Fixing HP Page 2: Page 2

Whitman can fix HP, but in order to do, so she'll have to undo the damage HP boards have done over a decade.
Posted November 29, 2012

Rob Enderle

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Repeating the Problem

Many credit Hurd with brilliantly creating a situation where, by effectively throwing the then HP chairman under a bus, he could become executive chairman. This repeated the Fiorina mistake and effectively made him his own boss. Many thought his history at NCR suggested a tendency to abuse power, and he allegedly tried to get HP to fund a mistress. The situation ended catastrophically with his sudden departure.

At that point, yet another HP board was faced with hiring a new CEO. Once again, they were faced with a nearly identical problem: they needed to restore excitement to HP. And in my opinion, they approached this problem even more catastrophically.

The Oracle Problem

You see, Oracle had through partnership effectively served as HP’s software arm in competition with IBM. But Oracle decided to get a divorce. Oracle bought Sun, a failing hardware company, in order to do so. Oracle then hired Hurd to run this near disaster. Suddenly, HP was forced into competition with both IBM and one-time partner Oracle, which was now led in part by HP's last CEO.

The HP board was likely a bit panicked. But instead of hiring a competent head of software (Hurd had gutted HP software during his tenure) and then rebuilding that unit under a new CEO qualified to run HP, they once again over-corrected. They hired Leo Apotheker, the failed CEO of SAP. He might have been fine running a software division but wasn’t at all suited to run a firm that was mostly hardware.

This decision was almost immediately catastrophic. First Oracle moved to have Apotheker become a key witness in their ongoing litigation against SAP. Second, many of the financial analysts and investors believed that he was a bad choice to run HP. And third, he was put in a position of both having to dodge Oracle’s attempts to get him into court and having to execute a bold strategy to create an HP software division.

This situation had all of the earmarks of a massive disaster, and that is clearly what resulted. HP's Palm acquisition failed. And it now appears the Autonomy acquisition was rushed and can be viewed as a failure as well. Apotheker may go down in history as doing more damage to a company in a short time than any other CEO in history. But the fault wasn’t his; it was the fault of those who selected him.

Wrapping Up: The Lasting Lesson

The problem with HP wasn’t the CEOs. The problem was with their selection.

In fact, the selection was almost always overkill. Where they needed a scalpel, they used a table saw. First, they needed stronger marketing and more compelling consumer products; they over-corrected with a new and mismatched CEO. When they needed ops, instead of a strong COO, they replaced the CEO again. And when they needed a software head, they once again replaced the head of the company with a person with that specialty. It wasn’t that the board didn’t understand the problem; it was that they forgot to protect the majority of the firm, which wasn’t broken and over-corrected. In short, they constantly traded one problem for another set of problems that were worse.

I believe Whitman is actually a good match for what they need at the top of HP. But she inherited the combined mess that HP's boards and CEOs had created over a decade of false starts and boneheaded staffing decisions. She now has the marketing and product problem of Fiorina, the ops problem of Hurd and the software problem of Apotheker. She can turn the company around, but only if they systematically fix each of these components. Given HP’s history, it seems more likely the firm will replace her -- and that would simply continue this cycle.

Whitman’s path should be similar to Gerstner’s at IBM. Fix HP’s image first. Then put division heads in place that can execute and slim the company down for combat.

HP can be fixed. It just needs to be fixed systematically and in parts. In short, if the body is sick you don’t repeatedly replace the head, largely because that will end badly; instead, you focus on the sick parts. And that is how you’d fix HP.

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Tags: HP, Mark Hurd, Meg Whitman, Leo Apotheker, board of directors

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