Given all the madness surrounding Hewlett-Packard's board-leak investigation—from Congressional hearings to criminal indictments—it's hard to consider Tough Choices, the new book by former HP (HPQ) CEO Carly Fiorina, on its own merits. Rather, the temptation is to read it like one of those I Spy… books, hunting for salacious clues about the now infamous characters mixed up in the well-known HP spying scandal.
That's too bad, because Fiorina's book is very good in many ways. The first half is a richly told memoir, full of telling anecdotes—for example, how she was so afraid of losing her beloved parents that she'd always seem to get sick before they left the kids alone at home. There are great insights about the challenges of women executives, be they climbing the ladder or already at the top, bearing up under the glare of public scrutiny.
And throughout (except for some sections when she falls into the familiar voice of the high-powered corporate consultant, imparting jargon-rich management wisdom from on high), there's a conversational style that reveals a more grounded, genuine Carly than the one that was so often obscured by HP's star-making machinery during her reign at the company from 1999 to 2005. In many cases, she gives fair, textured characterizations of people, such as HP board members Dick Hackborn and Thomas Perkins—bringing to life their complex personalities, rather than succumbing to black-and-white caricatures.
Often, Fiorina comes across as her friends describe her—not just brilliant and decisive, but fun, caring, and vulnerable. One anecdote that hit home with me: Fiorina's sadness at not being invited to the December, 2005, rededication of the original garage where HP (HPQ) was founded in 1939, even though she was the one who had decided to buy the property. Many of the warring HP parties were there, from boardroom rivals Jay Keyworth and Patty Dunn, to Fiorina's replacement Mark Hurd, to Walter Hewlett, Fiorina's nemesis during the proxy battle over the Compaq deal. If olive branches were being passed around, I wondered at the time, why not give one to Fiorina, too? She should have been there.
But if injustices were done to her, Fiorina doles out some of her own in Tough Choices. In most cases, it's not so much what she says as what she doesn't say. Here are some areas where omissions are glaring:
HP's Performance. The book paints Fiorina's tenure as a hard but rewarding and constant drive toward improved performance. That's not what happened. The company she inherited from Lewis Platt was healthy, if not exciting, and Fiorina's rapid attempt at "transformation" did not go over so well. The years 1999 through 2001 were just fine for many HP rivals, from IBM (IBM) to Dell (DELL) to Lexmark (LKX). But by the time she pitched the idea of buying Compaq in September, 2001, HP was badly in need of some big move—or, as many on Wall Street were already saying on background, a new CEO. In other words, the Compaq deal was not made from a position of strength, but of weakness.
No doubt, the Compaq merger didn't become the fiasco that many thought it would. Indeed it has given HP girth that is now being put to good use. But the merged company hit its original profit goals years after it was supposed to. Sure, some of that can be ascribed to a lousy tech spending environment during some of those years—but not all. When I reported a story earlier this year on HP's corporate computing effort, executives admitted to me they had only just finished the integration and were ready to start looking forward again.
In 2004, HP fell short of almost everybody's expectations. It lost several points of market share in critical businesses such as inkjet printers, PCs, servers, and storage devices. Its stock price dropped nearly 10%, underperforming most every rival, from Dell and IBM to weaklings like Sun Microsystems (SUNW).
All in all, HP's stock fell 51% on Fiorina's watch. No doubt, in her last year, she began to make progress on improving key businesses, particularly PCs and printers. But while HP insiders agree on little these days, they are in accord on this: Fiorina could not—or at least would not—have pulled off the operational overhaul or injected the tone of accountability that Hurd has brought to bear.
Indeed, she may well be right that she could manage operations as well as anyone. One of my sources, a top former executive, says one reason the planning that went into integrating HP and Compaq went so well is because she did get involved in the nitty-gritty details on that topic. But it didn't last. Soon thereafter she went back to focusing on sales, marketing, and working on HP's higher-level strategy, not to mention appearing at frequent industry events. "When you're out talking to customers and giving speeches, you're not in meetings talking about nasty little problems," the executive says. "She did not provide a strong, consistent operational focus."
Credibility. At one point in the book, Fiorina says the only "clouds on the horizon" were stock price weakness and sniping in the press. But underlying both was a larger problem: credibility. Not only did Wall Street analysts doubt the CEO had the operational skills to deliver on her goals, but they'd grown distrustful of her projections as well. HP slipped up and missed quarters—and missed big—on too many occasions. Analysts often felt she was trying to sell them a story, rather than giving a conservative view of the company's capabilities. In the book, she even slips into this mode in one small way. Fiorina cites a 13% one-day jump in HP shares in mid-2000 as proof that Wall Street was buying into her view. She leaves out that the pop was due to the sale of most of HP's remaining shares of spinoff Agilent Technologies.
