Ok, let's stop for a minute and acknowledge a few truths. First, H-P will not be able to replace Mark Hurd overnight with someone from inside or outside the company. There's no one who knew the culture, people, strategy/execution and how that coalesces together to produce results more than Hurd. Not an interim CFO, not the lead director, not anyone presently identified in the mess. Ironically, Hurd was known as a great developer of talent, according to someone with direct knowledge of H-P. But unfortunately that skill evidently has now left the building, leaving the H-P Way under direct assault.
Number two, Hurd's departure with no clear successor, or no publicly defined succession plan*, means this situation will remain in crisis mode indefinitely. Which stacked against their recent troubles with previous CEO Carly Fiorina and board chairwoman Patricia Dunne begs the most important future looking question that no one seems able to ask -- much less answer.
What did Hurd and the board do to ensure someone could eventually take over when the current CEO could no longer serve? The CEO's primary responsibility is to lead the company and make sure it's well positioned for the future. That includes, along with the board, identifying who will lead when the current occupant no longer can. The story here is the board's inability to map out an effective succession strategy; not all the superficial stuff that drives day-to-day palace intrigue.
According to the New York Times, the H-P board was so concerned about the Hurd situation that they hired the public affairs behemoth, APCO Worldwide, to measure what impact the "sexual harassment without the sex" charges would have on H-P's reputation. What they evidently failed to measure was how much not having a contingency in place in case something happened to the CEO would drain the company's equity value. Friday's 10 percent drop in share price ought to answer the question with or without a hypothetical study.
Strong cultures know what to do when the proverbial s*&^ hits the fan. For a recent example, consider McDonald's Corp., which effectively dealt with the death of not one but two CEOs on their way to a new leadership regime under current CEO James Skinner. Granted the company has stumbled a bit lately with other potential internal successors exiting. But the basic point remains: McDonald's has a succession strategy and H-P evidently does not. They're not alone. At least a third of all major companies don't have formal succession plans. Based on events over the past week, H-P and their board must be wishing right now that they didn't fall in this category.
Strong cultures know what to do when the proverbial s*&^ hits the fan. For a recent example, consider McDonald's Corp., which effectively dealt with the death of not one but two CEOs on their way to a new leadership regime under current CEO James Skinner. Granted the company has stumbled a bit lately with other potential internal successors exiting. But the basic point remains: McDonald's has a succession strategy and H-P evidently does not. They're not alone. At least a third of all major companies don't have formal succession plans. Based on events over the past week, H-P and their board must be wishing right now that they didn't fall in this category.
*Efforts to confirm whether H-P has a CEO succession plan were unsuccessful at blog posting time. The company did not return requests for information.
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3 comments:
Good column. Actually HP has at least two plausible internal candidates: Todd Bradley on the PC side and Ann Livermore on the services side.
It may be that the board went into this upheaval with both of those names on a "short list" and saw no reason to rank them as long as Hurd seemed in charge for years to come.
Everyone in my Silicon Valley chatting circle thinks it would be insane for HP to pick an outsider for the third time. It's a very complex company, as you rightly point out. You can't come in cold and make intelligent decisions about a business that's got so many interconnected product lines; so much global reach, etc.
HP also isn't in obvious need of the radical rethink that an outsider could provide. Hurd's strategy is coherent, and by and large has been producing financial results. Are there flaws to fix? Yes. Will an outsider spot them and be able to drive change without busting what isn't broken? Very unlikely.
Finally, you've got a workforce and management team that is bound to be deeply cynical about what the next "heroic savior outsider" can deliver. They've seen that movie before. Twice.
I realize boards have to say that they are looking for the best inside or outside candidate. But if these directors can't find an internal candidate to run HP, all the directors should resign. They will have failed HP much more profoundly than Mark Hurd did.
Thanks for the compliments, GCA. While I agree with your sentiments, nothing about the search effort would be surprising at this point. The H-P board has not only lost control of this situation they also have lost credibility, which is something that's talked about at length but often fails to be valued. Big mistake in situations like this one. Put yourself in the potential new CEO's shoes: Why in the world would anyone want to assume the mantle with the mess that continues to expand vs. shrink? Oh, that's right. A self interested fame and money seeker who thinks they're the greatest CEO since sliced bread. Let's hope the H-P Way doesn't hit its head on the door anymore. Best,
JG
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