You Can't S**t on Your Employees: Home Despot Part II

Jason Yip directed me to a fantastic post about Bob Nardelli -- the deposed CEO of Home Depot that I blogged about last week-- over at Lean Blog, called "You Can't S**t on Your Employees"

Here is the quote from an employee that inspired the post title:

""You can't s--t on your employees and deliver" results."

This one is also revealing:

"It's amazing the reaction of people on my floor. People are openly ecstatic. High-fiving," said an Atlanta store operations manager only hours after the Jan. 3 announcement. "There's a group talking about going to happy hour at noon."

Unfortunately, if you look at examples like Hollywood's Scott Rudin and Disney's Michael Eisner, I fear that there are too many places where the lesson seems to be "you can shit on your employees so long as you deliver results." There are also other reasons that Bob Nardelli  got fired, indeed, one of the  main lessons might be that that you can't shit on shareholders and keep your job.  But Nardelli's firing does appear to be a solid blow for The No Asshole Rule, as it suggests that dumping on employees can get your company in trouble with shareholders too. Nardelli's style clearly put off some of the analysts, as you can see from this post. 

This excerpt from The No Asshole Rule provides another example of how dumping on employees can drive down the stock price, although the CEO kept his job and seemed to learn something from the experience:

Neal Patterson, CEO of the Cerner Corporation, learned this lesson in 2001 when he sent out a “belligerent” email that was intended for just the top 400 people in this health care software firm. According the The New York Times, Patterson complained that few employees were working full 40 hour weeks, and “As managers -- you either do not know what your EMPLOYEES are doing; or you do not CARE.” Patterson said that he wanted to see the employee parking lot ''substantially full'' between 7:30 a.m. and 6:30 p.m. weekdays and “half full on Saturdays, and that if it didn’t happen, he would take harsh measures, perhaps even layoffs and hiring freezes.  Patterson warned, ''You have two weeks,'' he said. ''Tick, tock.'' 

Patterson’s e-mail was leaked on the internet, provoking harsh criticism from management experts including my Stanford colleague Jeff Pfeffer who described in it The New York Times as “the corporate equivalent of whips and ropes and chains.” Pfeffer went a bit overboard for my tastes.  But investors weren’t pleased either, as the value of the stock plummeted 22% in three days. Patterson handled the aftermath well.  He sent an apology to his employees, admitted that he wished he had never sent the e-mail, and the share price did bounce back.  Patterson learned the hard way that, when CEO’s who come across as bullies, they can scare their investors, not just their underlings.

Comments

[Frank Roche]

I was reading the NYT yesterday and was thinking about your book. Approach Boss With Caution talks about how Mesa Airlines CEO Jonathan Ornstein is a hothead and a very angry man. (http://www.nytimes.com/2007/01/19/business/19air.html)

""On a scale of one to 10, with 10 being the most volatile personality, Jonathan G. Ornstein, chief executive of the Mesa Air Group, cheerfully admitted, “I used to be an 11.”'

That article made me cringe. I just don't know how, in a world that doesn't allow colleagues to look at each other cross-eyed, can allow a CEO to be profiled as an....well, your title says it all.

[Lilly Evans]

Guess, Washington Post Mensa Invitational contestant who got second prize had it right -

"2. Ignoranus: A person who's both stupid and an asshole."

[dblwyo]

You can't but it takes too long for karmic justice. Let's consider though what Nardelli's balanced performance actually consisted off. He got the short-term numbers up by badly depreciating employee commitment to the health of the firm thereby lowering their long-term productivity. AND - in further cost cutting - has almost destroyed one of HD's OTHER great soft assets - the trust of it's customer based in value, service and customer focus. If we looked at this as a capital asset analysis how many $Bs did he destroy in search of his own payout ? The Board took too long to act but paying him off $210M package may have been cheap at the price. But what does HD do now ? Their old business model was getting exhausted and Nardelli has squander how many years making it worse. OUCH.

Dave Livingston

[Mark Graban]

I remember the Cerner story very well. What's the follow up on that? Patterson is still CEO, Cerner is still a leading company in the hospital information systems space.

Thanks for the link, also. I enjoy your blog Bob, just discovered it recently through Kent Blumberg.

[Ed Brenegar]

I had a conversation at a social event last year with a HD manager, and asked about the changes at the company. He told me it was totally about numbers, not about customer service. Where I live there is a Home Depot and a Lowe's two blocks apart. The Lowe's parking lot is full most days and Saturdays, especially Saturdays, and I can always get a spot at HD within five spaces from the door. The only other thing to say is that they approach the same "market" differently. I'm amazed at how different their merchandizing approach is. In out family, we'll go to Lowe's first, and then HD.

[Robert Hruzek]

So true, Bob! It's amazing how often the folks at the top forget that THEY set the tone for the entire organization! And investors examine that aspect as much as the share price, because it's yet another indicator of future stock performance. It all ties together.