Carly Fiorina, Mark Hurd: HP Stands for Highly Perplexing

Innovation Blog

Carly Fiorina, Mark Hurd:  HP Stands for Highly Perplexing

By Shlomo Maital

Mark V. Hurd

“Without vision, a nation perishes”. Isaiah 61, 11

If you track HP, now larger than IBM in global revenues ($115 b. in 2009), and if you are perplexed about why HP fired its CEO Carly Fiorina (now trying to become California Governor), and now has fired its CEO Mark Hurd  (“one of the great head-scratchers of modern times”),  read Joseph Nocera’s piece in today’s Global New York Times. [1]

Hurd led HP through the post-Carly crisis  to become the world’s leading computer company, and boosted its sales in about four years from $80 b. to $115 b., an increase of 31 per cent, while raising profitability as well in an industry known for its falling margins.  He was fired ostensibly for sexually harassing an HP contractor (he never laid a hand on her) and falsifying some luncheon expense accounts.

What in the world???

Nocera has the real story.  A long-time writer for Fortune,  Nocera is good at digging under the hype to find the truth.

Here is his explanation:

H.P. says its board should be applauded for not letting Mr. Hurd off the hook. But this is just after-the-fact spin. In fact, the directors should be called out for acting like the cowards they are.  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.   The stand-up thing would have been to fire Mr. Hurd on the altogether legitimate grounds that the directors didn’t have faith in his leadership. But of course Wall Street would have had a conniption if the board had taken such a step. So instead, it ginned up a tabloid-ready scandal that only serves to bring shame, once again, on the H.P. board.

Carly Fiorina had a powerful vision for HP, reinventing the company founded by legendary entrepreneurs David Packard and William Hewlitt (the “H” and the “P”).  She led the acquisition of Compaq, which now turns out to have been a good deal, against fierce internal opposition.  She was fired by the Board of Directors led by her one-time friend Patricia Dunn.  Dunn herself was fired, because of a scandal related to use of private investigators to track information leaks.  It turns out, according to Nocera, that Hurd was responsible for the private eyes, but dumped the blame on Dunn.

Well, those who live by the sword die by it.  HP’s Board has taken revenge.   Hurd was a penny-pinching efficiency expert who slashed costs to the bone, boosted HP margins – and destroyed HP’s future by slashing R&D investment from 9 per cent of revenues down to only 2.   HP, for instance, has no answer to Apple’s iPad, nor will it,  says Nocera.    Hurd engaged in a classic and not untypical strategy of boosting short-run profits, for his own gain and ego, while destroying long-run competitiveness.  It will be up to his successor to clean up the mess, if he or she can.

The irony is this:   Fiorina’s vision was outstanding, but she was incapable of leading the operational excellence needed to apply it.   Hurd brought that operational excellence, but neglected and discarded the vision.  For a company like HP to become great and remain great, you need both. Hewlitt and Packard together had both – long-run vision and short-run operational excellence.  Somehow their successors have not.   As Nocera summarizes:

One thing I found surprising this week was learning that to many H.P. 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 knew only how to cut costs.

The prophet Isaiah’s powerful statement in Hebrew reads, without vision, nations literally fall apart (“Nifra” means to disintegrate).   He might have added, without operational excellence, nations also disintegrate.   You need both, for nations and for businesses.  HP, under Carly, had vision (strategy).  HP, under Hurd, had operations (tactics).   Each is a necessary condition for long-term sustained success, and together, they are sufficient.  Firms, like armies, need good strategy and good tactics.  But if you lack one or the other —  in the long run, you are dead as a doornail.