Are HP’s Board and New CEO Headed in Right Direction?

 

Updated – Dec. 31, 2011

Not to be gauche, but it wouldn’t be surprising if Harry S. Truman were perplexed by the judgment and performance of the board of directors at the world’s biggest-selling tech company. That being the Hewlett-Packard board of directors over the past decade.

Indeed, many people might be wondering if the company might be better-served if the board adopted the former president’s famous mantra, “The buck stops here.” Because the question is, have they acted like it?

It’s unfortunate – the tech company has a rich heritage. That’s not to conclude that the board has ruined the company, because in 2010 it had an enviable $126 billion in sales. It employs 326,000 workers.

But HP has lost more than half its market value. Meantime, the board doesn’t appear to understand the Link between Financial Performance and Succession Planning.

Questions have once again recently risen over the board decisions and strategies, while many analysts approve of recent developments.  The storied company plans to continue with its strategy of cloud-based services and enterprise software solutions.

Based on past developments, HP fans, and I’m one of them, might wonder about HP’s long-term strategic planning.

Consider:

1. The board hired Carly Fiorina as CEO in 1999. Her performance proved to be unsuccessful, as she apparently didn’t understand a basic principle about mergers (If Mergers & Acquisitions Tempt You, Consult HR Pros). She persuaded the board to force a merger with Compaq – despite all kinds of red flags. At the time, as a media columnist for Belo Web sites, I wrote it would never work because the cultures of the two companies were vastly dissimilar. My predictions proved to be accurate. The merger resulted in the layoff of 17,000 talented people and HP’s financial picture worsened. She was fired in 2005.
2. Soon, the board’s chair, Patricia Dunn, hired firms that used illegal methods to try to stop leaks of proprietary HP information to reporters. 
3. Mark Hurd was hired to run the company. While he did have some success, many analysts believed HP suffered from his lack of vision and poor judgment leading to his forced resignation – over sexual harassment of a marketing consultant, who was actually an actress, and his inconsistent expense-account reports. 
4. They hired a CEO, Léo Apotheker, who made his own controversial decisions, including plans to change the company’s mission – from world-class hardware to software and cloud computing. Some board members voted to hire him without even meeting him. Mr. Apotheker’s actions prompted declining shares and a shareholder lawsuit. 
5. The board hurriedly hired a new CEO, Meg Whitman, who had joined the board after she lost to Jerry Brown, Jr. in running for California governor. As head of eBay, she was successful but known for questionable acquisitions. You might recall her 2005 purchase of Skype for $4.1 billion, but eBay ultimately sold it for $2.75 billion four years later. 
6. Ms. Whitman recently said she supports Mr. Apotheker’s decisions, including the proposed$10.3 billion purchase of commercial software-maker Autonomy, but she will not forego HP’s hardware business. The latter is ostensibly is one the most logical public decisions to come from her office. 
7. Ms. Whitman’s first announcement that her priority will be to get HP strong financially. But again, HP’s finances were hampered by negative Wall Street reactions to Mr. Apotheker’s actions, which she mostly supports. So how can she achieve such goals, especially since she doesn’t have any enterprise experience?

Ms. Whitman knows she has to make some strategic decisions about hardware, as the company initially indicated it might jettison its PC division. HP’s biggest customers balked at buying PCs until they got clarity on HP’s plans. Savvy consumers were probably hesitant, too. That was my thought when I spotted some flashy HP notebook computers in recent visits to retail stores. Fortunately, HP decided to stay in the notebook computer business.

Following weak sales, Ms. Whitman’s predecessor stopped marketing smartphones and tablets with webOS software, an HP product. She also needs to waive her magic wand in combating the popularity of iPads and smartphones to use the Internet.

Meantime, HP has other complicated matters to solve, including what to do about its services business, its slim profit margins in servers, and slower sales in printers. The latter two might very well be approaching the end of their product life cycle.

Ms. Whitman also promises to get more teamwork and cohesiveness out of her management team. That’d be a good move, too.

Before making any rash irreversible decisions, Ms. Whitman needs to conduct an in-depth SWOT analysis – of strengths, weaknesses, opportunities and threats – followed by a strategic action plan to anticipate emerging trends and capitalize on them. A sophisticated look to the future is prescribed here.

