Introduction
The Home Depot is one of the biggest retailers of home improvement tools and appliances in North America. For instance, the company’s market share in the U.S. was 29% in 2019, which was 10% larger than that of its closest competitor – Lowe’s (Danziger, 2020). Many, including the organization’s founders, attribute such a success to the strong corporate culture and the constant pursuit of better customer service and innovation (Morgan, 2020; Marcus et al., 2019). The latter, in turn, implies that The Home Depot should not only seek to introduce creative solutions that would increase the company’s performance but also efficiently implement various methods of change leadership.
Previous scientific and professional literature indicates that in order to ensure the success of various transformations in organizational structure or operations, it is crucial to manage those changes carefully. The central factor that leaders should consider is the reaction of their employees to the planned modernization, as resistance in the form of active protest or passive sabotage can significantly undermine the management efforts. For this reason, it is suggested that the proposed changes should be in line with the current corporate culture to reduce potential opposition from subordinates (Heath & Porter, 2018). Moreover, leaders should constantly communicate to the workers the importance of changes which is associated with the increased initiative support as opposed to bare compliance.
In this regard, the current paper intends to discuss one of The Home Depot’s recent innovation implementations and analyze how this change was managed. In particular, it will be shown how the company addressed the ‘shelfout’ problem using machine learning and what the employee reaction throughout the project life cycle was. As such, it is argued that there was small but significant resistance to the innovation during the implementation stage due to inefficient managers’ communications with their subordinates.
Change Description
The so-called ‘shelfout’ problem, when the product is not located on or missing from the appropriate shelf, is a major problem that many retail stores encounter. According to Trax (2019), if customers cannot find a necessary brand on the shelf, there is a 49% probability of purchasing a substitute product and a 39% chance of no purchase. Moreover, 12% of consumers would search for the same merchandise in the competitor stores (Trax, 2019). Therefore, such a situation is not beneficial neither to the retailer organization and its suppliers nor their customers.
The development of e-commerce and the recent outbreak of the COVID-19 pandemic has aggravated the problem of on-shelf availability. It is explained by the fact that the website and various store applications show the availability of a certain product based on the information regarding incoming supplies. However, when the merchandise is already in the store, there is no system that tracks its location. Therefore, when a product is not in the appropriate place, it may be an issue not only for the consumers but also for the company staff to find it. That problem is especially evident for the organizations such as The Home Depot, as the store occupies big spaces. As a result, when the company is actively involved in online sales, shelfout may further undermine customer experience.
Thus, to address this issue, The Home Depot’s Applied Machine Intelligence (AMI) team proposed a solution based on modern technological advancements, namely machine learning. In short, the AMI group incorporated various data that is collected by different departments, which amounted to more than 50 variables, into one system (Remidez & Beldona, 2021). In this respect, the two main predictors of a product’s proneness to shelfout emerged.
The first model analyzed the difference between the forecasted and actual sales of certain merchandise for a long period. This index was considered a valuable predictor because prior to the project initiation, AIM conducted an experiment that revealed a significant drop in sales once the product was misplaced (Remidez & Beldona, 2021). Therefore, if there is a sustained mismatch between the two parameters, the managers would conclude that the analyzed product is prone to the problem of on-shelf availability.
The second model calculated the ratio between the incoming package size and the shelf capacity. The validity of this index is explained by the fact that when the previously determined space for a certain package is not sufficient or already occupied, the staff may place it on the other shelf. This, in turn, greatly increases the chances that the merchandise will be missing, although it will be in the store (Remidez & Beldona, 2021). Interestingly, such an analysis would be almost impossible without modern technologies as the sizes of allocated shelves and packages are highly dynamic and vary from one store and supplier to another. Thus, in short, when data shows a mismatch between the incoming package and an assigned space, the managers should react accordingly to avoid a shelfout problem.
As a result, the project’s implementation was successful both from the financial and operational perspectives. According to Ted Denver – The Home Depot’s president and Chief Operating Officer – “sales per square foot improved, on-shelf availability improved, Voice of the Customer scores improved, labor utilization improved” (Motley Fool Transcribing, 2021, para. 20). Although there is no available data regarding the project available to the public, the fact that it is implied in more and more stores serves as evidence of its effectiveness. However, despite the huge success, there also were some problems with stakeholder involvement.
