Home Depot Implements Stakeholder Orientation
INTRODUCTION
When Bernie Marcus and Arthur Blank opened the first Home Depot store in Atlanta in 1979, they
forever changed the hardware and home-improvement retailing industry. Marcus and Blank envisioned
huge warehouse-style stores stocked with an extensive selection of products offered at the lowest
prices. Do-it-yourselfers and building contractors can browse among 40,000 different products for the
home and yard, from kitchen and bathroom fixtures to carpeting, lumber, paint, tools, and plant and
landscaping items. If a product is not provided in one of the stores, Home Depot offers 250,000 products
that can be special ordered. Some Home Depot stores are open twenty-four hours a day, but customers
can also order products online. Additionally, the company offers free home-improvement clinics to
teach customers how to tackle everyday projects like tiling a bathroom. For those customers who prefer
not to “do it yourself,” most stores offer installation services. Knowledgeable employees, recognizable
by their orange aprons, are on hand to help customers find items or to demonstrate the proper use of a
particular tool.
Currently, Home Depot employs more than 371,000 people and operates over 2,200 Home Depot stores
in the United States, Mexico, Puerto Rico, China, the Virgin Islands, Guam, and Canada. It operates four
subsidiaries: Home Depot International Inc., Home Depot USA, Inc., HD Development of Maryland, Inc.,
and Interline Brands. The company is the largest home-improvement retailer in the world, with over $78
billion in revenues. Home Depot continues to do things on a grand scale, including putting its corporate
muscle behind a tightly focused social responsibility agenda.
MANAGING CUSTOMER RELATIONSHIPS
In 2006 John Costello was the Chief Marketing Officer, or “Chief Customer Officer,” as he refers to the
position. Costello consolidated marketing and merchandising functions to help consumers achieve their
goals in home-improvement projects more effectively and efficiently. According to Costello, “Above all
else, a brand is a promise. It says here’s what you can expect if you do business with us. Our mission is
to empower our customers to achieve the home or condo of their dreams.” When Costello arrived in
2002, Home Depot’s reputation was faltering. His plan called for overhauling the Home Depot website
as well as integrating mass marketing and direct marketing with in-store experience. The new
philosophy was expressed by the new Home Depot mantra: “You can do it. We can help.” Teams of
people from merchandising, marketing, visual merchandising, and operations attempted to provide the
best shopping experience. The idea was simple. Home Depot believed customers should be able to read
and understand how one ceiling fan is different from another, and associates (employees) should be
able to offer installation and design advice.
In an effort to expand market share, Home Depot developed a new marketing strategy. The company’s
approach was to emphasize the store’s everyday low prices, high product value, and quality energy–
saving products. At the same time, the company cut back on special offers like discounts and
promotions, in order to combat volatile market conditions and remain competitive within the home
improvement segment.
Despite Home Depot’s proactive approach to customer issues, the company has had its share of
challenges along the way. In the past, the company was forced to deal with negative publicity associated
with customer-satisfaction measures published by outside sources. Over the past few years, Home
Depot’s customer satisfaction scores have significantly improved. However, the University of Michigan’s
annual American Customer Satisfaction Index in 2014 showed that Home Depot has consistently placed
behind competitor Lowe’s when it comes to customer satisfaction. The company is down 3.8 percent
from the previous year, whereas Lowe’s is down 1.2 percent.
Former managers at Home Depot blamed the company’s service issues on a culture that operated under
principles reminiscent of the military. Under CEO Robert Nardelli, some employees feared being
terminated unless they followed directions to a tee. After months of decline in customer satisfaction
and other areas, Nardelli was fired and Frank Blake became the newly appointed CEO. The Harris Poll
Reputation Quotient study has ranked Home Depot for several years, and the company has proven
inconsistent with its standing. At one time a number of customers said they appreciated Home Depot’s
quality services. In 2015 it was given a score of 75.38. It still trails behind Lowe’s, but a score of 75.38 is
considered to be a high score that indicates a strong reputation (scores from 75-79 are ranked as “very
good” according to the survey).
The increase of customer satisfaction was due to several efforts on the part of Frank Blake. The
company’s Twitter feed was inundated with comments from unsatisfied customers about the customer
service they encountered in the stores. Blake quickly admitted to the customer service problems the
company faced, apologized for the inconvenience it caused the customers, and encouraged them to
continue to leave their feedback so they could make improvements. Each one of the complaints was
addressed; some angry followers were appeased by phone calls from store managers and personal
emails responding to their specific issues. The responsiveness of Blake and former Senior Manager of
Social Media, Sarah Molinari, not only transformed angry protesters into enthusiastic fans but also
resulted in a strategic advantage for the company in terms of how it deals with customer feedback.
Inside the stores, self-checkout lanes were installed so customers do not have to spend time waiting in
line. However, at peak hours, waiting in line cannot be avoided. In instances such as these, Home Depot
associates can scan items in customers’ baskets while they are in line and hand them a card that holds
all their purchases. When the customer reaches the cashier, they simply scan the card and pay the total
they owe. Home Depot was also the first to partner with PayPal, making it easier for customers who do
not want to carry their wallet or cash with them to be able to pay more conveniently. Many of the Home
Depot associates are given devices called “First Phone,” which is a phone/walkie-talkie/scanner. This
device allows associates to help customers quickly by calling or paging fellow associates who can answer
customers’ questions and have immediate access to the price of an item by scanning it right where they
stand.
