Remembering Carly Fiorina at HP
James Madison
September 23, 2015 at 1:30 pm
 One of the things most of us are very good at is 20/20 vision … when looking backwards in time. We know what was done wrong, why it was wrong and how it should have been done. We now can say, “Knowing what I do now, I would not have….” But, to borrow from Hillary Clinton, “What difference does it make?” Looking back to dissect past decisions is pretty lame and can never fully capture the knowledge, conditions and circumstances of the time.
So it is with Carly Fiorina’s time at HP, Lucent, or on the church girl’s basketball team. We could claim to know now why she was a complete failure, disaster, job killer, and worst CEO in the history of the world — or worlds if you choose to go further out into the universe. But we miss the nuance and a whole lot more.
Thus, we have now been treated to a host of commentators, ex-employees, and even a Yale professor who has made a career of finding out who is and is not a good “failed” CEO. Turns out the key factor separating a good versus a bad “failed” CEO is whether they admit to a business school professor or someone that they made a big mistake (kind of like a confession, but with a business school high priest). That is what Jeffrey Sonnenfeld of Yale claims determines whether a failed CEO can be a great comeback story. And if you don’t mind me suggesting this, that seems like a rationalization.
The reason is simple. In the rear-view mirror, we can see that HP stock did this, or the Board did that, or sales went up (not apparently a good thing unless profits go up right away). What we do not see is the actual battlefield at each point in the fight. We do not see that HP, a proud company with an engineering legacy, was a troubled company that had been well documented to the point that it was featured as a problem in many Harvard Business School cases dating back almost 15 years before that non-engineer took over. We also forget that HP did not go outside to hire Ms. Fiorina because it was producing great products, profit growth and internal people to lead the company – at least not in the eyes of the Board that hired her. The Board thought there was something missing and Carly Fiorina filled the bill.
We forget there was a cult at HP that was recalcitrant and this was well documented. “I worked at HP,” the operative word being “worked,” was sometimes viewed as an imprimatur on a application long before Fiorina showed up. It showed you got hired, learned, and were ambitious enough to move on. A badge of gravitas.
Insular, hidebound, and untrusting of outsiders might apply to a company that held on to enormous profits from selling replacement ink cartridges for its ubiquitous printers. Its work stations, once its heart, were good. Its software good. The growth rates of these and other businesses did not meet the expectations of the Board. “Great” was not a generic term applied to HP in the decade prior to Carly Fiorina’s arrival. HP was great at some things but not at many others, was more likely how people saw it. And the company seemed to be standing still in comparison to other Silicon Valley competitors. In comparison to the dynamic sectors of the IT business, HP seemed to perform at a slower pace while its own printing division, Apple, Sun, Oracle, and even a reformed IBM seemed to be racing around it. Finally, some felt HP was top heavy with too much expense in the office and with duplicative sales organizations in the field.
So onto this terrain drove Carly the “wunderfrau.” She would be the one who would take it apart, analyze it and put it back together again. Never mind that HP’ers were not that interested in seeing her succeed. They knew the axe was going to fall.
Carly’s first job was to trim. And she did that several times. Name a CEO who eventually lays off tens of thousands because it is essential to corporate survival and then is praised for it. There are not many who will say, I am really glad ol’ Joe fired thousands and transferred some of the company’s manufacturing to Singapore – even if failure to do this would have resulted in closing the business.
She had one goal: spur growth at the company and then consolidate growth into profits. Her background was sales and she was great at it – prepared, well spoken and fast on her feet, and sometimes stunning at improvisational analysis. [ Which is why she does well in debates. ] There were two broad strategies developed by HP staffers, business heads, Wall Street analysts, and outside consultants. The first was to buy a large IT consulting and software business. The second was buy a major PC maker.
HP was already in both segments. It felt it was not large enough to survive and thrive in IT consulting or in PC’s. In PC’s, they believed they needed mass in market channels, product line and development, support, and market segmentation. There were several other players who faced a similar predicament. Asian manufacturers were commoditizing the business. If someone could design the products fast, outsource the production and offer the broadest array to the customers, one might create a winner. Many thought this was possible. Apple and Dell were doing it. HP was too. For HP, it would require an acquisition and then ferocious cost-cutting and the right people to build the winning brand and secure growth and profits. Synergy profits for other businesses from work stations to servers to printers, etc. probably got tossed into the calculation as deal fever rose.
Many, but not all, thought the software play was clearly the best option. There was one serious target that could make a difference, PricewaterhouseCoopers’s IT consulting business. After that, there were a bunch of small, less impressive consulting opportunities that might be for sale. But, they would not have a major impact at a time when HP needed to grow itself and get its top line moving while the profits from printing ink could still be counted on. The HP deal with PwC was underway when IBM swept in with a pile of cash. IT consulting and software would continue to grow organically at HP, but the best alternative was to turn to Plan B.
Compaq was the only logical candidate. HP moved. Carly executed. Merger, cut costs, and then consolidate.
What is now forgotten is how much in decline HP was. Many saw the printing ink business as something that could not sustain the company. That was in part why there was an urgency in hiring Fiorina, a non-technical person. She was a salesperson. There was desire to recast the company culture to be more sales oriented – the way IBM was. There was also desire to move fast and compete on speed. Fiorina was quick. It was the age of dot-com and rapid innovation.
Fiorina did not have 20/20 hindsight nor was she drawing two cards while holding three aces. She was doing what all CEOs who take over a company in decline do. She searched for options, she assessed them carefully, she crafted a strategy, she tried to implement Plan A; when that failed, she moved forward with Plan B. The Board was indecisive and fainthearted, perhaps dominated by those who became captured by their own talk about paradigm shifts and disintermediation. Those were the buzz words of the time.
Comparisons to the NASDAQ, which Fiorina herself has done, are kind of interesting. It is like saying the radishes in a salad are not as sweet as the lettuce. Neither are sweet and both are different things. The NASDAQ was flipping out with overvaluation due to upstart companies and dot-com ventures. It was tulip mania. NASDAQ and HP were two very different things. It skyrocketed and then plummeted. HP kind of missed both extremes. It was held up and down by its size.
What we don’t see is what HP would have looked like had the board not hired her and told her to make something happen. That is the point of comparison only a few inside the company know about. They could see the numbers with and without the Compaq acquisition more clearly. They knew that selling printer ink at outrageous prices would not last forever. They understood that HP’s reputation alone in work stations and scientific or engineering applications was no longer selling the products. There was competition. They had a “feel” which became the basis for urgent action. They were the George Tenets whose “slam dunk” assessments urged on the contest to change HP now.
So professors and pundits can say what they want about who likes Carly, who was a good CEO and what a good “failed” CEO should do. It really does not provide the kind of serious insight that some claim. Only a handful of people who saw all the data, the choices, the urgency, the resources, the inside of the boardroom, and the battlefield at the moment can assess whether her tenure was good or bad. She was bossy because she was the boss. But people underneath her did not quit in droves and there are not a lot Steve Jobs-like stories here, if any.
HP was unique, Carly’s job was unique, and that particular situation was unique. And by now, no two people can really remember what happened in the same way. We all have bias.
All we know is this: Carly was outstanding and landed some big jobs. Some guy at Yale who is a leadership guru cannot say enough bad things about her. She was successful in some things. Unsuccessful in others. She claims to believe certain things. Do you trust her?
Or, who do you trust more?
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