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HP’s Board Adds to Its Errors With Whitman Appointment

{complink 2376|Hewlett-Packard Co.}'s board of directors should have first sacked itself. Instead, the directors dumped Léo Apotheker on Thursday and installed Meg Whitman as his replacement in the role of president and CEO. The Whitman appointment isn't as bad as the other numerous mistakes the board has made previously, but its actions in recent years have been disastrous for the company. To be blunt, this has not been an engaged, informed, and efficient board of directors. (See: Bumbling HP Strikes Again and Muddled Thinking Sinks HP.)

The world's biggest IT company by revenue was ill-served by Apotheker's appointment 11 months ago, and the latest development isn't about to erase its record as a blundering bunch. Under the board's watch, HP foundered under Carly Fiorina, who acquired Compaq Computer before being forced out in 2005. Since Fiorina's departure, HP has lurched from one position to another, fitfully fighting to maintain its dominant position in a number of markets, even as it tried to copy {complink 2470|IBM Corp.} by moving into the higher margin software and consulting markets.

Apotheker's predecessor Mark Hurd was fast rebuilding the company's image as an innovative enterprise before getting ejected one year ago. The board, by dismissing Apotheker, has indirectly admitted its mistake, but it has added to the damaging errors of the past by naming Whitman, a former head of eBay and an ex-candidate for the governor's office in California, to replace him.

I didn't believe Apotheker was the right man for the HP job; I don't believe HP should have fired Hurd, and I don't think Whitman is going to save HP either. Whitman's first comments weren't reassuring. She wants to stick with the strategy Apotheker was implementing, including the decision to pay $10 billion for British software vendor Autonomy Corp. This was expected; Whitman, as a member of HP's board, agreed with the Autonomy decision, and I can understand her standing by that acquisition offer. Still, it boggles the mind that she would still consider a spin off or sale of the company's PC business and the equally idiotic decision to stop manufacturing tablet PCs.

That's not the only negative baggage Whitman is carrying. Her tenure at eBay, while considered a success initially, is now getting panned by analysts because the shares have fallen off since her departure. But the clearest sign Whitman is not the answer to HP's many problems is coming from investors. HP's stock price rose initially when news leaked that Apotheker would be sacked but fell two percent in after-hour trading on news Whitman would take over from him.

The reason is very simple: Whitman is no Mark Hurd — now at Oracle — and her background, though impressive, has not prepared her for the HP job. Under Whitman, eBay recorded peak revenue of $8.5 billion in 2008. By comparison, HP had revenue of more than $126 billion in the fiscal year ended October 31, 2010. Prior to joining eBay, Whitman worked at Dreamworks, Hasbro, Procter & Gamble, and Walt Disney Co. I have nothing against these companies, but they are not the proving grounds for the role of CEO of a mega electronics company. Furthermore, Whitman's political aspiration and her failed contest for the California governorship position won't win her friends in many places, and this will adversely affect HP.

In announcing Whitman's appointment and Apotheker's dismissal, Ray Lane, who moves up to the role of executive chairman at HP from his previous cast as non-executive chairman, said in a statement:

The board believes that the job of the HP CEO now requires additional attributes to successfully execute on the company's strategy. Meg Whitman has the right operational and communication skills and leadership abilities to deliver improved execution and financial performance.

Lane didn't specify the “additional attributes” that — I assume — Apotheker lacks and Whitman obviously possesses. And he didn't say exactly what corporate “strategy” the new president and CEO would be executing. However, he thanked Apotheker, adding, “We very much appreciate Léo's efforts and his service to HP since his appointment last year.” Really? HP recruited Apotheker to do a job and he didn't do it. He couldn't have. Apotheker's background did not prepare him for the role of the top gun at HP. Prior to his appointment, Apotheker had been relieved of responsibility as CEO of {complink 4784|SAP AG} and had been president and COO at Oracle.

There's one redeeming factor in HP's board of directors' recent decision: it is imposing an executive chairman over Whitman. Perhaps HP's board of directors did not want to leave a vacuum while searching for a more experienced and less controversial CEO. But, in typical fashion, it chose the easy way out by appointing someone with instant name recognition but limited knowledge of electronics hardware. If executive chairman Lane stays engaged, focused, and actively involved in HP's operations, the company might stand a chance. Otherwise, the game of musical chairs will only continue for many more years.

28 comments on “HP’s Board Adds to Its Errors With Whitman Appointment

  1. Eldredge
    September 23, 2011

    Clearly, the frequent changes at the CEO position are not a good indicator for the internal dynamics at HP. One would hope that the board recongnizes this fact, and spect some time in careful deliberation before making this announcement, past record notwithstanding. I hope they recognized what attributes they really need to move forward, and chose wisely. Time will tell.

