Bob Nardelli is Watching

From the comfort of his 22nd- floor office at Home Depot's bustling corporate headquarters in Vinings, Georgia, CEO Bob Nardelli is watching you. And yes, that means you. If you ever venture into a Home Depot store in search of a rake, a grill, or even that shiny black toilet seat you've always coveted, Nardelli can see you in real time. A computer terminal on his desk allows him to gaze into the parking lots, checkout lines, or even shopping carts of his consumers in any of 1,962 stores with the click of a mouse.

Originally created to help reduce "shrink," or lost inventory--which has fallen by around 50%--the company's closed-circuit television system, called HDTV, has also given executives the ability to see what's moving and whether enough staff members are on the floors. "Let's look at Kenner [Louisiana]," Nardelli says, clicking on a New Orleans-area store that has just reopened after Hurricane Katrina. It's doing decent business, but less than expected because so few people have returned.

I can do my job better if I have firsthand exposure to the good, the bad, and the ugly."

But Nardelli is no desk-bound manager. He also spends at least one week a quarter as a "mystery shopper," popping in unannounced to as many as 10 stores a day. "There was a perception that I was going out to catch people," he says. "Over time they understand that I just want to see it like a customer. I can do my job better if I have firsthand exposure to the good, the bad, and the ugly."

Nardelli runs an $80 billion megacompany--the 13th largest in the country and the second-largest retailer after Wal-Mart--but that doesn't mean he manages by memo. To be the CEO of a major public company today--in a Sarbanes-Oxley world in which the boss practically has to sign the financials in blood; in a scandal-and-scoundrel tinged era in which the Bernie Ebbers defense gets you a trip to the hoosegow--requires a leader who is as able to zero in on the tiniest details as he is to grasp the big picture.

To succeed in the CEO's job (where the average tenure is just five years) now takes a variety of complex, often contradictory, skills. For Nardelli, that means an ability to focus both on the distant horizon--housing starts, say--and on close-in details like the gross margins on house paint. It means blending in with the starched shirts of Davos and, the next day, sharing a plate of barbecue with a part-time worker. It is this fluidity that has helped Nardelli transform a company that few knew needed a major revamping when he arrived five years ago. He has dramatically hiked sales, from $45.7 billion to an estimated $80 billion in fiscal 2005, increased earnings per share by 20% annualized, and shifted the company from a big-box retailer stuck in a trench war with rival Lowe's to one that is succeeding in new segments such as the fragmented $410 billion professional construction market.

It has hardly been an easy go. Nardelli, 57, first struggled to impose a foreign culture--the meeting-and-metrics-obsessed style of General Electric, his alma mater--on the entrepreneurial style of founders Bernie Marcus and Arthur Blank. There was turnover, strife, and investor distrust, but Nardelli persevered. Today, the man once best known for coming up short in the most public succession story in business--the race to replace Jack Welch--wears the mantle of leader with confidence. "He really is the best manager, execution-wise, I've ever encountered," says Welch. "His real ability is to motivate lots of people around a mission, excite them about it, and make it happen."

In a journey that began at a conference on corporate citizenship and encompassed a needle-filled city park, a corporate jet ride, an all-day budget process, a staff dinner, a disaster briefing, and a visit to Home Depot's top-secret innovation center, Nardelli not only shared his views on management with Fast Company but also showed us exactly how he runs a large corporation. The result is an unusually intimate portrait, in real time, of what it takes to be a leader in the 21st century.

The Public Face

3:00 p.m. / Monday
Park cleanup, Washington, DC

It's safe to say that not too many CEOs have ever ventured into Watts Branch Park, a Washington, DC, spot that for years has served as a dumping ground for trash, drugs, and sometimes people. Today it's pushing 90 degrees, and yet 200 orange-shirted employees from 26 Home Depot stores and hundreds of other volunteers have spent the day planting trees, clearing away debris, and building a new community center in an old club where Marvin Gaye got his start. All told, the group found--and removed--about 7,000 hypodermic needles and seven-and-a-half tons of trash.