Home Depot's wise guys

CEO Frank Blake called in Home Depot's retired founders for help. It's working.

By Jia Lynn Yang, Fortune writer-reporter

(Fortune Magazine) -- Baboons drive the dethroned alpha male out of the pack. Eskimos set their elders adrift on ice floes. And so it goes with departing CEOs, who are often shown the door as part of the new regime's assertion of power.

But is this good management?

Home Depot CEO Frank Blake reached out to Arthur Blank (left) and Bernie Marcus (right) for advice.
When founders clash
Holiday Inn
Founder Kemmons Wilson resigned after the board voted for an acquisition he opposed. He went on to found a rival, Wilson Inn.
Colonel Harland Sanders disliked new management's direction so much that he sued KFC for misusing his image and changing his recipes.

It wasn't for Home Depot. In 2000, Bob Nardelli was named CEO, replacing Arthur Blank; within the next two years, Blank and co-founder Bernie Marcus gave up their remaining ties to the company.

Nardelli, a GE (Charts, Fortune 500) man with little retail experience, consulted Marcus during the transition but soon stopped seeking the founders' counsel.

"No one ever called or asked us our advice," Marcus recently told Fortune.

As a result, Blank and Marcus became outsiders at their own company - until January, when Nardelli stepped down amid charges of bloated compensation.

The board tapped executive vice president Frank Blake to take charge, and on his first day in the job, Blake called the founders.

He has since been using Blank and Marcus as advisors. He invited Marcus to walk the stores with him, and he's sought their input on pricing, merchandising, and dealing with Wall Street.

In May the founders attended their first annual shareholders' meeting since retiring. "They're two of the greatest retailers in the past 50 years," Blake says of his rationale.

Experts suggest Blake is the exception rather than the rule when it comes to recognizing the value in retired brass.

"They're an incredible resource," says Jeff Sonnenfeld, senior associate dean at the Yale School of Management. "They know where the bodies are buried."

The risk, of course, is that the old team hangs around too much. Blank and Marcus try to keep their distance. Marcus says he doesn't talk to employees without clearing it with the CEO. Blake says the founders have struck the right balance: "They're responsive, but not intrusive."  Top of page