First Blush: Meg Whitman Could be Great for HP

Thursday Oct 13th 2011 by Rob Enderle
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The stakes are high for HP's new CEO. Will she be able to avoid the missteps of her predecessors?

I spent last week at HP’s Printing and Imaging division and the employees raved about (as opposed to rave at) their new CEO, Meg Whitman, who appeared to be hitting all the right notes with them. This week the rumor is that she has revisited and reversed the decision to spin out the HP PC unit. This suggests that unlike some predecessors, she is less interested in covering up a bad decision than she is in correcting it.

I think this initially bodes well for her tenure at HP. Let me explain.

Umbrella CEO

HP is an umbrella company. This means it is made up of a few loosely coupled divisions, which are managed a lot like wholly owned companies. The division heads have power similar to a CEO. And the umbrella CEO, if effective, manages the group as if they are individual assets and helps drive synergy and cooperation between them.

This is a unique skill, more common in Venture Capital companies than in most businesses and enterprises. Often the problem with folks in this job falls into three areas, either they know too little about most of the units and focus excessively on the part of the company they do know, letting the others languish. Or they become isolated and the divisions slide into decline underneath them.

The third mistake, which was made by both Carly Fiorina and Mark Hurd, is to delegate the job to subordinates and get into personal trouble with their free time. Fiorina used this time to get into politics and focused on getting George Bush Jr. reelected rather than running HP. Mark Hurd appeared to become a little too connected to an attractive HP employee/hostess (the release of the details of this story is still being fought by Hurd in court).

John Akers, the IBM CEO in the 1980s, was an example of an isolated CEO. He was properly trained but became isolated. Similarly, you could argue that Steve Ballmer’s problems at Microsoft are largely tied to his tight and excessive focus on the Enterprise side of Microsoft, in which he spent much of his time.

An interesting side comment is that Ballmer, from a company performance perspective, has actually done very well and is getting a raw deal. Microsoft’s slide appears to be tied to the difference between a consumer product company like Apple and an enterprise company like HP, which typically trade lower. This piece in Venture Beat is a really an interesting read in that regard, but showcases that for Steve to be seen broadly as successful he’ll need to restore that consumer focus.

This means that the best umbrella CEO operates more like Venture Capitalist or someone that is good at overseeing companies. They know when they need help while otherwise not mucking them up and staying engaged.

Coincidently that is what Ray Lane (disclosure I’m a fan) has been doing for the last decade. Ray is HP’s new Executive Chairman of the Board.

The Building Meg Whitman Story

What you look for in initial behavior is someone that will listen and learn what the problems are, as well as where the jewels are before jumping in and fixing the wrong things. I think that was the problem with Leo Apotheker, his software background had him too focused there. He made massive mistakes kibitzing on the hardware side, first with killing Palm prematurely and then with his idea bout spinning out the PC company. My personal sense was he was played by someone who wanted his job and then left to hang. But it was his lack of balance that made him vulnerable.

Reports on Whitman indicate she is asking intelligent questions but not yet stepping in and fixing anything. She has already seen some of the major problems at HP that were missed by Mark Hurd, like the lack of a succession program. This is something that Carly Fiorina had effectively killed (and hadn’t been working all that well anyway). That one point could help turn HP into the kind of steady performer that IBM has become and help assure it could last 100 years, as IBM has done.

Overall she is behaving as a Venture Capitalist with a new investment in a complex company should. Learning what she needs to know about the business, figuring out who she can and can’t trust. And then I expect her, once her views are set, to take decisive action to fix what is broken and to not break what isn’t. This last part is conjecture but her start looks promising.

Milestones

HP has three obvious problems that have troubled Meg’s predecessors. The biggest is a tendency to leak information that should remain within the company. This has cost one board its job, landed the executive team in a Congressional investigation, created much of the drama surrounding it CEOs and shortened their apparent tenure.

If she doesn’t find a way to get HP to speak with one voice she will likely fail. Seeing her fix this, as Jobs did at Apple, or as we did when I was at IBM with newly acquired companies, would be the first milestone.

The second milestone is the identification and elimination of executives who can’t be trusted. Carly Fiorina was largely shot from inside the company, partially due to the fact she had alienated much of her senior staff. However Leo Apotheker’s problems were certainly exacerbated by what appeared to be an internal struggle for his job, both before and after he got it, initially souring the well and eventually making him look weak. Forming a team Whitman can trust will be milestone number two.

The third Milestone is the statement of an HP vision. This comes out of the collective wisdom from the IBM leadership event that was held in New York recently. At that event they defined what made a good leader and the speakers ranged from heads of state to heads of major corporations like Boeing and Bristol Myers. All seemed to agree that Vision was one of the most important aspects of a leader and either Whitman or Ray Lane will need to state one that encompasses HP.

Wrapping Up: Meg Whitman Represents Hope

In HP I hear things that remind me a lot of the IBM of the 1980s, which almost failed while I was there. That there are more people telling you why you can’t do something than there are folks helping you do it. That the left hand rarely knows what the right hand is doing, and that there is the right way to do something and there is the HP way – and they are often not the same way.

HP’s problems are largely the result of a series of CEOs who, for whatever reason, didn’t do their jobs. A company that was about results that came to be more about wasteful process. I think there is a good chance that Meg Whitman can fix these problems, her start is promising, but it will be the finish that will count.

Stay tuned. This will either be an incredible success story or another deep disappointment. I am sure that Whitman knows that this effort will define the rest of her life and her memory; as a result my belief is she will do what it takes to make HP strong again. Her future is tied to HP’s now.

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