*NEWS*HP:CEO WOUNDED BY DIVIDED ATTENTION

[Anonymous]

At Hewlett-Packard, a Chief Wounded by Divided Attention
PALO
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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September 27, 2006 at 10:36 AM