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Why was Carly canned? Plus a theory, and from the library: The Big Lie, by Anthony Bianco

Why was Carly canned? Plus a theory, and from the library: The Big Lie, by Anthony Bianco

Last updated on: August 30, 2015 at 1:41 pm by Jane the Actuary

Why was Carly canned? Plus a theory, and from the library: The Big Lie, by Anthony Bianco 2015-08-30T13:41:08-06:00 Jane the Actuary

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I told you a couple days ago that I was working through this whole question: why was Carly canned? And what do the circumstances of her departure have to say with respect to her potential as a presidential candidate or even a president?

This is a long post, so please bear with me as I work my way through this.

It’s hard to untangle the story of what happened at HP. She has defenders everywhere and opponents everywhere, it seems. The label “imperious” is applied to her so often, in article after article, that it reminds me of learning about Homer and the ancient Greeks, who used such phrases as “rosy fingered dawn” as stock phrases in their oral storytelling tradition. In her book, Fiorina addresses this with the complaint that she behaved no differently than other tech CEOs but was treated differently because she was a woman and came from a sales, rather than engineering, background.

With respect to her opponents, there’s a lot of anger, more than really makes sense to me — yes, she laid people off at HP, but there seems to be hatred reserved for her far more than any other CEO who lays off employees. Is this anger that revealed itself when she revealed herself to be a Republican? Was this simply because her name recognition is higher than most CEOs?

And yet — file this in the category of “odd news” — one of the HP board members who voted to fire her, and even seems to have been instrumental in that decision, venture capitalist Tom Perkins, has now come out in support of her, via a full page ad in the New York Times, in which he publicizes his objection to a recent critical story, and says:

I was a member of the HP Board of Directors much of the time Carly was the CEO. I was in the room for many of the decisions she made. I can attest to the strength of Carly’s leadership, the accuracy of her vision and the quality of her management. . . .

Carly was hired at HP because it was struggling. Revenues were down, quarterly earnings were missed, innovation lagged and growth stagnated. HP, once the leader in Silicon Valley, was clinging to the status quo and failing to embrace the new tech era. Silicon Valley companies were prospering by taking advantage of the new technologies; HP was stubbornly clinging to the past. HP needed a change agent and someone who could return the company to its glory days. Carly was the right choice. . . .

Critics often claim was fired at HP because she was unsuccessful. As a member of the board, I can tell you this is not true. In truth, it was the Board I was a part of that was ineffective and dysfunctional. The HP board of directors included family members of the founders. Carly worked with the hand she was dealt as best as one could. While Carly fought to save the company and the employees within, some board members fought for their own power or advancement. You see, some board members wanted to micro-manage the company, hand picking friends and allies to run divisions. This is no way to run a global company and Carly had the strength of character and courage of conviction to stand up to it and ultimately she lost her job because of it.

While lesser leaders would have accepted offers of transition plans and graceful resignations, Carly would have none of that. Carly demanded to be fired. In order to restore peace to the board I voted to fire her. That was a mistake.

Which brings me to The Big Lie. The book is primarily about “Spygate,” in which a board member leaked information to the press, and other board members and the corporate lawyer engaged an investigative firm to conduct what turned out to be an illegal investigation into the leakers. Board members were called on to testify to Congress and were charged with, but not convicted of, criminal conduct in California.

Bianco’s description of the events leading up to Fiorina’s firing is, in this sense, more of a prologue, even though it starts on page 102 — the prior pages telling the stories of board members prior to their arrival on the board. Bianco is by no means a supporter of Fiorina, but his tale is useful in that it gives the board’s point of view throughout, so I’ve attempted to read Bianco’s and Fiorina’s tellings of the events immediately leading up to the firing side-by-side.

Jay Keyworth

Director George “Jay” Keyworth, Bianco says, was originally a strong supporter of Fiorina as a “change agent” even referring to Fiorina as the son Dave Packard never had; then

In Keyworth’s view, the Compaq merger in 2002 confirmed Carly’s greatness as a strategist and leader while providing the HP board with a desperately needed infusion of new talent in the person of Tom Perkins.

(Yes, it’s oddly phrased to speak as if the arrival of Perkins is somehow a crucial outcome of the Compaq acquisition.)

At some point (neither source says when), Perkins organized a technology committee consisting of himself, Dick Hackborn, and Jay Keyworth, and from this vantage point, Perkins aimed to increase his power, and decrease Fiorina’s, as a de facto executive committee. Fiorina’s resentment of the committee’s “intrusiveness into what she considered the prerogatives of management probably cost Perkins his seat on the board in January 2004,” per Bianco. (Fiorina, in contrast, simply says that he had reached retirement age.)

