Toner News Mobile Forums Latest Industry News *NEWS*HP:CEO WOUNDED BY DIVIDED ATTENTION

Date: Wednesday September 27, 2006 10:36:00 am | Views: 126
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    At Hewlett-Packard, a Chief Wounded by Divided Attention
    ALTO, Calif., Sept. 22 — Mark V. Hurd sat at the head of the table in
    the Hewlett-Packard boardroom, the room that had been the source of
    leaks and the starting point of a misguided and ultimately embarrassing
    attempt to plug them.Mr. Hurd, the chief executive, had wanted to talk
    about the transformation inside Hewlett-Packard, how it was becoming a
    lean Silicon Valley growth company instead of a cash cow content to
    thrive on the high profit margins of its ink and toner cartridges.But
    instead, in his first public interview since the spying operation was
    revealed in early September, Mr. Hurd needed to talk first about the
    spying investigation that has sullied the company’s reputation as well
    as his own.“This is just a horrible thing that has happened,” Mr. Hurd
    said Wednesday afternoon, his rimless glasses perched on the end of his
    nose, “and we have to fix it.” He echoed that sentiment in a news
    conference on Friday at which he expressed regret and then apologized
    for the actions of company investigators and the detectives they
    hired.Mr. Hurd also apologized for his own inaction. As shocking as it
    has been to hear the methods used — obtaining private phone records, or
    trying to plant tracking software on a journalist’s computer — it is
    almost as surprising that Mr. Hurd sat on the sidelines while the
    company’s Clouseaus drew up plans to infiltrate newsrooms with spies
    masquerading as secretaries or janitors.Mr. Hurd, 49, is known as an
    operations expert who asks lot of questions. “Mark is very rigorous on
    operational details,” said Shane V. Robison, an executive vice
    president and chief strategy and technology officer. “He knows what to
    ask and he knows when to step back and listen,” Mr. Robison said in an
    interview in late August before the furor erupted.At least twice when
    he had the opportunity — at meetings in July 2005 and in March 2006 —
    Mr. Hurd failed to ask critical questions about the methods in the leak
    investigation.But some people close to him suggest — though they do not
    know for certain — that he failed to focus on the leak investigation
    partly because he was focused on getting the company fixed and partly
    because he regarded the search as the project of Patricia C. Dunn, the
    chairwoman.At Friday’s event and in the interview, Mr. Hurd chose not
    to explain that inattention.
    “He said nothing in effect, but he said
    it very well,” said Charles Wolf, a securities analyst who follows
    Hewlett-Packard for Needham & Company. Mr. Hurd may explain more
    when he testifies Thursday at a House subcommittee hearing.The mood
    inside Hewlett-Packard grew more apprehensive in midweek after Mr.
    Hurd’s name surfaced in documents about the spying operation. And a few
    corporate governance analysts have wondered whether he might become a
    victim of the scandal, like Ms. Dunn, whom he succeeded as chairman
    after her resignation from the board on Friday.But what has won him the
    benefit of the doubt within the company and among investors is that he
    has done so well fixing the company. He was transforming NCR when he
    was hired in March 2005 to take on the task of righting
    Hewlett-Packard.At the time, most analysts and investors said its best
    days were behind it. But the stock has risen 77.4 percent as he cut
    costs, restructured operations, hired more salespeople and pushed
    employees to find new opportunities for growth, like commercial
    printers, energy-saving blade servers and software to manage data
    centers.“He doesn’t promise much, but he’s delivered five quarters of
    upside surprises,” Mr. Wolf said.The reason Wall Street remains
    enamored of him and the company is what Mr. Hurd has done with a
    business model that employees have taken to calling the Triangle, a
    regular feature on company whiteboards and PowerPoint presentations.On
    one corner is Efficiency. At first that meant reducing headcount.
