Three CEOs in six years and the inability to steady a concrete well set up business – this is what HP, one of the founding companies of Silicon Valley has to show. How can they put the house in order?
The pay premium of these CEOs is negatively correlated with the future performance of the firm that has hired. In other words, the bigger the CEO, the worst he performs in the new job. According to a study commissioned by Hay Group in 2007, around 80% of Fortune’s Most Admired Companies chose internal candidates as CEOs! In fact, Booz Allen’s benchmark 2008 CEO research documents that 80-83% of CEO recruits are insiders! The research further goes on to prove that operationally and statistically, ‘insider CEOs’ outperform ‘outsider CEOs’! Next time, it would be advisable if the HP board could look for a worthy suitor for the top job from a reservoir of 350,000 employees.
But what is more disturbing is how HP has been tampering with a well structured strategy for almost 10 years now. The acquisition of Compaq made it the largest IT company in the world. Hurd took it forward pretty well. Under his tenure, HP crossed the $100 billion m-cap mark for the first time. However, Apotheker’s focus on software unleashed a chain of cataclysmic events, which has today made the company a laughing stock. With the announcement of Whitman as President & CEO, HP’s stock price declined to an all time low of $22.2 from a point where it had even traded at around $60 in April 2010. Speaking to B&E from Chicago, Michael Holt, Chartered Financial Analyst, Morningstar, sounds his concern “Meg Whitman is a surprising choice for the permanent CEO position: She lacks experience leading a firm of HP’s size, managing enterprise-focused strategies, or nurturing critical channel relationships that weakened during Leo Apotheker’s tenure.” The board continues to stand by its decision of converting HP into a software giant and Whitman is yet to decide as to what will become of the PC business. No doubt that the Personal Systems group generated profits of just $2 billion on revenues of $40.74 billion, but then it was this business in the very first place that made HP the largest IT company. If HP does really want to go the IBM way, then the most strategically sound decision at this point of time would be to retain its PC business and use the money to fill in the missing pieces of the software & enterprise businesses. IBM could make one of the most successful transitions in corporate history primarily because its enterprise, software and services businesses derived immense synergies from each other. HP doesn’t have a line up of developer platforms or general purpose enterprise softwares. It’s heavily dependent of others for enterprise software. Without all this in place, HP cannot even become a respectable enterprise software outfit let alone resemble IBM. It’s time they got on to fine tuning their product strategy as well as their head hunting acumen.
But what is more disturbing is how HP has been tampering with a well structured strategy for almost 10 years now. The acquisition of Compaq made it the largest IT company in the world. Hurd took it forward pretty well. Under his tenure, HP crossed the $100 billion m-cap mark for the first time. However, Apotheker’s focus on software unleashed a chain of cataclysmic events, which has today made the company a laughing stock. With the announcement of Whitman as President & CEO, HP’s stock price declined to an all time low of $22.2 from a point where it had even traded at around $60 in April 2010. Speaking to B&E from Chicago, Michael Holt, Chartered Financial Analyst, Morningstar, sounds his concern “Meg Whitman is a surprising choice for the permanent CEO position: She lacks experience leading a firm of HP’s size, managing enterprise-focused strategies, or nurturing critical channel relationships that weakened during Leo Apotheker’s tenure.” The board continues to stand by its decision of converting HP into a software giant and Whitman is yet to decide as to what will become of the PC business. No doubt that the Personal Systems group generated profits of just $2 billion on revenues of $40.74 billion, but then it was this business in the very first place that made HP the largest IT company. If HP does really want to go the IBM way, then the most strategically sound decision at this point of time would be to retain its PC business and use the money to fill in the missing pieces of the software & enterprise businesses. IBM could make one of the most successful transitions in corporate history primarily because its enterprise, software and services businesses derived immense synergies from each other. HP doesn’t have a line up of developer platforms or general purpose enterprise softwares. It’s heavily dependent of others for enterprise software. Without all this in place, HP cannot even become a respectable enterprise software outfit let alone resemble IBM. It’s time they got on to fine tuning their product strategy as well as their head hunting acumen.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