Let’s hope Ms. Whitman comes up with better strategies and communication than she did in her failed gubernatorial campaign and questionable acquisitions at eBay. She also has to be successful working with a board that’s made so many anemic decisions.

HP is a fine company and deserves a better future than its performance of the last decade.

From the Coach’s Corner, here is a related link: Leadership, HR, Marketing Lessons from HP’s Executive Turmoil.

“One of the biggest responsibilities of management is to look after the corporate DNA.”

- Andrew Rolfe

 

Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complementary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

 

Did Carol Bartz Use the Right Leadership Approach?

 

Feb. 7, 2012

Imagine, you’re at work and you suddenly get a boorish mass e-mail from the head of your company announcing she’s just been fired.

How would you feel? Would you respect the person sending such a message? Would you be confident in your company?

I don’t know about you, but I’d have a negative response to all three questions.

My perspective is three-fold: Early in my career, I worked in management, and found myself downsized. I’ve been an executive who decided to terminate employees. And now I’m a business-performance consultant who advises clients in human resources.

Yes, losing a job is painful. And, yes, it’s important to be transparent. But that doesn’t mean it’s OK to be crude in making such announcements.

That’s my assessment in the case of Carol Bartz.

When she was terminated as Yahool’s chief executive officer, published reports indicate she sent an e-mail blast to 13,400 employees. It read, “I’ve just been fired.”

It isn’t hard to believe. Her job ended just as the events unfolded in her tenure – chaotic. She’s one of the business management lessons from Yahoo’s demise.

Here’s why:

All Ms. Bartz accomplished in her message was to act unprofessionally capping an unproductive pattern of behavior, which had led to poor performance, and her eventual demise.

What she never seemed to understand was that she never understood Yahoo’s mission. In her case, it should have been all about building Yahoo to satisfy its users.

Now, she’s the second woman in the last six years to disrupt a major technology company. She didn’t learn from the lessons of Carly Fiorina, who misjudged Hewlett-Packard’s situation in the marketplace.

She came across as brash and ostentatious, too. Ms. Fiorina never should have tried to force the merger with Compaq. The cultures at the two companies were too different. Some 17,000 workers lost their jobs unnecessarily. And HP, my favorite printer company, still hasn’t found its way.

At least when Ms. Fiorina was terminated in 2005, she publicly indicated she respected the decision. In my view, that was her most stately act as head of HP.

But Ms. Bartz’s e-mail blast came across as angry, egotistical and manipulative. All Ms. Bartz accomplished was to continue an unproductive pattern of behavior, which led to poor performance, and an eventual demise. Her salty language more suitable at a football game.

Leaders might be confident in their abilities, but they evaluate their performance on a regular basis. They make corrections when necessary. But they don’t continue as if everything is good when it isn’t. They don’t consistently make brash statements. And don’t fail to take responsibility for setbacks in the marketplace.

Aside from her career, her crass announcement has at least two ramifications:

1. She’s hindering Yahoo’s future.
2. She’s sending an emotional message that makes it more difficult for women business leaders to break through the glass ceiling.

Unfortunately, for Yahoo stakeholders, Ms. Bartz was simply an example of the Peter Principle. She rose to her level of incompetence. The job was simply too challenging for her. But she didn’t have to make the situation worse. That’s not what leaders do.

From the Coach’s Corner, other editor’s picks:

Leadership, HR, Marketing Lessons from HP’s Executive Turmoil

If Mergers & Acquisitions Tempt You, Consult HR Pros

“Management is doing things right; leadership is doing the right things.”

-Peter Drucker 

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Terry Corbell is a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

 

Are You Successful In Keeping Female Talent?

 

Enlightened marketers know that women make 80 percent of household buying decisions. And in most cases, even when a husband goes to make a purchase, he often defers to his wife. Whether it’s a suit or a computer, she usually prevails on choosing the color and the price.

So, if you want to be successful in attracting female customers, enhance your odds by making your company a great place for women to work. That means making a commitment to giving back in your communities from where you derive income. Why?

A 2009 study provides a warning signal to companies finding it difficult to retain female talent. A survey of women managers indicates they’re happier with their employers, if social responsibility is practiced. Ironically, however, many females aren’t aware of it even when their companies are socially responsible.

Such were the findings in a survey of 380 women managers by the Simmons School of Management in Boston, which was underwritten by Hewlett-Packard.

