A Centralized Structure Transforms Essay Example

made were: creating a bonus system based on performance to motivate managers and employees; streamline and centralize purchasing activities; increased the number of new and innovative products; and also created an organization wide it program that provides store by store performance. Nardelli approach to the organizational structure was much different than the approach that the founders created in the early days of Home Depot. Nardelli knew that he may receive resistant from the employees in the change of structure.

Nardelli would need to recreate the culture within the company to be able to bring the company back to the top. Nardelli brought personal leadership and accountability to the organization through his own behavior. He also created specific tools to change the company’s culture which were created by Dennis Donovan a previous colleague of Nardelli from GE. Nardelli placed a trusted colleague in a position that lacked influence in previous years at Home Depot. Donovan was one of the highest paid executives which signaled that changing the culture within Home Depot was an essential part to making the company successful in the years to come.

Ram Charan an employee during this time made two significant points about this time. He states that “ these changes in the business would not have happened without a real and observable change in the culture…. cultural transition can be achieved systematically, even under less than favorable conditions, not simply through the charisma of the person leading the change but through the use of mechanisms that alter the social interactions of people in the organization”. (2006) Within 18 months, the new organization structure was paying off and sales increased

as customers enjoyed the new products and better customer service.

Discussion Questions Decentralizing can help Home Depot improve its performance by: motivating mangers; employees taking responsibility for their actions; and promoting flexibility and responsiveness. Centralizing can help Home Depot to improve their performance by: standardizing products and the stores; creating a better communication process by adding an organization wide it system; reducing cost by decreasing the costs of management and the ability to have more decision making authority with the lower level staff.

There are several factors in which a company would want to change to decentralizing, one those reasons would be efficiency and effectiveness. Decentralization allows decision making across an organization and also empowers employees to improve their performance by being able to improve inefficient areas quickly without approval from the executive management. Decentralization also allows mangers to use their knowledge and previous business experience to improve their areas.

Decisions made by executive management benefits the whole organization but decisions made by department managers benefit their department. An experience d CEO can make difficult decisions during a crisis or negative economic climate. Communication is a factor in regards to changing to decentralizing; decision making becomes slow process when there is chain of command that lengthens the ability to make decisions between executive level staff and lower level management.

Slowdowns hurt the organization’s performance and being able to respond promptly to their customer’s needs. An organization may want to switch from a decentralized system to a centralized organization to increase competition within their staff and to also being a strong work force. Managers are allowed to create activities and rewards systems

to motivate employees to obtain the company’s long term goals. Also, the implantation of standardized procedures by executive management can create an increase in cost saving for the company. Conclusion

In the 2000s, Home Depot made the right decision to change the climate of their organization by hiring Nardelli and creating a new environment for his employees along with the practices of Home Depot. I believe that all organizations need to continue to evaluate how they conduct business and need to change the climate of their organization based on the company’s annual goals along with the expectations of their customers. The approach that Home Depot decided upon in the 2000s may not work as easily for them currently and they will need to continue to adapt and adjust to their customer’s needs to remain successful and productive company.