Dan Markovitz is our guest blogger again today. Dan has been a regular contributor of articles to the Superfactory website and to the Evolving Excellence blog, and you’ll be hearing more from him in the future.
In The Toyota Way, Jeffrey Liker identifies an eighth waste (in addition to Ohno’s traditional seven): "unused employee creativity." The Wall Street Journal’s story today on Bob Nardelli’s departure from Home Depot illustrates this waste in a way that would be comical, if it weren’t so sad for the employees.
According to the article, Home Depot faced intense pressure to grow in the face of extraordinary return’s from Lowe’s. In response,
Mr. Nardelli moved to cut back on higher-paid full-time employees with experience as plumbers or handymen, and to rely more on part-time workers with less experience answering home-improvement questions from customers. Frequently, Mr. Nardelli found himself fending off questions about deteriorating customer service and about whether cost-cutting was the cause of that. Every few months, Home Depot management would roll out another program aimed at improving customer service, from employee bonuses to customer call buttons. But none appeared to have any lasting effect.
So, in an effort to grow, the CEO cut back on the very employees who had the greatest ability to provide customers with value and increase sales. This sounds like a strategy to cut costs, not to grow the business. While cost-cutting might provide a short term boost to the stock, it’s not a great strategy to increase sales or develop customer loyalty.
The supreme irony is that he then spent additional money on customer service improvement programs. What was the total cost of laying off experienced sales people, hiring new people, and introducing these programs? How does that cost compare to keeping the quality, experienced salespeople in the first place?
The article goes on to say that at a later date,
Mr. Nardelli took criticism [from analysts and investors] for not investing more money into renovating Home Depot’s aging stores and for not hiring more seasoned employees capable of offering better home-improvement advice.
Of course, Mr. Nardelli had laid off just this type of "seasoned employee" several years earlier. Perhaps they had gone to work at Lowe’s.