"A country, just like a company, that does not manage itself properly – will not survive."
Tycoons / The Elderly Can Do it Too
Did It Himself
Bernie Marcus, founder of the Home Depot empire in the United States and one of the richest people in the world, relates how he built an empire in the sixth decade of his life, how the Americans learned to install ceiling fans by themselves, and what he really thinks about the Israeli industry
By Eytan Avriel
Being dismissed at the age of 49 is usually considered to be a difficult experience. 49 is a problematic age – well into the career, but over a decade before retirement age. Someone who goes through a dismissal at this age fears that he will no longer be able to find an alternative place of employment. Bernie Marcus was fired at age 49 from the Handy Dan chain of stores, and it was the best thing that had ever happened to him. His dislike for the boss and his desire to prove himself were so strong that he hurried to open a competing chain. This is how he founded Home Depot, which is currently in 13th place in the ranking of large companies in the United States and is one of the most profitable companies on the continent.
It should be conceded that Marcus was no longer a salesman at the store when he was dismissed; for 22 years he served as CEO of a regional chain of stores that sold home supplies. “My boss was simply a bad person, we called him ‘merciless.’ Whereas I was the complete opposite – all I could think about was how to care for and serve our customers,” he relates. “Accordingly, the unique thing about the company that I founded, Home Depot, was creating customer assistance services that had not previously existed in the market. Employees in our stores can take four hours explaining to a customer how to do something, even if he only ends up buying a four-dollar product.”
Marcus’s approach has proven itself. Home Depot, established in 1978, became one of the greatest Cinderella stories in business of all times and grew faster than any other retail business, even faster than Wal-Mart. On the way, Marcus bought Handy Dan, which had fired him, and he and his employees became millionaires. “Over the years, we have distributed stock options to all the employees, and there are currently about 3,000 millionaires from our options, including my secretary,” he says. Marcus himself has a place of honor on the list of the 100 richest people in the United States, with equity capital of approximately $2.2 billion US.
The fact that he began to build his brilliant career in the sixth decade of his life does not appear out of the ordinary to Marcus. “Even at age 49, an entrepreneur is an entrepreneur and a great idea is a great idea,” he says, but immediately clarifies that the business environment in which he began his path to wealth has changed. “Such a story is also possible today, but it is much more difficult. The environment today is much tougher – especially with regard to legal risks. A small group of crooks has cast a heavy shadow on the entire environment, and it has now become impossible to be a CEO or member of the board of directors. Today you need a lawyer at your side to protect yourself,” says Marcus.
As a person with decades of experience in the retail business, Marcus says that in recent years, management methods in this field have fundamentally changed, and it is much more systematic and technocratic today, with less room for entrepreneurship and improvisation. “Retail business is much more organized today, and it is easier to manage a business, with all the computers and new methods – but these are methods without soul, without entrepreneurship,” he says. “We will never be retailers as good as Wal-Mart, but Wal-Mart is a store you go into, pick up something and leave. At Home Depot we have taught Americans how to do things on their own and how to save money. Today, for example, 80% of Americans install ceiling fans by themselves, and it is not at all a simple installation.”
Marcus has unique management methods, which are his asset but also his Achilles' heel. “I was a manager with a free and informal style; I always looked at the big picture, while my partner Arthur Blank handled the details. We called it Lucy-Goosy style management. It sounds funny, but people who found a business are people with vision. The problem is that they don’t go all the way, and after the business grows you have to bring in other managers, people with a more structured style and management methods.”
This is not just talk. In November 2000, Marcus left all his posts at Home Depot, including the board of directors, and appointed Bob Nardelli as CEO in his stead. Nardelli had left General Electric at the time, after not having been appointed to the corporation’s senior position. Nardelli implemented at Home Depot what he had learned at General Electric – he multiplied by 12 the investments in computer systems, renovated the stores, systematized the employees’ training programs, and opened new stores around the world. In the meantime, he has met with only partial success: after a drop of nearly 50%, the Home Depot share has returned to a price of $38 US, which is very close to its price at the time he assumed the position of CEO – $40 US.
