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Carly Fiorina and HP

George Anders
Author, Perfect Enough: Carly Fiorina and the Reinvention of Hewlett Packard
Thursday, February 10, 2005; 11:00 AM

Carly Fiorina, one of the nation's most prominent technology executives and a popular symbol of women in big business, was ousted as the head of computer services giant Hewlett-Packard on Wednesday over "strategic differences" with her board of directors.

George Anders, author of Perfect Enough: Carly Fiorina and the Reinvention of Hewlett Packard, was online to discuss Fiorina and her tenure at HP.


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A transcript follows.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

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washingtonpost.com: George, thanks for joining us. What was your initial reaction when you heard that Fiorina was leaving HP?

George Anders: complex reactions. fascination probably was the first one. this was a huge step for the board to take, and the board had been very loyal -- maybe too loyal -- to carly fiorina for a long time.

so i wanted to know everything i could about the board's deliberations.

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Baltimore: It seems almost everyone questioned the strategic value of the Compaq acquisition. Yet she got it done. Doesn't the Board take a major part of the responsibility for that error? What changes have happened/ will happen to that group?

washingtonpost.com: HP-Compaq Still Fuels Debate Over Marriage of Equals (Feb. 10, 2005)

George Anders: There are two sets of questions on the Compaq deal -- did it make strategic sense? and was it executed well?

The board still defends the strategy. It's not an easy defense, but it's not ridiculous either.

Clearly the execution didn't go well. Too many good people left. Too many product rollouts got handled clumsily. That's all being blamed on Carly Fiorina

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Los Angeles: Any chance that Michael Capellas might be in line to take over the helm at HP? Given all the scuttle about MCI being an acquisition target, does it make sense that MCI and HP merge?

George Anders: Mike Capellas is an interesting contender. The HP board has said it wants to go outside for a new CEO.

But if it goes too far outside, it risks having another cultural mismatch, as it did with Carly Fiorina. Capellas has the virtue of knowing much of the business and a lot of the people already.

There are other such candidates, too. Antonio Perez, a former HP executive, now at Kodak

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Boca Raton, Fla.: It seemed to me that Carly did not move fast enough back in 2000 to change the culture or replace top managers when she had her 'honeymoon' period. Then the PWC misstep. It seems that Carly was not strategically decisive at any point in her tenure. The Compaq move was defensive at best. Is that fair?

George Anders: Interesting period to focus on. New CEOs can do an enormous amount in the first 6 months to year. Then they become part of the establishment. I'd agree with you -- there were lost opportunities back then.

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Cupertino, Calif.: I see that Carly will get a $21M severance package. Combined with her sign-on bonuses, stock options to replace Lucent options, the Compaq merger bonus, and her standard compensation, it appears that Carly garnered well over $200M in pay for her mediocre performance. Are those pay numbers accurate? When can stockholders (not just HP's) expect some rationality in CEO pay?

George Anders: I believe the actual number is a bit smaller, because most of her sign-on bonus turned out to be worth less than the originally announced amount, once HP's stock started to slip.

But your basic point is right: that's a lot of money for sub-average performance. I wish there were some way to get this process under control, but so far, CEO hunger for more pay has outweighed every attempt to rein it in

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Oakland Calif.: Growing service was a main part of the strategy. Acquiring Price Waterhouse would have contributed in this direction, (as IBM showed a year after it did not happen for HP).

How did the merger with Compaq contribute to this strategy, since Compaq was mostly selling hardware and only little service ?

Did not the compaq acquisition conflict with the "service" strategy ?

George Anders: Compaq (via the old DEC) actually had an OK services business. A lot of it was Windows help-desk kind of work, which isn't very glamorous, but if you've ever used Windows, you can imagine that's a great growth business for a long, long time.

The PWC deal might have worked well at a lower price . . . but switching from a partnership structure to a corporation would have been very hard. The PW partners who were selling were likely to want to retire. And HP needed them to keep working

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Fairfax, Va.: How much of Fiorina was true substance and how much was presentation/show? Obviously we all make mistakes, but do you think she was in over her head?

