Former HP CEO Fiorina Derailed by Failing to Learn Importance of Trust

Rob Enderle

Carly Fiorina, HP's ex-CIO, is positioning to run on the Republican ticket for one of California's Senate seats in the upcoming election.

 

Opponents are using HP's reported sales through distribution to Iran during her tenure as CEO to challenge her integrity and compliance with the U.S. embargo against that country. While a CEO can, and sometimes is, held accountable for subordinates' actions, it is unlikely Fiorina condoned or even knew of the sales to Iran.

 

She will have trouble winning the ticket for other reasons, which we'll cover below, but the Iran trafficking charge shouldn't stick except as a pointer to the real problem. I covered HP deeply during her tenure and found her to be capable, but apparently unwilling to face an obvious shortcoming. In my opinion, Fiorina's real problem is she hasn't been a team player.

 

Iran Sales

I spent some time talking to a large number of Middle East distributors in Dubai some months ago about sales to Iran. It seems it isn't uncommon for distributors to sell into that country from Dubai and other parts of Eastern Europe to increase their sales volume and profits. The embargo is not something they generally feel applies to them and it appears, because of the embargo, goods going into Iran can command a higher price, so there are substantial incentives for distributors to go around the embargo.

 


Companies like HP generally don't monitor distributors very tightly and generally don't appear well equipped to enforce embargos in the channel. I'm not aware of any allegations that HP sold to Iran directly, only through distribution, and large companies just are not staffed or equipped to micro-manage their distributors worldwide.

 

In addition, the handling of distributors is not a CEO function. In rare cases, very large distributors might be invited to meet with the division head of a company like HP, but the only real reason to meet with the CEO would be at an event opening up the region or as part of a sales outreach effort -- and even then it would likely be en mass and social, not business-detail related.

 

These relationships are managed reasonably far down in the organization from the CEO, and even the HP employees directly responsible for the relationship wouldn't be given an incentive to aggressively look for sales in Iran. Compensation tends to be tied to sales volume, and being aggressive about the embargo or simply being too nosy would tend to push distributors to other vendors. Many distributors in the region (Eastern Europe and the Middle East) are ex-smugglers left over from the Cold War and are not exactly the easiest to audit, in any case.

 

Political Aspirations

One of the primary reasons Fiorina was at odds with her board was due to her extracurricular political activities in support of George Bush's election. She spent so much time on the campaign that she was neglecting her duties and had planned for a role in the Bush government (initially she was put forward to run the World Bank as a stalking-horse candidate). This not only took her eye off HP, but would have made any business with Iran massively counterproductive to her political goals.

 

At that time, given her political goals were putting her job as CEO at risk, it would appear clear that her priorities were to gain a future job in politics, not to maximize HP's revenues or profits. This means that trading HP income in exchange for her political future would have been unacceptable, and she would have stopped sales to Iran and done so visibly to protect that political future.

 

Still Unlikely to Win Senate Seat

Fiorina has a recurring problem, however, that should prevent her from being elected: an unwillingness to be a team player. This unwillingness cost her the job at HP, prevented her from getting the initial appointment with the Bush Administration, and got her kicked out of the most recent political campaign. In hindsight, she might have been a better VP candidate than Sarah Palin, but clearly the decision didn't go her way.

 

With HP, the problem became evident in the way she treated her staff, focused on the Bush campaign rather than her CEO job and refused to take direction from her board. During her tenure at HP, she did not take care of her supporters and they, in turn, stopped taking care of her. I've been led to believe that suddenly losing her chief marketing officer, Allison Johnson, to Apple was the final straw for the board and that triggered Fiorina's firing. Johnson had been Fiorina's biggest and most capable cheerleader, but the relationship had failed, and the result was clearly both surprising and painful.

 

Fiorina's untimely termination made her a poor choice for a presidential appointment, and the Bush administration knew that the first candidate for the World Bank likely would be rejected and so put her forward. She was rejected and the preferred candidate was given the job.

 

Fiorina was given a second chance with the McCain campaign and was one of the most visible surrogates for McCain in the media until she decided to go off script and put forth a personal position on an important women's issue. This blindsided McCain, and she lost that position as well.

 

The recurring theme is the inability to be a team player who supports either her subordinates or the people she works for. To get elected, she will need the support and trust of the Republican Party and, given her background, it is unlikely to be willing to trust her. Given her past practices, even if she were trusted, she likely would betray that trust before the election anyway.

 

In business or politics, trust is an important currency to acquire and to spend wisely.

 

Wrapping Up: The Importance of Being a Team Player

Good executives and CEOs learn early that you support those you report to as well as those who report to you. If you do that well, chances are they will support you when you need it. If you don't, both likely will start hunting for your head. While I've seen a lot of CEOs and executives manage to dance for a while, eventually they make a mistake and get shot out of a company like a cannon, often thinking they were treated unfairly. Strangely enough, the people around them that caused the decision likely felt the same way.

 

There is a good lesson here: Take care of those around you and they'll take care of you. Don't take care of them and they'll still take care of you -- but the words "take care of" will have an entirely different meaning. Carly Fiorina's example is that our futures depend on others. When we forget that, our future is at risk.



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