We wrote yesterday about Robert Nardelli’s success at Home Depot, comparing it to the problems that his fellow GE alum, Larry Johnston, has faced at Albertsons. And we posed the question: what would have happened if Nardelli had gone to Albertsons and Johnston had gone to Home Depot?
MNB user Bob Vereen responded:
What is especially interesting is how Nardelli has reacted to the efforts of #2--Lowes. Lowes upgraded its presentation and began attracting more women. Nardelli early on recognized that the "old" Home Depot needed to change, and his efforts are paying off. Newly-built stores downplay the orange, though keep it in some parts. Most warehouse racking is now off white; orange in the building materials sections.
The Design Place format is a major upgrade; Appliances are well signed and merchandised. The Color Center emphasizes style and fashion, and features exclusive brands like Ralph Lauren.
The most noticeable change probably is in the advertising. Early Depot advertising had a very borax look--lettering that looked hand-drawn. Today the ads are stylish, because the products are being bought on style, not just price.
The biggest change, however, is that both Depot and Lowes are raising their margins on a steady basis. When Bernie Marcus and Arthur Blank founded the company, their margins were in the mid 20's--but under Nardelli, they have been steadily increasing. Depot reached 33.4% last year; Lowes is now 33.7%, and these include their major appliance departments. The gap between these two and privately owned competitors is continuing to shrink.
Another MNB user wrote:
It is an interesting question to ponder. The answer will come, I hope, in some responses from Albertson's and Home Depot employees. It seems to me that Home Depot executes their operations strategy at store level in a positive way and the Albertson's people do what they do out of fear!
MNB user David Diamond wrote:
You raise an interesting question about Larry Johnston and Bob Nardelli (and Albertson’s and Home Depot) – but I think you ask it in a fundamentally misleading way.
First of all, Larry Johnston was not a finalist for Jack Welch’s job – the three finalists were Jeff Imelt, Bob Nardelli and Jim McNerney who became CEO of 3M, and recently left there to become CEO of Boeing. Larry Johnston left when he did not get one of the jobs that opened up when the three finalists moved. That is to say, he was one rung down the ladder. I do not know if that really means anything, but it should be noted.
Second, Bob Nardelli inherited a powerhouse which needed a bit of retooling, while Larry Johnston inherited a mess. It is true that Home Depot was having some issues maintaining growth as they grew to become a retail giant. It is true that Home Depot’s culture needed to evolve from founder-run, entrepreneurial to corporate-run. It is true that Home Depot now has a real competitor in Lowe’s. And it is true that the first year or so of Bob Nardelli’s career there were somewhat rocky – for exactly these reasons.
But Larry Johnston arrived at Albertson’s and inherited a world of significant structural issues, ranging from the critical question of centralization versus regionalization, to a declining industry to out of-control employee costs – none of which effect Home Depot. Larry Johnston did not solve all of these problems (or arguably, any of them), But Bob Nardelli didn’t face them.
All of this is to say that, first of all it is unfair to compare the two people but, more importantly, it is unfair to compare the two assignments.
We agree that the assignments were different. But we wonder if Nardelli would have been able to fix the mess…not whether he faced one.
We got a ton of email yesterday in response to our story about the government planning new dollar coins with portraits of former presidents, according to legislation sent to President Bush on Thursday. Four coins will be issued each year in the order in which the presidents served. This will be the third dollar coin introduced by the US government in the last few decades – there was the unsuccessful Susan B. Anthony dollar that came out in 1979, and then the unsuccessful Sacagawea dollar that came out in 2000.
The reason the government keeps trying to convert the public from dollar bills to dollar coins: it would save about $500 million a year in printing costs because dollar bills inevitably wear out. The new coins will be gold colored, with the Statue of Liberty on the reverse side. No living presidents will appear on coins, and Grover Cleveland will be on two coins because he served non-consecutive terms.
Our commentary: Dumb idea.
No cash register has a slot for these coins. Everybody gets them mixed up with quarters. And you’d think that an idea that failed twice wouldn’t get tried a third time…If they really wanted to be efficient, they’d decide to eliminate the penny at the same time they introduced the dollar. Now that might make some sense…
MNB user Wayne Barrett wrote:
If the government wants people to use the dollar coins, just eliminate the printing of dollars bills, it's that simple. People will adjust. The last time I looked in a cash register, today, there are five slots for coins.
i>MNB user Donna Osburn wrote:
I’ve spend a lot of time in Canada with the Loonies and Toonies (I am talking about money!). It took me a while to get used to them but I did.
