Fiorinas Lasting Legacy: A Post-Compaq Culture

 
 
By Wayne Rash  |  Posted 2005-02-09
 
 
 

Fiorinas Lasting Legacy: A Post-Compaq Culture


If Carly Fiorina is to be remembered for anything at Hewlett-Packard, now that she has resigned effective immediately from her post as chairwoman and CEO, it is for some fundamental changes she brought to the company.

The most obvious was the acquisition of Compaq Computer in May 2002. It was one of the biggest acquisitions in the history of the industry, and it developed great controversy that was helped along by a nasty fight among members of the board of directors.

But despite the ill will generated by the Compaq merger, the integration of the company has moved ahead to the point that most observers dont think the company could be taken apart again, even if the board wanted to do so.

Read more here about Fiorinas abrupt departure from Hewlett-Packard.

"Carly Fiorina was the driving force of the Compaq acquisitions," said Laura Koetzle, vice president and research director at Forrester Research Inc.

"Our opinion was that it was the right thing to do," she said. While saying she thinks the overall direction at Hewlett-Packard Co. since Fiorina came onboard has been more right than wrong, Koetzle added that it still hasnt been a smooth transition. "The protracted battle was unfortunate. It made the merger more painful than it should have been," she said.

But that merger has since proven to have been the right decision, according to analysts and others interviewed for this story. "Their strategy has been directionally correct then and since. By no means should one view the departure of Fiorina as the wheels coming off the bus," Koetzle said.

The basically solid performance of the company during Fiorinas tenure in office bears out that opinion. "The return to shareholders has been very good," said Ben Rosen, retired chairman of Compaq.

Rosen left the helm of the Texas manufacturer two years before the merger, but he has been observing the company since. Rosen is the legendary venture capitalist who was responsible for starting some of the industrys most famous companies, from Compaq to VisiCalc.

"I think the high point was in her execution of the Compaq acquisition," Rosen said, adding that the merger was a benefit for both companies.

Next Page: Changing the "HP Way."

HP Way


But like most observers, Rosen said Fiorina faltered in executing her ambitious plans. "The execution subsequently has lagged," he said. "Theyve lost a lot of outstanding people who shouldnt have been lost."

But in some ways, a lot also was gained. Perhaps most important was another major change instituted by Fiorina—the HP culture, and the end of "the HP Way." Before Fiorina took over at HP, the company had a culture developed by and beloved by the company engineers. The idea was that anyone on a project could stop the project if that person felt there was something wrong.

"They had this country-club culture that wasnt going anywhere," said Carl Claunch, research vice president at Gartner Inc. "HP couldnt get to market. They were constantly being stopped by any little objection." Claunch said that when Fiorina saw what was happening, she brought an end to the "HP Way."

But it was also the beginning of a new effort to incorporate the skills and technologies of smaller businesses into HPs products. "We are the strategic security event manager for HP OpenView," said Reed Harrison, chief technology officer and founder of e-Security Inc., based in Vienna, Va.

"Weve been a strategic alliance partner for about three years now," he said. Harrison said this was possible because HP fostered relationships with SMBs (small and midsized businesses) with innovative technologies.

"The environment of partnerships that she has allowed to occur within HP is very beneficial to smaller companies," Harrison said. "Weve experienced a lot of success because of that relationship. It allows for a lot of innovation in technology."

He added that he thinks HP has gone out of its way to work with companies smaller than itself. "They are a very strong partner," he said. "They have a very open business relationship, and theyre very willing to assist a smaller company dealing with a very large organization."

Working with such companies is part of what Gartners Claunch calls Fiorinas "portfolio strategy," the practice of gaining partnerships with companies that fit in well with HPs offerings. In some cases, those companies were acquired, and in others, partnerships were formed. Claunch said this process and other cultural changes were a shock to the way HP was used to working.

Hewlett-Packard needs an outsider at the helm, one columnist writes. Click here to read more.

"Turning that whole thing on its head created a lot of resentment. Its quite a different company: Its more efficient, leaner," he said. "She transformed the company and changed its culture against great resistance. She had a clear vision of what she wanted the company to be, and she put it there."

But of course, getting there was only part of the battle. The biggest part was executing the plans once everything was in place, and execution was apparently Fiorinas biggest challenge, and one that she never quite mastered.

"There is a top five list that she pays attention to," Claunch said. "Things only worked when she was personally managing it." He said that ultimately, Fiorina had problems spreading herself around to cover everything that needed fixing.

"You cant have that in a large organization," Claunch said. "You need someone who is heads down and who operates the company."

He said he thinks it will take a while to find the right person to take the organization Fiorina built and then execute her plan. "I would be looking for somebody in some form of conglomerate," Claunch said. "Id want to find the next Jack Welch, [former CEO of General Electric]."

How are resellers reacting to Fiorinas resignation? Click here to read more.

"Theres an opportunity here similar to two other technology companies when there was a change in management," Rosen said. "Look at Apple [Computer Inc.] when Steve Jobs returned in the 90s, and when IBM was floundering and Lou Gerstner was brought in.

"Both were agents of change that created totally different companies than the companies that were floundering." Rosen said he thinks HP could be in for significant changes as well. "Im looking ahead to the next five years, and I think there is spectacular opportunity here."

While some analysts said they think Fiorinas departure could lead to a breakup of Hewlett-Packard, many do not. "I dont see any indication that the company may be planning to split.," Koetzle said, pointing out that recent reorganizations have put products into areas that made sense.

"HP has done a lot of things to bring businesses that were unfocused and demoralized into a more focused, integrated kind of place," Koetzle said. "I dont think anyone should view this as a judgment that Fiorinas tenure was a failure. This departure does not signal a change of course for HP.

"It looks to us like HP is basically on track," she said.

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