than this in my lifetime. So the challenge is making sure that as an organization we have the right structure in place, given the economic conditions.

"If people aren't happy, they aren't going to be happy to the customer. That's why morale is so important in our business, and that's my focus."

    As part of that, hiring the right talent is a huge challenge. We recently started a program called Master Trade Specialist, where we hired 3,000 trade specialists that are licensed electricians and plumbers. They have huge expertise.

    The other challenge, given the economy, is figuring out how much we should invest in learning given the attrition rates we experience. I am not going to comment on our attrition rates, but retail attrition in general is higher than in other industries. So we need to figure out how much learning do we put in place, knowing that there is going to be attrition.

    WM: Is there a formula to figuring out how much to invest in learning given the rate of attrition you have?

    Crow: No. Again, I can’t comment on our attrition rates, but it’s one of the lowest attrition rates that I have seen at a retailer. There is no formula, but that’s why we have to just focus on getting associates out on the training floor so that when they encounter a customer, they are motivated to learn rather than having them go through hours of orientation and e-learning.

    WM: How is your approach to HR different from that of your predecessor, Dennis Donovan?

    Crow: It’s different, but these are different times. The economy alone is totally different, so it’s hard to compare my approach with Dennis Donovan’s.

    WM: Many people have said that CEO Robert Nardelli and Donovan’s focus on centralizing the company’s culture crushed the entrepreneurial spirit of the individual stores. What are you doing to revive that entrepreneurial spirit?

    Crow: If people aren’t happy, they aren’t going to be happy to the customer. That’s why morale is so important in our business, and that’s my focus. That’s not to say it wasn’t Dennis’ focus. But given the economy, CEO Frank Blake has made morale a strategic priority.

    To reach this goal, last year we revamped our Success Sharing program so that when stores made sales goals, they could receive more money. In 2006, which was a better economy than last year, we paid out $25 million. In 2007, we paid out $63 million—that was more than ever. And we also enhanced it so that hourly supervisors are able to participate in this program in a bigger way.

    Our Homer Badges are also designed to address morale issues. Also, last year we began offering restricted stock grants to assistant store managers to encourage them to see their career path and want to stay on.

    WM: What was the goal of the recent HR reorganization?

    Crow: In 2002, when we put the HR positions in each of the stores, the objective was to create and implement common HR processes across the organization. The company had grown really fast, so we wanted to institutionalize those HR processes.

    Flash forward to today. The good news is that those processes have stuck. They aren’t even HR processes anymore; they are part of the leadership model. When I talk to a store manager, they talk about talent management and career development as part of their job.

    Today, the economy has changed, and we needed to make changes to be responsive to the business. It’s not about saving money and adding to the bottom line. It’s about redeploying the investment in our HR infrastructure into customer-facing hours on the sales floor. Since our store managers had done such a great job of institutionalizing HR processes, we could do that.

    WM: How do you make sure that store managers don’t sweep HR matters under the rug?

    Crow: Members of our district HR teams are in the stores every day. And they may be an associate relations expert, but when they walk into a store they are a generalist.

    The stores are seeing their HR professionals anywhere from four to five days a week, and they aren’t doing transactional processes. They are engaging associates and working with management.

"It's not about saving money and adding to the bottom line. It's about redeploying the investment in our HR infrastructure into customer-facing hours on the sales floor. Since our store managers had done such a great job of institutionalizing HR processes, we could do that."

    This isn’t scientific, but I was talking to some store managers in a roundtable in Arizona recently and I asked them how they liked the transformation. They said that they are seeing HR more now than they did in the past.

    So listen, like any big company that is serious about associate relations, we have an Aware Line that people can call if things aren’t working. And I haven’t seen an increase in Aware Line calls since we made the change.

    WM: As part of the HR reorganization, you hired 200 people for a call center to handle employees’ transactional HR questions. Why didn’t you save money and outsource it?

    Crow: We stress service a lot in this company. The last thing I wanted to do was to not have our hands on the service when it comes to HR. If the Home Depot passion is about supporting each other, I’m not sure it would have made sense to outsource this.

    WM: How else has the economy affected Home Depot’s HR strategy?

    Crow: Frank Blake has a great comment about the economy that a downturn is a horrible thing to waste. So we are taking this opportunity to make things stronger so that when we come out of the downturn, we are performing on all cylinders. A lot of things we are doing with our associates cost money, but we are betting that it’s the right thing to do.

    We have a labor model that flexes based on sales rather than just flexing down in a down economy. So our Aprons on the Floor program is designed to get more associates on the floor. As part of that we are encouraging employees to come up with ways to redeploy hours and costs and register their ideas. All of those savings go back into the stores.