Causal Analysis: How Intel’s Board Picked the Wrong CEO, a Huge Process Problem

    One of the reasons I think we’ve had so many CEOs fail in office is because, when one fails, we don’t spend a lot of time on why they were selected in the first place. This kind of analysis, looking at the cause of a mistake, is causal analysis (I think a lot of executives should have to write a causal analysis essay). It forces you to think about the stream of events that resulted in a success or failure in order to better understand it. We do a lot of this kind of analysis to understand product failures and crashes, but we don’t seem to do it when it comes to a failed job candidate. This seems a shame because, often, the reasons an employee fails are not directly related to the employee but to the manager or support structure in the company (a lack of onboarding with CEOs is a common cause of failure) and thus replacing the employee just shifts the problem and doesn’t eliminate it. Or, put differently, if you have a manufacturing line producing defective parts, throwing away the parts just reduces visibility for the problem, it doesn’t solve it. You need to fix the process to stop the production of defective parts.

    Intel’s first three CEOs were all successes (each had a full term of around 10 years). Founders Robert N. Noyce, Gordon Moore, and Andy Grove remain near legendary in the company. You could argue that Intel’s last three CEOs failed (none made 10 years), as they didn’t retire from their jobs; they were pushed out for a variety of reasons. That suggests the problem isn’t just the people, it is the process Intel uses to select them. What was particularly interesting, or sad, depending on how you look at it, was that Grove (I’ve met with him a number of times over the years) thought Craig Barrett was a mistake and Paul Otellini the right man for the job (suggesting Intel’s board was the problem). As a result, Otellini’s failure might not have been a failure of the CEO but a failure of the board, which then failed again at picking a successor.

    Let’s look at the elements of CEO Brian Krzanich’s failure, why I’d argue that he was a really bad choice for CEO, and where the fault lies in the process. (By the way, it was particularly fascinating, and upsetting, to watch Krzanich force out most of his rivals and nearly every senior woman in the company (Stacy Smith, Diane Bryant, Kim Stevenson, Renee James, and Deborah Conrad, who had just buried a husband and fought off cancer while still performing well as CMO).

    Decision Maker(s)

    When you look at Intel’s board, it appears to be mostly made up of personal friends of the chairman, Andy Bryant. Bryant is an ex-Intel executive (CFO last) but lacks an engineering degree or background. In fact, the board only has one person, an academic, who appears to have the requisite background to understand Intel’s business. Most of the rest are bankers or from industries that use Intel-based products but that don’t buy directly from Intel. Full analysis of Intel’s board is here, but it showcases a distinct lack of the critical skills typically necessary to run a microprocessor manufacturing company. There is a lack of skills in the board in either Intel’s existing business or where the company wants to expand.

    As a committee or individual, if you don’t have the critical skills needed to understand a job, you can’t prioritize well what you need in a candidate. More important, as the hiring authority, you’d want to understand why the last two CEOs failed before you selected the next one.

    Sequence of Events

    Based on what I’ve been able to find out and then using conjecture to fill in the blanks, I believe the likely sequence of events for this latest CEO mistake was as follows.

    Intel’s board was under pressure for the firm to expand into new markets. PC sales were slowing, and it was PC volumes that kept Intel factories, called Fabs, in near full production. If production fell off far enough, Intel would flip into the red and likely not recover, so the board was in a near panic to fix the problem.

    Intel’s division, run by Krzanich, focused on these new markets, was struggling, as were Intel’s recent acquisitions. Someone, likely Krzanich himself, was able to convince Intel’s board that this failure wasn’t a failure in management but a failure in adequate resourcing. I expect Otellini was likely considering firing Krzanich for lack of performance. Instead, Krzanich flipped the table, causing Otellini’s early retirement.

    The board, wanting to hedge its bets, put Krzanich and James in as a team, though Krzanich seemed to force James out pretty quickly after the dust settled (James was a business expert and has since moved on to a startup).

    The alleged affair that resulted in Krzanich’s termination preceded his CEO selection and should have been discovered during due diligence. The fact that it wasn’t again showcases that the Intel board was out of touch and Krzanich’s lack of disclosure created severe integrity problems (he should have been fired prior to becoming CEO). It is interesting to note that the story being told about how the affair was discovered indicates that it was shared as a confidence between friends and one “friend” turned Krzanich in to security. This would indicate an extreme lack of loyalty or respect for Krzanich in the rank and file at Intel.

    Given what now appears to be a rather severe lack of integrity, extreme discrimination against women, poor judgment, lack of leadership, and apparently extreme abusive behavior, Krzanich should have never been a manager at Intel, let alone the firm’s CEO.

    Something is severely broken in Intel. I believe it begins with Intel’s board.

    Wrapping Up: Intel Needs a New Approach

    What is that definition of insanity again? Oh yes, “doing the same thing over and over and expecting different results.” With three failed CEOs in a row, maybe it is time to take a different approach, and just maybe, it is also time to have a board that has interests in line with Intel’s own.

    If folks don’t know what they are doing at the top, that doesn’t bode well for the firm’s customers, investors or employees. Something to think about this holiday weekend as the word “Independence” is likely getting a very different meaning for Intel’s customers this year. Until Intel fixes its board, it is unlikely to even know where to look for a new successful CEO, let alone hire one.

    Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm.  With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+

    Rob Enderle
    Rob Enderle
    As President and Principal Analyst of the Enderle Group, Rob provides regional and global companies with guidance in how to create credible dialogue with the market, target customer needs, create new business opportunities, anticipate technology changes, select vendors and products, and practice zero dollar marketing. For over 20 years Rob has worked for and with companies like Microsoft, HP, IBM, Dell, Toshiba, Gateway, Sony, USAA, Texas Instruments, AMD, Intel, Credit Suisse First Boston, ROLM, and Siemens.

    Latest Articles