Look at it this way. I’m all about the government saving money. And it gives the cash register folks an opportunity to sell new drawers!!
Another MNB user wrote:
Let me offer my perspective. As a Canadian who lived through the transition to both the 'loony' and 'twonie,' I have to disagree. The idea failed in the US the first two times because people still had a choice and no incentive/reason to make a change. Dollar coins won't be successful unless the gov't simply eliminates paper dollars.
The coins were just fine once I got used to them and cash drawers can be adapted. Make them a different colour and size and you can tell them apart without trouble [ask any cocktail waitress making change in a dark bar.] For me, the benefit was that as a girl who worked in restaurants through University, people tended to leave larger tips because dollars became change. It also made saving $ easier because I would just dump all of my change into a jar when I got home.
MNB user Rick Heineman wrote:
This is a big issue for the vending industry. With this like so many things there are many sides to the story.
MNB user Tim McGuire wrote:
The real problem with the unsuccessful introductions of the dollar coins in the U.S. is that the government never discontinued the dollar bill at the same time. Here in Canada, our dollar bill was replaced in 1987 by the dollar coin (affectionately known as the "loonie" because it has a picture on the back of a common loon, which is an elegant waterbird common through Canada's lake country) and after a few months of predictable complaining from those who didn't like change (in either of that word's contexts) it was fully accepted. Building on that success, the government then successfully introduced a two dollar coin several years later, replacing the two-dollar bill (another denomination that has failed repeatedly in the U.S.). Showing a sense of humour about it all, the one-dollar "loonie's" two-dollar counterpart is commonly called the "toonie". "Loony-tunes" it may all be, but Canadian taxpayers have captured hundreds of millions of dollars of savings over the past 18 years.
To your specific objections, Kevin, all of them managed to be overcome in Canada. Every cash register supplier came up with a simple plastic insert to change the dollar-bill slot into a dollar-coin slot. Once the two-dollar coin came in, another simple plastic insert divided one of the coin slots into two in order to handle another coin.
We don't mix the coins up with quarters because they're a different size (larger than a quarter) and a different colour (the loonie is gold coloured, although certainly not made of gold, and the toonie is a gold centre surrounded by a silver ring (similar to the 2 Euro coin).
It's not often that I disagree with the Content Guy, but $500 million per year in tax savings seems way too good to pass up just because previous poorly-designed and executed attempts failed.
MNB user Lisa Greim Everitt wrote:
The Brits did it right: when they issued one-pound coins, they stopped issuing one-pound notes. As you know, a quid coin is a different color, a weird size and substantially thicker and heavier than the smaller coins, and now there's an oversized bimetallic two-quid coin as well.
The Canadians followed up with the loonie. Same deal.
If you take the dollar bill out of circulation, there's plenty of room in the cash drawer for dollar coins.
Another MNB user wrote:
You missed the point - the government makes good margin selling these type of coins in proof and uncirculated condition to collectors (the more coins, the higher sales volume - $$$). I doubt anyone in the government believes these coins will have any real impact in replacing paper dollars.
MNB user Andrew Hartnett wrote:
Interesting to hear your views on the dollar coin as they have been in circulation in Australia for well over 20 years! Not only do we have $1 coins but we also use $2 coins as well.
The only confusion that we have is that the $2 coin is smaller than the $1, but the coins have different etchings around the rim of the coin, are a different colour (gold) and are thicker than coins of a smaller value. We have also eliminated the 1 & 2 cent coins from our currency, which has led to the joys of rounding up or down, and overall the system works fine.
While current cash registers may not be able to accommodate the coin, surely industry is smart enough to design new drawers that can replace the current ones.
Efficiencies like these do help long term, as coins take longer to wear out, and for foreigners, using US currency can be confusing as all the bills look the same. A dollar coin may be bad news for waiters, porters and doormen who will miss out on the $20 tip when the tourist confuses the $20 for a $1, but long term it makes sense to have a currency that is easy for all to use.
