BUILT FROM SCRATCH

BUILT FROM SCRATCH

From Chicken Soup for the Entrepreneur's Soul

Built from Scratch

There’s nothing wrong with being fired.

Ted Turner

You want a formula for success? Take two Jews who have just been fired, add an Irishman who just walked away from a bankruptcy and an Italian running a no-name investment banking firm. Add—then subtract—Ross Perot. Lease space from a shrinking discount chain, fill a space the size of a football field full of hardware (and a few hundred empty boxes), and you’ve got a company.

At least that’s the way we did it.

* * *

The creation of The Home Depot began with two words in the spring of 1978:

“You’re fired!”

Twenty years ago, we were two out-of-work executives. Our situation was not a lot different than millions of others who were shown the door. We had little in the way of capital and faced some daunting personal and legal challenges as we tried to get our careers back on track.

In our early years, we lived on the edge, with no balance sheet and a lack of financing. It took great romancing to establish the vendor base necessary to open and maintain the broad product selection for which we quickly became known. We were always pushing boundaries beyond where our industry’s conventional wisdom suggested we could go.

And it paid off: In just twenty years, our company, The Home Depot, has multiplied exponentially from four stores in Atlanta to 775 stores, 160,000 associates and $30 billion in sales. Almost all of our growth has come from internal expansion and very little through acquisition. How did we and our associates do it?

Building The Home Depot was a tough, uphill battle from the day we started in a Los Angeles coffee shop shortly after we were fired. No one believed we could do it, and very few people trusted our judgment. Or they trusted our judgment, but just didn’t think the whole concept of a home improvement warehouse with the lowest prices, best selection and best service was going to work. They certainly didn’t realize that what we were planning would turn out to be a revolution in the retail business.

While we want to tell the story of The Home Depot because it’s a great entrepreneurial tale, our larger goal is to convey what we learned along the way about customers, associates, competitors, growing a business, building a brand, and many other topics everyone in business needs to know.

We’re two regular guys from similar modest personal backgrounds and religious orientation who were given a strong drive to succeed by our respective parents. The values that form the core of The Home Depot’s business philosophy are bigger than one person. They developed from our families as well as from key business experiences in the early days of our careers.

But we’re not a company that’s just about numbers. The numbers are important as a measure of our success. But we’ve attained them because of a culture that is agile and flexible enough to change directions as quickly as events demand it. When something isn’t working in our stores, we don’t keep doing it the wrong the way simply because the rules say to do it that way. Instead, we do it the right way and change the rules. We do things because they’re the right things to do for our customer.

A set of eight values has been our bedrock for the past twenty years. Although they were not put in writing until 1995, these values—the basis for the way we run the company—enabled us to explode across the North American landscape and will be the vehicle for reaching our ambitious goals in the international marketplace.

We’re only as good as people—especially the men and women working in our stores every day. If the front line isn’t absolutely committed to the cause, we can’t win. That’s why we believe a sure way of growing this company is to clearly state our values and instill them in our associates. Values are beliefs that do not change over time; they guide our decisions and actions. They are the principles, beliefs and standards of our company. We call this process of enculturation “breeding orange.”

In summary, we care about the customer and we care about each other. Our values are not platitudes that are dead on arrival on a lobby wall plaque, but are the spine that shapes the way we do business. These are The Home Depot’s core values, although they are so universal that they should apply to every company:

• Excellent customer service. Doing whatever it takes to build customer loyalty.

• Taking care of our people. The most important reason for the The Home Depot’s success.

• Developing entrepreneurial spirit. We think of our organizational structure as an inverted pyramid: Stores and customers are at the top and senior management is on the bottom.

• Respect for all people. Talent and good people are everywhere, and we can’t afford to overlook any source of good people.

• Building strong relationships with associates, customers, vendors and communities.

• Doing the right thing, not just doing things right.

• Giving back to our communities as an integral part of doing business.

• Shareholder return. Investors in The Home Depot will benefit from the money they’ve given us to grow our business.

Bernie Marcus and Arthur Blank

EPILOGUE: This story was taken from the book Built from Scratch—How a Couple of Regular Guys Grew The Home Depot from Nothing to $30 Billion (Random House), which was penned by Bernie Marcus and Arthur Blank in 1999. Since this book’s release, The Home Depot has grown to 2,051 stores, 355,000 associates and $81.5 billion in sales. To learn more about The Home Depot, visit www.homedepot.com.

Dahlynn McKowen

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