How Mark Hurd Wins for HP: Lessons That Should Be Learned but Often Aren't

Rob Enderle

One of the things I've personally been fascinated about is the high variance in the performance of CEOs. Even though many get massive compensation plans, few seem to do much for their companies, which languish under them. Mark Hurd is one of the exceptions and I've spent some time over the years talking to those who report to him and watching his decision process.


By way of background, I was in IBM's grooming program for executives myself. I had the responsibility of profiling competing executives, and also documented in detail that company's collapse in the 80s, which led to the only firing of an IBM CEO. I also covered the fall of Carly Fiorina, Mark Hurd's predecessor, and predicted her termination some time before she was asked to leave HP. Ever since, largely by watching the performance of CEOs, I've been able to accurately forecast sharp downturns for companies like Intel and Netscape.


In the end, there is no single person (except perhaps a founder working behind the scenes) that can have a consistently bigger impact on a company than a CEO.


Tactical vs. Strategic


One of the problems with a hired gun CEO as opposed to a founder like Michael Dell or Bill Gates is the inability to move strategically. This is often more a problem with the compensation program associated with the CEO than with the executive. Compensation programs, which are typically a combination of salary and stock option grants, generally focus the executive on tactical, short-term performance. Founders, on the other hand, appear more interested in ensuring the long-term survival of the company and are more willing to sacrifice the short term for long-term market leadership; their interests are more closely tied to the survival of the company.


In comparing Mark Hurd to Louis Gerstner, the hired gun CEO credited with turning IBM around, you find that both did large layoffs to bring costs in line with revenues and keep the financial analysts happy. But, when it came to investing in infrastructure, which would increase short-term costs but not provide real benefits for some time, only Hurd made the investment. IBM has lost its leadership position in the market largely because Louis Gerstner did not, and now IBM has lost the agility it needs to effectively compete with HP, which is reporting near legendary financial results.


All this before much of the change that Mark Hurd has started has been fully implemented, suggesting that HP will continue to accelerate and IBM will continue to drop behind. The big problem for IBM now is that investing in infrastructure would only cause it to drop behind faster near term -- and Sam Palmisano, the current CEO, might not survive the effort.


While HP's businesses are all solid, there are questions about whether any of IBM's x86 business, from workstations to servers, will be around much longer. IBM, to meet short-term cost objectives, divested itself of its PC division. HP, pressured to do the same by financial analysts, retained its PC division, which now is the second-fastest growing division, after software. The economies of scale it is contributing to servers and workstations is putting pressure on everyone else in the segment; even the historically faster-moving Dell has been surprised by HP's speed.


Form vs. Substance


One of the biggest problems with an executive moving up in a company is the need for credit. Getting credit is what allows an executive to move up but, once you get to be CEO the rules change. Few seem to realize this. Carly Fiorina failed because she wasn't properly groomed for the CEO role and didn't understand the rules. As a result, she tried to turn herself into a superstar and lost track of the fact that at some point she would be held accountable for the lack of solid results.


This isn't to say she wasn't brilliant. She lacked the ability to assure that the people below her both got credit for the good work they did and were managed so they couldn't fail or, if they couldn't perform, didn't remain in the job.


Mark Hurd lets his executives take the credit for their work and doesn't spend his time focused on public events, press interviews, or other things that place his face solidly over the performance of the company. As CEO, he gets that he'll get credit for the success and be held accountable for any failures without this extra effort. He also seems to understand that if he doesn't assure his direct reports' success, he can't be successful himself.


He appears to spend a great deal of time learning the operations of his subordinates and making sure they can address any concerns he has. While the common comment by Carly Fiorina's subordinates was that she was smart but lacked any understanding of the business, those that surround Mark Hurd indicate he is fair but difficult to work for, not because he is hostile, but because he seems to always know where the bodies are buried and isn't easily fooled.


He holds his people to a high standard that he aspires to himself, and the company results reflect this focus. This practice seems to result in an inordinate amount of loyalty; the kind of behind-the-scenes backstabbing that seemed to surround Fiorina isn't visible under Hurd. While HP is still plagued by a massive amount of bureaucracy and an unacceptable number of turf wars, these are vastly reduced under Hurd, who remains focused on eliminating them and has produced solid progress.


Wrapping Up


I think one of the problems we are seeing with businesses now is the lack of mentoring. This is particularly noticeable at the highest ranks. CEOs often don't seem to have a clue with regard to what their companies do and seem to be making increasingly panicky decisions to keep people from asking whether the emperor has no clothes.


HP is executing well because its CEO is focused on being a CEO, not on being a CMO, CFO, or COO with more authority. He lets his people take the credit for their efforts, understanding that he will share that credit and, in aggregate, get more of it naturally if the company succeeds.


For HP, the trick will be to continue to realize that once on top you can't kick back and rest, that companies like Acer and Lenovo are coming up very rapidly, and that Dell has its founder back -- and founders have a natural advantage that is starting to emerge, as Dell appears to be improving sharply as well.


The lesson here is that at any level in a company, mixing experience, execution, making sure credit goes where it needs to go, and taking care of those who take care of you can almost always assure success. Mark Hurd currently is the leading example of this and well worth watching.

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Add Comment      Leave a comment on this blog post
Nov 23, 2007 3:05 PM Pedro Soto Pedro Soto  says:
The Real Truth?Mr Rob EnderleIn Cisco Executives in Brazil Jailed: Cause Could be Brazil Corruption not Cisco Wrongdoing you made some statements about Brazil. Do you keep them? Or is another Lesson That Should Be Learned but Often Isn't? I believe that U.S. Justice Department must take action.RegardsPedro Soto Reply

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