This is a proposal that has larger implications than just new cash registers, it actually makes the US an easier place for all to work within.
This is a case where the people of the US should embrace change, no pun intended, and make everyone's lives easier. If that means replacing a dollar bill with a coin then so be it, and let's face it, in today's society you can't buy much for a dollar so it may as well be loose change.
MNB user Tom Kroupa chimed in:
I have a simple solution to make full daily use of a dollar coin in circulation:
When the government introduces the dollar coin/ it must simultaneously remove the one dollar bill/ from circulation. When we use a dollar coin exclusively in our daily transactions then it will be successful. Cash register manufacturers can make a cash drawer with the extra slot for the new coin. Obviously the coin must be easily distinguishable from other coins in circulation. And this has been done before in other countries. Great Britain introduced the one pound coin several years ago, eliminated their one pound paper note and the public has accepted it.
Another MNB user wrote:
I think an idea isn't dumb if it can save the country $500 million a year! Just think of all the ways that a half billion dollars every year could be used to do good in this country. It is a good idea. They just need to approach it more strategically. For example, they could simultaneously pull the one dollar bill when introducing the one dollar coin. Sure, there will some grumbling, but people would have no choice but to adapt. That's how Canada ensured the success of the "loonie" dollar coin.
And although it's been a long time since I actually worked at a cash register, I distinctly remember them having five slots. I often stored a couple rolls of pennies in the extra space, and would use it for the occasional half dollar coin (remember them?). But if it turns out that all the cash registers in the country have been updated to contain only four coin slots, you pointed out the solution yourself -- eliminate pennies and round everything to the nearest nickel. Australia has done that quite successfully.
I was in Brisbane last year and found all their currency to be smart. Instead of one dollar bills, there are coins in both one and two dollar denominations. There are no one-cent coins. There are variations in= coin size, edge design (smooth, ribbed, octagonal), and thickness (the one dollar coin is nearly twice as thick as the others). The bills are made of plastic, which I imagine makes it much sturdier than its paper/cotton counterparts in other parts of the world (and therefore less expensive because it doesn't need to be replaced so frequently). Each denomination is not only a different color, but a slightly different length, and each has a clear window with a different design. In general, the money is unique, easily distinguished, and very difficult to counterfeit.
The U.S. Mint might be served well by following the lead of other countries who successfully manage their currency and coinage. And if it saves $500 million a year in the process, the American people will be served well, too.
And MNB user Brendan Haslam added:
Correct me if I’m wrong, but I look at these new coin launches and think they should be treated as if they are new product launches for any CPG company. In general, the company feels like it has a product that will help their bottom line in some way, and they are going to bring it to market. In this case, the company is known as the United States government. The government releases these coins, with a fair amount of publicity in the beginning but to my knowledge, makes no continued effort to market the coin after the initial hoopla is over.
So, I think the main problem about the modern new coin launch is in the marketing. If Oral B or Tide launches a new product, they tend to: Buy TV times for ads, purchase space in newspapers, magazines, and journals for print ads, contact a rich media company to handle internet ads, etc - all for the hope that people start to adopt the product on a regular basis. If the mainstream media advertising budget is shot, they tend to increase the merchandising of the product within the stores, either by offering a temporary price reduction or some kind of added benefit to the consumer (like 10% free, or buy one get one free). Also, the government doesn’t do anything right with regard to trying to convince people that using the coins will make our lives easier. Is it because they know that these coins don’t make our life easier? I didn’t know that using a mouth rinse prior to brushing would help whiten my teeth until Listerine launched that product. Also, if releasing these coins is about cutting costs, why not spend some money to make some money, like the old saying goes? If you’ve got an expected $500 million windfall coming every year if this is successful, aren’t you going to invest a little in it becoming a reality? You’ve got to maybe offer something to the American people so that they start to use the coins everyday. You’ve got to provide incentive for the retailers to have registers capable of storing these coins. Yet, I don’t see them doing anything about it. Instead, they decide that the citizens will adopt this change, but then are left like CPG companies are when they don’t market their own products. Back at square one.
And finally, one MNB user wrote:
Grover Cleveland twice – ludicrous!
The people have spoken. And spoken. And spoken.
This was only a small percentage of the emails we got…and we have to admit, we’ve changed our mind.
