This paper discusses the role of human resources at Home Depot, Inc. According to Grossman (2008), the organization had to lower costs, increase customer service ratings, and revitalize the culture in an unstable economic environment. This paper identifies key problems in the company’s decision to reduce its workforce in an effort to redefine the role of human resources management. It also examines how Home Depot fits the Lepak and Snell Employment Model.
The findings suggest that in the last 20 years Home Depot has made strategic decisions in an effort to align its human resources role with business strategy, but has not fully transitioned to the role of Strategic Partner. The Evolution of the HR Role and Function at Home Depot, Inc. The original founders of Home Depot, Inc. believed in a bottom-up consultative management approach also referred to as an inverted pyramid centered on customers and store employees.The organization was financially successful, but it lacked an established HR practice.
In 2001, CEO Robert Nardelli changed the management style at Home Depot, Inc. from a bottom-up consultative approach to a disciplinary approach because of the damage caused by the economic housing crisis. Under Nardelli, Home Depot was able to increase sales; however, stock prices remained unaffected. In 2006, Nardelli resigned and Home Depot chose Frank Blake as his replacement. In 2007, CEO Blake appointed Tim Crow as Executive Vice President of HR.
Crow realized the importance of an employee’s contribution to the bottom line and restored the benefits Nardelli removed, shifting back to a customer-employee centered company. However, the change in culture did not affect current stock prices. He then revealed the “Aprons on the Floor” initiative as a method to increase low customer service, which he hoped would ultimately increase stock prices. To pay for the $180 million dollar initiative Crow’s executive leadership team proposed to cut 1,200 HR positions. This evidence, taken from the case study written by Robert Grossman, suggests.
that the reduction of the workforce at Home Depot was a critical step toward transitioning the HR role into a Strategic Partner. Despite the evidence, however, there are many reasons to believe that workforce reduction causes negative implications. It would appear Home Depot strategically aligned the reduction in resources across the organization with its business needs because it analyzed the environment to determine where and how to cut costs, redefined the culture to create HR business partners, and outsourced its transactional functions (Wooten & Decker, 1996).However, Home Depot failed to consider the possible effects of downsizing on its employees in its analysis. Workforce reduction can oftentimes lead to feelings of job insecurity amongst HR personnel, thus the possibility of minimized motivation due to feelings that the organization could not help to neutralize the negative results of job loss (Brockner, Grover, Reed, & Dewitt, 1992). In this instance, it is clear that Home Depot did not proactively prepare for all of the possible negative outcomes in its analysis.
They believed downsizing was the best way to fund the “Aprons on the Floor” initiative, as well as distinguish the customer service it provided to gain competitive advantage (Ci-sheng & Shu-ming, 2012). However, there is no proof that downsizing is a valuable way to decrease expenses or increase productivity; as an alternative, employees who have experienced downsizing have suffered harmful effects on morale and commitment (McKinley, Sanchez, Schick, & Higgs, 1994). Similarly, Home Depot neglected to consider additional aspects of the reduction that would influence the bottom line.As a result of the reduction, HR associates at Home Depot, Inc.
currently provide feedback on the business strategy, and they function as established business partners who focus on staffing and associate relations (Grossman, 2008). However, Home Depot, Inc did not solidify a crucial component of strategic HR: quantifiable data to determine the impact of the new processes on the bottom line (Becton & Schraeder, 2009). According to Mello (2010), one reason that may account for the lack of research and information regarding metrics in organizations comparable to Home Depot is that there is no consistent method of measurement.Strategic partner organizations should place emphasis on how performance is measured. Home Depot should have measured performance with regard to how HR performance metrics linked to the way organization applied its strategy (“Building an Effective,” 2012). Its decision to monitor how the calls were dealt with in the service center is a key HR performance metric (Reilly & Williams 2006; Grossman, 2008).
