When Carol Tomé became chief financial officer at Home Depot Inc. in 2001 she faced several challenges. Sales were slowing, and new Chief Executive Robert Nardelli was struggling to change the home-improvement retailer’s strategy and ruffling feathers with efficiency measures.
Over the next 19 years, Ms. Tomé helped the company return to a solid footing, successfully navigate the housing crisis and, thus far, fend off incursions from Amazon.com Inc.
In 2014, she was one of three top executives considered by the board to succeed Frank Blake as CEO. She didn’t get the job, but decided to stay on as finance chief.
The 62-year-old executive will retire from Home Depot this month and be succeeded by Richard McPhail, whom Ms. Tomé helped to groom for the role over many years, she said.
From the back room of a Home Depot store in Lodi, N.J., Ms. Tomé reflected on her nearly two decades as CFO at the retailer. The interview has been edited and condensed for readability.
WSJ: Home Depot was struggling a bit in those years before the housing crisis. What was it like to be in your role at the largest home improvement retailer?
Carol Tomé: We took our focus off of the retail business to invest in the wholesale distribution business, but there was more to it than that. There was a cultural revolution happening in the company in that we had turned what is really a unique management construct, the inverted pyramid, where we’re at the bottom of the pyramid supporting our associates who take care of our customers. We had turned that pyramid around and our associates were at the bottom of the pyramid. So, when Frank Blake became our CEO beginning in 2007, he turned to me and said, “What should we do with HD Supply?” And I said, “Sell it. We’ve got to focus back on the core.”…
We sold HD Supply at a time when we were heading into the worst recession since the Great Depression. As you know it was led by housing. It was led by the financial crisis, and we felt it. We felt it big. Between 2006 and 2009, we lost $13 billion in our sales, or 25%.
WSJ: Can you talk us through some of the key hard decisions, and how you felt about them at the time?
Ms. Tomé: We had to close stores. We had to take new stores out of our store-opening pipeline. We had to exit businesses….When we closed our Expo business [a chain of high-end home remodeling stores] Frank and I got in a plane and we flew to Florida, because we had a number of Expo stores in Florida. We walked into the store and the associates were there who were losing their jobs. I sat down and held the hand of the associates who were crying…I’m like, “It’s not your fault. We had a big, bad business model.”…I vowed to myself on that day that I would never allocate capital again to another store that needed to be closed, because it was just too hard…[We decided] our economic engine will no longer be driven by square-footage growth. It will be driven by productivity and efficiency coming off of effective capital allocation.
WSJ: Today we see other retailers making or thinking about similar choices. Do you remember back in those days what some of the debate was around that shift?
Ms. Tomé: The leadership team, we were all on board. We understood that this was the right thing to do. We had to bring everybody else along with us…We would put up data…When I started, there were 75,000 households per home improvement store. By the 2007, 2008 time frame, 33,000 to 35,000 households per home improvement store…The market was getting saturated, so you could show, hey, opening up stores in markets where we are already present actually is dilutive…We had to talk about it, and talk about it, and talk about it again. But when we came out of the recession and we started to show that we could grow, and not only grow, but outperform our next largest big-box competitor, people started to believe.
WSJ: What advice do you have for other CFOs that are helping a company navigate a time of difficulty beyond their control?
Ms. Tomé: I think the best CFOs are business people first, and finance people second. It’s really clearly important to your effectiveness to understand the business you’re supporting. And that means, for me, when I started, I had to put on an apron and work in the store. You need to be able to speak the language of the business, not the language of finance…You have to figure out what motivates people. Is it career opportunities? Is it career growth? Hit those emotional sweet spots. Try to be an inspirational leader. So many finance folks are not very inspirational.
WSJ: What are your thoughts and advice on how to navigate three very different CEOs? How do you not only stay valuable to the company, but want to keep doing the job?
Ms. Tomé: I view my role as a partner. I view my role as someone who should debate. Debate from a point of facts, but debate…But once the play is called, as long as the play is ethical…I run the play full out. I’m as loyal as the day is long…When Frank Blake was getting ready to retire…he had identified three internal candidates who might follow him, and I was one of those. When Craig Menear was named CEO, I was thrilled for Craig…But I had to make some decisions at that point, because typically if you’re in line and you don’t get it, well you’ve got to decide what you’re going to do.
The other person who was being considered was Marvin Ellison [the current CEO at rival Lowe’s Cos.], and he elected to leave our company…Frank Blake, who I just adore, he gave me a piece of advice. He said, “Carol, as you think about it, I’d ask that you think about it through the lens of impact. Where could you have the biggest impact?” And so I thought long and hard about that. I’m like, “You know what? I think I could have the biggest impact at The Home Depot…And it was by far the best decision I’ve ever made.
WSJ: If you look into your crystal ball beyond the time you will be at Home Depot, how do you think Amazon will challenge the home improvement space?
Ms. Tomé: The difference between us and Amazon is this: We don’t have a moat around our business…But we have a number of barrier islands, and we’re investing in those barrier islands. One would be our people. Customers come into our store because they need help, right? “I don’t want to burn down my house, and yet I need to rewire this socket. Could you help me?”…When you think about our potential contractor customer making 45% of our sales, you know why they come into our store? They come into our store for a break. We have free coffee for them. They can use our bathrooms, and they can chat it up at the Pro desk. That’s not an Amazon-like experience. Amazon is a fantastic, amazing company. But we offer a different experience, so that’s a bit of a barrier island.
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