Hewlett-Packard's actions against former CEO Mark Hurd are largely self-defeating, says Harvard blogger Jeffrey Pfeffer
Posted on Harvard Business Review: September 9, 2010 11:05 AM
In business school we teach students about game theory, which entails understanding payoff structures and making rational decisions in situations of conflict. But in the real world, all too often personalities and emotions becloud objective thinking. People sometimes want vengeance, for example. They want to exact retribution from those people or organizations that have wronged them. And in seeking to get even, people often make situations worse for all involved.
That seems to be the best way of understanding the continuing Mark Hurd saga. Hurd is a talented executive, at least according to Wall Street. Just look at the dive Hewlett-Packard's stock price took when he was fired, and the lift Oracle's got when he was hired as co-president. He could easily have landed in a private equity firm, where his cost-cutting skills are a perfect match for investor objectives. But no—Hurd chose to go to Oracle, a former strategic partner to HP whose founder, Larry Ellison, had very publicly lambasted HP's board for firing him. Now, with Ellison's spirited backing, he's in a position to turn Oracle into more of a competitor to his old employer. He knows how to hit HP where it hurts, and is probably looking for sweet revenge.
And HP's all too predictable response? Sue! Even though legal analysts believe the likelihood of prevailing is low, and even though it threatens to sour a 20-year partnership in noncompetitive areas, HP filed suit against Hurd on Tuesday, claiming that his joining Oracle would violate trade secret and confidentiality agreements. Meanwhile, the suit also guarantees continuing media focus on Hewlett-Packard, and more dredging up of other recent episodes in its boardroom soap opera: the spying on directors, the conflicts among board members, and the Compaq merger that pitted its then-CEO, Carly Fiorina, against a Hewlett.
All this is textbook behavior if you read the literature on the psychology of revenge. In it, we see ample proof that people are willing to cut off their nose to spite their face, often expending scarce resources to punish those who have affronted them. In particular, evidence suggests that people motivated by power and the desire for status are more vengeful than others, perhaps because it is so damaging to them to lose face. The sad fact, however—also demonstrated by research—is that taking revenge doesn't end up yielding much psychic benefit. (In experimental settings, people were subjected to free-riders who exploited them. Those who were not allowed to punish the free-riders actually felt better later than those who could—and did—impose punishment.)
Obviously, the right way to respond when you get mad is not to get even but to get over it. But how, in the heat of the moment, can you remember what you learned about game theory? Rudy Crew, the former school leader in both New York and Miami-Dade County, says the key is to keep asking yourself: "What would winning look like? If the battle were over and you had won, what would that be?" His insight is that, when we get caught up in the battle, we often forget what we are trying to accomplish. If our feelings are hurt, we're suddenly diverted toward crushing an enemy. We need discipline to stick to our overall vision and what is really good for ourselves.
A story from Laura Esserman, director of a breast care center at the University of California at San Francisco, is a reminder that a sense of moral righteousness can sometimes be an impediment. She threw her support behind a mammography van for poor San Franciscans despite the fact that it put her in conflict with her hospital CFO, who was concerned about inadequate reimbursement for services, and with her department head, who questioned why Surgery should sponsor a Radiology service. Caught up in the rush of doing the right thing and not wanting to back down, Esserman forgot about her larger mission to drive large, systemic changes at the medical school and in medical care more generally. Then one day, having heard her case dissected by my students, she mused, "Why am I doing this? Mammography is not the best diagnostic modality. And this is all getting in the way of my agenda." She backed off, put herself back on the same side as her colleagues, and most importantly, made new progress on her highest strategic priorities.
Rudy Crew and Laura Esserman have much they could teach the HP board and Mark Hurd. Vengeful behavior is not only undignified, it takes too much time and effort away from the things that actually matter. The proof of your power is not in making the other side suffer—no matter how much they deserve it. It's in making your own side succeed.