George Anders: I think of her as a bull-market manager . . . someone who was very good at expanding the business in boom times, but who didn't really have good instincts for efficiency in tough times. When she'd cut, it was with lunges that didn't satisfy either the workforce or Wall Street.

And HP is in some very technologically complex businesses. I think a top executive at such a company needs a deep understanding of the tech to be effective.

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Arlington, Va.: I went to school with Ann Livermore at HP. She had been "in the running" for CEO when Carly was selected instead. How would you handicap Livermore's current chance of getting the top job?

George Anders: Anything's possible. But her business units haven't been the big profit contributors to HP lately. It's the printing side that's been making money -- and for that reason, I'd see the printing head, Vyomesh Joshi, as the most plausible internal candidate.

Besides, the board has said it wants to go outside.

So what was Ann Livermore like in high school??

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Hayward, Calif.: Just how much printer business did HP lose when Dell cancelled HP products due to the Compaq merger? Can HP ever get back into Dell?

George Anders: I think it was less than 3% that slipped away. And Compaq was doing business with Lexmark, so that recouped 1% right away, as Compaq became a captive HP customer.

But there's always the question of whether HP could have opened a bigger relationship with Dell if the printing business had been standalone. Maybe. It's an intriguing area for speculation

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University Park, Md.: I am very interested in the new direction of HP and whom the CEO might be. I have been a customer for three years now and for the most part enjoyed the brand. Customer service has declined as the years have past, which is the only why to keep your current customers.

George Anders: Customer service is being whittled away at so many companies, which is one of the under-covered scandals of business these days. Ever try to get your cell phone provisioned? Your refrigerator fixed? A question answered about TurboTax?

The push to lean-and-mean causes a lot of companies to trim back their service departments. I wish that didn't happen.

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San Pedro, Calif.: Your opinion please. Which hurt worst...Buying Compaq computers or giving up the medical electronics division eventually to Philips Medical Systems. I, for some reason miss the old slow HP.

George Anders: I can understand the appeal of HP's old medical business. But that got put into Agilent, and then Agilent execs decided they didn't have "critical mass" to stay competitive there.

Bill Hewlett -- the son of a doctor -- was the person who pushed HP into medical, but once he retired, that became less of a focus. Given the growth of device companies like Medtronic, maybe HP should have skipped the PC business in the 1980s and doubled down on medical instead!

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Sevierville, Tn.: What is HP doing to keep my business as a consumer? When I first bought my computer, the rep at HP lied to me and I think I was cheated out of 150 dollars in rebates. As I was later told, they didn't have a rebate for the forms that HP sent to me.

George Anders: I don't know the particulars of your rebate snarl, but I've had similar experiences with other companies (Intuit's rebates are notoriously tough to collect.)

I think when the board said it wants better execution from its new CEO, it's speaking to what you're talking about. The ads about HP are nice, but they don't matter much if customers are frustrated. A good CEO should focus on that for as long as it takes, and try to get it fixed.

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Palo Alto, Calif.: Fiorina was feted from the start as a celebrity, something that never fit well at HP with its culture of egalitarianism (eg, 'management by walking around'). She hit a false note right away by commissioning a series of TV commercials that showed her next to, in fact actually leaning on, the iconic Palo Alto garage where Bill Hewlett and Dave Packard started HP.

My question, however, concerns her tenure at lucent before she came to HP. She ran the large enterprise sales group. It was a series of scandals involving this group, notably for off-the-books discounts to large customers, that nearly sank Lucent. Many of these occurred during Fiorina's tenure. Why has Fiorina never been asked about her role in this?

George Anders: I've asked Carly Fiorina about her Lucent track record, and others have, too.

It's hard to know how to apportion blame. The whole Lucent culture was go-go at the time, and other executives have come under more fire for pushing bad deals. I've heard Carly Fiorina say, after the fact, that she was concerned about Lucent's recklessness and saw that as a reason to leave.