The study indicated socially responsible companies benefitted three ways: Their female talent had a higher rate of job satisfaction, they were less inclined to think about resigning, and they were more likely to speak highly of their companies outside of work.

But again, many women were unaware of their employers’ corporate socially responsible initiatives.

Some of the survey’s conclusions:

• 75 percent preferred “making a positive impact on society” and “expressing and acting in line with my values.”
• Only 45 percent were of their employers’ social responsibility activities.
• Only 35 percent participate in such initiatives.

The study also provided some recommendations:

• Increase communications about social responsibility efforts.
• Discuss the level of commitment in terms of resources
• Mention the success of the programs
• Provide occasions for women to participate without the activities interfering with their jobs.

View the study here.

Incidentally, in my experience, the insight about corporate social responsibility and preventing turnover with quality managers holds true for both genders.

From the Coach’s Corner, while you’re at it, you might review this column:

Cause-Related Marketing Can Increase Sales by Double Digits.

If Mergers & Acquisitions Tempt You, Consult HR Pros

 

If you’re contemplating a merger, be very careful about your human capital – whether you’re in government, a small business or a global company.

Investment bankers will probably salivate over the prospect of new mergers when economic conditions improve, but senior finance executives need to listen to human resources experts to insure success.

From 2005 to 2008, more than 50 percent of the largest mergers should not have been consummated, according to a 2010 Bloomberg report, M&A Losers in $10 Trillion Takeover Binge Led by McClatchy, Sprint Nextel.

The 53 largest businesses were considered sub-par just 24 months afterward. They include Boston Scientific Corp, McClatchy, and Sprint Nextel – now, they’re valued less than for what they when the deals were struck.

Yes, any financial decisions about mergers should be based on input regarding human resources. There is another precedent for this precaution.

Actually, when I was contemplating this topic, I was reminded of my 2002 column warning about the unproductive merger of Hewlett-Packard and Compaq when I spotted an online video of her biography by the Carly Fiorina campaign for U.S. Senate in California.  

The spot touts her business experience at HP, but it doesn’t mention her dismal record, especially her merger of HP with Compaq. The merger was highly controversial because she merged two cultures that were not compatible. She was eventually fired.

Later, it was difficult for me to refrain from writing a “I told you so” piece in 2004.

Merger fever peaked in 2007. But the next year mergers plummeted to $1.97 trillion.

Finance pros are naturally concerned about money. Also at-risk are credit ratings and the improbability of profits after a merger.

But that’s not stopping Kraft from acquiring Cadbury or Comcast from trying to acquire NBC Universal.

If you’re contemplating a merger – it doesn’t matter how big or small or whether you’re in the public or private sector – there are several precautions to take.

Yes, crunch the numbers. Perform forecasts. But conduct an HR risk analysis – strengths, weaknesses, opportunities and threats. If you decide to proceed, plan and execute your strategy.

The big five pitfalls

There are at least five questions to consider:

1. Are the cultures compatible?
2. Will senior managers be compatible?
3. Will you lose key talent?
4. How can you be sure about financial sustainability?
5. What about productivity?

Note: 60 percent of these pitfall questions are HR-related.

People-related issues are paramount. Employees are your human capital and should be treated as assets. If you don’t pay early attention to human-capital issues, you’re risking failure. There are many elements to investigate, such as employee morale, benefits and payroll management. Not to mention information technology issues.

Remember, your customers buy from you because of their relationships with your employees. If your employees are uncertain about their future, then your customers will become apprehensive about their relationship with you.

That’s because all customer-buying decisions are made on five value-motivating perceptions. My research shows 53 percent of customer buying decisions depend on what customers think about your organization’s leaders and employees, and their attitudes. (For more on these perceptions, they’re included in this column, “The Seven Steps to Higher Sales.”)

Thwart your competitors who will be savvy predators in recruiting your best workers.

And understand when and what to tell your employees about possible layoffs.

Fiorina case study

HP’s difficulties after merging with Compaq include:

Its stock price dropped significantly despite good revenue and market share. It served one billion customers in 160 countries worldwide. Ranked no.14 among the Fortune 500, it employed 145,000 people and budgeted $4 billion for research and development.

