Thursday, August 19, 2010

My gawd, the HURD story is still alive?

These things usually abate fairly quickly; sexual pecadillos, robbing the till, and egregious acts of other kinds have a titillating capability for hours or a few days at most. Why is this one still going strong two weeks in?

Perhaps because it still seems surreal, even in the Cheshire Cat world in which we live. Hurd hand-picked seven of the ten directors who voted unanimously to have him resign immediately, for 'piddling offenses' (a wonderful phrase used yesterday by WSJ apologist Holman Jenkins Jr , who had the gall a year ago to inform his readers that the Wall Street meltdown of late 2008 was 'our fault' because we panicked, rather than any culpability by the banking/Wall Street community). Hurd's cronies -- unanimously? For no reason at all? Come on. Get real.

One columnist said "let's look back at his track record at NCR, before coming to HP." The finding: NCR has stagnated ever since -- for the same reason that HP has been stagnating for 34 months -- costcutting, especially when it cuts into bone (i.e. the innovation engine) cannot succeed in building long-term strength. You can build efficiency, but not momentum. And it usually quits working, especially in the brainiac high-tech world when your talent walks out the door. That is why it became double-edged when R&D is slashed so far and key resumes are flooding out of the place. Jenkins calls this "the sickly moanings of the vaunted HP-Way", demonstrating fairly clearly that he hasn't a clue what that 'vaunted idea' meant or means.

No one in this recent brouhaha has resurfaced the cover story for Business Week October 9, 2006 which noted that Hurd was so popular with his NCR employees that they repeatedly slashed the tires on his car in the NCR parking lot, and the company had to hire bodyguards to protect him at home from his 'team'. Wow! And no one has focused really on just how hated this guy was by his HP team -- 34% approval by "the home team" when even a Larry Ellison can garner 78% at Oracle. To blame this on "sickly moanings" of archaic nostalgia for "the HP Way" is seriously demented.

The problem with such drivel is that there is a germ of truth in it, and WSJ readers are not in a place to appreciate the nuances, especially when a too-clever by half editor picks up the cudgel. The HP Way did calcify under Lew Platt; Carly Fiorina was brought in to shake it up; she was resisted mightily under the guise of "protecting the HP Way", and she did ultimately fail. In part, that failure was due to passive compliance, if not outright resistance, to her ideas and leadership -- and "the HP Way" was invoked time and again as the stalking horse for such antics. But just as the bankers might have had just a spot of culpability for the Lehman et al debacle, it is just possible that Carly's leadership style had a little bit to do with all this.

Similarly, there is no question that Hurd did some -- even a lot of -- necessary and valuable 'tough leadership' to 'right the HP ship' in terms of operational effectiveness. That is to be applauded -- UNTIL it crosses the line. To become unethical -- with vendors, customers, employees, shareholders, investigative journalists, and even the board -- is OVER THE LINE. This guy, plain and simple, was and is a thug. There is no place, in the HP Way, the American Way, or in a Fortune 500 leadership company, for such a person to be exonerated, let alone exalted. Jenkins owes the HP Way an apology.


Jetski said...

Chuck, if not for the Hurd fiasco, I would never have found these great blogs. Your assessments of the way employees have been mistreated and the ruinous route that Hurd put HP on for the last five+ years is spot on. The quick dismissal of Hurd could be a sign that the board finally realized that short sighted slash and burn policies have jeopardized the future of the company. Everyone at HP heaved a collective sigh of relief when Hurd was turfed. We are now on pins and needles to see if his replacement has any real strategic foresight and a realization that an engaged and motivated workforce is the key to long term success.

J said...

I think that your right on. Mark Hurds usefullness had come to an end, and the board new it.

It is one thing to grow the top line by buying companies, or grow the bottom line through ruthless cost cutting. Hurd did great things with both of these brute force techniques, but neither of these are sustainable.

Sustainable growth takes a whole lot more finesse, and Hurd didn’t have that. Moreover the qualities that made him great at the brute force methods are actually counter to the finesse that is now required.

Everyone focusses on the R&D and the old hp way. Definately true, but I will give you another example.

You have a manufacturing company, you lay off factories workers, great. People are comodities, People are costs, you get real cost savings from squeezing them.
Hurd acquired a Services company, EDS, the rules are completely different, poeple are assets. You cant do the same thing. Yet he did.
EDS made Hurd good money in the first year. ACtually buoyed up the fall in ink sales… But what did he do. He cut salaries from 5% to 20%. Fired a bunch of employees, let a bunch of 3rd party contractors go. And a whole bunch more walked across the street to 25% to 50% increases (EDS had not been giveing raises for years). Now Hurd has made it impossibel to hire staff or contractors. And has a customer facing services staff who do't know what HP is trying to achieve.