Marcus, who is presently visiting Israel, is not just another American tourist. He is Jewish, he knows Israel well, he does business with Israelis, and for the past 15 years has also been the main donor of the Israel Democracy Institute. As a former senior American executive who follows the Israeli industry closely, Marcus believes that the local managers have taken a large and important step forward in recent times. “14 years ago, I stood before 200 people and told them that I would never buy anything in Israel. We were a public company traded on the New York Stock Exchange, and it was not appropriate for us to do business with Israel – it seemed at the time like mixing contributions with business,” confesses Marcus. “But today the situation is different. If there is an Israeli who is an entrepreneur and can present a competitive product – people will do business with him. This story of Israelis who know how to invent things but do not know how to manage may have been true 15 years ago – but not now. Today there are Israeli managers who are exported abroad, and there are companies in Israel that are competitive on a world level, such as Teva.”
It is usually customary to talk about an improvement in Israeli managerial skills in the context of the local high-tech market, but Marcus is interested in traditional industry and particularly in a pair of industrialists who have recently become large suppliers for Home Depot – Zvika Yemini, founder of the ZAG company, and Sami Sagol, owner of the Keter Group. “Zvika Yemini is a brilliant man. He is one of the most creative people I have ever met, and he has a mind that could create any product,” Marcus praises. “Whereas Sami Sagol is a great businessman, who is going to be the owner of one of the largest companies in the world in the plastic industry. I can’t see what could stop these two. Home Depot currently purchases products in Israel amounting to over $150 million US – purely on a business basis.”
As of today, Marcus believes that the Intifada and the security situation already have very little effect on the willingness of Americans to do business with Israel. “Over the past three years it was more difficult for us to invest in Israel, but today the situation is becoming less important,” he says. “I, for example, have invested now in the Markstone Fund, which is run by Elliott Broidy and Ron Lubash. I think this is a good investment, because Broidy is a very stable manager, who will invest time and effort in management.”
Marcus’s informal manner of speaking, just like his free style of management, changes unrecognizably when he speaks about his main project in Israel, the Israel Democracy Institute, and voices his opinions on governmental management in Israel. Suddenly he becomes much more adamant and tougher. “15 years ago, I already thought that a country, just like a company, that does not manage itself properly – will not survive. Since it was founded, Israel has overcome monumental problems through improvisation, but now the political system is working in a direction that is not good. Israel is a democracy, but not an efficient democracy.”
Marcus has no lack of funds, and everywhere he visited in Israel he was urged to invest in a body that would supply a platform for thinking, research, and presenting opinions on the events in Israel. When he met Dr. Arik [Arye] Carmon from Tel Aviv University, he turned over millions of dollars to him in order to open the Israel Democracy Institute, a body that aims to help legislators make more “correct” decisions – as perceived by Carmon and Marcus.
15 years later, the Israel Democracy Institute has already become an important and influential part of the establishment. The institute’s Caesarea Conference is the most important economic conference on the business sector’s calendar, and the staff of the institute, which is located in an old house in Jerusalem’s Talbieh neighborhood, are engaged in promoting legislation and what they describe as research assistance for Knesset members.
“The initial motivation for establishing the institute was to battle against the direct election system, which Arik Carmon thought would cause a disaster, and now we are trying to improve the mechanics of government. I have already seen in the past how Knesset members sit around a table and simply begin to draw up laws. Today, with the aid of the institute, the situation is much better: There is information, they check what is being done in other countries, there are facts – the system is much more efficient. One of our central projects today is a constitution by consensus – in a modern country there must be a legal basis that protects the rights of citizens, shareholders and landowners – and this does not exist in Israel.”
For those who might think that Bernie Marcus is detached from reality and the state of Israeli democracy is only worsening, the founder of Home Depot clarifies that he knows precisely what is happening around him, but he also knows what needs to be done to change it: “We have to start with laws and rules. You can’t play football without rules, and you can’t make politics without laws to protect the citizens.” Marcus, who contributes over 25% of the institute’s budget, has ready answers for those who argue that the Israel Democracy Institute has already become part of the system. “The institute is not an opposition party, and our role is not to criticize or attack the government. Our role is to help Knesset members behind the scenes improve their decision-making.”
Marcus is presently engaged mainly in philanthropic activities and giving contributions, but he tours the world frequently and takes an interest in business innovations. However, despite the long leisure hours that have suddenly become free in the life of a man who was used to working 15 hours a day, Marcus will never be caught toiling over the assembly of a ceiling fan or a modular bookcase. Ironically enough, the prophet of the do-it-yourself method is himself all thumbs. “I came to the field as an entrepreneur and manager, not a hobbyist,” he confesses, “and I think that it was my simplicity that contributed to the business. In the stores, if I saw something that I couldn’t understand or something that they couldn’t explain to me, I would immediately understand that there was a problem here.”
This interview originally appeared in Hebrew in the The Marker.