HP Chief Faces Short Honeymoon
May 1 2005 by Chief Executive
Of course, that may be easier when you’re the CEO of Dayton, Ohio-based NCR, which is a bit more sheltered from Wall Street’s glare than HP. Nonetheless, as CEO of the $6 billion ATM-machine maker for just about two years, Hurd managed to increase sales 7 percent, helping boost the company’s stock by an eye-popping 332 percent. “He’s a guy who’s shown a lot of courage in making tough business decisions,” says Umesh Ramakrishnan, vice chairman of the executive search firm Christian & Timbers, which brought Fiorina to HP in 1999. Investors will now be looking for a repeat performance at HP, which languished under Fiorina’s tenure, crippled largely by a disastrous Compaq acquisition.
Can he do it? Hurd provided few details of his plans after his appointment, but one message is clear: The showmanship that was a hallmark of the Fiorina years at $80 billion HP is gone. In his first public appearance at HP’s Silicon Valley headquarters on March 30, Hurd displayed the careful yet meticulous nature that made him a darling of NCR’s investors. Asked whether he planned layoffs or if he’d hire a strong COO, he replied: “I can’t give you any guarantees on anything.” He vowed to approach his new job with “excitement and humility.”
Good thing, because his challenge is humbling: repairing employee morale, squeezing more profits from a struggling commodity hardware business, fending off rivals like powerhouse Dell, and making hard decisions, such as whether the company should spin off its lucrative printer business. And time is of the essence. Analysts and investors are already frothing for visible change. Hurd will have to prove himself before his very brief honeymoon is over.
Welcome to a really hot seat.
Less than half of all retail investors have confidence that CEOs of public companies are engaged in ethical business practices, per a new survey by Opinion Research Corp. (OPC). About four in 10 have very little or no confidence in the ethical standards of top execs. “That’s not a good number,” muses Jeffrey T. Resnick, managing director of the Princeton, N.J., firm.
True, the numbers have improved from a low in June 2002, but there’s still a long way to go, says Resnick, who also runs OPC’s corporate reputation management practice. “There is a trust chasm between where executives probably believe they are and where the public believes they are,” he says. Nearly half of investors surveyed said CEOs do not care as much as they should about the reputation of their companies.
But assuming CEOs do care, and if most are acting ethically, why is it not translating to the masses? Paul Argenti, professor of corporate communication at Dartmouth’s Tuck School of Business, says that ethical behavior, along with corporate reputation and communication in general, have been seen as too intangible to value or invest in. “But some 80 percent of the value of a corporation is based on intangibles,” Argenti says. CEOs must get creative about quantifying the impact of ethical behavior and reputation on future profits, he adds, just as they measure the impact of an ad campaign on sales or other “squishy” numbers.
The other thing CEOs can do, Argenti suggests, is to consistently go beyond just the letter of the law. “There was nothing written down that said that [Boeing CEO Harry] Stonecipher couldn’t have a relationship with a female executive of the company, but if he’d asked, someone else in the company could have told him that,” he says. All CEOs would benefit from being more proactive about analyzing their company’s reputational risk, he adds.
That said, analysts and investors, who helped create this problem, will have to do their part to solve it. “By putting this much pressure on people to perform, perform, perform or we’ll whack you, they force people to act in ways that cut corners,” says Argenti. “They want ethical behavior, but they’re not willing to wait for it.”