This last week has been full of corporate drama. Google is apparently being pounded by the US Senate for its “bait and switch” strategy, and HP’s brand new CEO, Leo Apotheker, is already rumored to be out. Rumors suggest that HP’s new board member Meg Whitman is likely to replace him if booted. I think that would be an incredibly bad idea, because it would basically repeat the mistake Yahoo’s board made with Carol Bartz. My friend Lance Ulanoff (who recently landed at Mashable) argues that Mark Hurd would be a better choice, and with due respect to Lance, I think this is just nuts.
So let’s focus on HP and its ongoing CEO troubles this week.
Tightening the leaky faucet
First off, HP has a serious leak problem. Just before this most recent drip, word leaked about the HP board considering spinning off its PC business, causing HP investors to flee the company. I expect PC buyers did the same, particularly in corporate accounts, and all of this because HP was just considering options. The board was supposedly 18 months from a decision, which means by the time they actually did anything, two or more years would have passed. Nothing that far out is certain in technology, and it is kind of silly to worry about it, just like it was silly to make this announcement. The cause was the leak, and with all of this drama, the criminal inside of HP (this is insider information, and disclosure rules were clearly violated) who made it should be found, prosecuted, and fired.
If they can’t contain information about what HP’s board is thinking of as confidential, no CEO will be successful. This needs to be fixed first.
This poor guy was brought onboard HP to dramatically change the company. He has been CEO for 10 months now, much of which he has spent being chased by Oracle’s legal team, as Oracle sought to draw HP into its litigation with SAP. Oracle won that litigation, but recently lost its $1.3-billion judgment for it because it couldn’t actually show damages. During this time, he has been plagued by the aforementioned leaks, likely coming from someone who wants his job. His board, the ones who put him in the job, was largely replaced because they mishandled Mark Hurd’s separation. In addition, he was handed a company that Mark Hurd had gutted. Employee loyalty and satisfaction were at historic lows, and divisions were finding it hard to execute their tasks because of excessive layoffs. One of the first things he had to do was restore some of the performance incentives that Hurd had cut to refocus employees on their jobs, but hurt HP’s bottom line. Yes, things have kind of gone to hell in a hand basket, but to be fair, most were outside his control.
Now, Apotheker did make one $10-billion acquisition, which appeared excessive, but recall that Oracle had gone to war with HP and was attacking their shared customers, so HP had to rapidly build a stronger software portfolio. That is going to be expensive.
I sincerely think it is too early to pull the plug on Apotheker, unless the new board wants to go in a completely different direction than the old board, and Internet services likely aren’t a good choice for HP.
This takes us to Meg Whitman, who had a mixed history at eBay and a failed attempt to run for Governor of the State of California. HP is made up of five pillars that include software, hardware (servers and PCs), services, networking (the old 3Com), and printing. Apotheker struggled because Hurd gutted the software portion of the company, and this is what needed to be rapidly rebuilt when Oracle declared war and breached their partnership. But HP has no Internet service business to speak of, and that is Meg Whitman’s area of expertise. Recall Yahoo and Carol Bartz, the CEO the company got from Autodesk. She was a capable CEO, but her background in tightly targeted packaged software was a mismatch for a company that is basically in the Internet publishing business. Ironically, Whitman is likely far more qualified to run Yahoo than she is to run HP. Finally, recall that she largely lost the election because she alienated the State’s Hispanic base. She did this by showing disloyalty to her long-time illegal alien housekeeper. The attorney who effectively caused Whitman’s loss, Gloria Allred, is the same one who effectively got Mark Hurd fired. As showcased by all the leaks, HP has a loyalty problem at the moment, thanks to Hurd. Getting a CEO who also appears to have a loyalty problem would just make this worse, unless this is overtly addressed.
As I finish this, it looks like she may have the job, and she is a capable CEO. But to be successful, she will have to stop the leaks and fix the loyalty problem. In short, she’ll have to surround herself with loyal people who know HP and aggressively stamp out disloyalty. With the right team, and as a temporary solution, she could run the company, but HP would have to learn from Yahoo’s mistakes, and HP’s board would have to learn from their predecessors’ mistakes with Carly Fiorina (who also had political ambitions). This isn’t to say that people can’t change, or that these problems can’t be managed, but it says they must be, or Whitman could be worse than Apotheker.
Most of the problems HP is currently having seemed to track back to Mark Hurd. From employee issues to the weakness in HP’s software unit, to the Palm collapse, critical decisions track back to Hurd or his cronies in HP. He was fired not because he violated expense policy, but because board members felt he was lying to them and covering up insider information leaks made to his mistress. These are serious allegations that have recently led to criminal charges for a number of executives in other companies. His settlement with the mistress effectively sealed the evidence, barring the HP board from doing an investigation, giving the board no choice but to force his resignation. You can’t have a CEO who doesn’t follow corporate policies, that the board believes may have behaved illegally and covered it up, and that they don’t trust. The “Burn Your Eyes” letter that effectively got Hurd fired still hasn’t been disclosed.
I’ll end as I started: Unless HP can fix the leak problem, no CEO will be successful at the company. Apotheker hasn’t been given enough time to learn the job, let alone do it, and HP is a far more complex company than SAP was. While I think it too early to replace him, Whitman could do the job if she were properly supported and backstopped for a short period (and she is being positioned as “interim”). But to truly fix the problem, HP needs a true leader who is matched to the company.
IBM had a leadership conference this last week, and a collection of international CEOs, presidents from emerging countries, and leadership experts defined who HP should look for. That person has a vision that HP can execute, a passion for making the company better than when they found it, the ability to lead, and love for facts upon which they make their decisions. What they don’t need is another CEO who would rather be in politics, like Carly Fiorina, or one that is only passionate about his own benefits, like Mark Hurd.