That may be revisionism. Or it may be true. I'll leave it up to you to decide.

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Ness Ziona, Israel: How did the gap between a successful manager and her board become so large?

Sincerely, Avinoam.

George Anders: Excellent question. We report in today's WSJ that the board originally was looking to take much more modest steps -- having Ms. Fiorina delegate more responsibility to operating heads, and maybe appointing a strong No. 2 to handle operating details. She resisted that, then agreed to it, then told the media that it was pure speculation and that it might not happen.

I think the board felt she wasn't holding to her word. And once there are questions about truth and trust, relationships can unravel very fast.

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Newton, Ma.: Did Carly succeed chiefly because she is a woman? And did the narrowness of that success contribute to her demise?

George Anders: I think being female both helped and hurt her. It helped in terms of making her more visible. On the way up, it was easier to be identified as a rising talent. At the top, it was easier to get access to customers at the highest levels. (White House, etc.)

But it also isolated her. She didn't get the benefits of any of the old-boy networks. It would be nice if neither of those factors affected people's careers. I think we're still a generation or two away from that point.

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Philadelphia: What happens to Carly Fiorina now? Certainly there are other companies that can use her talents. What do you see are her most likely future career path?

George Anders: Interesting question. My guess is that she'll take at least six months to collect herself, etc.

After that, I'm sure there will be offers of corporate board seats, jobs at smaller companies, etc. But given the turmoil at HP, my guess is that these will be at much less prominent businesses, and that they may not appeal to her.

She's been interested in government and education for a long time. I think it would be hard for her to win an election, but it wouldn't surprise me if she eventually got some interesting appointed post.

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Charlotte, N.C.: What is Walter Hewlett's take/position on all this? It seems like he was right all along. Was he?

George Anders: He's been very low key this week, and his brief public statement was gracious and vague. (HP is a distinguished company with challenges. I hope it does well.) His advisers are saying he was right all along. His argument -- that HP should have just stayed with its printer business -- was always a position that deserved serious consideration.

I don't think he has any desire to come back to the HP board. The Hewlett Foundation has sold almost all of its HP stock.

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Dreamland: I think I could be a great CEO of HP or many other corporations. I too can come up with high-concept ideas that aren't right for the business and defend them as some cult-like 'strategy' at large meetings and media events. I've also got executive hair and the hand motions down. I can delegate the hard stuff to my subordinates and blame them and my enemies on the board when things go wrong. And bring little to no revenue growth, or perhaps consistent losses and still get paid $220 million? Yes, I think I can do that. Where do I sign up? How long before people realize these new emperors have no clothes on?

George Anders: Major business schools are accepting applications right now! Pay 2 years tuition, work at the right consulting firms for a couple years, climb the ladder, and you can be on the way!!

I wish I didn't feel compelled to give you a mordantly cynical answer. But the cycle is endless

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Alexandria, Va.: Mr. Anders, Do you think HP will follow her vision in the long run (I think she's correct)?

George Anders: Hard to tell. The HP board publicly is saying that it wants to press on with the Compaq-merger strategy, hoping for better profitability as things go forward. With a strong leadership team that can execute well, it's possible that could work well.

Wall Street is agitating for a breakup of the company, into printing vs. computing. But Wall Street always is looking for deals. A new CEO might want to do such a deal, but it's harder than it looks. Who keeps the HP name? How do patents get divided up? etc.

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Alexandria, Va.: Do you think the current article in Fortune (which I thought was a set-up against HP when I read it) was a final straw?

George Anders: Going back to an earlier answer, I think the breakdown of trust between Carly Fiorina and the board was the key problem. The business performance was disappointing but not catastrophic. If she and the board had agreed on ways to reshape her job a bit and bring in stronger operating people, she'd still be there.

Fortune, the WSJ and Business Week all did stories suggesting that Ms. Fiorina's recent work was disappointing. I think directors read all the publications, but they don't totally take their cues from the media

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Houston: Where was she going with the "invent" thing? That seems more a part of the H-P past than the present. Did the company commit to continuing research or just ride on past successes?

