Who is Minding the Store? Lessons for CEOs from the Mismanagement of HP

James Bandler has written a thorough expose’ on “How HP Lost Its Way” in the 2012 – Fortune 500 issue, which is another lesson in how not to manage for CEOs, and their Boards.

June 20 2012 by Bob Donnelly


James Bandler has written a thorough expose’ on “How HP Lost Its Way” in the 2012 – Fortune 500 issue, which is another lesson in how not to manage for CEOs, and their Boards.

In this penetrating piece Bandler outlines the seven year odyssey of several CEOs that he describes as a “humiliating series of epic stumbles.” While the article is about HP specifically, it is a repetition of a pattern of internal corporate politics that has been played out many times before.

As a result it begs an answer to the age old question: “does anyone learn anything from history?”

Harkening back to the guru of business management, Peter Drucker, who so eloquently defined management as (1) the purpose of any business is to create a customer, and (2) the job of the leader is to serve the customer so that they become a customer for a lifetime. He also defined the job of a leader as someone who inspires the management team and energizes them to constantly aspire to these fundamental principles.

In many large firms like HP these simple fundamentals get lost in the inwardly focused politics of those who are ultimately responsible for sustaining the company’s purpose in being. The corporate landscape is littered with dead brands that developed an emotional bond with customers over a long period of time, and then quickly lost that trust and brand equity by becoming totally distracted by wasteful infighting by management and the board of director’s.

Inevitably, this results in what Bandler describes as a company “in the midst of an existential crisis.” The culmination of it in the case of HP was the very public demise of an incompetent CEO who actually read about his termination in the news – Leo Apotheker, who only lasted eleven months in the job.

The combination of a failed tablet computer introduction, the confusing messages on considering the spinoff of the computer business, and the planned financially unsound acquisition of a foreign software company, in combination with Apotheker’s peculiar combative management style sealed his early departure. However, his brief tenure created so much havoc within HP that it is now questionable if his replacement – Meg Whitman, can salvage the company in the short period of time she has to orchestrate a turnaround.

Even more embarrassing was the golden parachute that Apotheker left with as a reward for the tremendous loss of brand equity and shareholder value he produced. Where else but in corporate America can someone get millions of dollars as a bonus for destroying so much shareholder and market value?

Bandler explores the epic stumbles at HP in great detail starting with Carly Fiorina and her public battles with the board over the expensive ($24 billion) acquisition of the Compaq brand. HP spent all that money for a brand that is now only a feint memory? What was the logic? Usually when you acquire a brand, and especially for that much money, you want to keep it alive to get a return on your investment – right?

Then he explores the also very public tenure of Mark Hurd and his overly ambitious cost cutting campaign. Unfortunately, his demise came rather quickly over a still questionable ethics issue, which appears to have been spurred on by a witch hunt by several board members who did not like Hurd’s style.

And then the very unusual search for his replacement with Apotheker, who had no experience managing a computer company and was appointed CEO without even meeting the full board? He could not even assume his full responsibilities due to legal issues with Oracle and was sent on a global jaunt visiting HP international locations?

Bloomberg TV even had a spot – “Where in the world is Leo?”

This reads like a comedy of management errors, not a finely tuned corporation with a clearly defined strategy. What would Drucker think if he was still alive?

The question now is as Bandler writes: What is HP?

The bigger question in my mind is “What can Meg do?” Sales are down, profits are down, shares are down, cash is deteriorating, and the annual forecast has been lowered. All of these indicators fit a common pattern all too familiar with analysts.

The recent announcement that tens of thousands of employees are expected to be terminated may just be another nail in the coffin for HP.