But at GE, Nardelli was struggling to get the kind of recognition that would lead to the big job. "There was always this rap against me about being functionally proficient but not very strategic," he says. In 1995 he left Transportation to become CEO of GE Power Systems; he completed 50 acquisitions and increased profits nearly sevenfold in five years. "Jack and I used to marvel at his ability to execute," says Bill Conaty, GE's human resources chief. "With Bob, it's very, very difficult to have a surprise, because he's into the details down to the level of the shop floor."

Nardelli never missed his targets. He never made a significant mistake, Welch says. Asked whether he had the best record on paper at GE, Nardelli replies, "Yes, by a lot. A lot!" Unlike his rival Jim McNerney, who was having job talks with 3M months before the GE succession race ended (and ultimately became CEO of 3M), Nardelli was fielding calls from Lucent, Kodak, Ford, and other companies, telling all that he had promised Jack he wouldn't talk to anyone until Welch made his decision.

"I went with my heart in my throat," he says about the cold, sleeting Sunday night two Novembers ago when he met Welch at the Albany, N.Y., airport. "How do you describe this? It's something you strive for for 30 years. You're hanging on every word. You're focused on his mouth, and the final words: 'I've elected to give it to Jeff.' And you're like, Did I really hear it right?" Unlike McNerney, who took his bad news in stride, Nardelli hammered Welch: "You've got to tell me why. Tell me what I could have done better. Tell me the numbers weren't there, the innovation, the talent development, the relationships with the Street. Give me a reason." Welch said to Nardelli, "It was my call, and I had to go with my gut."

To this day, it eats at Nardelli that Welch never told him why Immelt was a better man to be CEO of GE than he. Asked whether he thinks age--at 46, Immelt is eight years younger than Nardelli--was a significant factor in Welch's decision, Nardelli dismissively replies, "I don't know." He adds, "I told Jack, 'I need an autopsy here.' " Does he still want one today? "Absolutely," he says. "Let's exhume the body."

Meanwhile, at Home Depot, the board of directors was having its own debate about who should be CEO. Founded in 1978, the company was led in its first two decades by Bernie Marcus, a charismatic and beloved visionary--Home Depot's own Sam Walton. Marcus was succeeded by his co-founder, Arthur Blank. What no one knew at the time--it hasn't been revealed publicly till now--is that the board never fully supported Blank's elevation; some directors had to be coaxed to endorse his step-up to CEO in 1997. An uninspiring former accountant, Blank was a fine numbers man and No. 2 to Marcus, but as CEO he was seen as arrogant and dismissive. For instance, when Home Depot's directors, who are required to evaluate five stores every quarter, returned from their visits with poor report cards, Blank denied serious problems. He was slow to return their phone calls--a sure way to enrage big egos. After he and the directors had clashed about people, strategy, and other issues, Blank lost their support in the summer of 2000. "This is a board of directors who did their jobs well, while most directors sit on their asses," says Frank Borman, the onetime astronaut and Eastern Air Lines chief who retired from the Home Depot board last year. Says Marcus: "There are no wallflowers on this board. They're more like man-eating plants."

Led by billionaire investment banker Ken Langone, who gave Marcus and Blank their startup capital 24 years ago, the board zeroed in on Nardelli. As soon as they got him, the directors told Blank, now 59, that he had to cede the CEO title. The night the vote took place, at an emergency board meeting in an Atlanta hotel, a stunned Blank said he felt "set up," according to people who were there. Three months later, when the directors, including Nardelli, asked him to give up the co-chairman title and leave the board, Blank told them, "Every time I meet with you, you take something more away from me." Blank, who wouldn't comment for this story, has since bought the Atlanta Falcons football team and a ranch in Montana.

Meanwhile, Marcus, 72, gave up the chairman title at Home Depot in January and left the board in May. "It's like when you marry a daughter off," he says wistfully. "You're giving her over to a strange man. It's the same kind of feeling here, except I had the ability to live in the house, which most fathers don't get to do." Indeed, Marcus--who owns about $2.4 billion of Home Depot stock--runs his own foundation from an office directly below Nardelli's. If he's unhappy, Marcus jokes, he'll just bang on the ceiling with a broomstick.

When Nardelli arrived at Home Depot, he found himself a strange man in a strange place. The management style that Marcus and Blank promoted was "do it yourself," the same philosophy embraced by the retailer's customers. The co-founders used to boast that the chapter on merchandising in Home Depot's policy manual didn't have a single word in it. Merchants and store managers wrote their own rules. The cowboy culture worked well for Home Depot's first 20 years, during which the company grew faster than any other retailer, including Wal-Mart. But as inventories ballooned and growth sputtered during the Blank era, the system--or lack thereof--buckled under its own weight. Home Depot needed "shoring up--some pilings underneath this huge enterprise," as Nardelli says. His mission: to teach this gangling organization of proudly independent entrepreneurs to grow up.

He leads by example. Up at 5 a.m., he is in the office by 6:15 and usually works until at least 9 p.m. Saturday and Sunday are workdays--and unlike Blank, Nardelli has his executives in for weekend meetings. "It's not a job," he says. "It's a life." He is intensely hands-on: While Blank had ten people reporting to him and gathered them quarterly for business reviews, Nardelli meets with his 21 direct reports every Monday at noon, zeroing in on KPIs (key performance indicators, such as customer counts and average tickets) and action plans. "I love data," he effuses. "I love to know what's going on in the company totally." Former executives say that the new environment is "command and control" and "all business all the time." Though the company doesn't measure employee morale (Nardelli says he plans to start soon), some insiders say that lately it's been sinking with the stock. "There's quite a lot of anxiety about the changes to the culture," says Prudential analyst Wayne Hood, who has followed Home Depot for 19 years and has many friends who work there. (Despite his concerns, he has a buy rating on the stock.)

Many of Nardelli's changes come down to dollars and cents. "Cash is king," says CFO Carol Tome, a tough Nardelli ally. They have eliminated the company's famous cash-return policy--a move akin to defacing "the Holy Grail," Nardelli notes. Marcus and Blank held sacred the promise that if you bought any item at Home Depot and returned it to any store, receipt or no, next year or next decade, you got cash back, no questions asked. Abuse was flagrant. Nardelli and Tome collected data on how much the policy was costing, created spreadsheets, and shared the findings with store managers--who, pre-Nardelli, were not linked by e-mail. The new policy--no receipt, credit only--will save Home Depot well over $10 million annually, Nardelli says. He has also centralized buying, consolidating it from nine regional offices to one, in Atlanta. That has turned out to be a Darwinian exercise that squeezes out many local suppliers and gives the edge to efficient biggies that can serve Home Depot nationwide.

These are no-brainer fixes that almost any professional manager would make. Nardelli's more substantial and, frankly, riskier change is to the DNA of the place: the people. He has lost 24 of 39 senior officers in the first 19 months--some were fired, others quit. And he has brought in a bunch of nonretail people, including many GE alumni. "This is a business that has to reach outside of itself," Nardelli says.

If you want to know how much stock the new Home Depot puts into recruiting and developing its talent, just look at Dennis Donovan. A human resources executive who worked with Nardelli at GE Power Systems, he joined Home Depot as HR chief a year ago and got a $21.5 million pay package for 2001. That made him the second-highest-paid person at Home Depot last year (after Nardelli, who pulled in $24 million)--and probably the best-paid HR guy in America. "Yeah, Bob screwed me, but I came anyway," says Donovan, laughing. Says Nardelli: "A lot of HR people are just theorists. Dennis is the ultimate practitioner. He's the most effective HR manager I've ever known."