Published on January 22nd, 2010 | by Jonathan Gifford
Carly Fiorina’s change programme at HP: “It wasn’t pretty, but it got done.”
Carly Fiorina was employed as the CEO of Hewlett Packard (HP) in July 1999. She drove through a programme of change in the face of what she saw as a company that had taken Bill Hewlett’s and David Packard’s philosophy of devolving decision-making as far as possible to the level nearest to the consumer and, as the company rapidly expanded in its early days, of breaking what threatened to become an unwieldy mega-corporation into smaller, more human-sized units, where this management philosophy could still flourish.
When Fiorina joined the company, she felt that this approach – though admirable in theory – had resulted in a company fragmented into ‘a thousand tribes’. Support divisions were massively (and of course wastefully) duplicated. Individual managers were focussed on their own unit’s objectives, and had lost sight of the company’s broader challenges, and of the company’s relative performance in the wider market.
The performance of the company as a whole
Fiorina’s early changes included a bonus system based on the performance of the company as a whole, calibrated against external benchmarks. In time, measures of growth and customer satisfaction were added to the list of measures. At this point Fiorina was able, with complete justification, to quote Bill Hewlett (‘what gets measured is what gets done’) as a way of showing that these measures were not in themselves a radical departure from the company’s philosophy or culture. The founding fathers of Hewlett Packard may have believed in devolving divisions into manageable business units, but they would certainly also have had their eye firmly on the ball marked ‘overall company performance.’ To quote David Packard, “Although we minimise corporate direction at HP, we consider ourselves one single company, with the flexibility of a small company and the strengths of a large one.”
Having established the basic principle of reward based on the performance of the company as a whole, Fiorina went on to make further fundamental changes to the organisation.
As the huge potential of the worldwide web began to become apparent, it was clear that HP could no longer manufacture ‘stand alone’ products; its portfolio of products should be networked and compatible.
HP’s sprawling organisation of eighty-seven product divisions should also be rationalised to seventeen. These seventeen divisions were to be grouped into two major divisions: ‘Imaging and Printing’ and ‘Computing’.
Customer-facing divisions should be grouped together under two new ‘systems solutions’ divisions, one targetted at the general consumer and one at business clients.
The company had four different ‘Chief Executive Officers’ each with their own Chief Financial Officer. These CFOs saw themselves as helping their CEO to run his own businesses and they did not report to the man who was supposed to be ‘the Chief Financial Officer’, the corporate CFO, Bob Wayman. The CFOs of every business would now report to Bob Wayman.
Fiorina rationalised HR, Finance and IT functions across the company, removing the previous duplication of effort across myriads of independent divisions. These last efficiencies alone were estimated to save a potential $2 billion.
‘Ready, aim, aim aim . . . ‘
These corporate transformations set in train by Fiorina are businesslike and sensible. She knows that she has to change the company. She tells a good joke at Hewlett Packard’s expense: while the emerging industries (and future giants) of Silicon Valley were adopting a strategy of ‘Ready. Fire. Aim, aim, aim,’ (in order quickly to launch products that could then be adjusted to meet rapidly-evolving consumer demand), she said that HP’s management philosophy was still one of ‘Ready. Aim, aim, aim . . .’
It is hard to believe that David Packard or Bill Hewlett themselves would have any great problem in seeing these changes implemented. As Packard said, wanting to give groups of people ‘responsibility for specific areas of activity with wide latitude to develop their own plans and make their own decisions’ does not imply that you think it’s a good idea to have eighty-seven different HR and IT departments, or that any one major division should care only about its own performance and not about that of the company as a whole.
Fiorina was not wrong about the need for change – but had she really grasped the reality of the culture of Hewlett Packard, so deeply engrained, and now apparently perpetually endorsed by the almost mythic status of the founders?
A bull in a china shop?
David Packard had died in 1996. Bob Hewlett was still alive when Fiorina became CEO in 1999, but was in very poor health and was to die in 2001. Several family members were on the company’s board of directors; family foundations (and family members) were significant shareholders and power-brokers.
In this context, Fiorina comes across as something of a bull in the china shop of what was still a family concern (albeit a multi-billion dollar family concern). Her management analysis and programme was perhaps admirable; her diplomacy and – it must be said – the quality of her genuine leadership can still be questioned.
