Why Joe Nocera is wrong about why HP ditched Mark Hurd

Posted by Chris O'Brien on August 16th, 2010 at 4:00 am

Why Joe Nocera is wrong about why HP ditched Mark Hurd | SiliconBeat

Joe Nocera is one of the business columnists I respect most. So itís rare that I find myself in strong disagreement with his take on an issue. But his blistering column about why he thinks Hewlett-Packard really got rid of CEO Mark Hurd is one of those instances. And since things in the New York Times have way of becoming conventional wisdom, I think itís worth explaining why his theory is almost totally improbable.
To be clear, Iím not defending the HP board or Hurd. As Nocera writes:
ďIn fact, the directors should be called out for acting like the cowards they are. Mr. Hurdís supposed peccadilloes were a smoke screen for the real reason they got rid of an executive they didnít trust and employees didnít like.
The stand-up thing would have been to fire Mr. Hurd on the altogether legitimate grounds that the directors didnít have faith in his leadership.Ē
I agree with that statement as written. And yet, I donít agree with its larger implication. Yes, HPís board is looking more and more like craven weasels every day. And theyíre digging their own hole by not coming out with a plausible explanation for why Hurd was really ousted. I agree with Nocera completely on that point.
(As an aside, it seems the board is waging itís own battle of counter spin by leaking at least one version of what happened to the Wall Street Journal this weeked. Iíll come back to this story at the end.)
While we donít know exactly what Hurd did, itís clear he did something. He had some kind of relationship with Jodie Fisher that went beyond professional but stopped short of sex. And whatever it is, he clearly shouldnít have done it. He put himself in this pickle and has only himself to blame for that. And like the board, Hurd is also not explaining himself to the world, though most likely his separation agreements contains a non-disparagement clause of some kind. While telling the truth and stating the facts ought not to be considered disparaging to anyone, even if it makes them look bad, no doubt HP lawyers would use anything as grounds to recoup the $40 million or so that the board is paying Hurd to go away.
So where does Nocera go wrong? Itís with his conjecture on what the boardís real motivation was. In a nutshell, Nocera is arguing that the board secretly has disliked Hurd for years, in part due to his power play during the HP spying scandal. In the recent book, ďThe Big Lie: Spying, Scandal and Ethical Collapse at Hewlett-Packard,Ē former BusinessWeek writer Anthony Bianco claims Hurd was really the main actor, but managed to pin the blame on board chair Patricia Dunn.
Nocera then goes on to note that employees detested Hurd, citing an internal survey in which two-thirds of HP employees said they would bolt the company for another if they could find a similar job. Nocera writes:
ďThen there were the companyís employees. The consensus in Silicon Valley is that Mr. Hurd was despised at H.P., not just by the rank and file, but even by H.P.ís top executives.Ē
So hereís the leap Nocera wants us to make: After several years of massive layoffs, savaging the HP way, and not being a nice guy, the board was looking for an excuse to ditch him. In essence, Nocera wants us to believe that all of the sudden, the board of HP developed a conscience.
When you look at it like that, you realize this theory is nonsense. First, letís remember this is, in fact, just Noceraís theory. Like all of us on this story, heís on the outside looking. He doesnít point to a source or an internal memo or anything that bolsters this theory. He mainly relies on conversations with ex-HP workers, who not surprisingly despise Hurd.
Next, the Mercury News has reported that Hurd and the HP board were in negotiations for a new contract until the sexual harassment allegation hit. That would seem unlikely if they really wanted to force him out somehow.
But the part of this that I have the hardest time swallowing is that all of a sudden HPís board suddenly started caring about what employees thought of Hurd. After all, in its various configurations over the past decade, the HP board has signed off on the mass firings of more than 94,000 employees. This was part of a deliberate strategy to reinvent the company that was launched by ex-CEO Carly Fiorina and perfected by by Hurd. Hereís what I wrote on this subject back in June, when Hurd announced another 9,000 layoffs:
ďItís a ruthless, brutally effective strategy launched under former CEO Carly Fiorina and practiced with precision by current CEO Mark Hurd. Without question, the strategy has transformed HP from being the sickly also-ran at the end of the last century to its present position of dominant front-runner.Ē
The other side of this strategy is the $45 billion that HP has spent on acquisitions under both Fiorina and Hurd. The most recent of the deals was the acquisition of Palm, but HP is still digesting numerous others, including 3Com and the much larger EDS. To one degree or another, these deals were orchestrated by Hurd as part of a relentless march that increased the overall number of employees at HP from 88,000 (pre-Compaq merger) to more than 300,000 (current employment after layoffs).
Many of these most recent acquisitions remain very much works in process. There are complex integration and strategic issues to be worked out. Hurd, though rightfully dinged for being less than a visionary leader, still obviously had some strategic and operational plan in mind for all of this. And no doubt he communicated that to other executives. But he had developed a strong track record for pulling all of these things off. His successor will have to not just lead HP forward, but sort out this massive integration puzzle. HPís board would be seriously crazy to jettison the architect of all this in midstream without a darn good reason.
Even worse, the HP board got rid of Hurd at one of the most dynamic and challenging times in the industryís history. As a result of all the mergers and acquisitions by HP and others in recent years, the competitive landscape has completely shifted. HP now finds itself in direct competition with Oracle (thanks to the Sun Microsystems deal) and Cisco Systems (now that HP has gotten into networking via its 3Com acquisition) while at the same time the company is taking on IBM even more directly in the services market (thanks to the EDS deal).
Thatís a lot for any new CEO to walk into. Plus, letís not forget the company now probably needs to hire a new board chair and president. After this, it would smell bad if they donít break all of those jobs up. When the board says all is well, carry on, well, I canít believe theyíre really that delusional.

For all these reasons, though, I think Noceraís theory is just plain wrong. I admire him taking a strong stand and delivering a strong critique on the boardís handling this. But his reason for doing so is off base. When Nocera refers to ďthe real reason they got rid of an executive they didnít trust and employees didnít like,Ē the truth is that we still donít know what that reason is.
Finally, a word about the Journal story today. The story relies on a source who claims the board was angry about Hurdís settlement with Fisher, which supposedly short-circuited their own investigation and caught them off guard. I have a hard time buying that the board didnít know Hurd was talking to the woman about settling, but I suppose itís possible. But for me, the story boils down to this sentence:
ďThe account of thinking at the boardówhich has faced criticism to the effect that it rushed to judgment and that the ouster wasnít warrantedócontrasts with an account given by someone familiar with Mr. Hurdís thinking.Ē
In other words, itís ďHe said, She said.Ē And it still feels like weíre not closer to knowing the real story here.