  2. AnalyzeThis
    September 23, 2011

    Bolaji, in general, I agree with your assessment. The only thing I take issue with is that you think that it was an, “idiotic decision to stop manufacturing tablet PCs.” I think that bailing on the tablet business is a smart move, clearly the tablet market is jammed-packed with too many players and not enough demand for tablets which aren't made by Apple. I think HP needs to pick their battles, and the tablet fight is one they can't win… so stepping aside was a wise move.

    I don't like the Whitman move. It really is not a step in the right direction, in my opinion. Also, this really makes me question the amount of executive talent currently at HP… There obviously must not be a rising-star or an existing strong leader within the company. There are surely deeper leadership issues within the organization. I suppose it's a trickle-down effect, if the board and the CEO is kind of just flailing around, I guess you can't expect everyone else to fall in line…

    I'm really not convinced HP has a clear idea of what they're trying to do or what kind of company they hope to be. Beyond the lack of identity, I'm not convinced there's a clear, viable, overall strategy in place. And even once they do figure this out, I'm not sure if they have the leadership to actually execute.

    As you say, I think it's pretty clear at this point that firing Hurd was the wrong move. I guess Larry Ellison was right: “the HP Board just made the worst personnel decision since the idiots on the Apple Board fired Steve Jobs many years ago. That decision nearly destroyed Apple and would have if Steve hadn't come back and saved them. HP had a long list of failed CEOs until they hired Mark who has spent the last five years doing a brilliant job reviving HP to its former greatness” – Ellison, 8/9/10.

  3. Ariella
    September 23, 2011

    I was very surprised to see that HP took back the person who held the position earlier. I don't know if this is unprecedented, but it is, surely, unusual. Maybe they believe that they're playing it safer this way, along the the lines of “Better the devil you know than the devil you don't.”

  4. Houngbo_Hospice
    September 23, 2011

    @Eldredge 

    “the frequent changes at the CEO position are not a good indicator for the internal dynamics at HP”

    That is true. However Leo had been making a negative buzz since he allowed the TouchPad to be pulled off  7 weeks after it was released to realize later that people actually like the HP tablet and the main problem was elsewhere. 

  5. Kunmi
    September 23, 2011

     “the HP Board just made the worst personnel decision since the idiots on the Apple Board fired Steve Jobs many years ago. That decision nearly destroyed Apple and would have if Steve hadn't come back and saved them. HP had a long list of failed CEOs until they hired Mark who has spent the last five years doing a brilliant job reviving HP to its former greatness” – Ellison, 8/9/10.
    For HP to regain the credibility, the internal problem has to be resolved. The company is just struggling like the snake without a head. Once the company is able to get goal oriented leaders, then it can come back heavily. Who knows wether the board was afraid of loosing money if they go ahead on tablet PC under the current CEO leadership. To drop the idea of tablet may be the best decision the company can make

  6. Eldredge
    September 23, 2011

    That move certainly got public attention, butI'm sure his problems go back further than that. For the TouchPad, the question still remains whether it could have competed at a profitable level. Guess we'll never know!

  7. Houngbo_Hospice
    September 23, 2011

    Apotheker’s performance over the last 12 months was not that convincing and there was the need for a change in the management board. Meg Whitman’s appointment as CEO of Hewlett-Packard may help the company to be back in the spotlight. 

  8. Ms. Daisy
    September 23, 2011

    Hope HP got it right this time. The public will be forgiving if HP can re-make its image with the success of Whitman at the helm.

  9. elctrnx_lyf
    September 24, 2011

    I wish HP gets onto right path under the new leadership of whitman. Specifica challenges for her to actually define a strategy and exexute it successfully. What would be new business for the HP other than the newly acquired british firm. I think they should venture into IT services like what IBM has done in India. May be they can acquire a big services company in India.

  10. JADEN
    September 24, 2011

    The decision of HP's board to change its CEOs so soon point to the fact that the board is in disarray.  It's like they lack the idea of the company objectives, may be they are people from different industries, they are known for celebrity CEOs.

  11. Anne
    September 24, 2011

    Apotheker dismissal is as a result of his inability to deliver, this is understandable but can Whitman deliver, hope she will be able to fix HP as FTD was unfixable.

  12. _hm
    September 24, 2011

    Is Indira Nooyi good choice for HP?

     

  13. Himanshugupta
    September 25, 2011

    I believe that HP needs a person with exceptional analytical skills, leadership ability with some knowledge of the electronic industry rather than a celebrity. If Whitman wants to stay at HP for a longer time then she will have to first stop the downfall of HP and then think through of reshaping HP.

  14. Himanshugupta
    September 25, 2011

    the right question is whether HP is a right place for Nooyi? She has a broad leadership and executive experience but at a much smaller organization and in completely different industry. 

  15. _hm
    September 25, 2011

    Nooyi has worked for Motorola and also ABB. She was so effective that she eventually become CEO of Pepsico. This may be good challenge for her and it offers her challenge to make her prganization become second to Apple.

     

  16. _hm
    September 25, 2011

    Nooyi has worked for Motorola and also ABB. She was so effective that she eventually become CEO of Pepsico. This may be good challenge for her and it offers her challenge to make her prganization become second to Apple.