So here is the thing, EDS has had 1% bench for years. What that means is that every employee is genereating billable revenue or they are gone.
So, yes Hurd certainly reduced costs. Unfortunately every dollar he reduced in cost he walked away from 1.25 in revenue. And you gotta know that it is the best people who are leaving, not the deadwood. So, all of this sets up a very destructive cycle in a services division. People are truly the assets.

The former EDS has and continues to walk away from 100’s of millions of dollars of profitable busines, all so Mark Hurd could reduce costs and make head count comittments to Wall Street.
So now we are sitting a year later and we get results this week and everyone is wondering why technical services revenue is down and growth is at -1%. That is Mark Hurd. That is his legacy.

And R&D is a similar story. The point is that Hurd was not finesse player. And the days of growth from brute force were ending and the writing was on the wall that impact was
poised to go negative.

The board saw it and acted

chuck said...

Thanks, Jetski! The book was fun to do; we felt HP deserved a decent historical treatment -- amazed that it never got one really. So the blog grew out of the book; as luck would have it, we've been close in touch with a lot of HP folk as a result. Watching and listening these past few years has been 'educational' to say the least. It surely isn't "Dave and Bill's place" any longer. Hopefully the board will seek someone a little more compatible with what made this company great, and the people who work for it proud.

chuck said...

J, your thoughts are excellent re the EDS acquisition and subsequent management. We felt in the book that the EDS merger was wise, and could 'answer' IBM's prescient move. We also felt that Fiorina's attempt to buy PWC was not as dumb as everyone said (and the price, adjusted for the market dynamics, wasn't even out of line). Bet she'd have managed it differently.
All water under the bridge, alas.
Services, done well, could still be the big play for HP; there are significant possible differentiators in this arena for a company with some of the talent on both sides of the place.

Steve said...

It has been said that the same board that brought us Carly and Mark cannot be expected to achive a different result in their next CEO selection. After all, a body in motion tends to...past performance is an indicator of...well, you get the point.

I take exception to "J's" comment that "And you gotta know that it is the best people who are leaving, not the deadwood." News Flash: the deadwood got blown out early with Carly...and what was left was burned by Mark. Huge off shoring efforts and a collapsed job market has kept many of good people in a perpetual interview cycle or they'd be gone too.

Mark cut excellent people as well. Some of the more fabled and IP-laden ink scentists in the world were let go under his reign. Right over to HP's competitors. It's legend and legion the number of top people who were WFR'd. The rest ive in perpetual fear of their livlihood. "Human Resources"? HP personnel are viewed as more "resource" than "Human."

Hurd's short term gains will eventually show up in long term strategic weakness, expecially re R&D. I hear that "So, what's next?" is a common question around the HP shop. Cloud computing? Yawn. Another Me Too. What about technologies as interesting adn profitable as Ink, Laser, DVD, etc. HP Labs has been unusually quiet for years now. And that is a long term problem.

Religious adherance to shareholder primacy will always take down a good company, making it more concerned with the shre price than producing good products. And that's just the way it is.

Per said...

I saw an article today that said the real reason Hurd was let go was his low popularity with the rank and file and that the bidding war for 3Par was belated recognition that HP could no longer develop a comparable product in house.

Also, what's with closing Cupertino? I think it's a bad sign when the company is shrinking so much that a 40 year old facility is abandoned. I guess they'll end up selling it to Apple to be part of their new campus.

chuck said...

The Cupertino closing is consistent with the "maximize cash and minimize assets" stance that Hurd has taken throughout his reign. He has sold off, and leased back, most of HP's wholly owned facilities, a Marked departure from historic practice of being fiscally conservative and 'land-rich'. The debate, mentioned in my book, was about leaving Palo Alto and building a major headquarters at Cupertino -- as they got into the planning, they found that the Cupertino land was hugely valuable (Palo Alto is leased land from Stanford, tho HP owned the buildings), and indeed that Apple would pay dearly. So your surmise is indeed correct, at least acc. to our sources.

So they now rent R&D, buildings, and good will. Tragic and ironic twist of history for this proud company

Fred said...

Yes, the story is still alive. He is going to be a new "Co-President" at Oracle. It is good to have friends in high places, in this case Larry O.

Hurd will be replacing Charles Phillips who had an oops this year when his ex-mistress had pictures of the two of them on a large billboard in Times Square. Hurd is in familiar company.

chuck said...

Fred, I agree that the Oracle band could be a comfortable place for Hurd -- on multiple levels.

The Valley though has been notorious for high-flying CEOs / sex scandals / huge salaries / egos. So he could have found a home in any of several places.

This one will prove interesting as the competition stiffens between HP, Cisco, and Oracle -- which it will. All three are going after the IT Enterprise Center fulltilt