06 October 2015

Better than Jack Welch - Frank Blake's Home Depot Transformation

Are you a fan of Jack Welch ? Many of us are.

In the 90s and early 2000s, bosses are singing praises of Jack Welch management gospels and trying to mimic his style to gain better performance and higher stock value.

What was lacking, and we were blind to that, being of one track western mindset, is that his six-signma, 4E1P, performance driven and fear driven perform or get fired, top-down, autocratic style management, only works for certain situations. We need to go back to Chinese Mindset such as of Sun Zi, to understand the situation first and then apply the right tools for the right jobs.

Here is an article, as early as 2003, that was pointing out the errors of his disciples. Jack Welch's disciples have gone forth to preach his gospel. So far, most of them are failing.

Now at 2015, we have a longer history of evaluating the disciples performance. They are only good for short-term performances at some instances only, but failed badly in the long-term.

Consider Nardelli's tensure at Home-Depot. He did well at the beginning but was bad in the longer run and was replaced by Frank Blake (Nardelli's Deputy) who go back to the basics of serving associates(employees) to serve customers with the inverted pyramid management style. If you do a search on Frank Blake and Home Depot, you can find many stories about how Blake turnaround the company using his Inverted Pyramind management style. A great one showing him how he handled the Home Depot hacked incidence is in How Home Depot CEO Frank Blake kept his legacy from being hacked. A good case study on Home Depot is here.

Andy Stanley Leadership Podcast recently has an interview with Frank Blade that talked about the inverted pyramid can be found here or here for a complete list.

Here is my mind-map summary of the conversation key points:

It seems that 6-sigma, KPIs number chasing and cost-cutting system may help improve the short term performance but may, if not careful, destroy the original culture and the people who make the company successful in the first place. Management by KPIs and fear can only achieve short term success at the expense of long term growth and sustainability. They seems unable to innovate to create greater growth. It reflects EW Deming's words, "Zero Defect does not guarantee jobs". In this article, "Who Killed Nokia? Nokia Did", the author concluded that the root reason was fear.

However, don't go to the other extreme to say that 6Sigma or TQM or KPIs are no good. No, they are needed. However, they are not enough. You need both, the right values, culture and the methods to create a lasting and successfully company.

Go for Mission, Vision and Values based culture first and then have simplified performance management systems, not just for rewards and incentives, but more importantly, for learning and improvements. 

One more thing. Keeping employees happy is not the goal. Keeping employees happy in serving the customers to accomplish the vision of the company is the goal of any business. The order is happy employees leads to happy customers and to happy owners.

If you want the whole summary in one phrase, it will be "staff before systems" or "love is more powerful than fear".

Lim Liat (c) 6 October 2015