George Anders: I had a very interesting conversation with one of HP's former CEO's, John Young, a while back. He contended that "invent" never was what HP was about. He said "innovate" would have been a better word.

Invent sounded nice, but it misstated the way the company did, does and will make most of its money. It takes established breakthroughs and then refines them into multi-generations of products, adding capabilities and lowering costs to keep customers coming back for more.

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Austin, Texas: What impact will Fiorina's dismissal have on the other positions she holds on prestigious boards - World Economic Forum, MIT, NYSE? Will she retain the authority she clearly enjoyed in these forums as CEO, HP?

George Anders: My guess is that she'll stay on some but not all of them. America is a great country for second acts. Robert McNamara left the Pentagon in disgrace and recast himself as head of the World Bank. etc.

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Gaithersburg, Md.: In the 1970s say, Hewlett-Packard grew by introducing many individual gadgets: plotters, pocket calculators, and eventually computers. Now the nifty gadget business has been spun off into Agilent, and HP's big hardware successes are in the printing business. HP blazed new trails with laser and inkjet printers, and now reaps the reward.

Can you speculate on inventions that might pay off for HP, or the general possibility of progress on that front?

George Anders: There are some interesting things rattling around in HP Labs about different inks, different flat-screen technology, commercial printing, movie compression, etc.

I think the most promising areas are more in printing/imaging than in computing. In computing, HP has largely become a packager/reseller of others' technology.

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Fairfax City, Va.: While I noticed that Mrs. Fiorina had a strong background in sales and marketing, I was surprised that she had no training in Total Quality Management given how quality driven HP has always been. Could her lack of knowledge in that area been her downfall? She certainly had the educational background, job experience, personal, and willfulness to be successful.

George Anders: TQM isn't the only way to come at quality issues -- but certainly any executive in a mass-production, somewhat commoditized industry needs to have a firm grip on quality issues.

Interesting point.

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Washington, D.C.: Regarding the first question: Could the Compaq merger have been executed properly? If the execution was extremely difficult or perhaps impossible, then it's hard to see in what sense the strategy was correct.

George Anders: Well, what did HP need to do?

-- Get costs out of the PC business so that it could be profitable. It made some headway there. Maybe 6 out of 10.

-- Wiggle out of an excessive reliance on Unix machines in enterprise computing, and become more of a factor in NT and Linux. Compaq's product line helped here, but HP was slow to make this happen. 4 out of 10.

-- Build up a fast-growing and very profitable services business. HP didn't start with much, and Compaq brought a bit more. Realistically it wasn't going to catch IBM, but it could have narrowed the gap more. Maybe 5 of 10.

So, none of the key goals were easy, but I think there was a chance to do better

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Leland, Ill.: Do you think degradation of consumer support lead in any way to loss of sales?

George Anders: We've talked about this a couple times, and I'll agree with the thrust of the question once more. I wrote my book, "Perfect Enough," on an HP laptop that needed to have its screen replaced, needed to have its hard drive mended, and had a shocking erosion in battery life during its usage.

I like the design and specs of the machine, but after 2 years of using it, I've put it in storage. I'm mostly using a ThinkPad these days.

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Munich, Germany: As hardware becomes cheaper, the only things that seem to matter are price, price and price.

Do you think that Carly Fiorina's dismissal is a milestone for the Computer industry in terms of declining emphasis on service?

George Anders: It all depends on what sort of new CEO the company picks. The company could go either way on the price/service curve.

Right now, there's an argument that it's trapped in a bad place. Not as service-rich as IBM; not as thrifty as Dell. Which direction would you like it to move?

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washingtonpost.com: George, thanks again for answering questions from readers. Any parting thoughts?

George Anders: Thanks for the chance to do this. I'm glad to hear people asking so much about customer service. That's the forgotten part of the story -- make good products and everything else will work out. Come up short, and all the sizzle in the world won't save things

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