Why is CFO, Not CIO, Leading Home Depot's Tech Transformation Plans?

Ann All

Last spring I wrote a post called "CIOs, CFOs and the Line of Command," sharing the concerns of some observers that, at least at some organizations, the CIO role was being appropriated by the CFO. Among the information I cited was a Gartner/Financial Executives Research Foundation (FERF) study in which 42 percent of respondents said their organizations' IT departments reported to the CFO, well ahead of the CEO (33 percent) and COO (16 percent), the only other choices named by more than 10 percent of respondents.

 

Not only that, but 41 percent of the finance executives responding to the survey said they were the main decision-maker for IT investments. And 53 percent of CFOs said they wanted to move to an arrangement where CIOs report into CFOs. That's right, almost all of the CFOs who don't already have this kind of a reporting structure think that's the way it should work.

 

In the rest of the post, I went on to discuss how CIOs and CFOs can be effective partners in creating and carrying out technology-enabled business strategies.

 

It's unclear how close the working relationship is between Carol Tome, Home Depot's CFO, and Matt Carey, its CIO. I was more than a little nonplussed to see no mention of Carey in a BusinessWeek piece on Tome's efforts to bring Home Depot, seen as backward in its adoption of technology, up to speed with smaller retail rivals like Lowe's. How well Tome handles Home Depot's technology turnaround may determine whether she succeeds CEO Frank Blake, the article says.

 

Tome has worked for Home Depot for 15 years and is the only senior executive to have worked for all four of its CEOs. She played a key part in the chain's prior strategy of opening lots of new stores. Now, however, the emphasis is on maximizing sales at each location and increasing its online sales.


 

Home Depot's prior CIO, Bob DeRodes, resigned about a year after Blake replaced Robert Nardelli as CEO. DeRodes completed several major technology projects during his six-year tenure, including an upgrade of the point-of-sale system, installation of self-checkout terminals, deployment of a data warehouse, and implementations of warehouse and transportation management systems, wrote Meridith Levinson in a 2008 CIO.com column.

 

Though she presented DeRodes' departure as amicable, Levinson suggested it was due to Blake's desire to scale back the retailer's IT spending. She cited SEC filings that showed the company spent $1.8 billion in IT capital expenditures between fiscal years 2003 and 2007. The column quoted Mike Burgett, a managing partner of recruitment firm CIO Partners of Atlanta, who said Home Depot may not have felt it achieved a good return on its tech investments and would probably hire a CIO focused on cost containment to replace DeRodes.

 

In a later column announcing the appointment of Wal-Mart and eBay veteran Matt Carey to replace DeRodes, Levinson wrote that she found it interesting Home Depot hired someone with both ample retail industry experience and "a hard-core technology background." Although Carey was involved in the development of both walmart.com and samsclub.com, his bio stresses rollouts of back-office systems, such as Wal-Mart's RFID infrastructure and data warehouse.

 

OK, I thought, maybe Home Depot wanted someone other than Carey to lead its customer-facing technology initiatives. The BusinessWeek article mentions Tome and Blake attended an off-site meeting during which they heard mobility-focused presentations. After the meeting, Blake "asked Tome to come up with a plan," according to the article. Where was Carey? If he attended the meeting, it's not mentioned. The article quotes Blake:

The assignment for Carol was very logical. She has the breadth of view to coordinate that. She's a very bright woman with a good sense of the business.

The article also mentions two other technology projects that occurred "under her leadership" in 2010: a $60 million purchase of 40,000 handheld devices to replace outdated in-store computers and the launch of a blogging site at homedepot.com where employees answer customer questions. I came across two videos online, both dated 2009, that left me a bit confused. In one, Carey discusses a customer-focused technology agenda and in the other he shares Web 2.0 strategies. It seems odd he isn't at least mentioned by BusinessWeek, if not as a leader then as a partner, in these initiatives that would seem to benefit from his expertise.

 

The article ends with a Tome quote that Home Depot's economic engine "will be driven by productivity and efficiency."

 

Hmmmm. Is it possible Home Depot is still missing the point? I found an interesting Supply Chain Matters blog post from last May, in which Bob Ferrari discussed some of the significant tech improvements that occurred during DeRodes' tenure which increased efficiency but did nothing little to improve customer service. Home Depot was the first to implement automated checkout, for instance. But when Lowe's added self-checkout, it continued to train existing store associates to cover registers during busy periods, wrote Ferrari:

Their assumption was that people were to be supplemented by process improvement as opposed to eliminated.

Eliminating people to increase profits seems like a smart idea for retailers trying to cope with narrow margins. And technology can certainly help reduce headcount. But, wrote Ferrari:

Applying massive amounts of technology to solve large problems vs. tailored technology to enhance a business process or in the case of retail, providing answers to customer problems and buying needs seems to be a perspective lost by those who stand to gain by huge transformations.


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