HP: When Values Trump Value

Mark Hurd's forced resignation from Hewlett-Packard demonstrates that the company cares about its integrity, not just its bottom line.

In the fall of 2006, Mark Hurd – then at the height of his glory as CEO of Hewlett-Packard – gave an interesting interview to the magazine of his alma mater, the Hankamer School of Business at Baylor University. His words then have come back to haunt him:

HP was a company born in a garage in Silicon Valley in 1939. Bill Hewlett and David Packard built their first products in their garage, took them to market, and really built the company step by step from there. They created a performance-oriented culture from the very beginning. They built their reputation on world-class products, great customer and employee relationships; and a culture of giving back to the communities where they do business. They valued their people and their customers. Their values and uncompromising integrity are still things that attract employees to the company today. And working as part of a company with such an important history motivates me to make sure we continue to deliver against this legacy.

Almost four years later, Hurd’s forced resignation under a cloud of sexual harassment allegations and expense account controversies brought home that the company’s board did indeed value this legacy. Even though Hurd had led HP to excellent financial results during his tenure, he had to go.

Hurd’s friend Larry Ellison, CEO of Oracle, who has himself lived through similar controversies, was outraged. In an email to the New York Times, he compared Hurd’s departure to the firing of Apple CEO Steve Jobs:

The HP board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago. That decision nearly destroyed Apple and would have if Steve hadn't come back and saved them … In losing Mark Hurd, the HP board failed to act in the best interest of HP's employees, shareholders, customers and partners.

Larry Ellison shares with Mark Hurd a hardline commitment to the bottom line above all else – no matter what lip service he pays to some kind of balanced scorecard. But the idea that losing Hurd was not in the best interest of employees, shareholders, customers, and partners is disingenuous, to say the least. Take a look at the April 2010 assessment of Hurd’s performance in Forbes Magazine. Yes, HP’s results have been up – but at the cost of deep cuts in the organization, and the creation of a highly politicized and fear-driven culture, as well as mounting employee dissatisfaction, which you can observe on this external site.

Employees must feel that their leaders have integrity and are sincere, courageous, competent, and caring in order to stick with the organization and put their hearts and minds into its success. In the absence of these commitment drivers, people may stay in the organization on an opportunistic basis, but they will jump ship the minute they see something better. This imperils the stability and long-term health of the organization.

In the magazine interview with his alma mater, Hurd said that his time at Baylor had taught him to discipline himself. Clearly, he had forgotten that lesson. Courageous leadership isn’t just about talking the talk – it’s about walking the walk. Too bad for HP shareholders, who have lost a capable executive and a chunk of their investment in the company: $9 billion of shareholder value evaporated the day after Hurd’s firing.

The board acted courageously in facing the Hurd issue head-on, despite his current financial success, and in releasing the information about the incidents under examination.

While the board investigation concluded that the sexual harassment issue was unfounded, it did find that Hurd had had improper relationships, falsified expense accounts, exercised bad judgement, and misled the board. These are all behaviours that kill employee commitment as they look to their CEO for inspiration and leadership.

Hopefully, the board’s integrity – and a capable new CEO – will restore HP’s value over time. In the meantime, the board has clearly shown its workforce, its customers, and the world that the values instilled by the founders survive.