Another way Home Depot practices good customer service and simultaneously acts in a socially
responsible manner is through its program designed to teach children basic carpentry skills. Home
Depot provides a free program called the Kids Workshop available at all its stores. During the
workshops, children learn to create objects used around their homes or neighborhoods. Projects include
toolboxes, mail organizers, and window birdhouses and bughouses. Home Depot also offers free
workshops especially designed for women and for new homeowners.
ENVIRONMENTAL INITIATIVES
Cofounders Marcus and Blank nurtured a corporate culture that emphasizes social responsibility,
especially with regard to the company’s impact on the natural environment. Home Depot began its
environmental program on the twentieth anniversary of Earth Day in 1990 by adopting a set of
Environmental Principles. These principles have since been adopted by the National Retail Hardware
Association and Home Center Institute, which represents more than 46,000 retail hardware stores and
home centers.
Guided by these principles, Home Depot initiated a number of programs to minimize the firm’s—and its
customers’—impact on the environment. The retailer began using store and office supplies, advertising,
signs, and shopping bags made with recycled content. It also established a process for evaluating the
environmental claims made by suppliers. The following year the firm launched a program to recycle
wallboard shipping packaging, which became the industry’s first “reverse distribution” program. In
addition, it was the first retailer in the world to combine a drive-through recycling center with one of its
Georgia stores. One year later Home Depot became the first home improvement retailer to offer wood
products from tropical and temperate forests certified as “well–managed” by the Scientific Certification
System’s Forest Conservation Program. The company also began to replace its hardwood wooden
shipping pallets with reusable “slip sheets” to minimize waste and energy usage and decrease pressure
on hardwood resources.
In 1999 Home Depot joined the Certified Forests Products Council, a nonprofit organization that
promotes responsible forest product buying practices and the sale of wood from Certified Well-
Managed Forests. Yet the company continued to sell products made from wood harvested from old
growth forests. Protesters led by the Rainforest Action Network, an environmental group, picketed
Home Depot and other home center stores for years in an effort to stop the destruction of old growth
forests, of which less than 20 percent still survive. Later that year, during Home Depot’s twentieth
anniversary celebration, Arthur Blank announced Home Depot would stop selling products made from
wood harvested in environmentally sensitive areas.
To be certified by the Forest Stewardship Council (FSC), a supplier’s wood products must be tracked
from the forest, through manufacturing and distribution, to the customer. Harvesting, manufacturing,
and distribution practices must ensure a balance of social, economic, and environmental factors. Blank
challenged competitors to follow Home Depot’s lead, and within two years several met that challenge,
including Lowe’s, the number-two home-improvement retailer; Wickes, a lumber company; and
Andersen Corporation, a window manufacturer. By 2003 Home Depot reported it had reduced its
purchases of Indonesian lauan, a tropical rainforest hardwood used in door components, by 70 percent,
and continued to increase its purchases of certified sustainable wood products. In an effort to reduce its
carbon footprint, Home Depot aimed to decrease not only store operations but also simultaneously
reduce transportation emissions emitted by the company. To do this Home Depot installed dual-flush
low-flow toilets in stores that reduce water usage by 40 percent. In other efforts, the company switched
to high efficiency T5 fluorescent lighting, which lowered overall wattage and created more energy-
efficient lighting in stores. The company then provided new irrigation systems that reduced water usage
by 35 percent and only irrigates where and when it is necessary. Also, Home Depot installed LED exterior
signs that replaced the fluorescent lighting that was previously in place.
To further its efforts of sustainability, Home Depot installed solar panels on 62 of its retail stores, making
it the largest retailer to host solar programs. The company partnered with solar energy provider
SolarCity to inform in-store customers about the benefits of installing solar panels. As part of the
partnership, SolarCity consultants can be found in Home Depot stores nationwide. In 2015 Home Depot
awarded SolarCity the Home Depot Environmental Partner of the Year Award. For its efforts in social
responsibility and sustainability, the company was honored with the ranking of one of the top 25 Socially
Responsible Dividend Stocks in 2012, meaning it was recognized as being a socially responsible
investment. Being a responsible investment is determined not only through its environmental initiatives,
but also through its social impact. The company also offers a variety of sustainable products through the
brand Energy Star, which allows its customers to take part in creating a better tomorrow.
These efforts yielded many rewards in addition to improved relations with environmental stakeholders.
Home Depot’s environmental programs earned the company an A on the Council on Economic Priorities
Corporate Report Card, a Vision of America Award from Keep America Beautiful, and a President’s
Council for Sustainable Development Award. The company has also been recognized by the U.S.
Environmental Protection Agency with its Energy Star Award for Excellence.
EMPLOYEE AND SUPPLIER RELATIONS
Home Depot encourages employees to become involved in the community through volunteer and civic
activities. It strives to apply social responsibility to its employment practices, with the goal of assembling
a diverse workforce that reflects the population of the markets it serves. However, in 1997 the company
