Thursday, September 9, 2010

insider or outsider

A number of my best friends -- "oldtimers" as they're affectionately called in our book THE HP PHENOMENON -- are clear. What's been wrong at HP is that the Board has picked two outsiders in a row, and they were both TERRIBLE when all the facts became known. Thus, without question, the Board has to pick an INSIDER this time, the way HP did it so well for the first sixty years. Otherwise, it is hard to know, respect, and honor "the HP Way".

There is a lot of wisdom in that view, in my opinion. The HP Way, despite what Wall Streeters and avaricious shareholders believe, is not outmoded or inappropriate for this day and age. Indeed, as we chronicle in the book, the very distributed nature of most multinational corporations today, whether using outsourcing or offshoring or merely localized operations to support international sales, MUST HAVE some sort of honor system akin to the historic HP Way. Consider -- one out of five professionals working for Intel, Microsoft, Cisco, IBM or HP have NEVER met their boss face-to-face. Wouldn't you, as a shareholder, like to imagine that those workers believe in their company and their leadership and work hard on their (and your) behalf?

But, this begs the question. The first question to consider is "who is an insider?" Are there any left? Who knows what the HP Way even means. Instructive to read page 245, where old-timer VP Bruce Wholey was vituperative about the "new kids in computing and in Headquarters" circa 1980's. Page 384 documents the fact that these disgruntled employees led Packard to "ask for John Young's resignation" for lack of empathy with "the HP Way". Lew Platt certainly fulfilled the founder's hopes, and the company employees adored him by and large. Worth noting though that what Hurd was good at (and I do give him credit for running a lean, mean organization which did bolster Wall Street bidding 'while it lasted'), was just not Lew's strength.

So, the first thing to note is that the Board replaced two insiders (Young and Platt) in just about the same timeframe as the later Board got rid of two outsiders. This job ain't easy. In other words, they were looking for help outside when they found Carly; the insiders had not measured up twice in a row.

Perhaps the more important observation, though, is how many "insiders" are left, and from when do you count? By our 'count', only about five percent (ONE OUT OF TWENTY) employees at HP worked there before Packard passed away in 1996. And only about ten percent (ONE OUT OF TEN) employees at HP were there prior to the Compaq merger eight years ago. If those numbers seem out of whack, go do the math. It should scare you!!! Lest you think this is a new problem, consider page 383 where Bill Hewlett observed that 58% of HP employees in mid-1976 had been with the company less than 18 months, so how could they possibly know yet "the HP Way"?

So, it is folly to think that the ONLY CHOICE is to "go inside" -- and it is even more silly to think that if the Board does so, that it will mean that the CEO selected has any HP WAY DNA built in over a long acculturation period. Granted, there is still a pool of several thousand folk who have been at HP a long time, and "know deeply" the HP Way -- but they are more or less unlikely to be on the short list of CEO candidates.

So, I submit that the Board's task is to study the meaning and impact of the HP Way of doing business, try to correlate that with the distributed / chaotic / inchoate / highly competitive world in which the company has to perform, and select someone INSIDE or OUTSIDE, who can balance three things --- 1. the HP Way of leadership and ethics, which means empathy for, trust in and responsibility given to employees; 2. bold, decisive strategic choices; and 3. crisp operational excellence.

Thinking about these three points -- Packard and Hewlett shared power for a long time, and both were legendary for Point #1. Packard was great at #3, not too bad on #2; Hewlett was generally intuitively great on #2, and almost absent on #3. The pair did good work. Young was excellent on #3, as was Hurd. Hurd failed #1 on every count imaginable, and #2 mostly. Young did better, certainly excellent on much of #1 (not so hot on empathy, but able to delegate). Platt was superb on #1, better than either Dave or Bill on empathy and trust. Lew did not, however, do #2 or #3 particularly well. Carly... gets an A from me on #2, although the trade press and many pundits didn't agree even on that. I think time has vindicated her two biggest moves, even though the PwC attempt failed, it was the right direction and IBM has shown that to be true in spades. She actually should get fair marks on #3, because the truth was that the PC integration with Compaq was much further along under Duane Zitzner than the current team gives credit for -- Dell was already on the run. Carly's failing was that style issues clouded #1 so badly that it would have taken herculean measures in #2 and #3 to 'win'. Kinda like Hurd -- herculean #3 stuff at the expense of #1 especially, and #2 eventually, catch up with you.

So, what does that say? No new CEO will walk on water for very long; Hurd and Ellison will help see to that, not to mention legions of other observers. And no person can be great at all three (presumption, yes, but perfection is rare, right?). So, it might be that an organization of two or three shared roles is worth considering (possibility one) or that if just one person, they should be a good listener, able to let their team help on all three points, but in particular, they must not be ONE-DIMENSIONAL. A choice to be empathetic and operationally tough is tricky at best, but if you're ethical and fair, it is easier. It'd be wonderful to imagine that someone could be found who is a leader, not a manager, good at two of the three and not terrible at the third; who could accept a COO who could be really good at two of the three with a different balance than the CEO. That's my dream...


Fred said...

Well, the Board has sprung another surprise. So, how does the newly appointed CEO score on your three attributes? His visible bio and record does not give me much to go on.

chuck said...

Fred, Thanks! See my post today for my 'quick reaction'

I don't know enough yet about this guy (I think that is the reaction of most everyone), but the bits that I have assembled, and the triangulation (e.g. re Ray Lane's very positive endorsement and decision to come along for the ride) are very hopeful.

Re the three attributes -- sounds like he gets very high marks for #2 in his historic role at Sap, and good marks for #3 (with Donatelli and Lane both superb at #3 in the same space). The question re #2 is "if he is so good here, why did he get bounced? Wasn't that a miscalculated strategic blunder?"

Re Point #1, which is what so many oldtimers (including me) worry about, there is little to go on re this choice (i.e. I don't have any data of consequence). So I have to go on several triangulations again -- a. the board did not pick an avowed Hurd clone, very positive; b. the board did ask Lane to join, a clear "HP Way" kind of believer; and c. at least so far, the ethics side seems pure, bearing in mind that SAP is clean in the German investigation and HP is not (maybe this is a case of homefield referees?)

Time will tell, but I am more than mildly enthusiastic. It is way better on the surface to me for the challenges that HP faces than any of the internal candidates.