The HP Way. Throughout the book, Fiorina suggests that HP's culture was stuck in the past, with executives waiting for orders from company founders who had, unfortunately, long since moved on to a nonearthly realm. Certainly, there were pockets of such backward-looking old-timers. But most HPers were thrilled when she arrived, and anxiously signed up to follow her orders—even orders they doubted could work. The best example of this: her radical plan to impose a matrixed organization that left the CEO herself as the chokepoint for many key decisions.
At one point, Fiorina comes close to nailing what I see is the crux of the problem—how the same salesmanship that enabled her to get the job and rise so far in her career also enabled her to win her way with managers, even if they didn't believe her course would work. "I know I can be formidable in debate, and in management meetings I had more position power than anyone else in the room," she writes. So she would remind people of this, and tried to embolden them to speak their mind rather than be "intimidated into silence." In the end, Fiorina seems to feel HPers let her down, by deep-sixing her ideas once they got out of the conference room. But the more common perception inside HP is that people tried to make her ideas work, and grew disillusioned when they couldn't.
HP as Innovator. Given the poor performance of the stock during her tenure, Fiorina takes credit for fixing the company in other ways—such as by turning the company from an innovation laggard into the "number three innovator in the world in 2005." But by what measure? Few pundits or average Joe consumers would list HP or its products as innovation stand-outs. Fiorina is basing her claim on a rise in the number of patents. No doubt having more patents is good—mostly because it helps a company barter better terms on cross-licensing deals.
But what Fiorina doesn't mention is why the number of patents skyrocketed. Much of it had to do with a program put in place in 1999 to get HP into the top 10 patent producers. It relied on paying engineers for each new possible filing. At the time, it was $175 for a basic "invention disclosure," $1,750 if it became a patent application, and another chunk of cash and a plaque for an actual patent. To prime the pump, HP lawyers held "Invest Shops" where a few dozen engineers were expected to write up lists of possible applications. One engineer, Shell Simpson, nearly tripled his salary by working weekends in the first year by filing 120 disclosures and 70 patent applications—at one point taking two weeks off to work on patents full-time.
The bottom line, say many within HP: Cranking up the portfolio was a smart thing to do—but it's not a real sign of an invention renaissance at HP. Ironically, it may say as much about Fiorina's attempts to use innovation as a marketing device—along with changing the logo to say "Invent"—as it did about the underlying innovativeness of its engineers.
Fiorina's Ambitions. Fiorina concedes that talk of her interest in a move into politics was widespread—so much so that she addressed the topic at a big management meeting in late 2004. She says she admitted she'd had offers, but said she hadn't pursued any of them. That's true. Two sources tell BusinessWeek that Fiorina was considered a top candidate to become Commerce Secretary or U.S. Trade Representative, and that she might even have had a shot at replacing Treasury Secretary John Snow, who'd been rumored to be mulling retirement for a year before leaving earlier this year.
Indeed, one of Fiorina's closest advisors since the Compaq proxy fight in 2002 has been the braintrust behind the powerful Washington lobbying firm Quinn & Gillespie. Jack Quinn (Al Gore's former chief of staff) and particularly Ed Gillespie, who was head of the Republican National Committee from 2003 to early 2005, were frequent advisors during the proxy fight and later. One Washington source says "Gillespie was definitely talking her up," about the Commerce Dept. job.
The reason Fiorina didn't go, say two sources, is that she felt the positions were beneath her. She had her eyes on the Secretary of State position, both sources insist. "She didn't think those positions were big enough" to leave HP at that juncture, given her confidence that the company was on the right track, says one of the sources. "Carly didn't consider any other jobs because she felt her job at HP wasn't done," says Kathy Fitzgerald, Fiorina's close friend and former spokesperson. Fitzgerald says talk that Fiorina was interested in the State Dept. job is "categorically untrue."
Staff Development. Fiorina writes a lot about the deficiencies of some top HP managers and about the need for a strong team. While she does explain that she didn't initially want to bring in a bunch of outsiders, she doesn't address her complete record on this front. In her five years at the company, she brought in only one top executive—to replace retiring human relations vice-president Susan Bowick. She got close to luring a few others, including Acer president Gianfranco Lanci, but didn't close the deal. This became a major concern for some board members, as many of Compaq's best operating executives began jumping ship.
A failure to lure top talent would emerge as one of the reasons for Fiorina's ouster. When she came to the Chicago board meeting that would be her last, she had a memo that included long lists of possible candidates for top jobs, including some longtime allies such as McKinsey & Co. consultant Michael Patsolos-Fox, who did much of the analysis used to sell the board on the Compaq merger. On another occasion, Fiorina had approached her strongest advocate on HP's board, Lawrence Babbio of Verizon Communications (VZ), about taking a management role (a source close to Fiorina says this offer wasn't serious). Neither executive jumped at the offer. And skeptical directors were left to question Fiorina's ability, or willingness, to bring in strong outside talent.
