HP: The Gift That Keeps On Giving

http://www.nytimes.com/2010/08/14/business/14nocera.html?emc=eta1

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"The selfish leader will attempt to lead others for their own gain and for the detriment of others."
(Tom Peters)

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As is always the case in these situations (Mark Hurd's exit from HP), the "facts" begin to leak out and this time Joe Nocera has put many of those facts together to draw the messy picture that continues to be the top job at HP.

We continue to enjoy the "soap opera" that is HP and chronicle the lessons of what to do and NOT DO in managing effectively. Again, HP provides proof that great management in the middle of an organization can carry that organization if things are a mess at the top.

Back to Joe Nocera: "The resignation of Mark V. Hurd last week from his seemingly secure post as chief executive of HP has got to be one of the great head-scratchers in recent times ... Here's a guy who walked into a very troubled situation, replacing Carlton S. "It's All About Me" Fiorina, and oversaw what appears to be a magnificent turnaround. In his five years at HP, every metric Wall Street uses to judge companies had gone in only one direction: up."

More Nocera: "Its 2009 revenue was $115 billion, up from $80 billion when he took over. Four years ago, HP (passed) IBM in revenue, making it the country's biggest technology company. It's average annual 18% profit increases were remarkable given the company's mammoth size. And, the stock price more than doubled on Hurd's watch."

Nocera characterizes Cathie Lesjack, the HP CFO and temporary replacement for Hurd, as going out of her way to "diss" him in her press release. Since we haven't seen the press release (and have no interest), we'll take Nocera's word for it. What interests us more is that Nocera connects the attitude that Lesjack puts forth with the attitude of HP staff at every level.

Why Hurd is leaving relates to that. Nocera points out that the "board" cleared Hurd of "sexual harassment" charges but a spokesperson pointed out that the "relationship" was a "conflict." We're confused. So, then there were the "fudged" expense reports - ethically a problem, but proof of "fudging" is sometimes difficult and many times fixable by repayment and a wrist slap. So, as Nocera says, what's up here?

Nocera: "Mr. Hurd's supposed peccadilloes were a smoke screen for the real reason they got rid of an executive they didn't trust and employees didn't like ... Mr. Hurd's sudden departure from HP can be traced, in truth, to the last time the HP board did something shameful. This was the infamous "pretexting" scandal, which burst into public view about a year and a half into Mr. Hurd's tenure. The essential allegation was that the company, led by board chairwoman, Patricia C. Dunn, had gone way over the line in investigating a series of damaging leaks, including hiring investigators who used false pretenses to obtain phone records of people suspected of being the "leakers" (including board members) ... According to "The Big Lie: Spying, Scandal and Ethical Collapse at Hewlett-Packard,"... Mr. Hurd was very involved in HP's efforts to hunt down the leakers. But, when the whole process became public, Thomas Perkins, a prominent board member, skewed the situation to make it look like Hurd was not involved." The book concluded that Hurd lacked the moral character to be CEO.

Nocera again: "Then there were the company's employees. The consensus in Silicon Valley is that Mr. Hurd was despised at HP, not just by the rank and file, but even by HP's top executives. (Perhaps this explains why Ms. Lesjack was so quick to denigrate him once she took over.) "He was a cost-cutter who indulged himself," was one description I heard. His combined compensation for just his last two years was more than $72 million - a number that absolutely outraged employees since their jobs were the ones being cut."

Nocera's data from employees and former employees is so "juicy" that it's hard to choose what to include here but all of it proves the case. HP's R&D budget (something it has always been known for) was 9% of revenue - now it's 2%. Where do the new products come from?

A good Hurd summary would be from one former employee, Charles House, a longtime HP engineer who now runs a research program at Stanford University, Hurd was " ... incredibly demeaning and relied on the fear factor. He was wrecking our image, personally demeaning us and chopping our future."

As Nocera points out, are any of these firing offenses? Probably not. Especially when the short term profits are exceptional, you've bought EDS (while deciding to get rid of 25,000 people in order to pay for it - does that bother anybody?), and you've passed IBM in revenues.

But, again quoting Nocera, "... just whip up a personal scandal - make sure it has a little sex in it - then you can get rid of your failed leader on the grounds that he "violated company standards."

The best perspective from a management point of view is how Nocera ends his article (in my view: a classic): "One thing I found surprising this week was learning that to many HP observers Ms. Fiorina no longer seemed quite so bad. It was actually her strategic vision that Mr. Hurd had executed, I heard again and again. Her problem was that while she talked a good game, she lacked the skill to get that big, hulking, aircraft carrier of a company moving in the direction she pointed. Mr. Hurd was a brilliant operational executive, but had the strategic sense of a gnat, and only knew how to cut costs ... What HP needs next ... is someone with Carly's strategic sense, Mark's operational skills, and Lew's emotional intelligence." (Lewis E. Platt preceded Ms. Fiorina as CEO)

Meanwhile, the HP ship moves on. CEOs come and go but outstanding management in middle is a priceless commodity. When Hurd bought EDS, he simply gave it to Anne Livermore who has been on Fortune's list of the Top 50 Women in Business for years. Livermore has survived Platt, Fiorina, Hurd and members of the board who felt she could be replaced over the years. She, and her people simply move on. A lesson for all of us. A lesson probably lost on the HP board.