Toner News Mobile › Forums › Latest Industry News › *NEWS*SHOULD CEO’S TELL THE TRUTH ?
- This topic has 0 replies, 1 voice, and was last updated 9 years, 8 months ago by Anonymous.
-
AuthorPosts
-
AnonymousInactiveShould CEOs tell truth about
being in trouble?
Carly Fiorina’s refusal to admit
she was in trouble is no secret.Two weeks ago,During a meeting with
journalists at the World Economic Forum in Davos, Switzerland, the now-ousted
chief executive of Hewlett-Packard said her relationship with her board was
“excellent.” Rumors were swirling that H-P directors were unhappy with the
company’s financial performance, but she insisted that “since the merger (of
Compaq Computer and H-P in 2002), our competitive performance has improved in
every dimension.”H-P directors may not have been pleased
to hear that Ms. Fiorina thought everything was hunky-dory. They had already
told her she had to open up the office of CEO and give more day-to-day authority
to several operating executives. Last week they asked for her
resignation.What should a CEO whose company is
rumored to be in trouble and whose tenure may be on the line do or say? Is it
suicidal to admit publicly that things haven’t gone as expected and own up to
mistakes? Or should business leaders always appear confident, even
invincible?“No CEO who is still leading a company
and serving customers can announce publicly, ‘I’m just about out of here,’ ”
says Jim Citrin, a managing partner of executive recruiter Spencer Stuart. “But
the first job of any leader is to define the real situation he or she is in. If
you are on thin ice and asked about that, you might say ‘My job is to drive
value, and we’re not doing that as well as we can, so I’m going to try to do
whatever it takes.‘ “
But admitting weakness doesn’t come
naturally to most CEOs. So many are surrounded by subordinates who want to
please them that all they ever hear is “everything you are doing is right.” When
problems do arise, they often blame others, producing a culture of fear that
further stifles frank feedback. When H-P badly missed its fiscal third-quarter
financial projections last August, for instance, Ms. Fiorina fired three top
executives.Taking responsibility can pay off,
though. In October 2000, five months after she took over as president of Xerox,
Anne Mulcahy bluntly told Wall Street analysts that the company’s business model
was unsustainable. Her challenge, she said, was to radically restructure,
abandon Xerox’s reliance on its aging copier-machine business and stave off
bankruptcy. Within hours, Xerox’s stock fell 60 percent. “Some (Xerox) people
had warned her that the market would react badly, but she wanted to be candid
about the situation we were facing,” says Christa Carone, a Xerox
spokeswoman.Ms. Mulcahy also traveled to numerous
Xerox sites to talk with employees. “She looked people in the eye and said,
‘This is going to be one of the most stressful situations of your life, so if
your heart isn’t in it, please don’t stay,’ ” says Ms. Carone. To stay solvent,
Xerox eliminated profit sharing and outsourced half of its manufacturing,
shrinking its work force 41 percent to 58,000. But under Ms. Mulcahy, who is now
chairman and CEO, the company has also cut debt in half, moved heavily into
digital products and increased cash flow from zero to $1.5 billion at the end of
2004.Just because CEOs own up to
difficulties, though, doesn’t mean they necessarily get to keep the top job. As
head of Electronic Data Systems, Richard Brown had a tough time in 2002, when
the company was hammered by the bankruptcies of WorldCom, United and US Airways.
When the company missed its third-quarter earnings forecast, he took it hard.
“You feel a pit in your stomach and like a failure,” he said then. But he also
said, “I own this problem.”He was surprised when, early in 2003,
his board asked him to resign, according to a person familiar with the
situation. (Mr. Brown couldn’t be reached for comment.) One reason for his
ouster: He apparently didn’t seek help from directors to create a turnaround
strategy, and thus didn’t have their allegiance.“No one can be a master of the
universe,” says Roger Enrico, former chairman and CEO of PepsiCo, who was among
the EDS directors who asked Mr. Brown to resign. The most effective business
leaders, says Mr. Enrico, who is also a director at Target, Dreamworks and Belo,
“know their strengths and their weaknesses and are very honest with their boards
about getting help.”Ken Freeman, former chairman and CEO of
Quest Diagnostics, thinks executives must be “brutally honest” not just with
directors but also employees and customers, especially when trying to turn a
business around.Earlier in his career, as head of
Corning’s TV-glass business, he had to convince employees they would lose their
jobs unless they improved quality. But he was the fourth head of the business in
as many years, “so when I went to our factory, employees figured they’d outlast
me,” he says.To make them listen, he shut the
factory for nine days and invited his biggest customers to address them. One
customer said he would stop buying Corning products in six months unless the
quality improved. “Employees who had turned their chairs away from the stage
suddenly turned around and listened,” says Mr. Freedman. Within a year, they had
overhauled manufacturing processes and solved the quality problems.The Music Stops for a Rock Star
Carly Fiorina tried to jump-start staid HP by adding a
dose of Hollywood glitz and celebrity cool. But in a post-Enron world, style
alone just wasn’t enougFeb.05 – Even in a belly-baring, hip-hugging plaid suit, singer Gwen
Stefani couldn’t save Hewlett-Packard CEO Carly Fiorina. Neither could U2’s the
Edge, Sheryl Crow, Alicia Keys, Ben Affleck or Matt Damon, who talked about his
production company’s use of HP technology and joked, “I think I’m married to
Carly, I’ve thanked her so much today.” These stars all made appearances over
the last two years during Fiorina’s public speeches, as part of an effort to
sprinkle Hollywood glitz and rock-star cool on her company, a Silicon Valley
pioneer associated more with pocket protectors than celebrity schmaltz. Fiorina
set out to prove that the high-school nerd really could hang out with the cool
kids, and for a few years, at least, it seemed to work.But
it didn’t last. The HP board of directors asked Carly Fiorina to resign last
week, ending the six-year reign of the highest-profile woman in American
business. HP’s dismal financial results provide the easiest explanation for the
dismissal: while its revenues are climbing slowly, its stock is down 50 percent
since her tenure began, and her poorly conceived and contentious takeover of
Compaq has done little to strengthen HP’s balance sheet. (The poor performance
perhaps justified the board’s particularly harsh public statement, which didn’t
contain the usual excuse of a suddenly demanding family.)But
the problem wasn’t just the substance of Fiorina’s leadership—it was also her
style. She had plenty of it. Fiorina brought panache to HP: she combined the
showmanship of Steve Jobs with a dash of Donald Trump’s ostentatiousness.