    Shortly after Mr. Hurd arrived, he announced that the company would
    shed 14,500 employees, or about 10 percent of its work force, for about
    $2 billion a year in savings. But he is not done cutting. The company
    continues to find places to cut costs, like disposing of some of its
    real estate.On another corner is Capital Strategy, which is the $16
    billion Hewlett-Packard has hoarded.On the third corner is Targeted
    Growth, which is where the savings and the cash hoard are spent.Growing
    animated when the Triangle was mentioned, Mr. Hurd said, “It’s not
    rocket science.” But as for execution, Mr. Robison, the chief
    strategist, said, “You have to do all three at the same time, and that
    is really hard.”The point Mr. Hurd makes to employees is that cutting
    costs is not enough. “Management’s job is to explain that cost-cutting
    and growth are not two things,” he said. “They are really one thing.”A
    good example is Hewlett-Packard’s data centers. It had 85 of them
    spread around the world. The company is building six of them in two
    cities to handle all the data processing. It will close the existing
    centers, sell the real estate and lay off more employees to save $1
    billion.Lower personnel and operating costs free up money to develop
    the software and equipment that will make the centers more efficient.
    But there is also a growth opportunity, because Hewlett-Packard will
    sell similar data centers to other companies that also want to cut
    costs.Knowing that cost-cutting and growth are the same objective helps
    to cushion the pain of never-ending cost-cutting. “The person knows we
    aren’t just taking costs out, we are helping the company grow,” Mr.
    Hurd said. “The employees have to know the plan. Then it is a different
    attitude. They want to be on a winning team.”“That’s what’s so horrible
    about the current situation,” he said, returning to the spying scandal.
    “They want to know they are making progress. The people in the company
    are working very hard. We’ve done some tough stuff. I don’t want to
    forget we took 15,000 jobs out of the company and told a lot of
    employees to go home and tell their families they that no longer have
    jobs.”The concept could be an important model for any aging behemoth —
    think of Ford, Coca-Cola or Time Warner — that wants to grow but needs
    to cut first. He has been at it less than 20 months, and not everyone
    thinks it can be sustained.“The jury is very much out on whether Hurd
    has made any notable progress on growth yet,” said A. M. Sacconaghi, a
    securities analyst with Sanford C. Bernstein & Company. “That is
    his next big challenge, and materially boosting revenue growth on a $90
    billon company will be much tougher than cutting costs.”The
    distractions of the spying scandal are certain to test the
    concentration of the company’s top executives. But those who have known
    Mr. Hurd say they think he can keep morale at the company high.Dipak C.
    Jain, the dean of the Kellogg School of Management at Northwestern
    University, who has known Mr. Hurd for more than a decade, said his
    style was not to bully or humiliate his lieutenants. “People don’t get
    intimidated working with him,” Mr. Jain said. “He believes that if
    people get intimidated, their best doesn’t come Mr. Hurd recognized,
    for instance, how anxiety-ridden top executives become when they
    discuss the current quarter. “They get defensive,” he said. So when he
    arrived at the company in 2005, one of his first management meetings
    was about 2010. “We would take the short-term emotion out of the
    equation and work backwards,” he said.At the same time, he is not
    bothered by people who say Carleton S. Fiorina, the former chief
    executive and chairwoman, should get some credit for the company’s
    current success. “I don’t look at things as binary,” he said. “It just
    needed a bit of crystallization.”There is another aspect of his
    management style that may account for the paradox of his success in
    running the company’s business and his failure to stop the managers
    overseeing the detectives from getting so far off track. Mr. Hurd
    trusts his executives to make decisions.He said he discovered after he
    arrived at Hewlett-Packard that he was being asked to make too many
    decisions. For instance, he was mediating disputes between the computer
    division and the printing division, which shared a sales force. He tore
    up that matrix system of management and made division executives
    responsible for their own sales.Pushing down responsibility and
    accountability develops products faster, gets them to market faster and
    makes for more satisfied customers, Mr. Hurd said. That new structure
    freed Vyomesh Joshi, executive vice president for the printing
    division, to invest heavily in new areas — like the online photo
    service Snapfish, copiers, commercial printing and a teleconferencing
    service called Halo — that have added $1.3 billion in revenue over 12
    months.Does distributing responsibility have another cost — more
    detachment from the oversight by the chief executive? It is another
    unanswered question. But as Mr. Hurd explained a sketch about
    bureaucracy and how information is shared in an organization, he noted:
    “The problem isn’t at the bottom. It is near the top.”He says he thinks
    a lot about process. To help repair the damage from the scandal, he has
    appointed Bart M. Schwartz, a former federal prosecutor, to examine the
    company’s process for investigations.“We are working as hard as we can
    to get through this,” Mr. Hurd said Wednesday. 

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