Unfortunately, a determination cannot currently be made on whether or not the reduction yielded a return on investment.Without application of performance drivers to the balanced scorecard Home Depot intends to use to generate measuring indicators related to staffing, learning, performance management and associate relations, the impact of the reorganization on the bottom line is inconclusive (De & Costa, 2013; Grossman, 2008). Even despite the lack of traditional metrics to support whether or not the reorganization was a success, other areas of analysis show that the reduction was necessary to transition the role of HR.Prior to the workforce reduction at Home Depot, Inc. , the human resources role was an administrative staffing function. After the cuts, a strategic HR presence in the organization was created (Grossman, 2008).
Given the economic housing crisis, it would appear Home Depot should not have risked reorganization. In reality, strategic planning is the most effective way to help organizations cope with disorder during periods of economic instability (Van Mechelen, 1996).Had Crow opted to be more risk-averse, he would not have been able use the workforce reduction to fund the “Aprons on the Floor” initiative to help the company meet its goals. The cuts were also necessary to outsource transactional work in an effort to provide HR with time to think strategically (Grossman, 2008).
For HR entities to move toward the role of strategic business partner, they must change their state of mind regarding the business strategy because strategic HR must be able to measure their impact on the bottom line (Becton & Schraeder, 2009).Home Depot was able to focus on the needs of the organization to create a strategic HR presence in the organization. While the cuts were necessary to transition the role of HR, they did not immediately influence the stock price. Home Depot’s Annual Report (2009) indicates a decrease in stock prices from 2008 to 2009 for all four quarters, which it attributed to the economic recession. However, Home Depot’s Annual Report (2010) reveals to stock prices improved with increases from 2009 to 2010 for all four quarters.
To explain the decisions made by Home Depot, the next section will examine where it fits in the Lepak and Snell Model. Home Depot fits into Quadrant 4 of the Lepak and Snell Model and utilizes a collaborative-based HR configuration to illustrate alliance and partnership employment. The organization use associates that do skill-based work and require a specific knowledge base. However, they do not provide a strategic contribution to the organization.
Employees with unique skills who do not create value for the organization to are a key component of alliance/partnership quadrant (Mello, 2010). Home Depot depends on its associates to provide feedback on home improvement products, but they do not rely on the associates to make analytical decisions regarding the organization. It also used stock grants and monetary rewards to motivate managers and associates to meet performance standards, which helped the corporation increase its gross earnings and created a mutual benefit for both partners (Lepak & Snell, 1999; Grossman, 2008).Lastly, the executive leadership team determined that its human resource staff spent too much time on transactional work, also known as data processing (Grossman, 2008). As a result, Home Depot considered other ways to deliver transactional human resources services and outsourced its transactional HR work to an in-house service center established by Home Depot to accomplish strategically its business goals (Van Mechelen, 1996; Grossman, 2008).
According to Lepak and Snell (1999), this would be an example of outsourcing work based on the sharing of information an establishment of trust.Rather than contracting the work, Home Depot used associates with an understanding of the culture, and product knowledge staff the service center and insource the labor. In the last 20 years, Home Depot has made strategic decisions in an effort to align the human resources role with the business strategy, but has not fully transitioned to the role of Strategic Partner. Home Depot completed an analysis of their resources, and aligned the resources with the workforce reduction to increase the staffing budget and transform the HR role, ultimately increasing stock prices and making the organization more efficient.Although Home Depot used strategic methods to fund the “Aprons on the Floor” initiative and solve problems with the business strategy, they spent more time focused on the process than the results. Despite Home Depot’s strategic decisions, they neglected key issues such as the negative impact the reduction could have on the bottom line, the possible effects to the workforce and quantitative metrics to project future strategy.
Even though Home Depot was able to increase stock prices and affect the bottom line, the reorganization had problems with negative results.According to Lepak and Snell (1999), Home Depot made the cuts that were necessary to become a more collaborative-based organization, and to shift their thinking toward that of strategic business partner, but did not fully prepare for all possible outcomes. Although Home Depot was able to begin thinking strategically, their inability to properly prepare and bring the transition to completion hindered Home Depot from a full transition to strategic business partner.
