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Ciptapangan Visitor
Hurd Instinct In Navigating HP
posted by admin on 15/09/06

 He is a classic HP kind of manager, low-key, self-effacing and a bread-and-butter business guy.

When the story broke about the crisis in the boardroom at Hewlett-Packard last week, the almost universal reaction here in Silicon Valley was: What would Bill and Dave have done?

The answer is: What Mark Hurd just did.

The spirit of Bill Hewlett and Dave Packard still haunts high tech, especially the Valley. A quarter-century after the two men stepped down from the day-to-day management of the company they founded, their business philosophy still stands as the ultimate example of enlightened management -- and as a perpetual rebuke to executives who fall short of their lofty standards.

Nowhere is this more true than at Hewlett-Packard itself. It's one thing to run some semiconductor company on paranoia, or an enterprise software firm on fear. You can always rationalize your abusive management as necessary to succeed in a uniquely competitive market. But violate the precepts of the HP Way -- management by objective, pushing decision-making down through the organization, deep trust in your employees -- at HP and you have to convince the world that your results will outperform what was perhaps the most successful corporate stewardship in U.S. business history.

That's what Carly Fiorina learned during her controversial tenure at HP. Had she tried her superstar CEO/top-down management/big merger style most anywhere else, she might have succeeded. But at Hewlett-Packard all she managed to do was set off an employee mutiny. The company that had once rewritten every known measure of employee loyalty, still found within itself the capacity to pull itself together and repudiate its new leader. By violating the trust of HPers, Ms. Fiorina utterly lost the proxy vote with her own employees and was saved only by institutional investors. In the end, she lost her job when she couldn't put up HP-like numbers to match her radical plans, and Wall Street abandoned her.

This is the clever time bomb that Bill and Dave left as their legacy to high tech, and to HP in particular. It isn't enough to be enlightened, innovative or successful -- you have to be all three, or you will fail by comparison. From beyond the grave, H and P are always saying: Go ahead and break the social contract with your employees, indulge in mass lay-offs and stick with aging but profitable products . . . but if you can't maintain three decades of continuous growth, enjoy the highest employee morale in the industry and create a half-dozen major new industries, don't even think about leaving a legacy as a great manager.

From the beginning, Ms. Fiorina's successor, Mark Hurd, has seemed to understand this. Word from inside the company is that he is low-key, self-effacing and a bread-and-butter business guy. Best of all, he listens. In other words, he is a classic HP kind of manager. He may not have the culture of trust all the way down, but he is close enough. And the results have been apparent: HP profits and stock are up, its products are improving in quality, and employee morale is the strongest in years. The company is even beginning to win again the old-fashioned way: by remaining consistently strong and waiting for competitors -- in this case Dell Computer -- to stumble.

And then, just when it seemed that the dark days at Hewlett-Packard were finally in the past, along came this body blow of a scandal at the very top of the company.

In case you haven't been following the story closely, it goes like this: In early 2005, troubled by leaks in the media that appeared to have come from the boardroom itself, HP Chairman Patricia Dunn set out to trace and expose their source. She hired private investigators, who then proceeded to contract another company to help with the investigation. This second company gathered phone records not only from HP board members, but also from nine reporters from The Wall Street Journal, CNet, Business Week and the New York Times, among others -- all without the subjects' knowledge. To do so, these investigators engaged in "pretexting": representing themselves as those directors and reporters in order to obtain personal information.

Ms. Dunn claimed that she didn't understand the concept of pretexting until this June. Moreover, she seems to have been supported in this dangerous project by Valley uber-lawyer Larry Sonsini. What is certain is that at the May 13 meeting, Ms. Dunn announced the results of her investigation and "outed" retiring director and former Reagan science adviser George Keyworth II as the leaker. And that was just the beginning. Fellow director Tom Perkins, a legendary venture capitalist and one of the Valley's most powerful people, resigned from the HP board in disgust at Ms. Dunn's tactics.

It was downhill from there. Mr. Perkins publicly stated that he and the rest of the board were kept in the dark about the precise nature of Ms. Dunn's investigation, while she all-but accused him of lying about his involvement. Mr. Hurd, who may or may not have known about the investigation, went before HP's employees last Friday to underscore his support for the search for leakers, but also to promise to investigate the investigation. On Monday, both Congress and the Justice Department announced that they were also looking into the matter. California State California State Attorney General Bill Lockyer stated on Tuesday that there was "sufficient evidence to bring criminal charges against individuals inside Hewlett-Packard as well as outside."

Meanwhile, HP's stock was falling, reversing the gains of the previous months. And HPers everywhere were appalled, disgusted and once more feeling betrayed.

Almost lost in the coverage is that this all began during the tumultuous last days of Ms. Fiorina at HP, when the board was deeply divided over the future of the company and the fate of its high-profile CEO. Indeed, it was a board member, Walter Hewlett, Bill's son, who led the shareholder revolt. He lost his directorship as a result (but not the admiration of HPers). That proxy battle fractured HP's board, creating a schism that apparently never fully healed, and which re-opened over the leak matter.

Tuesday, after two days of emergency board meetings, HP announced that Ms. Dunn would step down, to be replaced by Mr. Hurd, though she herself would remain on the board. "I am taking action to ensure that inappropriate investigative techniques will not be employed again," Mr. Hurd announced. "They have no place in HP."

Is this what Bill and Dave would have done?

Hewlett and Packard are no longer in a position to answer for themselves. But we do know that the two men always operated on trust and openness, but also with a strong hand. They would never have allowed the board to sink into civil war. We can also assume that they would have skipped the skullduggery and presented the leak problem to the assembled board at the beginning, and requested a full buy-in on any investigation. That alone would likely have plugged the leak. Given that HP under their leadership was never allowed to speak ill of a competitor to the media, we can also guess that Bill and Dave never, ever would have approved any investigation against reporters. And as men who had grown a company from a garage to a billion-dollar multinational corporation, they were wise enough to know that you can't buy the cloak without getting the dagger.

Finally, Hewlett and Packard firmly believed that you don't fire loyal employees for being beyond their competence; rather, you move them to where they can make the best contribution. In demoting Ms. Dunn, but still keeping her on the board, Mr. Hurd did the right thing. He did what Bill and Dave would have done.

Look next for deep and sincere apologies to everyone involved. That's the HP Way. Mark Hurd is learning fast.

Mr. Malone, a columnist for ABCNews.com, is author of "Bill and Dave: How Hewlett and Packard Built the World's Greatest Company," to be published in Spring 2007.

 


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