Crash of Carly Fiorina

Hewlett Packard (HP) is a technology company that operates in more than 170 countries around the world. HP was founded in 1939 by Stanford University classmates Bill Hewlett and Dave Packard. The company’s first product, built in a Palo Alto garage (the HP Garage is California Historic Landmark No. 976 – Birthplace of Silicon Valley) was an audio oscillator-an electronic test instrument used by sound engineers. One of HP’s first customers was Walt Disney Studios, which purchased eight oscillators to develop and test an innovative sound system for the movie Fantasia (About Us: Hewlett-Packard Development Company, L.P., 2009).

Fast forward 60 years to 1999 their corporate headquarters still remains in Palo Alto, California and they are among the world’s largest information technology companies, with revenue totaling $118.4 billion for the fiscal year 2008. In 1999 they named Carly Fiorina as their CEO succeeding Lewis Platt. Fiorina became the first woman to lead a fortune 500 company (Mooney, 2009).

It wasn’t too long after Fiorina was appointed CEO that she made several big mistakes ultimately resulting in her demise. There are many contributing factors that can explain her fall from corporate America these include: Fiorina’s lack of operational skills, gender bias, market conditions, and recalcitrant employees. The story of Carly Fiorina is a cautionary tale, exposing not only Fiorina’s ethical shortcomings but also the HP board members. (Johnson, 2008).

From the very beginning it appears as though the position as CEO of HP was never a good fit for Fiorina. She had never run a corporation and her expertise lied in sales not in operations. Her career started at AT&T as a low level manager in sales working her way up the ranks; drawing the attention of top management. She eventually became president of North America sales and would go on to be head of Lucent Technologies sales and marketing group. During her tenure the company’s profits and stock value grew significantly.

Stephen P. Robbins and Timothy A. Judge discuss personality-job fit theory in their Essentials of Organizational Behavior textbook. Their person-organization fit essentially argues that people leave organizations not compatible with their personalities. Research also looks at a person’s values and whether they match an organization’s culture. The fit of employee’s values with the culture of their organization predict job satisfaction, commitment to the organization, and low turnover (Robbins & Judge, 2008).

The text would suggest that Fiorina’s personality clashed with the employees who at the time made up the organization. Fiorina is a very strong willed person who enjoyed the limelight, glitz and glam that went along with the position as CEO. She was media savvy, starred in the company commercials, regularly attended the World Economic Forum in Davos, Switzerland and was commonly seen on the cover of business magazines; opposite of her predecessors.

In the beginning, the employees found this new energy refreshing and women looked to her as their role model but soon found a little bit of Fiorina went a long way. She came on too strong too fast and made more enemies than allies. The company culture was not one that embraced Fiorina’s harsh, cutthroat, to the point way of doing business. This was not the way they were used to doing business. Prior to Fiorina’s tenure things were more about the people and not about the numbers. This didn’t matter to Fiorina if employees didn’t embrace her changes she was making or meet your numbers for the quarter she had no problem showing employees the door.

Fiorina blamed the HP way for being the main reason for their unsatisfactory performance. She was not opposed to removing those who resisted change. She felt that keeping those around clinging to the past were risk factors to HP. (Johnson, 2008). She wouldn’t think twice about calling an employee at 5:00 a.m. to have a phone conference with them to let them know they didn’t make their numbers and were fired.

The three major changes she made that largely impacted the company’s culture was to make a shift from nurturing employees to focusing on financial performance. Under her leadership the primary value became financial results. Her second major change was altering the reward metrics. Fiorina replaced HP’s profit sharing plan with an incentive program designed to reward all employees based on whether HP met their financial goals set for the year. The salespeople who were salaried would now work on a commission base system. To prevent sales people from “coasting” until the last quarter commissions were only handed out twice a year. Her third change was to restructure the business units within the organization. She drastically reduced them from eighty three to four units. The new restructure consisted of two front end units and two back end units. The front end units targeted consumers while the back end was manufacturing the products HP made. (Johnson, 2008).

