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Remembering Carly Fiorina at HP
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. 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?
Published in General
I trust my own lying eyes. They can see that Carly made a superficial choice for a merger partner and predictably flopped, destroying her company. They see that she then moved on to deny responsibility for her mess and simultaneously claim credit for the merger-related “growth” in sales and revenue.
Well done, JM. The whole tech sector took a bath. Some of them drowned.
Jeffrey Sonnenfeld? The business “expert” who has never, ever run a company? He is, like Jonathan Gruber, the great expert about “leadership” that’s never led but claims to know everything because he’s studied others. He lives in a world of theory, not accomplishment.
Sonnenfeld was dismissed from Emory University in Atlanta for childish and immature acts of vandalism. Unfortunately the media gives him gravitas that is richly undeserved.
I’m not sufficiently acquainted with the HP story of 10-15 years ago to pass judgment on whether Fiorina destroyed her company, which, near as I can tell, is still trading on the NYSE. I think I’m somewhat more qualified to judge how her story would be playing out if she were a pro-abortion Democrat:
The rise from Secretary to CEO: amazing and unprecedented; a pioneer in shattering the glass ceiling.
The struggle to “save” HP during and after the tech bubble: worthy of a Lifetime movie with Meryl Streep moving to cable to play Carly.
Her ultimate loss in an attempt to rally a tech behemoth: the product of board room jealousy and recalcitrant white males in a white male dominated industry.
Having been in business as the boss, although to tiny fraction of HP, the 20/20 hindsight of critics is amazing. It is almost impossible to explain. You have done a good job James.
Your post contains a number of valuable insights into the technology sector at the time.
But what it will all boil down to, rather than an issue of trust, is “who has the best soundbite?”
Because that’s all the media has time for. And it’s all that they will report.
So, in response to a debate question about the Republican war on women, thinly disguised as a some sort of question about pay equity and who he hired, Mitt Romney disastrously uttered the phrase “binders full of women.”
And the rest, as they say is history. Poor Mitt. He was left smiling, batting his eyes, and saying . . . well, I can’t really remember anything else he said, for the entire rest of the campaign. The only other thing the media found time to report was the sad story of the woman who
he killed.died from cancer several years after her husband lost the family health insurance from a company that was invested in by Bain Capital. It didn’t seem to matter that Romney had been gone from Bain for some time when the health insurance was cut, or that she had insurance at some part of the intervening years from another company, and that it was after she lost that job, and that coverage, that she found out she had cancer. That wasn’t the right message, so it didn’t get prominent coverage.I think Carly Fiorina is made of sterner stuff, and, no matter the outcome of her run, I’m looking forward to her taking on the press.
EJ,
What you say is true. Sonnenfeld has not run very much.
In the halls of academia there are some very interesting people who at the highest rungs teach strategy or transformation. I have participated in assessments of past managers and gave it up long ago. After-action reports, quality reviews, decision-making trees, and even ‘fish bone’ diagramming of faulty decision -making in non-authoritative structures where people participate in the process inevitably leads to a conclusion that those making the decisions lacked good information. Too many people cannot remember the events, even when written down. All is not written down. So there is a lot of selective recall.
I particularly find the study of organizational transformation interesting. Think if you will, who in history set out to be transformational, with the possible exception of Jesus and Barrack? The most tranformational people are generally not at all easy to get along with, often overly ambitious, uncompromising (e.g. Steve Jobs).
The thing that most interests me is the abiding disdain Sonnenfeld has for Carly Fiorina. I mean, why? The answer may lie in the fact that he pronounced her a failure, she did not come to admit her sins, and now his academic credentials will be crucified if she is elected. And just as he accuses her of selective data picking, he is guilty as well.
Jeff, give it up. America gets to decide.
You eyes are lying if you think you know what was going inside HP, the Board and the business units at this time. But if you read, you will be surprised at how an aggressive Board became reticent and has even admitted they were not clear. As for the sales growth, where did they come from? As for the profit improvement – see what happened under Mark Hurd. They improved very quickly under Hurd. He did that with what Carly left him. Was it great? No. Was an Edsel? Not at all.
Great analysis, JM, and a very useful primer for those of us who don’t work in corporate management.
I haven’t seen anyone point out that when Fiorina made her California run in 2010, she was running at the same time as Meg Whitman. Let me freely admit that I can’t prove this, but I think both campaigns were somewhat harmed by it, as the two (who are very different) were seen as a matching pair of relative unknowns.
People often say it’s time for a business leader, but other than Trump, or Bill Gates, few voters can even name a business leader. Maybe in the Lee Iacocca days it would have worked. Steve Forbes was unknown to anyone lacking liquid assets of $40 mil upwards. Ross Perot comes closest to the mark, but he was more famous for the “On the Wings of Eagles” rescue than for his actual job at EDS.
The things that cops, and triage nurses, and sausage makers, and CEOs do are often unpleasant looking to outsiders, but they are vital.
Carly was severely criticized real time by Wall Street and those knowledgeable in the technology sector. She persuaded the HP board to approve the Compaq merger because the owners of HP, the stockholders, were putting immense pressure on the HP board to replace her. One large mutual fund manager agreed to give Carly more time to prove she was capable of actually running HP, she failed and the stockholders fired her.
There was no shortage of real time criticism of the many mistakes Carly inflicted on HP.
I agree.
This is going to be the way the opposition (from both parties) attacks Carly. High-level corporate management is an unknown for many Americans, who have images of corporate life from “Dallas”still burned in their minds (and there’s a new show “Blood and Oil” which is probably going to maintain the stereotype). The opposition will talk about Fiorina’s “failures”, her “cruelty”, her “indifference to the suffering of her employees”.
