CEO 101: Following HP's Apotheker, Yahoo's Bartz and Google's Page

Rob Enderle
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I've been following CEOs since the early 90s and actually was in IBM's executive training program while employed there. Most executives that get the job seem poorly trained for it and much like the job of president seem to spend much of their first years learning the ropes or dodging responsibilities they don't like. CEOs appear to fail for a variety of reasons: poor preparation for the job, mismatched skills, bad measurements, and/or an attitude of them versus me with regard to employees and/or investors, which often has its roots in horrid compensation programs.


Right now, HP's Leo Apotheker is doing a number of things right, Yahoo's Carol Bartz is doing a number of things wrong and Larry Page is demonstrating a bit of both.


Let's talk about CEOs this week and what should be in CEO 101.


Carol Bartz and the Three Envelope Joke


There is a joke that I was told a long time ago about a new CEO meeting his predecessor for the final meeting. This now-fired CEO handed his successor three numbered envelopes and told him to open one each time things got bad. Well things were already bad, which is why the new guy got the job, and so he opened the first envelope, which said, "Blame the last administration." So he did, which took the heat off him for a while, but the firm still didn't recover so he opened the second envelope, which said, "Do a massive restructuring." So he did and problems were blamed on the restructuring, but the company still wasn't doing well. In fact, things were as bad as they had ever been so he opened the last envelope and it said, "Prepare three envelopes."


Carol Bartz at Yahoo appears to have taken this joke as a to-do list because she appears to either be constantly blaming others (most recently Microsoft) for Yahoo's failure to meet financial expectations or doing large-scale layoffs or restructuring to create the impression that she is actually making progress. I think at the core of this she is simply trying to cover up that she still doesn't fundamentally understand the business she is in, and the skill set needed appears to be closer to that of a magazine publisher than it is the expertise she brought to the table, which was that of a packaged software company. AOL seemed to show the way when it bought The Huffington Post, though that purchase is clearly undergoing its own pain. The skills match is closer, but the problems seem to have more to do with cultural conflicts commonly found in a large merger.


But Yahoo's board didn't just mess up the selection, it messed up the compensation, which is why Bartz ranked toward the top on highly paid, but underperforming CEOs. She is hardly alone: Forbes covered this a while back and it is common to increase a CEO's pay while cutting staff. The issue with this is that it puts the employees and the CEO at odds and makes it appear that the CEO is only in it for himself, which is horrid for morale and company loyalty. The practice makes it less likely that the firm will succeed. Granted, the CEO is paid more, but he or she is more likely to leave the job as a failure, and most folks who seek this job highly regard status and the money isn't a good replacement for the title and power. So it is arguably foolish all around. Now Yahoo's only hope may be if Microsoft once again moves to buy the company. Microsoft has the skill set, but Yahoo burned the company so badly the last time that I doubt it'll be willing to dance again.


Apotheker Image and Loyalty


Contrast what Bartz did at Yahoo to what Apotheker has done at HP. One of his first acts was to restore benefits and salaries to the rank and file at HP, which Mark Hurd, his predecessor, had stripped. While this action would adversely impact Apotheker's short-term financial performance that is focused compensation, it sends a statement to the employees that they are important and that his agenda, unlike his predecessor's, isn't to benefit from their loss. That builds loyalty and helps put the employees and the CEO on the same side.


However, the big lesson is his recent hiring of a new CMO. There are two best practices in play here: One is that a CEO needs people loyal to him who are in critical positions in the company, and the other is he needs to be able to protect and manage the company brand.


While some will argue that bringing on your own team will alienate the existing managers-which can be true-the fact that the board went outside the company for the CEO generally results in alienation anyway. Most of Apotheker's predecessors didn't do this and while Hurd largely weathered this mistake, Carly Fiorina was largely betrayed from inside. Any leader needs to know that critical roles inside the company are loyal to him and will follow direction, not just give lip service while undermining in private. Apotheker's plan, which is vastly different than Hurd's, is to run HP more as a company rather than run it as a holding entity over independent divisions. For that change, he will need this loyalty.


Finally, if you can't control the image of your company, it makes no difference how good you are at your job, you will be poorly reviewed. Microsoft lost control of its image in the 90s and just recently made major staffing changes to correct that mistake. Like Microsoft, HP is consolidating marketing control somewhat under the new CMO so that Apotheker can better maintain the value of the corporate brand and company image, and better assure that third parties see HP's efforts as successful. This is something Google still has to learn.


Larry Page Drifting to HP or Yahoo?


Google's brand has degraded badly and largely because Eric Schmidt did little to maintain it. Now if you search "evil and Google," the top results suggest that the two have become synonymous and this showcases a lack of investment in protecting and maintaining the brand. It is a marketing problem and Google, at least from the viewpoint of corporate marketing, doesn't appear to get this and it is drifting farther and farther toward regulation as a result.


On the positive side, Page is addressing what is often the first thing employees want addressed by a new CEO: a firm's inability to act. Google under Schmidt apparently became excessively bureaucratic and getting things done became more and more difficult. Page is moving to streamline organizations and make them better able to function, but he may be making a classical mistake.


Often, when a new CEO takes the job, he fails to give up his old one. A company needs to be balanced and Page appears to be taking the engineering bias from his product job up into the CEO job and a corporation needs broad specialists, not engineers, in critical non-engineering jobs. A CEO needs to quickly understand the skills needed to do the breadth of things a firm needs and, particularly if it intends to go after social networking, needs people who understand how people function. A similar realization is why Intel now has an ethnographer as a key development role in that company. You put the wrong skills in critical jobs and the result, regardless of how good those people are, won't be a success because the job they are doing simply isn't what these folks are good at doing.


Wrapping up: CEO 101


The role of CEO is unlike any other role in the company. The CEO has to assure that all parts of the firm function and that means they need a great deal of breadth. While in prior roles he could be his own greatest cheerleader, as a CEO, he is the firm's greatest cheerleader because the two are tied together at the hip. Together, they need to develop and maintain loyalty and morale and assure the brand image of the company, which may be the firm's second greatest asset (employees are the first), and they have to fundamentally understand the business of the company. It is a people job and those who aren't good with investors, employees or customers generally don't do well.


The reason most CEOs fail starts with the board and bad skills match, poor compensation planning and/or an inability to successfully direct or manage the CEO. HP's historic CEO issues all largely started with its board and, in every case, most of the board was replaced. This is also a reminder that most boards don't survive bad practices for long.

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