“Business is a lot more than just facts and figures and products. It’s about emotion – real, powerful emotion, and how people react to emotion. This needs to be managed just as much as the income statement and the balance sheet.” – Carly Fiorina
With the temperature finally, if only temporarily, heating up in Boston, a fresh wind recently blew into campus accompanying Carly Fiorina, CEO of Hewlett Packard (HP). Fiorina, arguably one of the world’s most watched CEOs, spoke in detail about her personal and professional experiences at the helm of one of the world’s largest technology companies and her most recent adventures orchestrating the most publicized and controversial mergers yet in the 21st century.
To dispel the myth that HP is “just a printer company”, Fiorina began with a review of HP’s numerous business units to provide a broader context to the success and global reach of the company. For those of you who may be less familiar with HP, it is a $72 billion company with 140,000 employees in 106 countries. It conducts business on its website in over 13 different languages, owns over 17,000 patents, and spends an average of $4 billion annually in R&D. The company’s four major areas – Imaging and Printing, Personal Systems Business, Enterprise System Business and Professional Services, have enabled HP to become the undisputed leader in the printing business, in addition to being one of the world’s top PC providers. What many people don’t realize however is that HP has also established a tidy business in the server and storage arenas, which as Fiorina pointed out, results in “HP products today powering most of the world’s stock exchanges and 90% of the world’s security transactions.” In addition, HP has built a substantial internal consulting division with over 65,000 professional service personnel stationed around the world.
Four years ago however, this technology giant was facing a decidedly less rosy situation. Alarmed that the company seemed to have lost its ambition and operational discipline, the board decided to bring on a new CEO. Fiorina arrived shortly thereafter at a time when HP was considered by many to have lost its leadership position and to be less and less relevant to the technology discussion. Fiorina, who had ironically started her career as a secretary at HP many years earlier, returned as CEO to find a company who had, as she describes, “Great aspirations, but who was so in love with its past that it had forgotten to look forward to its future.”
Fiorina then embarked on an ambitious schedule of transformation considered revolutionary by most company veterans who had grown so accustomed to tradition, they considered “change” to be a bad word.
Reflecting back, Fiorina pointed to a few key decisions that she believes significantly impacted the company’s ability to endure, and eventually thrive through the change process. Fiorina describes that upon arriving she quickly discovered that the famous phrase “the HP way,” which had historically stood for accountability, responsibility, respect for the individual and integrity, had instead been transformed into a means of entitlement and a vehicle to avoid important, if difficult conversations.
Determined to steer the company back to its original definition of the “HP way”, Fiorina and her team set their goal to be the clear leader in every business in which it participated. In preparation, the HP management team’s next step was to set about creating a new leadership framework for the company that they believed would help HP rediscover its roots, define its future, and steer it through the change it was about to endure.
In addition to re-defining their goals and creating a new leadership framework, Fiorina described implementing some tactical changes aimed at centralizing and creating greater efficiencies across the organization.
Upon discovering for example that the company managed and operated over 1600 separate internal websites and promoted over 100 sub-brands in the market-place besides its HP brand, Fiorina embarked on an aggressive schedule of consolidation to present a more unified product and brand to the customer. Furthermore, upon discovering that 75% of the employee base had been told they were exceeding their objectives while the company itself was missing its objectives, Fiorina re-launched a pre-existing but under-utilized performance management system to establish more realistic and accurate performance evaluations across the company.
While Fiorina clearly targeted several areas of the company for dramatic rehauls, by far her most ambitious project, and for what she will be most remembered for, was her relentless campaign to merge HP with its long-term rival Compaq Computer Corporation (Compaq). What followed was a highly publicized and extremely controversial battle that graced the covers of newspapers and magazines globally as Fiorina worked to eventually overcome government regulators, an organized no-vote movement, and an in court challenge spearheaded by none other than Walter Hewitt, son of founder Bill Hewitt.
With Fiorina convinced that the merger was necessary to preserve the long term competitive position of the company, the deal seemingly teetered on the edge for months with many convinced that the merger, given its enormous opposition, would never go through. The merger was so controversial, in part Fiorina explained, because there had been very few successful mergers in the high tech arena to date and because many underestimated the competitive situation and economic downturn ahead.
Looking back on those times, Fiorina today warned “You can’t manage your business based on conventional wisdom as conventional wisdom is frequently wrong. You can only manage the company and focus on the production of sustainable value.”
But merge they did, and today Fiorina faces the next major challenge of her career – to ensure the merger is a success, thereby securing the long-term competitive position of HP and forever leaving her footprint in the hallways of corporate America. By Fiorina’s account, less than a year after HP has completed the merger with Compaq, they have achieved their goals and then some. While HP indicated they would save $2.5 billion as a result of the merger by 2004 – Fiorina maintains they will save $3 billion in 2003 alone. Fiorina also pointed out that HP has sequentially gained market share in every product category in which they compete since the merger and just announced their most profitable results in the last ten quarters. Today, Fiorina stated , “We have achieved important positions of leadership and now our goal is to build on that.”
Not everyone however is convinced, at least not quite yet. Critics maintain that Fiorina now has to produce tangible results with customers and partners who signal their support through increased investment in HP products and services. In addition, by most people’s account HP still faces more rounds of lay-offs and there reportedly remain several challenges in integrating the IT systems of both companies into one.
Furthermore, the PC industry continues to experience significant turbulence with PC sales down 2.7% in 2002 for the first time in history and Dell continues to ruthlessly attack HP’s market share. Supporters respond by pointing out that HP retains an undeniable competitive advantage in the printer business which has a convenient tendency of locking in customers for ink and other supplies following their initial printer investment. They further maintain that turbulence in the PC business is nothing new and that HP has consistenly traded places with Dell for the #1 and #2 spot, an undeniably enviable position by most people’s standards.
Perhaps HP’s greatest challenge however, revolves around the company’s ability to adapt to continuous change. For a woman who was widely criticized for implementing massive change considered by many to be too quick and too severe, Fiorina’s acknowledgement that c
hange is hard may be the understatement of the year. In perhaps a more revealing statement Fiorina suggested that the key to change is to garner a critical mass of support which does not necessarily have to represent the majority. “A critical mass may in fact be just enough of what you need to move forward,” commented Fiorina.
In response to a question from the audience asking her to identify what she would have done differently, Fiorina acknowledged that she simply did not appreciate how different and radical she must have seemed to a large constituency of people. “I had stopped thinking about myself as a woman in business twenty years ago. Others haven’t,” reflected Fiorina.
She also stated that if given the opportunity again, she would have given the managers at HP more time to internalize and prepare for the company’s layoffs in the summer of 2001, which were the first layoffs at HP in a very long time. Fiorina also revealed that she was surprised and ill-prepared for the intense discussion, scrutiny, the depth of emotion that followed her every move. In retrospect, Fiorina pointed out that “Business is a lot more than just facts and figures and products. It’s about emotion – real, powerful emotion, and how people react to emotion. This needs to be managed just as much as the income statement and the balance sheet.”
Fiorina perhaps has learned more about managing emotion and human conflict than most Fortune 500 CEOs today. For some she continues to be a highly controversial figure for which the jury is still out on her performance. For others, she is a trailblazer – a woman not afraid to call for change and to follow up with the heavy lifting necessary to ensure change translates into tangible results. History will tell us which group was right, although Fiorina, who was met with a standing ovation in the Burden auditorium, will no doubt continue to make headlines and will assuredly judge history on her own terms.