There were amazing developments at Home Depot last week. According to Alan Murray's comments on CNBC on Monday afternoon, here's what happened.
First, Relational apparently got the Home Depot board to agree to revisit the 'supplier' business which Nardelli and his lieutenant, now CEO, Frank Blake, built and acquired.
Second, in presenting their analysis, Relational allegedly corrected a prior mistake in calculating this unit's ROI. This part is just amazing. So Blake and Nardelli, two exorbitantly-compensated senior executives, couldn't even do the basic math to correctly determine the return to HD of a new business? Can we say "mediocrity?"
Consequently, third, the board is now agreeing to consider getting rid of the unit. Maybe a good idea, maybe not, as some note, because they would be selling 'at the bottom,' the housing sector being as weak as it is just now.
How can the board actually retain a CEO, even a new one, who was responsible for incorrectly providing the basic arithmetic of calculating operating performance for the new business unit, and presenting it to the board? For more thoughts on this, see my post on MBAs this week, as well as this one on a recent application of a very old marketing management method at GE/NBC. It's easy to see why I am so sceptical of the value of an MBA, isn't it? Somehow, common sense was simply lacking, even among GE-trained senior operating executives. Neutron Jack would be so proud.
Does the Relational Investors saga make you wonder what else is going on at Home Depot that smacks of grade school ineptitude? Not to mention how little spine the Home Depot board seems to have, bending to whomever has pushed on it with the most force most recently?
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2 comments:
An right on cue, HD annouces earnings today that are down 29%. Sadly that math is almost certainly correct.
thanks for your comment. yes, sad indeed.
however, from low points like this, perhaps, new growth may be possible. being a retailer, not a manufacturer, it is possible for HD to return to consistent growth and superior total returns more easily, I believe.
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