Change Evaluation
The stakeholder approach has gained great popularity during the recent two decades in the academic and professional literature. It is based on the idea that the firm’s strategic thinking should seek to balance the interests and demands of various actors who can impact or are influenced by the organization’s activity (Pedrini & Ferri, 2019). From the change management perspective, involving all the stakeholders and ensuring effective communication would reduce resistance to planned transformations (Pedrini & Ferri, 2019). Thus, it is crucial to promote the active engagement of various levels in the organization in the process of decision-making.
In this regard, the innovation proposed by the AMI team in The Home Depot proved to be partly in line with the stakeholder theory. On the one hand, Remidez and Beldona (2021) state that various departments participated in the data gathering process, advising which parameters should and should not be used. On the other hand, based on my observations, there was some employee resistance to the change. In my opinion, it occurred due to poor and non-effective communications between the frontline workers and their managers. As such, when the project was implemented in the store where I work, many merchandising team members were not supporting the implementation of a new system. The new solution was integrated into the existing Smart List application and presumed that the latter group of workers would have to check it often to prevent the shelfout problem. However, the members of the merchandise team considered that the innovation would result in increased work complexity and personal responsibility. As a result, the employees, at first, tried to sabotage the project by working slowly and inefficiently.
Although the resistance to change did not last long as workers discovered the new system’s advantages, the transformation could have been handled differently. As mentioned earlier, the biggest mistake was a lack of interaction between managers and subordinates which led to the various misinterpretations by the latter. For this reason, Barrow et al. (2017) emphasize the importance of employee communications and education prior to the change to reduce potential human-related barriers. Additionally, Aziz and Curlee (2017) mention that during the fast-paced innovation implementation – as in the case of The Home Depot’s project – the managers tend to miss certain important steps that would facilitate the change. In the current case, the managers neglected communications, and as a consequence, the project advancement was slower and faced employee resistance. Therefore, the key lesson that leaders can learn is the importance of open and clear communications with the workers prior to and during the innovation implementation.
Change Leadership Action Plan
Any change leadership action plan should be based on the premise that people prefer the status quo to the unknown associated with the transformation. Thus, under this paradigm, the necessity to convince people concerning future plans becomes central (Hussain et al., 2018). However, before that, according to the Systematic Change Model developed by Kast, the managers should thoroughly inspect the current conditions, identify the problems, and determine the gap between the real and desired condition (Galli, 2019). Next, it is necessary to elaborate on the possible solutions to the issue (Galli, 2019). During this stage, it is important to use the stakeholder approach and evaluate the views and interests of various parties involved. In this regard, Pedrini and Ferri (2019) discovered that leaders who consider various opinions and can deal with contrasting perspectives effectively usually deliver better decisions. In practice, it can be achieved by conducting an employee survey or developing ‘suggestion box’ systems (Kappel, 2018). After completing all the steps of the preparatory stage, the leaders can now move to the implementation part.
As mentioned above, the success of change is widely determined by the leader’s ability to convince one’s subordinates, starting with the managers. As such, Kotter’s Change Model suggests that one of the preliminary steps of project implementation should include the formation of a strong leader’s alliance (Galli, 2019). If the managers are aware of the purposes and benefits of the planned change and exhibit a desire to promote the transformation, it implies that the leader could form a strong alliance. Next, administrators should build similar communications with their own subordinates. Importantly, it is necessary that during the meetings, managers consider the ideas or criticism of their subordinates and properly address them. It will allow further improvements to the project (Pedrini & Ferri, 2019). This approach will ensure that all the people in the organization share similar views concerning transformation. Lastly, leaders should provide appropriate training and education so that they can successfully fulfill the new duties.
Conclusion
Overall, the current paper discussed the recent innovation that The Home Depot initiated to address the shelfout problem. The analysis revealed that the biggest mistake that the managers made during the project implementation process was a lack of communication. Next, the change leadership action plan was developed, effectively addressing the latter shortcoming. It was ensured that the suggested recommendations coincide with the organization’s values. Indeed, the emphasis on active stakeholder interaction, which leads to active opinion exchange and the necessity to convince the subordinates instead of imposing regulations, guarantees that the associates’ opinions are considered. This, in turn, aligns with the inverted pyramid view that the company should prioritize its workers’ interests above those of the top management.
References
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