Cautionary Tale

Carly Fiorina aroused strong emotions.  She fought Bill Hewitt's son Walter on H-P's Compaq acquisition and won.  Sort of.

H-P's is a venerable engineering culture.  Engineering cultures have long memories...longer than most, in my experience.  Why?  Because engineers keep all the data in little charts.  Forever.  Nothing's ever forgotten. 

And Carly was anything but an engineer.  I don't know her, or know anyone who's ever worked for her, so I all I have to go on is what I read in the papers.  Every story today referred to her public persona, her "rock star" image, her "autocratic" style. 

This was no bland corporate exec.  In fact, she sounds like someone you either loved, or hated:

Ms. Fiorina's leadership was also marked by a drop in morale at a company with a legendary history of a collegial culture. She had a compelling public persona that gained her many fans in the business world. Yet inside H-P, she was a highly polarizing figure who stirred deep animosity from many veteran employees. Her abrupt -- some said autocratic -- management style won few fans. In recent months, several high-level executives had quit for positions elsewhere, something that increasingly concerned the board, according to people familiar with the matter.

Yesterday, some H-P employees reacted to the news of Ms. Fiorina's ouster by holding champagne toasts, according to several employees, who described the scenes as "jubilant."

Like Fouroboros said, this kind of reaction makes you feel like things were pretty personal.  Especially when the board says it doesn't plan any major strategic overhaul.

Buy that?

Nope.  They can't wait to undo what she did.  They want to turn the place back into the H-P of old, get back to doing things the "H-P Way."

Here's what I think happened.  H-P was in big trouble when Fiorina joined it.  Hidebound.  Complacent.  Arrogant.  Needed something big.  She shook it up and did something very bold in acquiring Compaq.  Didn't work.  Bad timing.  Maybe a bad idea.  In 2004, Dell had 17.9% of the PC market and H-P had 15.8%.  Not bad, right?  Nope.  Not good enough.  H-P's share was shrinking, and with IBM selling its PC business to the Chinese, margins are about to make a sharp turn even further southward.  The only profit engine H-P has left is the printer/cartridge business, with nearly $4 billion in profits on a little over $24 billion in revenue. But this was not enough to provide growth.  Sadly, they're in even worse trouble today than they were when Fiorina came on board.

So, what about Carly?  Bad fit with a technocratic organization that resented her personal style and never accepted her turnaround vision.  Bad market conditions that made a risky move even riskier.  With the stock down 50% since taking over, her position with the board was sufficiently weak that the  naysayers could move in for the kill.  And they did.

This is a talented executive, just 50 (almost a toddler!) who will turn up somewhere in a year or so and make quite a splash.  I hope she chooses a better fit next time and has a little better luck with the outcome of her next big bet.

Because you know this is the kind of executive who'll certainly make one.

Comments

[Connie Sartain]

I was entertained by the return of Brenda Barnes to a CEO position on the same front page as the exit of Carly Fiorina. Barnes is not positioned as a change agent, so perhaps she can improve the general tenure of CEO's. (see this month's HBR story on the ceo crises.)

Change agents are particularly vulnerable, of course. When you bring someone in "to save the ship", boards tend to get foggy about how many sailors it takes to get underway (not to mention how many engineers it takes to stay afloat.)

The board complaints about Fiorina's rock star status and her success with Washington echo the board complaints about John Sculley when he left Apple. In her case, they credit her w/ being a visionary but claim to want hands on management. In his case, they claimed the visionary was preoccupied with too many things, like sitting next to Hilary Clinton at the State of the Union. It was in one of Clinton's open forums on business that Sculley said in effect, "Developing a sound strategy is not difficult. Execution is." He said this at a time when "strategy" was considered the holy grail.

So how much sense does it make to pretend the CEO is repsonsible for what it takes them all to do?

These companies depend on mutually beneficial relationships with Washington (ignore them? witness the fate of Bill Gates). Generally the CEO's relationship is their strength - think Lay of Enron.

Oh this is just too much fun.

PS: THe other code word for trouble, besides visionary, is creative.