     

  17. Himanshugupta
    September 25, 2011

    I am not sure how much experience she has in electronic industry as i could not find much about her experience at Motorola (i accept that i did not do much extensive search). She has been very successful at Pepsico but i am skeptic of her talking the helm at HP.

  18. Wale Bakare
    September 25, 2011

    Unsurprisingly some CEOs unceremoniously get axed at this tough period, tough time they say only ephemeral but tough people rule longlast. Visionary leaders arent easy to get by and hired, in the same vein unanimous decision undifficult to reach in getting visionless leaders fired. At present time, where innovations change at near rate of speed of light, top IT companies need strategists at helms.

  19. bolaji ojo
    September 25, 2011

    @DennisQ, Your analysis is spot on and I like the quote from Larry Ellison of Oracle. You asked why I don't agree with the decision to exit the tablet PC market. I don't know whether or not it is the right move for the company. What I question is the timing of the announcement. The company said it was considering spinning out or selling its PC business and then chose the same period to exit the tablet PC business.

    What is the incentive for a buyer if you choose to exit one of the fastest-growing segments of the market? The decision reduced the attraction. The buyers should be allowed to take that decision, not HP. Whether or not Apple has a lock on the tablet PC market the truth is that it is still a hot segment. HP's PC business is more valuable with the tablet division. Getting out now adds to the list of incomprehensible measures HP's board of directors has approved.

  20. bolaji ojo
    September 25, 2011

    @Eldredge, Exactly. HP didn't give the TouchPad a fighting chance. It dumped it two months after introducing the product. Was it really that bad and it it was, whoever gave the approval to sell it in the first place needs to do some explaining. Let's see what Meg Whitman will now do. If a company dumps a CEO only after one year in office, it doesn't sound too encouraging if the replacement says she would maintain his policies. If his policies were so good — and if he wasn't involved in some shenanigans — why then was he replaced? Anyone expecting Whitman to perform miracles should reassess that view.

  21. Anna Young
    September 25, 2011

    @Eldredge, You raised a valid point. This is a $126 billion revenue company and so far it hasn't been able to name an internal candidate as CEO. What exactly has the board been doing until now? This company should have a rack of potential CEOs in place. That it doesn't is shocking.

  22. Parser
    September 26, 2011

    As an employee in engineering (not at HP) I went through many changes on top in several different companies. At first they all say nothing is going to change. It is only to keep employees not worrying. It takes about 3 to 6 months when things change completely. 

  23. jbond
    September 26, 2011

    This is a rather puzzling piece of news from HP's Board. They fire their current CEO after making startling news about sluggish sales, a fire sale on the Touchpad that nobody gave a chance too, and talks of spending billions to become a major player in the software business to compete with IBM. Yet they replace him with a “yes person” from the board who lacks proper experience or knowledge of the electronics industry. And the most startling comment is that they are following suit with the big business change over. All of this makes me wonder how long Whitman will be in place and how much damage to HP will have taken place over that time period.

  24. bolaji ojo
    September 26, 2011

    @Parser, HP will definitely have to change and some of the changes will be structural and so the company may not want to spook employees. I understand companies often do this when a new CEO takes office. In the case of HP, though, the circumstances under which Leo Apotheker was removed and the continuing turmoil surrounding the company warrants a different approach than the one adopted by Whitman. It is disingenious to abruptly remove Apotheker and then have a new CEO announce it's going to be business as usual. Everyone can see through the deceptive statement, including the employees the company is trying not to alarm.

  25. Parser
    September 26, 2011

    @Bolaji Ojo, I totally agree with you. It is a very deceptive statement. It looks like layoffs and selloffs are imminent. 

  26. Mr. Roques
    September 26, 2011

    Well, HP needs to reinvent itself, just as Nokia. IBM made a bold move and it paid off and HP is wanting to make a move but makes it halfway there. 

    The stock price is definitely a reflection of what they are doing.

  27. Taimoor Zubar
    September 27, 2011

    I can't really comment on how good Whitman will be in comparison to Apotheker, but if Whitman is still pursuing the strategy of dissolving PC and tablet business, I don't see any hopes of HP getting better or recovering from it's current state. While it is advisable to continue with previous policies and bring about change slowly, I still think if HP doesn't make a move now, it may be very late.

  28. Tim Votapka
    September 27, 2011

    Bolaji's review on HP's revolving door was well presented. I don't know the players involved in this story nearly as well as others do, but from my hat as an organizational consultant it seems to me HP may be missing something very key: an administrative scale. By definition this is a written, living, breathing document that outlines an organization's goals, purposes, policies, plans, programs, projects, orders, ideal scenes, statistics and valuable final products. This scale is worked up and down until each item is in full agreement with the other items. When one item of the scale is not aligned with the other items, the project (and overall organization) will be hindered or fail altogether. 

     

     

     

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