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I’ve been thinking a lot about HP’s CEO problem and what kind of CEO they need to carry the company forward. The firm is in reasonably good financial shape but those metrics shield serious competitive and employee problems.In short, I think what they need is a CEO who can rally the HP troops and reform the company into a more agile battle-hardened entity that can win, or settle, the growing number of competitive wars the company has engaged in over the last decade.
We’ll cover the major problems first and then talk about who is needed to address them.
Breeding Disloyalty
Mark Hurd exceeded Carly Fiorina on most positive metrics but what we haven’t really talked about is that he also exceeded her in negative ones (it is worth reading Chuck House’s blog for background). We’ll talk about two here and the first is employee loyalty.
While Hurd’s own compensation went up significantly — particularly with regard performance bonuses — the employees who did the actual work saw theirs fall as profit sharing was eliminated and salaries were reduced.In sum, the employees paid out of their own pockets so their CEO could have even more money and this clearly didn’t sit well with the troops.Evidently over 60% indicated they would leave if given the opportunity, which is a bad milestone for a company that historically attracted employees because it was safer than higher paying alternatives.
This disloyalty, as the market recovers, has turned HP from a company where headhunters had difficulties to one of the biggest pools of available talent.
Wars r’ Us
During Carly Fiorina’s time the number of HP competitors stayed relatively fixed. She even tried to turn Apple into a partner by licensing the iPod but, unfortunately, that will likely go down as one of her biggest mistakes.Under Hurd, competitors bred like rabbits, putting HP under unprecedented competitive pressure.
Cisco went into servers and Oracle bought Sun, taking two of the most powerful partners that HP had. And with Oracle went one of their advantages against IBM, putting these folks in the liability column. On the PC side the moves were even more frightening as historic parts suppliers Acer and Asus emerged as surprisingly fast-growing PC OEMs. And Lenovo, after acquiring IBM’s PC business and dealing with a few issues of its own, also increased in power dramatically.
Dell slid to number two but largely because they bet too heavily on business and not entirely because of HP’s efforts. Even Microsoft, who had been a strong partner, has moved more into the competitive ranks as a result of HP’s purchase of Palm.
Sidekick
One of the people who allowed Lou Gerstner to succeed was Jeremy York, who as IBM CFO had been hired by the IBM board to supplement the CEO. In the early years of IBM’s turnaround York actually did more of the heavy lifting as the two worked together to accomplish what was thought to be impossible, the restoration of that company.
Under Carly Fiorina HP was long on vision but short on execution, under Hurd HP was long on execution but short on vision.This suggests that like IBM, HP needs more than one person covering the top job to cover both vision and execution for the company. A strong CEO with vision with a strong COO underneath them who has their back and helps keep them from doing stupid things.
In addition, in both people there likely needs to be a strong ethic of taking care of the employees, because no matter how capable the folks at the top are, a company with hundreds of thousands of employees can’t be run without the strong help of those employees in peace, let alone in war.This time the selection should be made to ensure the employees aren’t given short shrift.
Wrapping Up: Adding Europe and Asia
This suggests two executives and a Chairman who together provide the operational excellence of Hurd, the vision of Fiorina and don’t have the disdain for employees that both of these executives demonstrated.Because of the wars that are ongoing the CEO needs to be more like a general — and an actual military background likely wouldn’t hurt because you quickly learn in the military what the word “frag” means if you don’t take care of your troops.
But one other skill likely needs to be in the top ranks and that is the ability to compete in Europe and Asia where many of HP’s future competitive battles will be fought. China is growing to be a massive market and one that likely will need the top executive’s focus if US centric HP is to be successful there.
So HP’s board doesn’t just need one person, they need a team to fight an increasing number of battles, keep the wars from proliferating, and to turn HP back into a place where employees supported their executives rather than were frightened of them.No one person can do that job as Gerstner, Fiorina, and Hurd have demonstrated.All eyes are now on Mark Andreessen and HP’s board. IBM in the 90s demonstrated that this can be done and HP is in better shape than IBM was. The question now is will it.
