Restructuring HR at The Home Depot

The fallout of the entire housing market meltdown continues to afflict businesses directly related to the home construction and building products industry. Home Depot recently announced major restructuring within their HR department. Much like my post several months ago about the impact on Andersen Windows, this story reflects that continuing impact.

From HRE Online:

The move by Home Depot to transform -- and cut up to 50 percent of -- its human resource function is probably a good move, experts say. In the past, HR jobs at the company were a dead end. The new strategy offers a higher level of HR responsibility.

By Tom Starner

With the company's economic woes worsening, it should be no shock that Home Depot Inc., the global mega-home supply chain with 1,970 stores across America, had to make some drastic changes.

And the company's latest announcement -- that it would cut as much as 50 percent of its 2,200-member HR department in a major redesign/restructuring of the HR function -- shows the Atlanta-based employer believes that tough times call for tough measures.

By May 1, the company will no longer have an HR manager on-site in each of the company's U.S. stores, and all HR supervisor positions no longer will exist, according to Home Depot spokesperson Ron DeFeo.

At the same time, the new strategy creates 230 HR "district teams." Each of those teams -- an HR manager and three additional HR professionals -- will oversee six to 10 stores. On a related front, Home Depot will hire 200 workers for a new HR service center. Finally, DeFeo says, there will be 30 new hires for regional HR associates to focus on recruiting.

While cost-cutting would seem to be one reason for the loss of 1,000 or so HR jobs, DeFeo says the plan really is to fund more "customer-facing" jobs. By year's end, Home Depot is planning to hire three new associates to work on the floor in each of its U.S. stores.

All affected employees, HR or otherwise, can apply for other jobs within the company (employees who lose jobs get 60 days' pay), he says.

"I think it is a step in the right direction," says Roberta Chinsky Matuson, president of Northampton, Mass.-based Human Resource Solutions, an HR consulting firm.

"If you follow any of the HR boards online, it's pretty clear that the store HR positions at Home Depot seemed to turn over even more than the associate jobs. The buzz on the 'online' street is, this is not a job you would want.

"It sounds like Home Depot will have an opportunity to make a new name for itself in the HR community as it looks to attract new HR talent," says Chinsky Matuson, who previously served as a retail HR supervisor at the Houston flagship store of Foley's, part of the Macy's Inc. department store chain.

"These new roles will give HR professionals an opportunity to work at a higher level. This new approach may actually allow the HR team at Home Depot to help move the organization forward," she says.

Like many other housing-related businesses, Home Depot has been hit hard by the housing market collapse -- a key driver in the HR restructuring. The company's NYSE-listed stock closed Tuesday at $28.18, about $9 less than a year before, and its quarterly earnings growth is down 27.50 percent over the prior year.

With about 331,000 employees globally, the HR cuts seem small, but any time you chop an entire department in half, your new strategy had better work. The soon-to-be-gone HR structure was architected by Dennis Donovan, who left Home Depot in February 2007. Tim Crow is now the EVP of HR at Home Depot.

Whether the transformation is more for cost savings or for more effective HR, Chinsky Matuson says no doubt both objectives are part of it.

"They don't shuffle the deck this drastically for no reason. I am sure cost savings is in there," she says. "But also, their HR delivery and service model needed to change, because all indications are that Home Depot was not a place to go for an HR professional. Certainly, it's not like working at an Ikea or Target, where HR positions are in demand."

Billie Blair, a management consultant who discusses some of Home Depot's strategies in her latest book, All the Moving Parts: Organizational Change Management, says that the idea of a manager in every store really is a throwback to the days when HR was seen more as the "personnel" department. So in her view, the Home Depot changes are overdue.

"Putting HR people in stores does a disservice to HR," says Blair, president and CEO at Leading and Learning Inc., based in Los Angeles. "They are out of touch and in a situation where they can't work together with other HR professionals."

She adds that when ex-CEO Bob Nardelli moved to more of a part-time strategy for store associates, it caused a turnover nightmare for the HR people in stores.

"Now, they are pulling back to a more typical, centralized HR function," she says. "They are trying to regroup."

She says Home Depot top management no doubt carefully re-thought the HR situation, and looked at other retail HR strategies as part of that thought process. "Clearly, their current situation was not working, so they looked at new designs," she says. "And what they saw were other retailers, companies like Macy's, who are doing very well with HR."

Mary Key, a business consultant who heads the leadership practice for Institute for Corporate Productivity (i4cp), in Seattle, warns that some retail companies restructure in the hopes of creating a winning strategy and are unsuccessful, even to the point of creating severe damage.
She points to Circuit City, a company she has consulted with in the past, which laid off key experienced people in their stores, and then suggested the workers could re-apply for their old jobs at a lower hourly wage.

"Circuit City had a strategy to begin better customizing for the customer and yet its field leadership took the misstep of getting rid of the experienced people who would have a better chance at executing on this strategy," she says.

She says the real question regarding Home Depot is, does the new CEO, Frank Blake, have a winning strategy that takes the troubled retailer to a better place?

"Because of the downturn in the market and the mismanagement of the company, job cuts may be inevitable," says Key. "I don't necessarily see the restructuring as a bad thing, especially if top-performing HR staff will be part of the 'district teams." She adds that in this new alignment, the more "transactional" aspects of HR no doubt will be done by the new HR service center.

"If Home Depot has outlined the competencies that are important for certain positions, creating a recruiting unit might be an attempt to better leverage attracting new talent and addressing the entire recruiting picture versus just focusing on a given store," she says, adding that most engaged workforces have leadership that is consistent, and has a commitment to creating a high-performing culture that involves employees in reaching a vision.

"Ultimately, Home Depot's vision and strategy are at the core of whether or not the HR restructuring works," she says.

April 9, 2008