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Look Out For These 3 Telltale Signs Of Transformation Theater

2024 May 19
by Greg Satell

When Bob Nardelli took over as CEO at The Home Depot, he was geared up for the challenge. Passed over for the CEO job at GE in a high-profile succession process, he was determined to show that he could, in fact, be a transformational leader. As Uber-consultant Ram Charan put it, ”What got Home Depot from zero to $50 billion in sales wasn’t going to get it to the next $50 billion.”

He sought to replace the retail firm’s famously decentralized, entrepreneurial culture with the six-sigma driven performance culture he brought from GE. He intended to ruthlessly seek out ways to cut costs, and streamline operations. Under Nardelli, everything would be measured to his exacting standards.

It didn’t turn out well. The truth is that what Nardelli did was not genuine transformation, but transformation theater. Despite the hype, he took the company backward and it lost ground. In the end, he was fired, but walked away with $210 million. Today, Nardelli has spawned an army of imitators. We need to learn to recognize these 3 telltale signs.

1. A False Sense Of Urgency

Founded in 1978 by Bernie Marcus and Arthur Blank, The Home Depot had always had an idiosyncratic culture. It invested in its staff, many of which were former or part-time contractors, and had an unrelenting focus on customer service. You went to The Home Depot not merely to buy products, but to get advice on your home improvement project.

22 Years later, when Nardelli took over, the company was the unquestioned category leader in home improvement, the company had grown to 1,100 big-box stores and reached the $40 billion revenue mark faster than any retailer in history. The business was extremely competitive and still growing. That’s the kind of legacy most leaders would want to continue.

Not Bob Nardelli though. Although he had no retail experience at all, he moved quickly to forge a complete cultural change. One of the first moves was to bring in loyalists from GE to key positions, in particular targeting HR, in order to accelerate the shift from the firm’s famously entrepreneurial culture to a more centralized, command-and-control approach.

Now consider the case of Lou Gerstner. When he took over IBM in 1993, the company was on the verge of collapse and he needed to move quickly to cut costs and streamline operations. It was simply a matter of survival. Yet still, he made sure that his first trip out of headquarters was to the IBM’s legendary research facility at Yorktown Heights, because he wanted to make clear that, although operational principles would change, key values would continue be honored and revered.

That’s one of the key characteristics that separates a true changemaker mindset from the transformation thespians. Genuine agents of change act with empathy, they strive to empower others to do important work. Those engaging in transformation theater, glorify themselves. They want to remake the organization in their own image.

2. A Rushed Strategic Process

Unlike Gerstner, Nardelli had the luxury of time. He could have reached out to long-time executives and partners to understand what was working and what wasn’t. This would also help him identify pockets of resistance as well as those who were more enthusiastic, enabling him to build a coalition to begin identifying a few, initial Keystone Changes.

Yet Nardelli would have none of that. As Ram Charan, who advised Nardelli explained in Harvard Business Review, he moved quickly to install a  three-part strategy: enhance the core through improving the profitability by cutting costs, extend the business by offering related services such as tool rental and home installation, and expand the market, both geographically and by serving new kinds of customers, such as big construction contractors.

At least two of these were disastrous failures. A key strategy for increasing profitability, replacing full-time employees with low-cost, part-time help undermined both morale and customer service. Similarly, the move to service large contractors moved The Home Depot from the high-touch, high margin consumer segment into the cutthroat, low-margin wholesale business where it was less competitive.

We should keep in mind that hindsight is 20/20, but still, it’s hard to imagine that if Nardelli had taken the time to really listen to long-time executives who helped build the business that he would have made such fundamental errors. But, by almost all accounts, the newly minted CEO alienated the rank-and-file with his brash, unwavering style.

Compare that to Lou Gerstner, who in his first public remarks at IBM famously said, “the last thing IBM needs right now is a vision.” That would come later and his refocusing the company on consulting, the Internet and open-source would not only transform the company, but technology itself. Yet it would be a team effort, rooted in IBM’s values and he refused to rush it.

3. A Large, Public Rollout

As one of the frontrunners to succeed the legendary Jack Welch at GE, Nardelli was already a well known figure and his outsized pay package did even more to raise expectations. Still, the CEO’s brash, arrogant style and frequent media appearances seemed orchestrated to attract attention before any results were possible.

This is always a red flag. We know from decades of evidence that transformation follows an s-curve, meaning that it necessarily starts slow and takes a while to gain traction before it can hit an inflection point. We also know that change always encounters resistance and that ideas about change are largely propagated through peer networks rather than communication campaigns. Successful change leaders leverage these simple truths.

For example, in Cascades I told the story of how Barry Libenson led Experian’s cloud computing transformation, which he knew would trigger resistance for a number of reasons, including concerns about the firm’s business model, cybersecurity and the shift to an Agile development environment. As Global CIO, Libenson had full authority to mandate these changes, but unlike Bob Nardelli at The Home Depot, he didn’t.

Instead, he looked for product managers already enthusiastic about the idea and, rather than go out with all guns blazing, he provided them training and support to help them build cloud-based products. As they became successful, the initiative gained steam and began to spread. It was only after the effort gained traction and led to the company’s highly successful Ascend Platform that the company began to talk about it publicly. The transformation continues even now with a new version of Ascend recently unveiled.

Nardelli, on the other hand, continued to raise expectations, which probably accelerated his need to show quick results and affected his decision making. Eventually investors saw through the smoke screen, punished the stock price and Nardelli was summarily. Transformation theater can only take you so far.

What Problem Is Being Solved And Who Will Benefit?

Genuine transformation is notoriously difficult, but transformation theater is relatively easy. There’s never any shortage of corporate hucksters, gurus and other con artists looking to sell us the change gospel, weaving visions of “burning platforms,” in a VUCA world. Many build impressive careers, moving from failed initiative to failed initiative, without ever actually accomplishing anything.

The problem is, of course, transformation theater does an incredible amount of senseless damage to our organizations, our mental health and our societies. We need to learn to recognize the telltale signs and call them out when we see them or we can only expect more of the same and nothing will change.

When leaders create a false sense of urgency, rush the process in a manner that quells dissent and seek out publicity before any real results have been achieved, they are pursuing transformation theater rather than genuine transformation. They are not pursuing a solution to a genuine problem, but preying on our bias for action in order to glorify themselves.

Yet we have the power to choose what we glorify. We can ask hard questions, apply strict scrutiny and demand common sense. There’s always someone trying to sell us something, but we can decide what we’re willing to buy. There’s certainly no reason that we need to accept that every change is equally valid just because it’s different from what we’re doing now.

In the final analysis, innovation should serve people, not the other way around and that’s the standard we need to apply. Every transformational initiative should be able to answer the question: “What problem is being solved and who will benefit?”

Greg Satell is Co-Founder of ChangeOS, a transformation & change advisory, an international keynote speaker, and bestselling author of Cascades: How to Create a Movement that Drives Transformational Change. His previous effort, Mapping Innovation, was selected as one of the best business books of 2017. You can learn more about Greg on his website, and follow him on Twitter @DigitalTonto and on LinkedIn.

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