On April 14, 1978, Handy Dan Home Improvement Centers fired its two top executives on the same day. Arthur Blank and Bernie Marcus. Most people would call that the end of a career. They turned it into the start of The Home Depot. Most founders fear getting fired. These two built a fortune because of it.
We believed from the start that if we brought the customer quality merchandise at the right price and offered excellent service, we could change retailing in the United States. Today, we are the model of what retailing should be.
– Bernie Marcus
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121
It was April 14, 1978. Handy Dan Home Improvement Centers fired two executives on the same day.
Arthur Blank was the Executive Vice President and CEO. Bernie Marcus was the President and CEO. Daylin, Inc., a major retail conglomerate, owned Handy Dan Home Improvement. Daylin acquired Handy Dan in the late 1960s. It became one of Daylin’s flagship home improvement brands. Daylin went bankrupt in 1975. Handy Dan remained at the core of the surviving business. Daylin emerged from bankruptcy under CEO Sanford C. Sigoloff, who didn't like Arthur or Bernie.
Handy Dan was the leading home improvement store in the USA at that time. The company was a mess during bankruptcy. Sigoloff wanted to surround himself with yes men, which Arthur and Bernie were not. So the company found a reason to let them go during the corporate restructuring.
Instead of fighting back, they took significant time to reflect.
What type of competitor would be unbeatable?
It would be a new kind of home improvement business.
Blank and Marcus had spent years at Handy Dan. They experimented with discount pricing. They observed how lowering prices boosted sales volume and reduced costs. The Home Depot would be a clone of Price Club, but for home improvement.
In 1954, Sol Price founded FedMart. It was one of the first discount warehouse retail chains. He later founded Price Club in 1976. Price pioneered the membership warehouse club model. Costco and Sam’s Club followed that model. Price had an innovative customer-centric philosophy. He saw his role as a retailer to be the customer’s “greatest friend and advocate”. Sol Price provided the best value and fair treatment. Sam Walton acknowledged Sol Price. He learned and “borrowed” many retail ideas from Sol Price’s discount models.
The Home Depot would have lower prices than their competition. As well as a wider product selection, and knowledgeable customer service.
They partnered with Ken Langone, who helped secure financing. Merchandising expert Pat Farrah helped them further develop their concept.
You have just been kicked in the ass with a golden horseshoe. This is the greatest opportunity!
– Ken Langone, financial backer of Arthur Blank and Bernie Marcus
They envisioned large warehouse-style stores that would dwarf the competition. They would stock it with an unprecedented range of products. The Home Depot would attract DIYers and contractors. Customers would keep coming back for excellent customer service. Associates would have a high degree of training. They could guide customers through any project.
Blank and Marcus empowered associates at every level. In fact, they would even make unscheduled visits to stores to learn from front-line staff. After all, who was closest to the customer? This drove feedback and change in a way that most businesses avoid.
They call this the “Inverted Pyramid” leadership model.
Most CEOs position themselves at the top of the corporate hierarchy.
Not Marcus and Blank. They inverted this structure. They positioned themselves at the bottom. Store associates and customers are at the top.
Most corporations have corporate headquarters. But how many refer to them as the “Store Support Center”? That’s what they called their Atlanta headquarters. Corporate exists to serve the stores.
If we broke down the management structure at The Home Depot on a blackboard, Bernie Marcus and Arthur Blank would be at the bottom; the stores would be at the top. The people at the stores are the most important – after customers – because they interface with the customer... We don’t care what your job is. What have you done to help a customer in our stores today?
– Arthur Blank and Bernie Marcus, from their book Built from Scratch
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I was in the stores yesterday, I saw people that are there 26 years, 20 years, 15 years, people that I personally trained who just love what they’re doing every day.
– Bernie Marcus
Most founders maximize their own equity and minimize employee ownership.
Not Marcus and Blank.
They achieved their financial freedom by sharing it.
They encouraged a motivated, loyal workforce that drove exceptional performance and customer satisfaction.
They proved how to do it with The Home Depot founders’ approach.
You have to surround yourself with people who are better than you are. That’s one of the lessons that guided Arthur Blank and me when we started The Home Depot.
– Bernie Marcus
Marcus and Blank put employees and customers first. They would rather do it this way than maximize short-term profits. Which created far greater long-term wealth for everyone involved.
The lesson here is, your employer firing you can lead to your path to financial freedom.
It was the first time in my life I’d ever been fired... I decided I never wanted to work for anybody again. The results are the Home Depot.
– Bernie Marcus
I like you,
– Sean Allen Fenn
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