If the use of a $1 coin can save $500 million a year – and if it is accompanied by the elimination of the one dollar bill – then this may be an idea that actually makes perfect sense.
MNB user Bob Vereen responded:
What is especially interesting is how Nardelli has reacted to the efforts of #2--Lowes. Lowes upgraded its presentation and began attracting more women. Nardelli early on recognized that the "old" Home Depot needed to change, and his efforts are paying off. Newly-built stores downplay the orange, though keep it in some parts. Most warehouse racking is now off white; orange in the building materials sections.
The Design Place format is a major upgrade; Appliances are well signed and merchandised. The Color Center emphasizes style and fashion, and features exclusive brands like Ralph Lauren.
The most noticeable change probably is in the advertising. Early Depot advertising had a very borax look--lettering that looked hand-drawn. Today the ads are stylish, because the products are being bought on style, not just price.
The biggest change, however, is that both Depot and Lowes are raising their margins on a steady basis. When Bernie Marcus and Arthur Blank founded the company, their margins were in the mid 20's--but under Nardelli, they have been steadily increasing. Depot reached 33.4% last year; Lowes is now 33.7%, and these include their major appliance departments. The gap between these two and privately owned competitors is continuing to shrink.
Another MNB user wrote:
It is an interesting question to ponder. The answer will come, I hope, in some responses from Albertson's and Home Depot employees. It seems to me that Home Depot executes their operations strategy at store level in a positive way and the Albertson's people do what they do out of fear!
MNB user David Diamond wrote:
You raise an interesting question about Larry Johnston and Bob Nardelli (and Albertson’s and Home Depot) – but I think you ask it in a fundamentally misleading way.
First of all, Larry Johnston was not a finalist for Jack Welch’s job – the three finalists were Jeff Imelt, Bob Nardelli and Jim McNerney who became CEO of 3M, and recently left there to become CEO of Boeing. Larry Johnston left when he did not get one of the jobs that opened up when the three finalists moved. That is to say, he was one rung down the ladder. I do not know if that really means anything, but it should be noted.
Second, Bob Nardelli inherited a powerhouse which needed a bit of retooling, while Larry Johnston inherited a mess. It is true that Home Depot was having some issues maintaining growth as they grew to become a retail giant. It is true that Home Depot’s culture needed to evolve from founder-run, entrepreneurial to corporate-run. It is true that Home Depot now has a real competitor in Lowe’s. And it is true that the first year or so of Bob Nardelli’s career there were somewhat rocky – for exactly these reasons.
But Larry Johnston arrived at Albertson’s and inherited a world of significant structural issues, ranging from the critical question of centralization versus regionalization, to a declining industry to out of-control employee costs – none of which effect Home Depot. Larry Johnston did not solve all of these problems (or arguably, any of them), But Bob Nardelli didn’t face them.
All of this is to say that, first of all it is unfair to compare the two people but, more importantly, it is unfair to compare the two assignments.
We agree that the assignments were different. But we wonder if Nardelli would have been able to fix the mess…not whether he faced one.
We got a ton of email yesterday in response to our story about the government planning new dollar coins with portraits of former presidents, according to legislation sent to President Bush on Thursday. Four coins will be issued each year in the order in which the presidents served. This will be the third dollar coin introduced by the US government in the last few decades – there was the unsuccessful Susan B. Anthony dollar that came out in 1979, and then the unsuccessful Sacagawea dollar that came out in 2000.
The reason the government keeps trying to convert the public from dollar bills to dollar coins: it would save about $500 million a year in printing costs because dollar bills inevitably wear out. The new coins will be gold colored, with the Statue of Liberty on the reverse side. No living presidents will appear on coins, and Grover Cleveland will be on two coins because he served non-consecutive terms.
Our commentary: Dumb idea.
No cash register has a slot for these coins. Everybody gets them mixed up with quarters. And you’d think that an idea that failed twice wouldn’t get tried a third time…If they really wanted to be efficient, they’d decide to eliminate the penny at the same time they introduced the dollar. Now that might make some sense…
MNB user Wayne Barrett wrote:
If the government wants people to use the dollar coins, just eliminate the printing of dollars bills, it's that simple. People will adjust. The last time I looked in a cash register, today, there are five slots for coins.
i>MNB user Donna Osburn wrote:
I’ve spend a lot of time in Canada with the Loonies and Toonies (I am talking about money!). It took me a while to get used to them but I did.