At the same time as Perkins left, so too did two other board members; in the meantime, in Fiorina’s telling, the board, and Fiorina herself, worked to recruit new board members but without much success. Bianco, on the other hand, says she made only a “token effort” — and in any event, the board had decreased from 14 to 9 members, thus requiring only 5 votes to later remove her.

Then — here’s Bianco’s description of what set the firing in motion:

By the fall of 2004, Keyworth’s admiration for Fiorina had given way to the belief that she was wrecking HP and must be removed as chair and CEO, one way or another. Like many of his fellow directors, he had become progressively disillusioned by Carly’s pursuit of celebrity. Few CEOs have ever cultivated a high profile as relentlessly as did Fiorina, who traveled constantly, making dozens of speeches and personal appearances every month, many of which had no direct connection to the business of Hewlett-Packard. (p. 105)

(Fiorina addresses this — I can’t find the page or the quote now, but from memory she says that she was doing no more speech-making than other CEOs, and in any case, she was promoting the HP brand.)

Fiorina could get away with turning Silicon Valley’s largest company into The Carly Show as long as the company performed well, as indeed it did into 2004, her fifth year on the job. HP did a good job of melding Compaq’s operations into its own, a Herculean undertaking that consumed eighteen months.

But, says Bianco, the integration hadn’t produced profit growth, hadn’t produced market share increases, and the stock price was doing poorly, even relative to the tech industry in general.

By [mid-2004], it was apparent to moth HP directors that Fiorina had neither interest in nor aptitude for the hard, unglamorous work of managing a complex company day to day.

At the same time, Keyworth “started spending more and more time at HP headquarters” — Bianco says this was because he now headed the technology committee; Fiorina says (Tough Choices, p. 280) it was because he had just lost his wife, and, to help him, she had allowed/invited him to get more involved with the company — but, in a paragraph from the book that Bianco also cites, she says he offered one impractical suggestion after the next (p. 107/280-281). The unintended consequence? Bianco says, “unwisely if unwittingly, Fiorina made an enemy of [Keyworth.]”

Confrontation and Resolution

Keyworth began building consensus among board members — at least those who were not open Fiorina supporters — to terminate Fiorina, or at least confront her with demands to restructure and cede power. On January 5th, Keyworth, as well as directors Hackborn and Dunn met with Fiorina, and presented their demands. Fiorina was taken by surprise, and didn’t think much of their demands (p. 286 – 287) but agreed to rearrange the agenda for their off-site three-day planning meeting, which was to occur in a week. And here Bianco and Fiorina disagree on much but are in agreement on the outcome of this meeting, broadly speaking.

Fiorina says (290):

At the end of the meeting, Lucy [Salhany] said, “You know, Carly, everyone can be wrong sometimes, and this time the Board was wrong.” . . .

I was tired by the end of those three days. I felt as though we’d spent an enormous amount of energy on too many of the wrong things. Nonetheless, I believed that in the end, we’d had a reasoned and reasonable conversation. The Board had heard even more detail about the operational plans that were now in place and against which their organization would execute. The Board declared its substantial satisfaction with both the operational details and the anticipated results of these plans. . .

Bianco says (114):

There was general agreement that Carly held too much power, but no consensus on the issues of how it should be redistributed and to whom. Fiorina made no commitments, but listened, for a change, and also kept her temper in check. Most directors came away feeling mildly encouraged that Carly would do what needed to be done to start fixing the company. Dunn was so sure that crisis had been averted, at last for the time being, that she flew off to Bali for a vacation with her husband.

So what happened?

The Leak, and Denoument

On January 24, 2005, the Wall Street Journal published a front-page article, “Hewlett-Packard Board Considers a Reorganization.” There was nothing particularly horrific in the article; it presents a board meeting with contention but a consensus afterwards:

Ms. Fiorina “has tremendous abilities,” one person close to the situation said. “But she shouldn’t be running everything every day. She is very hands on, and that slows things down.” . . .

But in recent months, directors have grown uneasy with H-P’s uneven performance, according to the people familiar with the matter. The board’s concerns, according to these people, include the mediocre performance of the PC business, which ekes out thin profits, and the perception that H-P holds weak market positions against IBM and Dell. Three H-P directors discussed these issues with Ms. Fiorina during a meeting to set the agenda of the planning sessions several weeks before they were held, these people said.

Under the reorganization plan discussed by the board at San Francisco’s Park Hyatt Hotel, three H-P executives would gain more day-to-day control. They are Vyomesh “VJ” Joshi, who leads H-P’s printing and personal-computing division; Ann Livermore, head of services and enterprise computing; and Shane Robison, the chief technology and strategy officer, people familiar with the matter said. One person close to the situation said Ms. Fiorina initially had resisted the moves, but by the end of the session had agreed with directors and was on good terms with them.

