A 20 percent error in behavior. That’s the bottom line on Mark Hurd’s ouster from CEO and chairman’s posts. HP’s stock has lost 20 percent in value over three weeks of trading after the company announced a sexual harassment claim and expense report creativity that led to the ouster. But as we finished our August issue of The 3000 NewsWire, to wrap up our 15th year, HP’s stock was sitting at a new 1-year low. My regard for its boardroom ideals has fallen lower.
Perhaps I’m an innocent in that way, but this is Hewlett-Packard we’re talking about here. One industry history called its founders The Aristocrats. HP may have gotten large by purchasing one company after another over the last decade, but it cannot purchase greatness. Not any more than its board chairman could buy profitability with research cuts and layoffs of tens of thousands of employees. It hasn't slowed, either. This week HP continued bidding up the price of buying a cloud storage company in a showdown with Dell. You can't help but wonder how much R&D could be bought with the current $1.88 billion HP wants to spend on 3Par. (And for the record, that company HP's chasing lost $3.2 million in its latest fiscal year.)
I can see a greater penalty levied on Hewlett-Packard’s industry prestige. Hurd becomes the third straight HP chairman forced to resign by a board of directors now looking skittish at best. Carly Fiorina was forced from her chair in 2005 over inability to execute much but layoffs and product cuts. Patricia Dunn, who took the chair from Fiorina, resigned over a pretexting scandal that spied on the media and their families to stanch boardroom leaks.
Now that Hurd has packed up his locked-door office, the fact that an HP leader gets bounced for sketchy behavior has less shock value. Except perhaps to Hewlett-Packard customers like the ones in our community, those who remember either Bill Hewlett or Dave Packard holding the chairman or CEO post. If ever there’s a stunner in HP history, it’s this: Company marketing now pounces so catlike that a sexual harassment claim and $20,000 in unauthorized payouts are board-level issues. HP's cold dead fish has been replaced by the sizzle of hot meat.
The 3000 community includes many partners and customers who recall the Bill and Dave era with nostalgia. That was a company era when the 3000 was a strategic business; Bill and Dave might have been kings, but they never had unmarried consorts, or contractors who’d be mistaken for harassed concubines.
However ironclad the old HP’s boardroom integrity,, the company’s now become one whose CEO pedigree has been in decline for a decade. It's a period that tracks directly with the decline in R&D.
Hurd was hailed as everything that Carly Fiorina couldn’t be for HP — focused on results, cool to public acclamation, serious about growing business, detail savvy. Hurd was too dowdy, thank goodness in an old HP Way, to be seen posing with Gwen Stefani or arranging a victory walk down the old Compaq HQ halls, one where employees were told to wear Western garb.
But now there’s his exit from HP’s stage, all to the tawdry fanfare of sexual innuendo about an employee labeled as a cougar in her other professional life as an actress, work still fresh when he hired her. That a HP CEO could hire someone to mingle with top customers, and potential acquisition partners, who’d have a Cinemax movie resume on IMDB shows something permanent about changes at Hewlett-Packard.
From an IT manager’s point of view — once you can pry them away from the YouTube videos and the sideshow of Jodie Fisher’s catwalks — whoever works as the CEO and chairman of this vendor is of modest tactical consequence. HP spent an hour convincing stock analysts that Hurd is just one player, not the man who makes HP’s $125 billion sales engine hum with record profits. Which is just the thing you’d say to a pack of stock mavens after you cashier your CEO over perceptions, claims of indiscretion and less money than HP’d spend on a 20x20 booth at the Technology Forum & Expo.
For partners in our community, it’s a tougher measure of this loss of HP front office integrity. It’s easy to hoot at reports of Hurd and Fisher’s intimate dinners after their days of schmoozing top customers. Harder to assess is the impact on future alliances HP might win to improve prospects of current partners. Sales wins come and go. A good friend who works sales in the reseller community says, “When everything’s equal, the customers buy from the person they like the best.” We’re human that way, because an investment is a relationship of desire. But alliances, at some level, track to a higher ideal of integrity.
There is not much to be gained in tracking Hurd’s mistake against the HP of Bill and Dave. That Hewlett-Packard is long gone, flushed out by Fiorina and then laid off by the relentless cutting of Hurd’s. The reports from today’s HP include longer hours for less pay. In a recession, you can demand a 5 percent pay cut across a workforce. Top management took a 10 percent cut, but only in base. Stock and benefits, as sumptuous as befit the top computer firm, rose to royal heights for Hurd and some of HP’s top VPs. HP CIO Randy Mott, one of Hurd's darlings, took in $28 million while sending several thousand IT staffers to consolidated datacenters across the country, or out of HP's employ entirely.
Hurd’s best play was to defer and delete spending. In more than a dozen briefings with the same analysts who heard why he was ousted, Hurd would tout cost controls. In product terms this meant less HP R&D and more purchases of technology. It’s great to own Palm and 3Com inventions. But technology managers from the Bill and Dave days like Chuck House shudder over the potential crash HP can make with a fraction of R&D spending. That’s Hurd’s handiwork.
Hurd will be replaced, and the company has hired executive search firm Spencer Stuart to do the job. The HP share price tumble has been tied to investor worries about a change in leadership -- even though HP said the company strategies were led by executives, not Hurd. But the next CEO may need to be a pro of indelible integrity. Or not, based on HP stock performance, market share and profitability. Many thought Hurd was cut of similar cloth as Hewlett or Packard. The reality of 2010: Any $125 billion company is capable of hiring an emperor who will shed such clothes. While Hewlett-Packard searches for a new top dog, its customers can adjust their expectations for a fresh decade of leadership.