It was now Fiorina’s duty to lead the company – a company with deeply-held and admirable principles embedded into its culture.
Here’s what Fiorina says about the vital moment when the changes are presented to the ‘extended leadership team’. She has shared her programme for change with the board, which is supportive. She and the board have discussed senior executive’s strengths and weaknesses. The executive team meet with Fiorina, but apparently only to agree on the agenda and approach for the next day’s meeting with ‘the extended leadership team’ of ‘about three hundred people’.
About three hundred? At this point, it is obvious that not even the ‘executive team’ is aligned with the proposed changes. At the stage when you are presenting a process of major corporate change to about three hundred people including your senior executives (‘the extended leadership team’), this can no longer be a forum for debate.
Debate, alarmingly and inevitably, is what breaks out. Senior executives start to disagree in public. They worry (in public) about their own changing responsibilities. Some say nothing and leave it all to poor old Carly. Others try to intervene but are ignored in what begins to sound like a badly run piss-up in a brewery.
“What it all boiled down to,” says Carly, “was a last-ditch effort to back out of our agreement and decision. We covered and recovered the same ground. People stalled for time, trying to run the clock out before we faced the organisation in the morning.”
“To blink when challenged (as a leader) in such circumstances,” continues Carly, “is to lose the ability to choose and decide the next time.”
Um, yes, but this meeting was supposed to be the presentation to the obviously unmanageable ‘extended leadership group’ of the executive teams decisions, not a brainstorming session. It would also seem that even the core leadership team had not, in fact bought into what Fiorina calls ‘our agreement and decision.’ If they had so bought in, why all the public debate and alarm amongst senior executives?
“By about four o’clock I’d had enough,’ says our girl, Carly. ‘. . . my team needed a reality check. I said, ‘Folks, we’re not leaving this room until you are prepared to present our decision and your agreements with one another. Dave Packcard is not going to ride back into town on his white horse and save you from these changes.’ We stayed till eight o’clock that night. It wasn’t pretty, but it got done. And the next day we launched the broader HP management team in the reinvention of the company.”
‘It wasn’t pretty, but it got done’
Well, I wasn’t there, so maybe I’ve got the wrong end of this stick. But this doesn’t sound to me like anything recognisable as consensus management, and it certainly is not a good example of a leader inspiring a team to follow her new, if controversial, direction. Senior executives, demonstrably, were by no means aligned with this plan. And I worry about her reference to David Packard ‘not saving’ this group. Fiorina regularly cites Packard’s stated beliefs as proof that she is merely doing what Dave would have wanted anyway. So what is Dave supposed to be ‘saving’ the team from at this stage? If Packard would genuinely have wanted this, why are the ‘old culture’ team resisting?
And “It wasn’t pretty, but it gone done,” sounds like the kind of thing that revolutionaries say after the execution of a bunch of troublesome reactionaries. One assumes that there was indeed blood on the walls. Fiorina paints a vivid picture of a management team that has absolutely not been convinced either of the need for change or of the process that needs to be undergone.
As her writing on this process unfolds, one is led to believe that Fiorina slowly communicated her way to a genuine, company-wide embrace of the need for change. “People had to hear me, but they also had to believe me; and so my communication had to be authentic, balancing aspirations and risks, optimism and realism, and big ideas with small details . . . And in all that communication, the most important ideas of all were that change was necessary and possible, and we could achieve what we chose.”
Well, I think I’ve read the same book by some leadership guru somewhere. But had she really won hearts and minds? Had Fiorina really showed genuine leadership?
The results of the changes were initially successful. HP stock had stood at $54.43 when Fiorina joined the company; it rose to a peak of $74.48. But the company struggled to meet its growth targets, especially as the downturn in the economy that began in late 2000 started to bite.
Fiorina opted for one of the classic – and riskiest – of solutions and decided to merge HP with one of the brash new darlings of Silicon Valley, the PC manufacturer Compaq. Or was it her decision after all? Did it lead to her downfall, or was that caused by other factors? And if, as some believe, the merger should be seen as having been ultimately successful, did she also nevertheless fail to achieve the merger’s full potential? (See Carly Fiorina and the HP Compaq Merger)
Carly Fiorina, Tough Choices, Nicholas Brealey, London, 2006
David Packard, The HP Way, Harper Collins, New York, 1995