Centralization and Decentralization at Home Depot
Centralization and Decentralization at Home Depot
Christopher Navage MGT 302-1 Modern Organizational Theory
Colorado State University – Global Campus
Dr. Bonnie Adams
August 6, 2010
Centralization and Decentralization at Home Depot
It is interesting to note how the Home Depot's combination of centralizing and standardizing authority and methodology, coupled with the definitely decentralized concept of giving managers authority to make important business decisions locally has resulted in a winning system.
Such inventive management practices, for instance, allowed the Depot to be more profitable in the 2013 fiscal year, up from the 2008 recession (Stock, K. 2103). Managers were practicing creative and aggressive sales tactics, such as making personal visits to bankers and private equity firms specifically targeting foreclosure properties (Stock 2013).
Decentralization.
Clearly, giving the authority to local store managers and correspondingly, their teams, is an example of decentralizing the authority and ability to generate new business on a very basic level, that of direct sales.
Reaping rewards. For the entire reporting year of 2013, the Depot out-profited Lowe's by 15 ½ percent (Orland, K. 2013). Lowe's strictly centralized overall corporate style mandated the company adopt one particular strategy, investing in inventory it hoped would sell in spring, from which it could not sufficiently recover.
Lowe's could have benefited from a decentralized philosophy. Unlike the Depot, Lowe's did not adjust, and could not because of the top-down management style employed. One could easily reason Lowe's could have adopted a similar strategy as the Depot, with equally successful results. Local store managers simply were not given the authority. Lack of decentralization costs profits. This lack of foresight specifically can be pointed to as the greatest single factor in Lowe's lack of comparable profit to the Depot. One simply has to compare a
Christopher Navage MGT 302-1 Modern Organizational Theory
Colorado State University – Global Campus
Dr. Bonnie Adams
August 6, 2010
Centralization and Decentralization at Home Depot
It is interesting to note how the Home Depot's combination of centralizing and standardizing authority and methodology, coupled with the definitely decentralized concept of giving managers authority to make important business decisions locally has resulted in a winning system.
Such inventive management practices, for instance, allowed the Depot to be more profitable in the 2013 fiscal year, up from the 2008 recession (Stock, K. 2103). Managers were practicing creative and aggressive sales tactics, such as making personal visits to bankers and private equity firms specifically targeting foreclosure properties (Stock 2013).
Decentralization.
Clearly, giving the authority to local store managers and correspondingly, their teams, is an example of decentralizing the authority and ability to generate new business on a very basic level, that of direct sales.
Reaping rewards. For the entire reporting year of 2013, the Depot out-profited Lowe's by 15 ½ percent (Orland, K. 2013). Lowe's strictly centralized overall corporate style mandated the company adopt one particular strategy, investing in inventory it hoped would sell in spring, from which it could not sufficiently recover.
Lowe's could have benefited from a decentralized philosophy. Unlike the Depot, Lowe's did not adjust, and could not because of the top-down management style employed. One could easily reason Lowe's could have adopted a similar strategy as the Depot, with equally successful results. Local store managers simply were not given the authority. Lack of decentralization costs profits. This lack of foresight specifically can be pointed to as the greatest single factor in Lowe's lack of comparable profit to the Depot. One simply has to compare a