Sunday, September 03, 2006

Carly's Biggest Shortcoming

Carly Fiorina has taken her lumps. The former head of HP was once touted as the most powerful woman in US business -- and perhaps the world. She was pried loose from Lucent -- back when Lucent was a high-flier, pre-bubble -- to take over HP, at the time, seen as a lumbering Giant in need of some "new economy" fairy dust. She brought glitz, she brought ink, and (see the attached photo) she even brought a little celebrity (that's Gwen Stefani helping make HP digital cameras cool), but in the end her tenure can only be marked as an ignominious failure.

There are many lessons to be leared from her time at HP. However, the most important one is the Power of "Authentic Leadership."

One of the most critical aspects we have found in our research linked to long-term increase in shareholder value is a CEO who embodies "authentic leadership." That is, the people who actually make the organization successful -- often far away from the executive suite -- can relate to their leader(s). With Carly, from Day One, there was a gulf. Whether intentional or not on her part, she oozed self-importance. From her Hilary Clinton-esque wide lapels and power suits to the way she walked the stage at all the big trade shows with her flashy head-mic, you wouldn't expect to run into her at the Mountain View Starbucks. She had the air that she was always running late to meet some head of state or speak at Davos -- as opposed to running the business. This bred enormous disenchantment with the HP employees and - ultimately- the board of directors.

No executive or CEO fails alone. There is blame to be shared -- just as credit should also go to others in times of success. The board is the one who hired Carly; and they made the final decision to let her go. They surely forgot about the importance of "Authentic Leadership" at the time of hiring. Going back to then, they wanted to get a little bit of sizzle into HP's stock; and who couldn't have been impressed by Lucent's success to that point? Carly was able and more than accomplished looking over her CV to that point. How many people, in retrospect of a bad hire, have later said: "He/She looked so good on paper"?

They forgot to delve into whether "authentic leadership" was an issue for Carly. But they didn't when it came time to choose her successor. Mark Hurd is something of an anti-Carly. Quiet, unassuming, from Dayton! He's not the star -- it's the organization, which is to say the employees. I talked to some HP employees a few weeks ago and their relief under the new regime is palpable.

For execs and board members, the message is clear: CEOs better be able to connect with their people, or they won't stay connected to their board.

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Anonymous said...

An excellent post

Anonymous said...

Great post. So many times the Board get it wrong but never seem to suffer until they've got it wrong so many times!

Was Carly really bad? Did it need someone like her to get HP/Compaq past first base? Would someone with less of an ego and self-belief go ahead with it? Look at them now - Hurd did not do it but he is executing it.

Churchill led Britain through WWII but he was not the man to rebuild it. Carly maybe led HP through troubled times, it was just time to hand over to the builder.

Unknown said...

Hi Peter:

Thanks for the comment.

It's interesting to think if anyone else could have gotten that deal done. But should it have been done? Is that deal an unmitigated success? I'm not sure it is. It helped vault Cappellas on the bigger and better things. The strategy consultants and investment bankers did well, but HP shareholders -- even with Hurd's performance to date?

I suppose it's an open question that can only be answered a couple of more years out. However, I remember once wandering through the halls of the old DEC offices in Nashua, NH, (after HP bought them) and being amazed that over 70% of the maze of cubicles appeared empty. A shell of a former company -- not a hub of future quaterly profit growth.

Anonymous said...

As a recently retired 21 year HP veteran, I was fortunate to experience the leadership of the founders and two successors who had learned the business under Hewlett and Packard's direct guidance. The atmosphere was amazingly egalitarian and the open door policy was real. Bill and Dave truly did wander the halls from time to time and chat with employees in the hallway, and the loyalty and dedication this created cannot be overstated. Bill and Dave understood that such loyalty dropped to the bottom line, though I don't believe their motivations were cynical.

Enter Cary Fiorina. She was warmly welcomed, but her callous treatment of the workforce and her towering narcissism undermined this loyalty and dedication. People who had gladly worked long hours and weekends were were gone at 5pm. And then the recriminations started. A typical Carly broadcast went something like this: "We're doing better than ever under my leadership, but not well enough to give you the bonus that have regularly received over the past 20 years." Then the board bought Carly a new G4 so she could travel to Davos. Absolute death to loyalty.

In my years before the merger, HP businesses were typically managed at the business unit level, and the General Manager had enormous authority (and responsibility) to make the decisions that would return profit to the company. Despite the reputation for stodginess, HP was at it's core a very entrepreneurial atmosphere because of this business unit structure. Think of the hundreds of businesses that have been created by those with HP on their resume. Carly changed this, as well. All authority was centralized, with even the most basic decisions requiring review from many layers up the organization. The message: I'm in charge and you're not, because I don't trust you.

And then the merger happened, during which the son of the founder was treated shabbily. One more strike against Carly in the minds of the employees. I worked directly for a former DEC manager, and found that the organization was filled with those who had speciliazed in surviving the continuous layoffs in that company over many years. Rather than being forward looking and aggressive in the marketplace, these survivors were spectacularly risk-averse and bureaucratic. These behaviors were foreign to the HP workforce, and thus we had no natural defenses against them and their destructive effect. The net result was the 4 year transformation from a loyal, hard-working, and entrepreneurial workforce to a cowed and coopted workforce with one eye on the clock and the other on their resume. The reward system had changed from hard work and inventive engineering to avoiding mistakes and following the chain of command.

At least some of the rebound in HP's performance was the renewed sense of hope in this workforce with Mark Hurd's arrival. He is, as many have said, the anti-Carly. No photo-ops with Bono or jet-setting with the rich and famous. Mark's facility with even the most arcane details of HP business operations was truly impressive even in the first few weeks in a way that was reminiscent of the founders. I personally hope that he doesn't bear any culpability for the recent boardroom drama.

The board must resolve their differences very quickly and get to business or the few remaining instincts for greatness that this Silicon Valley icon has may fade away and be lost to American business for good. I could never forgive them.

Unknown said...

Thank you for this very thoughtful comment. I had the privilege of working with several HP people when I was with VoiceGenie and I was always very impressed with their loyalty and sense of values. They were also disillusioned with the new guard. I hope they find their footing and regain their former greatness. Thanks again for this excellent comment, Eric