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FEBRUARY 17, 2005
By Peter Burrows Where the Buck Stops at HP [Page 2 of 2]
DEPLETED RANKS. And what about the booting of Fiorina? Even in this instance, the board acted slowly. Since the departure of Capellas, directors were pressuring Fiorina to appoint a chief operating officer. Rather than pressure, it should have acted. In fact, a simple solution was available in late 2003. That's when long-time HP exec Webb McKinney successfully finished the task of integrating the Compaq and HP operations, and approached Fiorina for his next job. Multiple insiders say McKinney asked for the COO job, but Fiorina refused. The board should have forced her hand. Outside of operational shortcomings, Fiorina also was let go due to board concern about HP's lack of bench strength. A stream of well-regarded executives from Mary McDowell, currently executive vice-president at Nokia (NOK ), to Juergen Rottler, now an executive vice-president at Oracle, bolted over the past 18 months. AVAILABLE TALENT. The board, however, did little to hold Fiorina accountable until her Feb. 9 ouster. And when the company missed its third-quarter numbers last year, Fiorina promptly fired three high-ranking sales executives. "How could they let her go on this finger-pointing campaign?" wonders Sonnenfeld, who says that IBM's (IBM ) board rebuked then-CEO John Akers for similar actions in the early 1990s. The point: HP should have held Fiorina accountable, and insisted she take the heat rather than further deplete the executive talent. Fast-forward to the present. As the HP board begins the search for a new CEO, it should also reform itself. Job No. 1: Bring in some new blood -- although not a full transfusion. Some people close to HP, for example, are calling for the head of Richard Hackborn. A brilliant strategist who started HP's hugely successful printer business, he was instrumental in choosing Fiorina, and was a key champion of the controversial Compaq merger. "Given his support for Fiorina, many of us felt he should have resigned as well -- for the same reason: she didn't succeed," says Carl Snyder, HP's former head of procurement before he retired in the mid-1990s. WHO'S NEXT? That might be excessive. Hackborn is one of the few heavy hitters on the board when it comes to running a major tech company. Renaming interim CEO Robert Wayman to the board was also a good move. Despite the turbulence of recent years, Wayman built up huge credibility during his long career as HP's CFO. And the directors inherited from Compaq clearly know how to build shareholder value. Consider that Compaq's investors are far better off than they would have been without the HP merger. Less of an argument can be made for others, such as Robert Knowling Jr. A former telecom executive, he was pushed out of Covad Communication Group shortly after Fiorina named him to the board. At the time, his allegiance seemed inclined far too much to Fiorina, rather than to HP's investors. As he told BusinessWeek at the time, "I didn't join HP. I joined Carly. If she left tomorrow, I'd resign tomorrow." PASSIVITY'S PENALTY. Mostly, HP should look to bring in some new faces -- experts who can bring ideas for how HP can reestablish itself as an information-technology industry leader of the future. For too long, the HP board has gone along for the ride. Before now-deceased founders Bill Hewlett and David Packard backed away from the scene in the 1980s, the board understandably rubber-stamped most of their moves. Then, the board became too passive with a very different kind of leader. Now, having mustered the courage to ax Fiorina, the board needs to be just as courageous when it looks at its own makeup and its role going forward.
 Burrows is Computer editor in BusinessWeek's Silicon Valley bureau
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