Instead of working quietly for the first few years to fix the company, she
believed that building buzz for herself—including appearances in early TV
ads—was key to re-energizing staff and exciting customers. Tech CEOs named Jobs,
Ellison and Gates can get away with this; as founders, they seemingly have more
leeway in cultivating a cult of personality. But Fiorina’s style clanged
dissonantly off HP’s wonky products and the staid corporate culture that HP
founders Bill Hewlett and Dave Packard initiated 65 years ago in a Palo Alto,
Calif., garage. Some employees loved her—but many disliked her and were no doubt
glad to see her go. Last week, interim CEO Robert Wayman told NEWSWEEK that
senior executives “were very pleased with the reaction of the employees to all
the communication. They were way more comfortable than [senior execs] had
worried they would be.”With
the benefit of hindsight, Fiorina’s outgoing approach seems like the wrong
strategy at the wrong time. But back in 1999, it was exactly what the HP board
of directors wanted. At the time, the Asian financial crisis had wrecked HP’s
bottom line and the company had missed out on the Internet boom. The board
decided that HP needed a bomb thrower. They tapped flashy 44-year-old marketing
and sales whiz Fiorina, who, one director said at the time, “has an exceptional
track record of accelerating growth in large technology businesses.” For leaving
AT&T spinoff Lucent to take over HP, they paid her $69 million in signing
bonuses and stock grants.Fiorina immediately did what she was asked to do, transforming all
aspects of the company. Along with streamlining how the company was organized,
and instituting large bonuses for sensational employee achievement, she bought a
corporate jet, a first at the company. She also placed her own portrait
alongside those of the founders in HP’s main lobby and made the infamous ads,
featuring herself, speaking in front of the garage where HP was founded—only it
was a fabricated look-alike, because camera crews couldn’t get access to the
original. Employees felt their sacred culture was being corrupted.The
new parade Fiorina tried to lead quickly began to lose followers, including her
own board. The directors endorsed a 2001 takeover of the consulting arm of
PricewaterhouseCoopers that would have helped HP compete with IBM, then changed
its mind and withdrew the offer (IBM later bought the consulting unit). They
also approved Fiorina’s 2002 bid for ailing PC company Compaq, but then director
Walter Hewlett backtracked, leading to a destructive yearlong proxy and legal
battle. “The board never really got back in sync,” says Brian Sullivan, CEO of
executive-search firm Christian Timbers, which brought Fiorina to HP. (Sullivan
now admits, “Perhaps there was an error in judgment as to what skills were
needed at HP.”)When
results from the Compaq takeover fell short of her projections, Wall Street gave
up on Fiorina. She crisscrossed the country, explaining her strategy of
leveraging HP’s disparate technologies into a more comprehensive pitch to
customers. But Wall Street concluded the acquisition did little more than give
away part of HP’s valuable printer business to Compaq shareholders. Its brutal
voting mechanism—HP’s stock price—was relentlessly down. Kevin Rendino, a
portfolio manager with Merrill Lynch Asset Management who backed the deal in
2002, now says, “I don’t know anyone who has any faith in her.”The
sagging stock led to questions about whether Fiorina had the time and skills
necessary to oversee the day-to-day details of the 151,000-employee firm. Her
board didn’t think so; it wanted her to bring on a strong lieutenant, the kind
Bill Gates has in Steve Ballmer. But Fiorina thought she could do it all: run
the company and jet to give speeches at global confabs like the World Economic
Conference in Davos last month. That began to look bad when the financial
results got worse and customers noticed problems, like the shipments of HP
servers and storage products delivered late to customers last summer when the
company was having software problems related to the merger.In
the end, Fiorina may have suffered in part from bad timing. While a high-powered
marketing whiz seemed like the answer for HP back in 1999, the post-Enron,
post-dot-com business environment appears better suited for low-profile,
operationally minded chief execs who leave grandstanding to the quirky
entrepreneurs, like the Google guys.The HP board now has to flip its old
formula around and seek a quieter CEO with a better record at long-term stock
growth.One thing is for sure: no singer or actor can help HP
now. -
AuthorFebruary 16, 2005 at 10:48 AM
- You must be logged in to reply to this topic.