If anything, HP’s challenges exemplify why power-centric bureaucracies fail. Photo/FILE
If there is one company that best exemplifies the crisis (and deficit) of leadership that we face worldwide, it is Hewlett Packard.
For all Meg Whitman’s strengths as a person, she is not the right leader for HP.
If anything, HP’s challenges exemplify why power-centric bureaucracies fail.
Let’s rewind for a moment. I’ve spent over 10 years learning about HP as a venture capital investor, student and researcher of HP’s leadership and innovation, from my vantage points at Stanford Business School and the Stanford Institute of Design.
Based on hundreds of discussions with HP leaders, managers, employees, partners, customers, here are a few observations.
1. HP grew, on average, 18 per cent a year for 60 years — a remarkable feat. Long-time HP veterans like Ned Bornholt, HP senior executive and former Agilent CEO, and Chuck House, the respected HP historian and coauthor of The HP Phenomenon, attribute this remarkable growth to a few factors.
One was the highly effective and balanced partnership between Bill Hewlett and Dave Packard. Hewlett was the more creative, intuitive pillar, known for spending a lot of time with customers and the R&D team, and for fostering a climate of innovation, especially by encouraging small bets.
Packard, meanwhile, was an operational force, and could optimise any core business.
For many years, HP was extremely decentralised, with thousands of product skews, and an engineering culture that prided building products (and services) for customers than betting big on great ideas that resonated like printers and computers, while selling small increments of the other products.
2. One critical problem with the original HP culture was that for all its admirable values, such as Packard’s philosophy of “management by walking around,” almost no one ever got fired. Complacency was a real threat to the business and the dotcom bust. The company then looked to “leaders,” often from the outside, to shake up the culture and spurn reinvention and innovation.
3. Observers of HP’s leadership woes almost always say that the leadership problems began to hit hard during John Young’s tenure, who was CEO from 1978 to 1992.
4. As HP grew larger by the late 1990s, it faced another big problem. Execs felt increasing pressure to make bigger and bigger bets to get larger and larger chunks of revenue.
No longer was incremental organic growth enough; they needed hundreds of million dollar chunks of revenue to hit their double-digit growth targets.
5. By the time Carly Fiorina arrived to HP the company had already lost its way. It was a company that increasingly forgot what it was all about and where it came from.
Fiorina is a masterful speaker and marketer, yet also extremely detached from HP’s people and customers. Senior HP execs and managers describe her as largely keeping to herself in her office, unlike Packard’s famous mantra of walking around.
The acquisition of Compaq, another big bet, was controversial enough from a business strategy perspective, yet even more damaging was the deeply scarring proxy battle with the Hewlett and Packard families.
By the time Fiorina departed, with her well-publicised $42 million severance package, HP had lost its soul.
6. By the late 2000s, I think it’s fair to say HP had forgotten how to learn. In speaking with dozens of employees, they described a culture of fear, risk aversion, and very little innovation.
For all of Mark Hurd’s operational prowess, his strength was squeezing every additional penny out of the company through cost cutting, not innovation and inventing revenue. People took a back seat to an obsession with numbers.or.
7. That brings us to the HP of today. With HP’s board in very well documented shambles, Leo Apotheker never seemed to have a chance.
He never seemed to have the confidence of a fractured and weak board.
It is sad to see the old HP culture — of customer focus, invention and innovation, and value of people over profit — die. Viewed more optimistically, perhaps that’s just a part of the natural cycle of organisations, especially companies that forget how to learn.
HP is merely a leading example. Sadly, I think HP will continue to unwind and decentralise. Sims is an entrepreneur and former venture capitalist.
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