Former Hewlett-Packard CEO Carly Fiorina spoke to the California Republican Party Convention in February and has since told the San Jose Mercury News that she is “seriously considering” a run for the U.S. Senate against Barbara Boxer. As a journal interested in the confluence of business and politics, Fox and Hounds Daily submitted to her a series of questions about her brilliant but controversial business reputation. Here are the questions and Fiorina’s responses:
1. You were fired by the Board of HP. Why?
To answer why I was fired, it is important to understand why I was hired. I was hired as a reformer, a leader who would challenge the status quo and transform HP from a company stuck in the past to an innovative industry leader. HP’s transformation required tough choices about performance measurement, accountability for competitive performance, streamlining the organization, as well as, the merger with Compaq. While overcoming these challenges and pushing through the changes ultimately positioned HP to become the largest technology company in the world, in the short term they negatively impacted the stock price.
Ultimately, I was fired because I disagreed with some members of the board on management prerogatives, called for an examination of board performance and accountability; and challenged leaks on the board which were undermining the company’s interests. All of the Board’s decisions during my almost six year tenure were unanimous except the decision to fire me. In this case, the Board was bitterly divided, with two Board members resigning over the issue. The three Board members who fought most vigorously for my removal were themselves fired 15 months later for leaking confidential information and conducting electronic spying on both current and former Board members.
2. Your five and a half year tenure as CEO of HP has been both praised and criticized. What facts do you believe best capture the true picture?
I am proud of my time at HP and proud of the employees and performance of the company. I think the facts about financial performance, job creation, innovation and customer preference tell the complete story. When I arrived at HP we were a roughly $44 Billion company whose growth had slowed dramatically. HP’s profitability in every product category was deteriorating. In some very important product lines such as PCs and software, we were consistently losing money. Market share was falling and financial commitments had been missed for nine straight quarters.
By the time I left, we had doubled the company’s revenues to $88 Billion, and were achieving organic revenue growth of 9%. Despite operating through the worst technology recession in 25 years, we dramatically improved profitability in every product line and were achieving record cash flows. We were the market share leader in virtually every product line and every region of the world (we were #2 behind Dell in PCs, although as predicted we eventually overcame them, and lagged IBM in service revenue but outperformed them in profit). Despite the rigors of the merger, in 2003 and 2004, we outperformed analysts’ estimates for both revenue and earnings per share.
While we had to go through tough employee layoffs during the worst of the dotcom bust and the merger with Compaq, by the end of 2004 we were once again adding jobs and total headcount was higher than the combined headcount of HP and Compaq from before the merger. We were able to drive innovation, even during the tough times, increasing patents per day, on average, from 3 to 11. By 2005 we were recognized as one of the world’s most innovative companies. Not surprisingly, given the magnitude of the company’s transformation, HP’s stock price was under pressure during certain periods of my tenure. Neither the Board nor I believed in chasing short-term stock price and I remained focused on driving long-term value and improving competitiveness. During my tenure, HP stock outperformed the technology index of peer companies by 22 points.
3. You made changes at HP that reportedly rattled the culture of a legendary company. Did you implement the right level of change at the right pace?
Transformation is not incremental. Capturing the attention of 80,000 employees in a 60 year-old, global company takes bold, decisive, urgent action. Still, I understand that change is hard and unsettling. I also know that the status quo always has great power because people want to protect their positions and their influence. For this reason, talking about change and actually getting it done are two very different things. I understand what change takes and I understand how difficult – and how important – it really is.
4. How did HP employees react to the merger with Compaq?
The merger threatened the status quo of a vocal minority, but the majority of employees supported the massive change as measured by regular, externally executed employee surveys. To this day, I receive some messages from those who feel I hurt them, but many, many more from those who feel I enabled them to succeed. In fact, the favorables run almost 10 to 1, a ratio that has been quite consistent for many years.
5. The merger with Compaq was controversial to say the least. What facts bear out the contention that it was the strategically correct move?
The context of the merger is important. It was accomplished in the aftermath of one of the worst technology downturns in history with stock prices of major tech companies down an average of some 25%. The planning assumptions for the merger included a 20% hit to HP’s stock price, a three-year execution timetable and substantial, but manageable, risks. The merger was nevertheless approved for the creation of long-term sustainable shareholder value. That goal has been achieved. By the time I left HP, we had become the 11th largest company in the world and a global technology leader. Today, HP continues to thrive and is able to weather the current recession.
6. Your severance has been widely reported in the context of failed CEOs leaving their companies with “golden parachutes”. What are the facts of your severance?
As CEO I accomplished my mandate: the successful transformation of an iconic American company. Change agents always attract controversy and I was no exception, but I laid the foundation for the success HP enjoys today. My severance was $14 million with an additional earned payment of $7.4 million in performance-based incentives. Both were voted upon by shareholders well ahead of my departure, as was every other aspect of my salary as CEO. My performance-based pay was determined against the same metrics as every other employee at HP: revenue and profit growth, customer satisfaction, employee satisfaction and cash flow and operational effectiveness.
7. Did you see HP’s prê-texting scandal coming?
I never envisioned the HP Board or management condoning covert surveillance of phone records. This never occurred, was never contemplated, and would not have been tolerated during my time at HP. During my tenure, I was upset by obvious leaks coming from the board. I took this on in an open and transparent manner by asking the counsel to our board to interview each board member to determine who was leaking proprietary information. After I left HP, I was dismayed at the so-called spying scandal and was upset to know my own phone records had been accessed. Those board members and managers responsible for this threat to HP’s reputation were fired for violations of the company’s Code of Conduct.
8. Does the Tech “boom and bust” instruct us in today’s recession?
My tenure included the end of the tech boom and the several year tech bust which followed. Ultimately, the bust became the worst technology recession in 25 years. This coupled with the 9-11 attacks produced a multi-year bear market. I will boil the lessons down to this: each of our business crises in the last decade (dot-com bust, Enron, and the current Wall Street crisis) was caused in great part by people who chased short-term stock price. Boards and management teams must focus on creating long-term shareholder value, ensuring a company’s sustainability and competitiveness in bad times as well as good times, and fostering real transparency and accountability for decisions and performance. One final point: government bail-outs were not part of the tech sector recovery and the tech sector is stronger and better as a result.
9. Do you think you were treated differently as a female CEO?
I was the first woman to lead a Fortune 50 company, and the first in HP’s history. I was also the first outsider to lead HP and the first non-engineer. All of this led to a different kind of scrutiny and a lot of skepticism to overcome. On top of this, a mandate for change is always a tough role to fulfill particularly in such a legendary company with a longstanding culture. In addition to the resentment of an outsider bringing massive change, the comments about my clothes and my style were offensive and even hurtful. Most men do not endure that. Many women experience different treatment in the workplace; and, we all have to recognize sexism whenever we see it or experience it and be prepared to call it out.
10. How would you hope your own leadership would be described?
I hope to be thought of as an effective advocate for change, as a pragmatic, results-focused leader who is capable of making tough choices, and as a problem-solver who will not shrink in the face of controversy.