OTOH, she has been brilliant in addressing similar questions on Ricochet podacasts, and other interviews. I just hope the average person can see through the media bias against (non-Democrat) wealth and power.
Had she been brilliant at HP she would have done things liberals find abhorrent – like making huge profits. Don’t fight this on their terms – EVER.
We are an output-oriented society. Effort and intentions count less than results, even if these results are due more to luck or serendipity than to skill and hard work. Sure, there are always mitigating circumstances. But not clear why it should matter, since we will never know what could have been. We only know what was.
Excellent analysis, JM. Thanks for this.
If that were only true. Every liberal failure is excused by their “good intentions.”
After she left, what did management undo? What was the longer term result of her changes.
I meant in business. Even there, it is not without slippage. As in politics at the office, when all else fails.
Carly’s pursuit of the acquisition of Compaq was not about good the intentions of pursuing the best interest of HP stockholders or even HP’s employees, it was a Hail Mary attempt to save her job as CEO.
Compaq was a failing PC company which is why it was for sale. Carly spent $20B to enter a commodity market where HP had no competitive advantage. Which also meant HP was swimming upstream, other companies were exiting the commodity PC business, for good reason.
Carly’s decision was the anti- Jack Welch approach to managing a large enterprise.
Apple’s stock dips when they announce record profits because they weren’t the record profits Wall Street analysts predicted. Amazon gets praised and bumped when they barely have a profit margin. Those knowledgeable with the technology sector have predicted “peak iPhone” for years, and it just keeps climbing.
It’s not to say that the naysayers are wrong about Fiorina, simply that criticism from Wall Street and tech journalists are poor indicators of how well a company, or CEO, is actually performing.
I claim no expertise, but wouldn’t this guy be in a position to know : “Tom Perkins, the founder of the venture capital firm Kleiner Perkins Caufield & Byers and a member of the board that ultimately ousted Ms. Fiorina in 2005, described the Republican presidential candidate as a visionary executive who helped to revive the company during hard times. “Not only did she save the company from the dire straits it was in, she laid the foundation for HP’s future growth,” Mr. Perkins wrote, pointing to an increase in revenues and patents during her time there.”
Bottom line: There are those folks in the batter’s box swinging and there are those in the stands who complain about someone else’s ability to hit a curve.
Sure, we all do that to a certain extent here, but that said, we’d probably all be a better president than Barack Obama than we would be as CEOs.
Don’t leave out the Lifetime Channel bio-pic that chronicled her fight with cancer.
This piece is not a ringing endorsement, but seems balanced : http://www.bloombergview.com/articles/2015-09-18/carly-fiorina-s-hewlett-packard-record-in-one-chart
“Then, not longer after Fiorina left, the bet started paying off. Part of the initial rise in HP’s stock price was probably relief that the contentious Fiorina era was over. And much of the company’s stock market success during the next five years can be attributed to Mark Hurd, the relentless cost-cutter who took over as CEO about a month after Fiorina left. But Hurd was for the most part executing the strategy that Fiorina had laid out. Her plan to make HP a credible competitor for IBM worked far better than the strategies of McNealy and Dell and enabled HP to modestly outpace IBM as well. Fairly assigning credit between Fiorina and Hurd here is impossible, but it seems clear that (a) Fiorina didn’t leave behind a basket case of a company and (b) the Fiorina-Hurd era was — again, by the metric of total shareholder return — a relative success.”
The stockholders have 100% of the standing to criticize the CEO’s ability to hit a curve ball.
I don’t have the time or inclination to parse out what happened at HP when Carly was CEO. And frankly I don’t think I have to. My question is this. Was she a Henry Ford, or a Steve Jobs? When people write about the great companies and managers that founded them or built them up will her name be there? From what I understand of the situation the answer is no. So at her best she was (dare I quote Trump?) okay. At worst she was not very good. The point is she wasn’t and isn’t going to go down as one of the great businessmen of America. Neither do I think will Trump.
She isn’t stupid, she isn’t lazy, and I don’t begrudge her for being proud of her carrier path, but I don’t have to be terribly impressed by it either. I don’t think it is her strongest possitive, and it probably is one of her biggest liabilities from a political stand point.
Edit: Timing the stock market is not possible unless you manage a quant fund with enormous amounts of cash, the most sophisticated software, and a 1″ connection to an exchange. Otherwise, market timing is a sure way to lose money.
The owners of HP, the stockholders, fired Fiorina for poor performance. She earned it.
Carly Fiorina was, in a way, the Marissa Mayer of the early 2000s – an outsider brought in to take drastic action as the leader of a dysfunctional, once-great tech giant struggling to find a place for itself in the 21st century. HP’s actions both before and after Fiorina’s time as CEO show what a mess the place was in, so it’s hard to blame her.
But it’s really the only stick her opponents from both sides have to beat her with, so they’ll use it till their arms are sore. They did it to Mitt Romney as well. Hopefully Fiorina will learn from that and not make any candid comments at fundraisers, because the same video leakers will be armed and waiting.
The board fired her; it was the stockholders who voted for the merger with Compaq.
The board of directors made the decision to put it up for the vote. It was very contentious. Carly convinced the board to approve the acquisition of Compaq, without the approval of the board it would not have been put up for a proxy vote.
jetstream: You are starting to sound like my financial advisor friend. The two names that make steam come out of his ears are Jeffrey Immelt and Carly Fiorina. :) :)