This leak outraged Fiorina, and outraged the board members (except, of course, for those who were responsible for the leak, and feigning outrage), but, what’s more, “Carly’s regally indignant reaction to the leak poisoned her relations to the board to a fatal level of toxicity” (Bianco p. 119). Even so, Bianco says that when the board met of February 7th, in a hotel in Chicago for secrecy reasons, the majority had not reached the firm conclusion to fire her.

Fiorina had written a lengthy document, intended, in Fiorina’s telling, anyway, to be a summary of prior conversations to ground the continuing discussion. When she arrived at the meeting and discovered that she was there as an outsider and put on the spot, she read the document as a statement. It was received with “complete silence” (Fiorna) or “stony silence” (Bianco); Fiorina was dismissed and, after three hours of discussion, which was more about trying to get the recalcitrant board members to agree to a unanimous decision than about achieving a majority, the board left, except for two who remained to give her the news.

(Incidentally, the Wall Street Journal, in its reporting on Fiorina’s termination, claimed it was because Fiorina refused to cooperate and rejected the board’s demands:

People familiar with the matter said directors felt too much of the company’s vast operations had been centralized in Ms. Fiorina’s office, creating decision-making bottlenecks. Meanwhile, H-P had failed to meet key performance targets Ms. Fiorina had set for the company during the Compaq takeover fight. . . .

As recently as two weeks ago, Ms. Fiorina was still resisting the board’s blueprint for management changes, according to one person familiar with the discussions. If Ms. Fiorina continued to resist, that person said at the time, the board would “tighten its position.”

That appears to be what the board did Tuesday.

But this telling doesn’t fit at all with Bianco, let alone Fiorina’s account.)

After Fiorina’s departure, her new replacement, Marc Hurd, was brought in in 1 1/2 months. The stock price climbed and HP began to perform well. Was it an improvement in the overall economic climate? Was it because Hurd was superior operationally? Was it because it was simply implementing a strategy that Fiorina and her team had already developed, as she claims in Tough Choices? Yeah, I’m not going to try to assess that.

Likewise, if the leak hadn’t happened, if the relationship hadn’t been so poisoned as to prevent a return back to a normal working relationship, would enough management changes have been instituted to get everyone back on the right track? Who can say? And, of course, if that had happened, would Fiorina have ever left the corporate world?

My Pet Theory and other thoughts

Because it wouldn’t be a proper Jane the Actuary blog post without a half-baked pet theory which may or may not have any connection to reality, here’s my wild speculation for the day: ADHD.

People with ADHD are considered to be hopelessly disorganized and unable to focus on much of anything, but that’s not the case. When something really engages such a person, they don’t just focus, they hyperfocus, and the effort that Fiorina put into her work on such massive undertakings as the Lucent IPO, the HP restructuring, the proxy fight, and the integration of Compaq certainly fit the bill. But the description that she simply wouldn’t, or couldn’t, buckle down to manage the day-to-day operations when that was what was required in 2004 and subsequent years (and appears to be what Hurd excelled at) and distracted herself with speeches, sure reads like an adult with ADHD.

And if that’s her failing, it doesn’t concern me all that much with respect to the White House — since, after all, the president of the United States is not a CEO, and is not responsible for operational aspects of the Federal government.

But what about her clashes with the board? Does this signal that she would be no more able to work with Congress (should it turn blue in part or in whole, or with respect to intraparty disagreements if not) than she was with the board?

To begin with, here’s what I can’t figure out: how many people voted against her that day in February? Fiorina says it was a majority of one, so that if she had indeed wished to be imperious, she would have claimed her right to vote as a director and it would have been a tie vote and a stalemate. Bianco says the vote was two short of unanimous, with directors Knowling and Babbio supporting Fiorina. (A list of all the directors at the time is here.) Does this mean the vote was 3-2, with other members wholly absent? I don’t know, and can’t seem to find the answer online, which makes it more difficult to assess the extent to which this was a reflection on Fiorina’s ability to play well with others, vs. one of those clashes among equally strong-willed people.

But it’s a given that in the year 2015, no one is going to make a try for the presidency unless they’re ambitious and think rather highly of their own abilities. Does this clash, whatever the particular, signal that Fiorina is fundamentally less able to work together to build consensus, when held up against an entire career of doing exactly that? I don’t believe that.

Up next: Rising to the Challenge is due at the library any day now, so I’d better get to my next goal of summarizing this book. . .

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