Just over a year of her joining HP as CEO her predecessors Lew Platt who had stayed on to advise and ease her transition and Richard Hagborn, founder of HP’s printer business, at the time acting as board of chair both left complaining that she would not listen. Her biggest supporter at first, Hagborn would grow increasingly concerned about Fiorina’s shortcomings and later worked to remove her (Johnson, 2008).

In 2001 company cutbacks marked a significant downturn in the relationship between Fiorina and her workforce. A survey of 8,000 employees revealed widespread unhappiness about poor communication and poorly implemented decisions. This was a complete reversal of earlier surveys, which found that HP had some of the employee satisfaction scores in corporate America.

Low morale and employee dissatisfaction is blamed on Fiorina’s personality and management by ambush style. In 2002 employees took active resistance when Fiorina launched merger talks with Compaq. Fiorina received resistance not only from her employees but from stockholders who also opposed merging with Compaq. After the merger with Compaq one critic further grounded her image as a visually pleasing, but “empty-headed” cheerleader (Norander, 2008):

She is a classic boss for our time: brilliant enough to dazzle the old
men on the board…and the young technicians…but devoid of the
imagination, humility and empathy that are the hallmarks of true
leaders (Norander, 2008).

Fiorina may have been under pressure to succeed as the most powerful woman CEO in America but it still does not excuse her disregard to the shareholders and employee opinions by classically displaying an over confidence bias regarding the merger and continued to move forward with her utilitarian approach in her decision making. Employee morale continued to drop and the CEO and her board clashed over appointments to head divisions of the company, plans for further reorganization, and suggestions that she hire a chief operating officer. Issues came to a head in the third quarter when the company badly undershot earnings projections and it looked like Fiorina was sacrificing others to cover for her mistakes.

According to Johnson, “lack of humility may well be the single most important contributor to Fiorina’s fall from power in 2005.” ” Her publicity efforts, including her appearance in HP commercials, seemed to promote “Carly” more than HP. Furthermore, she failed to demonstrate realistic self-appraisal, openness to new ideas, or a sense of transcendence.” “Fiorina was extremely confident in her abilities.” “For example, she rejected board suggestions that she hire a chief operating officer, saying at one point that “a CEO had better have his or her hands on the wheel.”” “Her refusal to ask for help was a key factor in the board’s decision to fire her.” “A top-down communication style discouraged feedback and devalued the input of employees.” “Until the end, she seemed to think that the fate of HP rested entirely on her shoulders.” “She apparently made no effort to groom a successor and drove a number of talented executives away, including many from Compaq (Johnson, 2008).”

Organizations and executives alike can learn from HP’s and Fiorina’s mistakes. There is after all a silver lining to every cloud. Fiorina’s mistakes cost HP greatly. However, they learned a good lesson and taught other organizations not to follow in their same footsteps. Hopefully this bad person-organization fit situation will prevent history from repeating itself and prevent the company and other organizations from hiring another “Carly.” By applying the basic concepts of organizational behavior employers and organizations should never be faced with the same situation.

RESOURCES

• About Us: Hewlett-Packard Development Company, L.P. (2009, November 29) Retrieved November 29, 2009, from HP Official Web site: http://www.hp.com/hpinfo/abouthp/.
• Johnson, C. (2008) The Rise and Fall of Carly Fiorina: An Ethical Case Study. Journal of Leadership & Organizational Studies (Sage Publications Inc.), 188-196.
• Mooney, C. T. (2009, November 4). Fiorina jumps into high-profile Senate race. Retrieved November 29, 2009, from CNN Politics: http://politicalticker.blogs.cnn.com/category/carly-fiorina/.
• Norander, S. (2008). Surveillance/Discipline/Reistance: Carly Fiorina underthe Gaze of the Wall Street Journal. Routledge Taylor & Francis Group, 99-113.
• Robbins, S. P., & Judge, T. A. (2008) Essentials of Organizational Behavior. Upper Saddle River, New Jersey: Pearson Prentice Hall.