Management Failures: Mark Hurd's @ HP Back to Letters

From Business Week, JUNE 16, 2005, NEWS ANALYSIS :TECH, By Peter Burrows, with Ben Elgin, in San Mateo, Calif.

The Un-Carly Unveils His Plan

CEO Mark Hurd is reversing his predecessor's moves at Hewlett-Packard, including shifting from an integrated sales force.

It has been 2 1/2 months since Mark V. Hurd became chief executive of Hewlett-Packard (HPQ ), and insiders say the differences with predecessor Carleton S. "Carly" Fiorina could not be starker. From the moment she arrived in 1999, Fiorina tried to inspire employees with pleas to help her recapture HP's lost glory, even going so far as to appear in a TV ad standing in front of a mock-up of the garage where HP was founded.

Hurd has hardly mentioned the so-called HP Way, focusing instead on dreary financial metrics to show where HP comes up short. And while Fiorina came with a grand vision to make HP a soup-to-nuts powerhouse of the Internet Age, Hurd has kept his strategic thoughts mostly to himself.

Too bad, Mark... one of the things that made HP strong was the HP Way, and many people who still are at HP, and many who used to be at HP, considered the HP Way to be one of HP's market differentiators and strengths. Ignore that to your detriment and to the detriment of HP. Second, another of the historic strengths of HP was the open communication by Bill and Dave.

Keep your strategic thoughts to yourself and you'll find it harder to get the rank-and-file to march in the direction you want them to. Be open with them, and you'll find them on your side, helping.

Now a broad outline of Hurd's plan is coming into focus. On June 13, HP announced it would separate its printer and PC divisions. Hurd also hired former palmOne CEO (PLMO ) R. Todd Bradley to run the PC group -- the most significant outside hire in years, aside from Fiorina and Hurd themselves.

BusinessWeek has learned that Hurd is also about to undertake a sweeping rethink of HP's sales force -- a move that would reverse a major part of Fiorina's strategic philosophy. And Hurd is set to pull the trigger on big layoffs, to match the efficiency of rivals such as Dell (DELL ). "The board replaced Carly because it wanted to focus on execution," says one insider. "Mark is doing just that."

The sales reorganization may be the clearest sign that Hurd is the un-Carly. Moving away from her efforts to create an integrated sales force that sold bundles of HP's many products to corporate customers, Hurd wants to shift back to a more product-specific focus. That could lower HP's selling costs, since less central coordination would be required.

Not exactly, Mark... among employees, "execution" evokes more of the image of a guillotine or noose than "getting the job done." Layoffs at HP were what I called "downsizing to success," and that didn't work for HP, either. Massive layoffs; languishing stock. To call Dell efficient is to ignore the ineffeciencies which have been allowed to continue at HP, despite the efforts of individual contributors to clue in muddle [oh, excues me, middle-] management to fix the inherent problems. And as for product-specific sales teams, I've said for years that product-specific sales forces is the same as product distribution at the lowest value-add level. Moving product is for the Circuit Cities, Fry's, CompUSA's, etc. Selling integrated sysems to mid and large-sized companies involves integration. Integration of anything that the customers need, from handheld PDAs to Non-Stop Fault-Tolerant computers. Small companies can get that kind of integration from good distributors and system integrators.

It would also mean fewer commissions for each deal. More important, HP would no longer be sending generalist account reps up against the razor-focused salespeople from the likes of Dell, printer specialist Lexmark International (LXK ), and storage giant EMC Corp. (EMC ).

That's not to say Hurd is making a total break with the past. Coordinated teams will still sell to the largest accounts, to prevent a return to the old days of "the five-Taurus problem," when several salespeople, all driving the HP company-car-of-the-moment, would descend on customers. Still, says a recent HP departee, "this is an about-face from the more integrated approach they were taking."

By separating the printer and PC units, Hurd is clearly opting for focus over synergy. The move should free up the two divisions to compete more effectively with Dell and Lexmark. And in hiring Bradley, Hurd has brought in a tough operational exec much like himself. One possibility: boosting HP's direct sales -- something it has avoided for fear of angering its resellers. And analysts say HP could phase out the Compaq brand on its lower-end PCs.

Not a bad start -- and there's plenty more to come. Insiders figure Hurd will outline more details this summer, when he announces layoffs expected to reach about 15,000 people. Two insiders hint that Fiorina's "e-inclusion" initiative -- an ambitious effort aimed at devising cheap technology solutions for the developing world -- may be a luxury HP can no longer afford.

And many hope Hurd will continue to fill the executive ranks with new blood, something Fiorina failed to do. Two jobs that will soon need filling: head of corporate sales, given the impending retirement of Executive Vice-President Michael J. Winkler, and then CFO, when Robert P. Wayman makes his oft-delayed departure.

While Hurd is dispensing tough medicine, most employees realize it is needed. "For years, we've just shifted the same people around, even though they're the ones who got us into these problems in the first place," says one midlevel manager. Given the pragmatism evident in Hurd's first months on the job, that seems unlikely to continue.

First rev: 06.16.2005