Joe Nocera is one of the business columnists I respect most. So it’s rare that I find myself in strong disagreement with his take on an issue. But his blistering column about why he thinks Hewlett-Packard really got rid of CEO Mark Hurd is one of those instances. And since things in the New York Times have way of becoming conventional wisdom, I think it’s worth explaining why his theory is almost totally improbable.
To be clear, I’m not defending the HP board or Hurd. As Nocera writes:
“In fact, the directors should be called out for acting like the cowards they are. Mr. Hurd’s supposed peccadilloes were a smoke screen for the real reason they got rid of an executive they didn’t trust and employees didn’t like.
The stand-up thing would have been to fire Mr. Hurd on the altogether legitimate grounds that the directors didn’t have faith in his leadership.”
I agree with that statement as written. And yet, I don’t agree with its larger implication. Yes, HP’s board is looking more and more like craven weasels every day. And they’re digging their own hole by not coming out with a plausible explanation for why Hurd was really ousted. I agree with Nocera completely on that point.
(As an aside, it seems the board is waging it’s own battle of counter spin by leaking at least one version of what happened to the Wall Street Journal this weeked. I’ll come back to this story at the end.)
While we don’t know exactly what Hurd did, it’s clear he did something. He had some kind of relationship with Jodie Fisher that went beyond professional but stopped short of sex. And whatever it is, he clearly shouldn’t have done it. He put himself in this pickle and has only himself to blame for that. And like the board, Hurd is also not explaining himself to the world, though most likely his separation agreements contains a non-disparagement clause of some kind. While telling the truth and stating the facts ought not to be considered disparaging to anyone, even if it makes them look bad, no doubt HP lawyers would use anything as grounds to recoup the $40 million or so that the board is paying Hurd to go away.
So where does Nocera go wrong? It’s with his conjecture on what the board’s real motivation was. In a nutshell, Nocera is arguing that the board secretly has disliked Hurd for years, in part due to his power play during the HP spying scandal. In the recent book, “The Big Lie: Spying, Scandal and Ethical Collapse at Hewlett-Packard,” former BusinessWeek writer Anthony Bianco claims Hurd was really the main actor, but managed to pin the blame on board chair Patricia Dunn.
Nocera then goes on to note that employees detested Hurd, citing an internal survey in which two-thirds of HP employees said they would bolt the company for another if they could find a similar job. Nocera writes:
“Then there were the company’s employees. The consensus in Silicon Valley is that Mr. Hurd was despised at H.P., not just by the rank and file, but even by H.P.’s top executives.”
So here’s the leap Nocera wants us to make: After several years of massive layoffs, savaging the HP way, and not being a nice guy, the board was looking for an excuse to ditch him. In essence, Nocera wants us to believe that all of the sudden, the board of HP developed a conscience.
When you look at it like that, you realize this theory is nonsense. First, let’s remember this is, in fact, just Nocera’s theory. Like all of us on this story, he’s on the outside looking. He doesn’t point to a source or an internal memo or anything that bolsters this theory. He mainly relies on conversations with ex-HP workers, who not surprisingly despise Hurd.
Next, the Mercury News has reported that Hurd and the HP board were in negotiations for a new contract until the sexual harassment allegation hit. That would seem unlikely if they really wanted to force him out somehow.
But the part of this that I have the hardest time swallowing is that all of a sudden HP’s board suddenly started caring about what employees thought of Hurd. After all, in its various configurations over the past decade, the HP board has signed off on the mass firings of more than 94,000 employees. This was part of a deliberate strategy to reinvent the company that was launched by ex-CEO Carly Fiorina and perfected by by Hurd. Here’s what I wrote on this subject back in June, when Hurd announced another 9,000 layoffs:
“It’s a ruthless, brutally effective strategy launched under former CEO Carly Fiorina and practiced with precision by current CEO Mark Hurd. Without question, the strategy has transformed HP from being the sickly also-ran at the end of the last century to its present position of dominant front-runner.”
The other side of this strategy is the $45 billion that HP has spent on acquisitions under both Fiorina and Hurd. The most recent of the deals was the acquisition of Palm, but HP is still digesting numerous others, including 3Com and the much larger EDS. To one degree or another, these deals were orchestrated by Hurd as part of a relentless march that increased the overall number of employees at HP from 88,000 (pre-Compaq merger) to more than 300,000 (current employment after layoffs).
Many of these most recent acquisitions remain very much works in process. There are complex integration and strategic issues to be worked out. Hurd, though rightfully dinged for being less than a visionary leader, still obviously had some strategic and operational plan in mind for all of this. And no doubt he communicated that to other executives. But he had developed a strong track record for pulling all of these things off. His successor will have to not just lead HP forward, but sort out this massive integration puzzle. HP’s board would be seriously crazy to jettison the architect of all this in midstream without a darn good reason.
Even worse, the HP board got rid of Hurd at one of the most dynamic and challenging times in the industry’s history. As a result of all the mergers and acquisitions by HP and others in recent years, the competitive landscape has completely shifted. HP now finds itself in direct competition with Oracle (thanks to the Sun Microsystems deal) and Cisco Systems (now that HP has gotten into networking via its 3Com acquisition) while at the same time the company is taking on IBM even more directly in the services market (thanks to the EDS deal).
That’s a lot for any new CEO to walk into. Plus, let’s not forget the company now probably needs to hire a new board chair and president. After this, it would smell bad if they don’t break all of those jobs up. When the board says all is well, carry on, well, I can’t believe they’re really that delusional.
For all these reasons, though, I think Nocera’s theory is just plain wrong. I admire him taking a strong stand and delivering a strong critique on the board’s handling this. But his reason for doing so is off base. When Nocera refers to “the real reason they got rid of an executive they didn’t trust and employees didn’t like,” the truth is that we still don’t know what that reason is.
Finally, a word about the Journal story today. The story relies on a source who claims the board was angry about Hurd’s settlement with Fisher, which supposedly short-circuited their own investigation and caught them off guard. I have a hard time buying that the board didn’t know Hurd was talking to the woman about settling, but I suppose it’s possible. But for me, the story boils down to this sentence:
“The account of thinking at the board—which has faced criticism to the effect that it rushed to judgment and that the ouster wasn’t warranted—contrasts with an account given by someone familiar with Mr. Hurd’s thinking.”
In other words, it’s “He said, She said.” And it still feels like we’re not closer to knowing the real story here.
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