HP was proud of its No. 1 market share in several products: Laser jet printers, disk storage systems, ink jet printers, UNIX servers, Windows servers, storage-area network systems, Linux servers, and notebook computers. Its printer market share was 47.1 percent. It ranked No.2 in handhelds, external RAID storage systems, and desktop computers.

But HP’s share price had dipped about 25 percent and the company did not appear robust.

Prior to the controversial merger, Ms. Fiorina was exposed to red flags. Along with director Walter Hewlett, a son of one of HP’s founders, and 49 percent of HP shareholders, this column raised questions at that time about the merger’s feasibility.

The concerns: Merger opponents were extremely vocal, the HP and Compaq cultures were vastly different, and the latter’s reputation for quality wasn’t strong as HP’s. I had products from both companies and that was my assessment, too. In fact, my firm has had a myriad of printers – black and white, and color – the two 15-year-old HP printers still work well with any computer.

As Forbes’ top-ranked businesswoman, HP CEO Carly Fiorina was a charismatic salesperson. She had her ups and downs, including criticism for purchasing a $30 million corporate jet and her unsuccessful bid to buy the consulting business of PricewaterhouseCoopers for $18 billion a few years previously.

Pundits complained HP had lost its focus in competing with Dell and IBM.

HP’s $586 million profit for the fiscal third quarter ending July 31, 2004, which was announced on Aug. 12, was below Wall Street’s expectations. As Dell began its larger foray in the printing business, HP’s profit in its core strength, printers, dropped.

Ms. Fiorina made another misstep: She was openly critical of Dell’s approach in not investing in research. Ms. Fiorina touted HP’s niche as being between Dell’s so-called low-cost products and IBM’s emphasis on costly consulting and information technology services. However, Dell’s profit jumped 29 percent and IBM was also growing and announced plans to hire 18,800 workers in 2004.

HP was vulnerable because of its broad strategy in taking on such venerable foes, especially when corporate and consumer spending on technology, in general, wasn’t robust. Plus, Dell had hired away Alex Gruzen, a HP senior vice president, responsible for HP’s notebook, tablet personal computers, and personal digital assistant division.

Merger Solutions

Here are the three A’s for merger success:

Awareness. Properly assess the risks. As in the merger of HP and Compaq, it’s important to note it isn’t feasible to achieve success after launching such endeavors for five reasons:

1. Strategy and focus – public agencies and companies lose focus when the merging cultures aren’t compatible.

2. Synergy – firms at the opposite ends of the spectrum culture-wise, don’t function well as a unit, no matter how much overtime the CEO works. This also means employees don’t respond well to new leadership, which leads to a breakdown in communication and infrastructure.

3. Apathy – such internal challenges lead to ennui in company initiatives; nothing great has ever been achieved by a lack of enthusiasm or passion.

4. Decrease in competitiveness – marketplace forces seemingly weaken a company, such as HP, as it learned in facing its opponents, Dell and IBM.

5. Effects from macroeconomic events – terrorism and recessions, for example, hover as challenges. As a result, consumers and businesses will spend less on technology. Ask any government agency or business about 9/11 and the impact on their revenues.

Acceptance. Just as analysts were adamantly opposing HP’s focus and its inability to discern challenges accurately and to adapt accordingly, customers will likewise become indifferent about a merged company’s products and services.

The concept behind the principle of acceptance also requires resourcefulness in creating solutions to deal with reality, hidden or not.

Action. To sustain performance, implementation of an action plan requires a checklist of six key elements:

• Analysis by an astute analyst to ascertain strengths, weaknesses, opportunities, and threats
• Close monitoring and participation by top executives, especially during periods of change or unrest by stakeholders
• Prudent assessments of strategy and tactics combined with implementation by an outside participant – an assertive, objective traffic cop – to monitor and insure success in sustaining performance
• Due-diligence and patience so that not even small details are overlooked
• Accurate anticipation of the needs of customers
• Performance-based compensation

The three A’s for merger success will insure any company adapts extraordinarily well in a climate of change and uncertainty.

Oh, if you’re contemplating the possibility of joining such employers, do your due diligence.

From the Coach’s Corner, related links:

Leadership, HR, Marketing Lessons from HP’s Executive Turmoil

 Did Carol Bartz Use the Right Leadership Approach?

 “Sometimes the poorest woman leaves her children the richest inheritance.”

-Ruth E. Renkel

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Terry Corbell is a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?