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:
- 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.
- Soon, the board’s chair, Patricia Dunn, hired firms that used illegal methods to try to stop leaks of proprietary HP information to reporters.
- 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.
- 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.
- 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.
- 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.
- 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?
Leadership, HR, Marketing Lessons from HP’s Executive Turmoil
Updated – Dec. 31, 2011
A court ruling puts former Hewlett-Packard CEO Mark Hurd and the company’sproblems back in the spotlight.
That means HP CEO Meg Whitman will find it advantageous to solve three salient corporate issues – long after the sudden exit of Mr. Hurd. At issue, are perceived quagmires in leadership, human resources and marketing.
Mr. Hurd was widely credited for HP’s recent success. But his forced resignation over a sexual harassment case and inconsistent expense-account reports is the company’s third tumultuous event involving key executives in just five years. Analysts were unimpressed with his lack of vision.
His accuser, Jodie Fisher, a 50-year-old actress and former reality television contestant who was hired has a marketing consultant, introduced him to key customers and kept him company. She said she was sorry he lost his job.
Especially, this week since a court approved publication of a letter sent by Ms. Fisher’s attorney, Gloria Allred, to Mr. Hurd – the letter detailed his alleged sexual advances toward Ms. Fisher.
For example:
“At times you would behave professionally seemingly ‘getting’ that she was not going to have sex with you,” wrote Ms. Allred. “At other times, not, and you would relentlessly attempt to cajole her into having sex with you.”
The first unsavory HP event, of course, was the 2005 firing of CEO Carly Fiorina following her lack of financial success and her questionable, contentious merger with Compaq resulting in heavy layoffs.
Then, there was the 2006 controversy surrounding Patricia Dunn, who as chair of the board, hired firms that used illegal methods to try to stop leaks of proprietary HP information to reporters.
So, it’s not surprising that published reports indicate employees now have huge morale issues after Mr. Hurd’s tenure.
Ms. Whitman will need substantial leadership skills because HP still has to improve the employee morale and marketplace position.
HP’s share price plummeted by 10 percent in just the first day after Mr. Hurd’s firing. It fell another 8.4 percent the following Monday to a 52-week low. Obviously, many investors are nervous. On Friday’s close, the share price was $25.76.
Certainly, employees feel betrayed. Improving employee morale necessitates a strong internal communications program with empathy and appreciation for the employees’ contributions to the company. Certainly, from the C-suite on down, HP’s HR and training initiatives are being tested.
It might seem like a bit of a stretch, but the marketing should tout the rich, storied legacy of the company’s origins in a garage. That’s what occurred to me after being reminded that Americans love an underdog following release of a 2010 study by the Simmons School of Management in Boston.
“Across contexts, cultures, and time periods, underdog narratives have inspired people,” according to the study co-authored by the school’s Jill Avery. “Stories about underdogs are pervasive in sports, politics, religion, literature, and film.”
In using the term, credibility, she implied in an interview with BusinessNewsDaily that trustworthiness and integrity are salient principles to inspire customers to buy.
“Underdog brand biographies contain two important narrative components: a disadvantaged position versus an adversary and passion and determination to beat the odds,” wrote the study’s authors.
In addition to Dr. Avery, the authors include Neeru Paharia and Anat Keinan of Harvard University, and Juliet B. Schor of Boston College.
They found that the respondents identified with underdog brands and were more likely to buy them.
“The American Dream, the fabled American myth, is built on the stories of underdogs who came to the United States with virtually nothing and pulled themselves up from their bootstraps to achieve success,” wrote the authors.
When the study of products that included the branding term, underdog, they were preferred in 89 percent of the cases by participants. Companies with a humble history are very appealing to consumers.
In fact, as a reward for participating in the study, respondents were given their choice of a chocolate bar. Seventy-one percent chose the underdog candy bar.
Meantime, to be fair — HP makes great products. My firm has had numerous laser printers; both black and white, and color. Some have only lasted a year or two. But two of the most reliable are the discontinued HP LaserJet 4P model printers from the early 1990s. They’ve produced reams upon reams of quality documents without fail. Sadly, they were finally mothballed in 2011 when it the drivers were no longer available for updated computers.
Let’s hope HP finally gets this leadership problem corrected. It’s past time for inspiration and vision for success with customers.
Related link: Are HP’s Board and New CEO Headed in Right Direction?
From the Coach’s Corner, if you have customer loyalty issues, don’t worry because you’re not alone: Bank Woes Provide Lessons for All Companies Seeking Growth.
“Leadership is solving problems. The day soldiers stop bringing you their problems is the day you have stopped leading them. They have either lost confidence that you can help or concluded you do not care. Either case is a failure of leadership.”
-Colin Powell
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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?
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 online videos by the Carly Fiorina campaign for U.S. Senate in California.
Her videos: Her biography and her attack spot, conservative in name only ad.
One spot touts her business experience at HP, but it did not 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:
- Are the cultures compatible?
- Will senior managers be compatible?
- Will you lose key talent?
- How can you be sure about financial sustainability?
- 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, whether you’re an employer or job-seeker, caution is also advised in the use of social media such as Facebook, LinkedIn or Twitter.
Employers should be careful in using social media in checking the backgrounds of applicants. If you find derogatory information and use it as justification of not hiring a worker, you will face legal hassles if applicants learn about it.
The protected classes: race, gender, religion, disability or sexual orientation.
Conversely, if you’re looking for work or networking for customers, a post showing any sign of unprofessional behavior will haunt you when decision-makers spot it.
