The best summary I have seen to date of why Carly Fiorina failed at Hewlett Packard is contained in this Rich Karlgaard op-ed today in the Wall Street Journal ($). Karlgaard, who is publisher of Forbes and author of Life 2.0 (Crown Business, 2004), notes Ms. Fiorina’s seven basic failures in managing HP:
1. Acting like a rock star. . . In the U.S., only entrepreneurs get to act as rock stars. Hired guns do not. . . We love our entrepreneur rock stars so much we let their sins slide. Carly was excoriated for a boneheaded move — giving Compaq shareholders 37% of HP’s profitable printer division in a swap for Compaq’s flagging PC business. Founder-CEOs are allowed to get away with far worse. . . Jobs’s first bold act after reassuming Apple’s reins in 1996 was to buy NeXT Software at an inflated $400 million and kill the company. Because he owned NeXT, Apple’s purchase made him rich. Yet Apple shareholders forgave Jobs because, well, he’s a rock star. And he has made good on that faith.
2. Failing to see the cheap revolution. . . . Dell is on the right side of the cheap revolution divide. It sells powerful servers for under $5,000 and keeps overhead low in Round Rock, Texas, where the average three-bedroom house sells for $200,000. HP sells servers for tens of thousands and keeps high overhead in Palo Alto, Calif., where the average three-bedroom sells for $1,500,000.
3. Failing to see the consumer revolution. A huge shift has occurred in the last five years. The coolest tech products now go straight into the consumer market. . . Carly has ineffectively maneuvered HP into this consumer field.
4. Obsession with size over flexibility. . . we need to go deeper and challenge the very premise of these mergers: that large scale is a requirement of success in the global economy. By merging with Compaq, Carly clearly believed this. But maybe the opposite is true — that speed and flexibility now trump scale.
5. Letting talent go. . . Aside from chasing away shareholder capital, she chased away talent, from Michael Capellas on down. For high-IQ tech companies, talent loss may be the greater sin. The most dynamic — Microsoft and Oracle during the ’80s and ’90s, and Google now — have always been obsessed with recruiting and keeping talent.
6. Not tolerating strength in others. . . the good [CEO’s] tolerate strength in others; the bad ones don’t. Gates has Steve Ballmer. Michael Dell has Kevin Rollins. Larry Ellison has Jeff Henley. Carly had no one like that.
7. Lack of focus. We conclude with Peter Drucker’s other great insight: Effective CEOs pick two tasks and devote their energies there. When those tasks are done, they don’t go to #3. They make a new list. One overlooked trick to maintaining focus, Drucker told me, is to cut travel. “Make your reports come to see you. Use technology, it’s cheaper than traveling. I don’t know anybody who can work while traveling. Do you?” Carly, globe-hopping in her Gulfstream, worked 100-hour weeks. But she was focused on too many tasks. Which is no focus at all.
Read the entire op-ed, and then think about how HP’s corporate governance promotes inflexible and ill-conceived management decisions such as those made by Ms. Fiorina. Professor Bainbridge also has some interesting observations on the big picture meaning of the HP Board’s action in terminating Ms. Fiorina’s employment.
On an anecdotal note, I am friends with several former Compaq executives who now work for HP in Houston. In discussing HP’s problems several months ago with one of my friends who is an HP sales exective, I asked him to sum up why he thought that HP was having so many problems integrating its various units into a cohesive whole. My friend’s reply was quick and authoritative:
“Because we are such a pain in the ass to deal with.”
By the way, my friend noted that he had passed that exact thought along personally to Ms. Fiorina on several occasions.