Look at it this way. I’m all about the government saving money. And it gives the cash register folks an opportunity to sell new drawers!!
Another MNB user wrote:
Let me offer my perspective. As a Canadian who lived through the transition to both the 'loony' and 'twonie,' I have to disagree. The idea failed in the US the first two times because people still had a choice and no incentive/reason to make a change. Dollar coins won't be successful unless the gov't simply eliminates paper dollars.
The coins were just fine once I got used to them and cash drawers can be adapted. Make them a different colour and size and you can tell them apart without trouble [ask any cocktail waitress making change in a dark bar.] For me, the benefit was that as a girl who worked in restaurants through University, people tended to leave larger tips because dollars became change. It also made saving $ easier because I would just dump all of my change into a jar when I got home.
MNB user Rick Heineman wrote:
This is a big issue for the vending industry. With this like so many things there are many sides to the story.
MNB user Tim McGuire wrote:
The real problem with the unsuccessful introductions of the dollar coins in the U.S. is that the government never discontinued the dollar bill at the same time. Here in Canada, our dollar bill was replaced in 1987 by the dollar coin (affectionately known as the "loonie" because it has a picture on the back of a common loon, which is an elegant waterbird common through Canada's lake country) and after a few months of predictable complaining from those who didn't like change (in either of that word's contexts) it was fully accepted. Building on that success, the government then successfully introduced a two dollar coin several years later, replacing the two-dollar bill (another denomination that has failed repeatedly in the U.S.). Showing a sense of humour about it all, the one-dollar "loonie's" two-dollar counterpart is commonly called the "toonie". "Loony-tunes" it may all be, but Canadian taxpayers have captured hundreds of millions of dollars of savings over the past 18 years.
To your specific objections, Kevin, all of them managed to be overcome in Canada. Every cash register supplier came up with a simple plastic insert to change the dollar-bill slot into a dollar-coin slot. Once the two-dollar coin came in, another simple plastic insert divided one of the coin slots into two in order to handle another coin.
We don't mix the coins up with quarters because they're a different size (larger than a quarter) and a different colour (the loonie is gold coloured, although certainly not made of gold, and the toonie is a gold centre surrounded by a silver ring (similar to the 2 Euro coin).
It's not often that I disagree with the Content Guy, but $500 million per year in tax savings seems way too good to pass up just because previous poorly-designed and executed attempts failed.
MNB user Lisa Greim Everitt wrote:
The Brits did it right: when they issued one-pound coins, they stopped issuing one-pound notes. As you know, a quid coin is a different color, a weird size and substantially thicker and heavier than the smaller coins, and now there's an oversized bimetallic two-quid coin as well.
The Canadians followed up with the loonie. Same deal.
If you take the dollar bill out of circulation, there's plenty of room in the cash drawer for dollar coins.
Another MNB user wrote:
You missed the point - the government makes good margin selling these type of coins in proof and uncirculated condition to collectors (the more coins, the higher sales volume - $$$). I doubt anyone in the government believes these coins will have any real impact in replacing paper dollars.
MNB user Andrew Hartnett wrote:
Interesting to hear your views on the dollar coin as they have been in circulation in Australia for well over 20 years! Not only do we have $1 coins but we also use $2 coins as well.
The only confusion that we have is that the $2 coin is smaller than the $1, but the coins have different etchings around the rim of the coin, are a different colour (gold) and are thicker than coins of a smaller value. We have also eliminated the 1 & 2 cent coins from our currency, which has led to the joys of rounding up or down, and overall the system works fine.
While current cash registers may not be able to accommodate the coin, surely industry is smart enough to design new drawers that can replace the current ones.
Efficiencies like these do help long term, as coins take longer to wear out, and for foreigners, using US currency can be confusing as all the bills look the same. A dollar coin may be bad news for waiters, porters and doormen who will miss out on the $20 tip when the tourist confuses the $20 for a $1, but long term it makes sense to have a currency that is easy for all to use.
This is a proposal that has larger implications than just new cash registers, it actually makes the US an easier place for all to work within.
