Built From Scratch Summary

Built From Scratch Cover

Built from Scratch by Bernie Marcus and Arthur Blank
How a Couple of Regular Guys Grew The Home Depot from Nothing to $30 Billion

My Thoughts

Built from Scratch is the story of the founding and growth of The Home Depot. I really enjoyed this book and it is written in a similar style to Sam Walton Made in America. It covers topics of customer service, developing people, leadership, management, growth and more.

My Favorite Quotes

  • No matter what your business, you cannot stay still for any length of time or your competitors will scratch and crawl over you. There is always somebody out there who is as bright or brighter than you who is looking for ways of taking away what is yours.
  • Our focus has to be on the customer, not our competition.
  • We learn by studying businesses who have failed and understanding why they failed. Failures, especially our own, are great teaching tools.
  • We have a responsibility to have people in critical positions who have the horsepower to do the job. Don’t outgrow the ability of people to take you to the next level.
  • One of the quickest things that can sink a company is a communication problem.
  • We must communicate why we do the things we do, let people understand the logic behind our actions.
  • When you know something is wrong and you don’t challenge it, you have become bureaucratic.
  • We want our people to be unafraid of making mistakes.
  • There is an aversion is most organizations. and among most managers, to hiring people who are smarter than they are.
  • As long as you aren’t fighting over values, difference helps you grow.
  • We need to judge ourselves not on the quality of work we do today, but on the quality of people we train to lead us tomorrow.

Introduction

The Home Depot’s Core Values

  • Excellent Customer Service
  • Taking Care of Our People
  • Developing Entrepreneurial Spirit
  • Respect for All People
  • Building Strong Relationships
  • Doing the Right Thing
  • Giving Back
  • Creating Shareholder Value

See The Home Depot core values site for more details on each value.

General Notes

The founders vowed that if The Home Depot was successful, everyone who worked there would have a chance to share in the wealth. They pay people what they are worth.

The Customer’s Bill of Rights

  1. The right assortment
  2. The right quantities
  3. The right price
  4. Associates on the sales floor who want to take care of customers
  5. Associates who have been trained properly in terms of product knowledge
  6. The expectation that our associates will be there when our customers need them

If you take care of these six things, you are taking care of all that a customer needs.

An associate should never point a customer to what they need three aisles over, they are expected to walk the customer to what they need and help them.

The Home Depot believes in doing more than customer service, they call it customer cultivation. If you cultivate the relationship, it will grow bigger and bear more fruit.

No matter what your business, you cannot stay still for any length of time or your competitors will scratch and crawl over you. There is always somebody out there who is as bright or brighter than you who is looking for ways of taking away what is yours.

Never underestimate competitors who are not as big or as successful.

We are in business not to destroy the competition but to serve the customer. Our focus has to be on the customer, not our competition.
We don’t have to beat the competitor, we have to win the customer. By winning the customer, we also take advantage of the competitor.

We learn by studying businesses who have failed and understanding why they failed. Failures, especially our own, are great teaching tools.

Management secrets of The Home Depot:

  1. We are not that smart.
  2. We know we are not that smart.

Because we are not that smart, we have learned that we must listen. In listening we have learned that the customer dictates who we are, what we are, and the services we provide.

People who talk all the time rarely listen.The art of communication is not speaking, it’s speaking and listening.

The 14 Essential Management Concepts of The Home Depot

  1. The Invisible Fence
  2. The Three Bundles
  3. Hire People who are Overqualified – With a View Toward Growth in the Future
  4. Have a Financial Conscience
  5. One Man Shows Don’t Cut it with Us
  6. How Would You Like Your Eggs?
  7. Bernie’s Test
  8. Going Around in Circles
  9. Establish Ties That Bind – and Strengthen Them
  10. Shut Up and Show Them What You Want
  11. Kill Bureaucracy
  12. Hire the Best
  13. Inverted Pyramid
  14. Respect for the Individual

The Invisible Fence

Being decentralized.
They insist, they demand, that their people take risks and take responsibility for those risks. It is your business, your division, your market, your store, your aisle, and your customer.

Associates are expected to think on their feet and take ownership. Don’t wait for a Home Depot bureaucrat to give you an answer or fix your problem.

Eventually you will hit the “invisible fence” and be reigned in. But until you hit that fence, keep taking ownership. It is better to ask forgiveness than permission. The founders tended to be much more forgiving on people with an entrepreneurial spirit.

The Three Bundles

Empowerment is a primary management issue for The Home Depot.

Transferring the decision making responsibility through the ranks is done on the basis for three bundles:

  1. Non-Negotiable Bundle: The Home Depot has very few of these. Things we do the same across the company.
  2. The Entrepreneurial Bundle: involves challenges in which the company provides only a minimum standard. Each store is allowed to develop and extend them as their own standard.
  3. Associates have complete autonomy to make their own decisions in the way they operate their store.

Hire People Who are Overqualified

We have a responsibility to have people in critical positions who have the horsepower to do the job. Don’t outgrow the ability of people to take you to the next level.

The people who got you to 10 million dollar company may not have the capacity to get you to a billion dollar company.

How Would You Like Your Eggs?

One of the quickest things that can sink a company is a communication problem.
We must communicate why we do the things we do, let people understand the logic behind our actions.

When you know something is wrong and you don’t challenge it, you have become bureaucratic. Entrepreneurs don’t act that way.

We expect and encourage people to think for themselves, make decisions, and make mistakes. When you have 80% of the facts, that is really all you need to make a decision.

We want our people to be unafraid of making mistakes.

If you are wrong, all we ask is that you be willing to step back and admit something is not working, and try path B or C.

Bernie’s Test

Bernie Marcus has a test to see how long it takes for an associate to recognize him when he walks into a Home Depot store. If it takes 45 minutes to an hour for someone to recognize him, he knows they have a serious problem. It means they are not making eye contact with customers.

Some stores take only 5 seconds, others can take over an hour. Typically it takes about 5 minutes for an associate to recognize him.

Going Around in Circles

They do 360 feedback as a way of providing Home Depot officers and managers with insights into their leadership style.

Establish Ties That Bind – and Strengthen Them

Trust is important, we must rely on each other. Rapid company growth can make trust difficult to establish.

Shut Up and Show Them What You Want

Look for opportunities to teach by showing. Don’t just tell them what to do, show them.

Hire the Best

There is an aversion is most organizations. and among most managers, to hiring people who are smarter than they are.

Hire the best people. Don’t just hire good people and let their potential go to waste. Give up responsibility and authority to them. Challenge them to surpass you.

Insecure people are afraid to hire smarter people.

Inverted Pyramid

home-depot-inverted-pyramid

The Future

Five Categories of Growth The Home Depot (from 1997 plan)

  1. Continued expansion of the core business
  2. Increased sales to professional customers
  3. International expansion
  4. Specialty store expansion
  5. Convenience stores

As long as you aren’t fighting over values, difference helps you grow.

We tell our people that your job is to train people to be even better than you. We need to judge ourselves not on the quality of work we do today, but on the quality of people we train to lead us tomorrow.

Related Book Summaries

Hope you enjoyed this and got value from my notes.
This is the 35th book read in my 2020 reading list.
Here is a list of all my book summaries.

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