Organizational+design

__**5/1/09:**__ Here's my contribution. It is a bit over two pages. I made it a little more than a page and a half since I'm not sure if my partner will duplicate any of it. Hopefully we'll end with at least three pages once we merge the two halves. Don The Home Depot uses a decentralized organizational structure. While its corporate headquarters are in Atlanta it has autonomous regional offices. The decentralization began when Home Depot began opening stores in California. At first neither the CEO nor the division presidents knew the boundaries of the latter's job. They probably still don't. In //Built From Scratch// Arthur Blank described the boundaries as an invisible fence. Not only that he explained that the invisible fence moves around. He also said, “The invisible fence is not just for our seven division presidents. It is used and applied throughout the company, up to and especially in the stores. Our store managers and their assistant managers have more operating and decision-making leeway than in any other retail chain in America.” (Marcus, Blank & Andelman, pp. 238-41). Sales associates are also empowered at Home Depot. The founders of Home Depot put the customer first and saw the sales associates, cashiers and other hourly wage earners as just as important as managers. Maybe more so since they are the once who have contact with the customers. The idea is to let those interacting with the customer have a large say in what is stocked in the store. Arthur Blank called this an “inverted management structure” (Marcus, Blank & Andelman, pp. 104). This decentralized structure leads to variety among the Home Depot stores. No two are alike since each one tailors its product mix to the customers patronizing it. Home Depot's inverted management structure is successful in part because of its “philosophy of hiring people who are overqualified for the positions to which they are initially assigned” (Marcus, Blank & Andelman, p. 179). They “hired an army of trained plumbers, electricians, and other craftspeople as associates” (Marcus, Blank & Andelman, p. 137) and their experience in the trades helped them to discern what was needed in the stores and made them invaluable as customer service agents on the floor. Home Depot also hires older people, some who no one else will hire. Some are people who retired and found the experience boring. Whatever the reason these 70 and even 8o year olds wanted to work it makes sense for Home Depot to hire them because of the years of experience they have. One Home Depot associate came to the company “after five decades in the paint business” (Marcus, Blank & Andelman, pp. 115-6). These tradesmen and former retirees make it easy for Home Depot to “hold classes for consumers on how to build decks, lay brick, install windows, and hang doors” (Hood, p. 75). Home Depot also hires most employees locally because local people have a better understanding of the area's customers. Since the company expects more form its sales associates it pays them “some of the highest wages in the retail industry and [they] share in the company's wealth through stock ownership plans: (Sagawa & Segal, p. 34). In fact, “they earn 20 to 25 percent more than their counterparts at rivals like Lowe's” and can buy company stock worth up to 20 per cent of their gross salary at a 15 percent discount” (Roush, p.15). Lowe's was the industry leader and clung to its tried and true way of doing business until Home Depot took the lead. At that point Lowe's switched from smaller stores to larger Home Depot sized stores (Marcus, Blank & Andelman, p. 170). The fact, mentioned above, that Lowe's employees are paid less than those at Home Depot suggests Lowe's has retained at least some of the traditional retailing methods. In 1994 a Home Depot division did a small secret shopper type test to compare itself with Lowe's. The secret shoppers went to both stores and asked for a specific though obscure item. At Home Depot the item was quickly found while at Lowe's it couldn't be found after a lengthy search. Others went to get ideas for redoing a kitchen for under $1000. The Home Depot associate came up with a $260 makeover while “the Lowe's clerks suggested buying a do-it-yourself kitchen design book” (Roush, p. 82). Clearly Lowe's does not hire employees with the same expertise as Home Depot's associates. It is reasonable to assume that Lowe's clerks do not give much input into the product mix carried by Lowe's. The conclusion drawn from this is that Lowe's does not practice Home Depot's inverted management structure but uses a more traditional centralized organization for it's retail operations. Home Depot has twenty executive officers listed on its corporate web site (Homer TLC, Inc.). There is a chief executive officer (CEO), eight senior vice-presidents (VPs), six executive VPs and five division presidents. Lowe's corporate web site lists thirty-one members of its upper management team. There are a CEO, a chief operating officer, twenty-four senior VPs, and five executive VPs (Lowe's, 2005). That the Home Depot has 112 stores per executive officer and Lowe's has 52 stores per executive officer helps substantiate the conclusion that Lowe's has a more centralized organizational structure. Not everyone sees the inverted management system as beneficial. Joe Feldman of Telsey Advisory Group, an independent investment manager (see []), said, “ Lowe's has been much more centralized, and that has been a competitive advantage for them," when comparing Lowe's to Home Depot (Marquez, 2006). **Sources:**  Homer TLC, Inc. (2003-2006). Senior leadership team. //In Our Company / Leadership.// Retrieved on April 30, 2009 from [|http://corporate.homedepot.com/wps/portal/!ut/p/c1/04_SB8K8xLLM9MSSzPy8xBz9CP0os3gDdwNHH0sfE3M3AzMPJ8OAACdDAwgAykdiypsaG8Dk8ev288jPTdUvyI0oBwDH_94N/dl2/d1/L2dJQSEvUUt3QS9ZQnB3LzZfMEcwQUw5TDQ3RjA2SEIxUEtDMDAwMDAwMDA!/]   Hood, John M. (1996). //The Heroic Enterprise.// New York: The Free Press. Lowe's. (2005). Executive management. In //Lowe's Investor Relations.// Retrieved on April 30, 2009 from [] Marcus, Bernie; Blank, Arthur; & Andelman, Bob. (1999). //Built from Scratch.// New York: Times Business. Marquez, Jessica. (2006). Home Depot Sheds Management Layers, Promotes From Within. Workforce Management. Retrieved on May 1, 2009 from []  Roush, Chris. (1999). //Inside Home Depot.// New York: McGraw-Hill. Sagawa, Shirley; & Segal, Eli. (2000). //Common Interest Common Good.// Boston: Harvard Business School Press.