Business Ethics. Here's where Fiorina casts herself most vividly as the victim in the HP saga. She claims that Walter Hewlett and his well-paid advisors, who opposed the planned Compaq acquisition, played dirty during the fight, and that her side vowed to "fight fair and not sling mud." She says as she sat on the witness stand during Hewlett's lawsuit to try to undo the razor-close merger vote, she fumed that "I was being portrayed as the villain, but it was they who were abusing the company, its people, and the entire legal system for their own personal and pecuniary aims."
Not so fast, Carly. While she claims she personally came up with the idea of calling Hewlett a "musician and an academic" and that the phrase meant no disrespect, the fact is that the description was part of a broad, often mean-spirited effort to personally discredit the foe. Hewlett, on the other hand, eschewed personal shots at Fiorina, at least until the very last days of the proxy fight. His stinging retort: "This time around, we don't want someone learning on the job," a jab at her status as a first-time CEO. At the end of the day, many critics of the deal were frustrated by Hewlett's refusal to jump in that mud, compared to HP. "Carly played to win. Walter played to tie," noted Silicon Valley financier Roger McNamee said at the time.
Indeed, Fiorina doesn't mention some of the other tactics that put HP high on the corporate governance experts' watch list. For example, while she criticizes one of Hewlett's advisors for getting hold of a recorded conversation she had with a big institutional shareholder, she doesn't mention the substance of the conversation: HP had convinced bankers at Deutsche Bank (DB) (who stood to make $2 million in fees if the merger closed) to arrange a last-minute meeting with the bank's investment managers so Fiorina and CFO Wayman could make a last-minute (and successful) plea to get them to reverse their decision to vote the banks' 17 million shares against the merger. Since existing banking relationships aren't supposed to be a factor when voting their fiduciary responsibility, Deutsche Bank later paid a $750,000 fine to the Securities & Exchange Commission.
Lew Platt. Throughout the book, Fiorina is alternately respectful and dismissive of her predecessor. But in the end, she does a disservice to Platt in a number of ways. For starters, she paints Platt as consumed with anger over his departure, claiming he refused to publicly admit he was fired. Not so. Platt, who would later earn kudos for his role in cleaning up the ethics-based mess at Boeing (BA), told this reporter on a number of occasions he was fired.
And she hints that Platt "even spoke to Walter about becoming the HP CEO once the merger was defeated." Based on interviews with Hewlett and Platt, who died a year ago, it's clear that Hewlett had approached Platt because he was concerned about statements from HP implying that many or even most of its directors and top executives would leave the company if the merger was overturned (claims the company later was forced to take back). Platt assured Hewlett that such a mass exodus was just a PR gambit, that so many devoted HPers would not jump ship and leave the company in the lurch. Just in case they did, would Platt consider coming in on a transitional basis? Yes, but only after the poisonous environment of the proxy fight had eased, and not as CEO. "I never said I'd be the CEO. I wasn't the right person to run the company; I felt that way in 1998," he told this reporter in 2002, still fuming that HP had tried to use his tarnished reputation on Wall Street to win votes by spreading the rumor—and doing so when he was on a trip to Southeast Asia and unable to quickly quell it.
It turns out that Platt may have had Fiorina pegged as well as anyone. In his last board meeting at HP in November, 1999, he asked the board for 45 minutes to read and discuss a three-page memo he'd penned about his growing concerns about Fiorina. He had attended meetings with her around the world in previous months, visiting remote offices, talking with suppliers, customers, and government dignitaries. But he had grown concerned at Fiorina's willingness to make grand, sweeping statements, without the detailed knowledge to understand their implications. She made many promises Platt felt certain she could not keep. And she was unwilling to take his advice.
Five years later, long after many employees, investors, and others had begun openly questioning her tenure, HP's board came to share Platt's conclusions. She was not operational enough, she had a penchant for making promises she couldn't keep, and she didn't take the boards' advice.
Which brings up the central question about Fiorina's new book: was she blindsided by her board? She paints a compelling picture of scheming, passive-aggressive directors who never gave her a clear sense that her job was in trouble. But again, that's only part of the story. "Would Carly survive" was a common question in Silicon Valley weeks before she was ousted. As one source put it, "if she was blindsided, it could only mean she didn't have her eyes open."
Editor's Note: Burrows is one of the reporters whose private phone records were sought by investigators in connection with Hewlett-Packard's probe of board leaks; Burrows chronicled Fiorina's tenure at Hewlett-Packard in Backfire: Carly Fiorina's High-Stakes Battle for the Soul of Hewlett-Packard.
Burrows is BusinessWeek's Computers editor in the Silicon Valley bureau
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