This is a case where the people of the US should embrace change, no pun intended, and make everyone's lives easier. If that means replacing a dollar bill with a coin then so be it, and let's face it, in today's society you can't buy much for a dollar so it may as well be loose change.
MNB user Tom Kroupa chimed in:
I have a simple solution to make full daily use of a dollar coin in circulation:
When the government introduces the dollar coin/ it must simultaneously remove the one dollar bill/ from circulation. When we use a dollar coin exclusively in our daily transactions then it will be successful. Cash register manufacturers can make a cash drawer with the extra slot for the new coin. Obviously the coin must be easily distinguishable from other coins in circulation. And this has been done before in other countries. Great Britain introduced the one pound coin several years ago, eliminated their one pound paper note and the public has accepted it.
Another MNB user wrote:
I think an idea isn't dumb if it can save the country $500 million a year! Just think of all the ways that a half billion dollars every year could be used to do good in this country. It is a good idea. They just need to approach it more strategically. For example, they could simultaneously pull the one dollar bill when introducing the one dollar coin. Sure, there will some grumbling, but people would have no choice but to adapt. That's how Canada ensured the success of the "loonie" dollar coin.
And although it's been a long time since I actually worked at a cash register, I distinctly remember them having five slots. I often stored a couple rolls of pennies in the extra space, and would use it for the occasional half dollar coin (remember them?). But if it turns out that all the cash registers in the country have been updated to contain only four coin slots, you pointed out the solution yourself -- eliminate pennies and round everything to the nearest nickel. Australia has done that quite successfully.
I was in Brisbane last year and found all their currency to be smart. Instead of one dollar bills, there are coins in both one and two dollar denominations. There are no one-cent coins. There are variations in= coin size, edge design (smooth, ribbed, octagonal), and thickness (the one dollar coin is nearly twice as thick as the others). The bills are made of plastic, which I imagine makes it much sturdier than its paper/cotton counterparts in other parts of the world (and therefore less expensive because it doesn't need to be replaced so frequently). Each denomination is not only a different color, but a slightly different length, and each has a clear window with a different design. In general, the money is unique, easily distinguished, and very difficult to counterfeit.
The U.S. Mint might be served well by following the lead of other countries who successfully manage their currency and coinage. And if it saves $500 million a year in the process, the American people will be served well, too.
And MNB user Brendan Haslam added:
Correct me if I’m wrong, but I look at these new coin launches and think they should be treated as if they are new product launches for any CPG company. In general, the company feels like it has a product that will help their bottom line in some way, and they are going to bring it to market. In this case, the company is known as the United States government. The government releases these coins, with a fair amount of publicity in the beginning but to my knowledge, makes no continued effort to market the coin after the initial hoopla is over.
So, I think the main problem about the modern new coin launch is in the marketing. If Oral B or Tide launches a new product, they tend to: Buy TV times for ads, purchase space in newspapers, magazines, and journals for print ads, contact a rich media company to handle internet ads, etc - all for the hope that people start to adopt the product on a regular basis. If the mainstream media advertising budget is shot, they tend to increase the merchandising of the product within the stores, either by offering a temporary price reduction or some kind of added benefit to the consumer (like 10% free, or buy one get one free). Also, the government doesn’t do anything right with regard to trying to convince people that using the coins will make our lives easier. Is it because they know that these coins don’t make our life easier? I didn’t know that using a mouth rinse prior to brushing would help whiten my teeth until Listerine launched that product. Also, if releasing these coins is about cutting costs, why not spend some money to make some money, like the old saying goes? If you’ve got an expected $500 million windfall coming every year if this is successful, aren’t you going to invest a little in it becoming a reality? You’ve got to maybe offer something to the American people so that they start to use the coins everyday. You’ve got to provide incentive for the retailers to have registers capable of storing these coins. Yet, I don’t see them doing anything about it. Instead, they decide that the citizens will adopt this change, but then are left like CPG companies are when they don’t market their own products. Back at square one.
And finally, one MNB user wrote:
Grover Cleveland twice – ludicrous!
The people have spoken. And spoken. And spoken.
This was only a small percentage of the emails we got…and we have to admit, we’ve changed our mind.
If the use of a $1 coin can save $500 million a year – and if it is accompanied by the elimination of the one dollar bill – then this may be an idea that actually makes perfect sense.
- KC's View:
