Leadership

HP's CEO failure was lack of leadership savvy

It's not what you're selling -- it's what you stand for. For both leaders and organizations it's important to keep this rule of success in mind.

Recently fired Hewlett-Packard CEO Leo Apotheker set at least one new record during his brief tenure -- the company lost nearly $40B in value during his 11-month rein.

He wasn't the first choice of everyone on the board when he replaced Mark Hurd; some decision makers had apparently doubted if he had the right stuff. To his credit, Apotheker was savvy enough to negotiate himself a nice "parting gift," reportedly worth about $25M in money and stock as a severance package. But based on readers' comments about my blog in August where I cited HP, I'm guessing his payout has outraged many who still care about the company.

Many observers will cite the former CEO's decision to push software (even though the segment is currently about 2% of its revenues) and jettison several key cash cows upon which it grew into a business doing about $125B in revenue. But I don't think that's why he got turfed.

My guess is that the board wasn't totally surprised on that front given that he came from SAP. In all likelihood that decision wasn't his alone; he must have had at least some board members' agreement before he announced such a significant change in corporate direction.

On several fronts, I believe, Apotheker is out of work because he failed, first and foremost, as a leader.

A few years ago, I concluded that there are 12 principal characteristics usually found in truly great leaders. Not all great leaders have every one of them, of course, but they usually have enough to get the job done and move their organization ahead with common focus. The entire list is here.

HP is an incredibly big organization with a demanding culture and a storied history. That, combined with the markets it dominates, demands that this company's leader must be truly solid just to survive. Beyond survival, HP's leader must have most of those traits too if (s)he expects to succeed over the long haul. In Apotheker, these leadership characteristics -- at a minimum -- were not evident:

1. A strong sense of purpose -- Organizations can be driven by purpose. Properly crafted and communicated effectively, purpose can unify a broad and disparate culture to achieve goals that otherwise will create havoc and poor results. We know where HP is. 2. Power vs. force -- Forcing outcomes leads to negative results. Leaders who are savvy know that the organization's success is greatly enhanced by helping teams understand what needs to be done and why. That takes time, but it's time well spent. 3. Great listening skills -- Great organizations serve the needs of all their constituents: customers, employees, shareholders. One of the best ways of serving a constituent is to ask and listen. Apotheker seemed to believe that if something is "right" in his opinion, it could be rammed through. And then it would succeed.

The trajectory HP has witnessed will become one of the world's great business case studies. In situations of all sizes and across many sectors of industry, this type of colossal failure as a result of hubris has been played out before. Unfortunately it will be played out again in other companies.

Don't make similar mistakes.

John

Executive and Leadership Coach

About

John M. McKee is the founder and CEO of BusinessSuccessCoach.net, an international consulting and coaching practice with subscribers in 43 countries. One of the founding senior executives of DIRECTV, his hands-on experience includes leading billion d...

14 comments
r3tic3nc3
r3tic3nc3

I currently work for a very large company whose current CIO came from CapGemini, an SAP partner. I won't go into too many details but much of what I'm reading in this article about Leo Apotheker is similar to what's going on at my current employer. In short, many short-term, instantly gratifying decisions are being made that are costing the company vast amounts of money. I've also uncovered a major conflict of interest that's directly related to the current infrastructure and the CIOs previous employer. Unfortunately, the company is privately owned so it doesn't appear that there is much that can be done. Nevertheless, I find it interesting that much of the behavior I'm reading about here is almost a carbon copy of what I've seen in my time with my current employer. Just a thought.

g01d4
g01d4

"A strong sense of purpose" seems rather vague; are you saying any kind of purpose will do as long as it's "properly crafted and communicated effectively"? Power vs. force is also rather vague. I would think that force is sometimes necessary to overcome the inherent inertia in a negative corporate culture. Or is power just force combined with a strong sense of purpose and ... "Great listening skills"? I wonder, did St. Jobs rely on his great listening skills when designing the Mac, iPod and iPhone or did he correctly know what the customer wanted before the customer could communicate it?

spawnywhippet
spawnywhippet

Essentially executive compensation has now moved from obscene levels to criminal levels. There is no way they deserve or need the outrageous amounts of cash they suck out of the company while at the same time, grinding the employees salaries into the ground and sucking every last cent and piece of morale from the corporation. It is time to stand against this and demand that if exec salaries are enormous for high performance reasons, then for low performance they should take a part of the risk also. If the company grows $10bn in a year, give them $10m. If it drops $40bn, then they have to pay $40m to the company. Otherwise stick them on a fixed $1m per year plus maximum of 25% bonuses.

konthra7
konthra7

Some commenters note that teh CEO is the scape-goat, and I have to agree. The fact the the board hired him puts much of the blame on them. But the failure still rests on the CEO's shoulders. Why? Here in the Army we have something called "Accountability". I put it in quotes because the Army definition is a little different from the rest of the world. A Leader is accountabile for what his or her organization does or fails to do, even if he or she had no control over it. The reason why is that a Leader who "passes the buck" won't fix the problem. That's the principle under which the leader assumes blame for the actions of his subordinates. Oh, and I won't ever feel sorry for someone who was given more money than my unit will ever see at once to go away.

Zzyzyx
Zzyzyx

Well, "fall" might be premature, but they certainly seem to be heading that way. You can't continue to operate on a once "great name" forever. Too many blunders, missteps, and bad decisions will eventually catch up with you. It is a shame that Leo Apotheker or any CEO can squeeze out a multi-million dollar severance package (and certainly not on poor performance). Really? I'm just not going to go further than that... The board of directors might have ultimate authority, but the CEO sets the tone. Dare I go here, I must... it's my opinion. Take a look at Steve Jobs. From my perspective he built a company, the board kicked him out and then later he saved it as it was faltering, and now at his death it would seem that many people are paying him great tribute. Will they do the same for Leo? (I'm not trying to be mean.) Sure people will find things about which to criticize Steve Jobs, but that just goes with the turf... some just won't like your decisions. Steve Jobs certainly knew something... he knew what he thought made a good product, he knew how to get it to market, and I'd say you can only do this if you posses some leadership skills. And somehow he managed to endear himself to many people in the process.

HAL 9000
HAL 9000

It's not the CEO who makes the decisions s/he's effectively a Puppet of the Board and is the one who gets to Face the Media when the Board makes it's decisions whatever they are and weather or not the CEO agrees with them. The CEO is also the [b]Sacrificial Lamb/Official Scape Goat[/b] for when things go wrong and the remainder of the Board generally stays put to continue the damage that they have done with Impunity. They even get to Appoint a New CEO who will act as their Mouth Piece and Sacrificial Lamb/Official Scape Goat if things continue to go wrong. The only real way to get rid of a Board of Directors is to allow the company to fail completely and then they don't have a place to rob blind and have to move onto Greener Pastures. Boards and CEO's are the Most Incestuous Relationships I have ever experienced and they are all out to get what's best for them and if the company does well so much the better as that allows them to grant themselves more money in both Salaries and Bonuses. ;) Col

one9ooh6
one9ooh6

Very good article. Within this article the link to the 12 leadership traits is a deadlink. Can you provide the correct link?

HAL 9000
HAL 9000

It's not the best person for the job it's the Best person to suit the Board. They not only know all the competition but they are friends with most and it's a Incestuous relationship where it's Jobs for the Boys. You'll find most of the Board sits on other boards and they are in a Merry Go Round of offering jobs to those who suit their best interests and will do as they require. Frankly when was the last time you ever heard of a Unemployed Member of a Board attending the Job Centre? They leave one place and have another 20 openings to walk into. Col ;)

michaellashinsky
michaellashinsky

Jobs did listen to subordinates, and was a very good listener. If a lowly engineer came to him with an idea or issue, he listened, and took that information into his decision making process. (Or so I have read.)

CharlieSpencer
CharlieSpencer

"It is time to stand against this and demand that if exec salaries are enormous for high performance reasons, then for low performance they should take a part of the risk also." Who do you propose to stand against? Boards of directors approve CEO salaries on behalf of companies' owners. Why should anyone who is not a shareholder have any say in how much an executive, who is an employee of the shareholders, receives in compensation?

CharlieSpencer
CharlieSpencer

The next response I see from John will be the first.

spawnywhippet
spawnywhippet

I am both a shareholder and an employee, as are many hundreds of thousands of other people. Unfortunately that does not give me the ability to set their salaries or have any say in the matter, as this is done by the self-serving board themselves, not the shareholders...

CharlieSpencer
CharlieSpencer

Shareholders elect board members. If you want to vent, no problem. If you want to make changes, you'll have to be a more active owner. Attend shareholder meetings. Meet your fellow shareholders. Discuss the issue of CEO salary with them. Nominate a board member candidate who supports your position.

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