Shortly after Carly Fiorina joined Hewlett-Packard as chief executive in July 1999, she went on a whirlwind trip to Paris to see customers and employees.
With a packed schedule and heavy traffic, she took a helicopter to an HP sales office outside the city.
To provide a landing spot, a local crew had to chop down some trees at the facility–half a dozen saplings, according to the official account.
The tale, which made its way around HP in increasingly outlandish variations, says a lot about how employees at the Palo Alto, Calif.-based company perceive their leader: imperial, flashy, unwilling to let anything stand in her way.
Fiorina later told employees that she didn’t know the trees would be cut down, and when she found out, she ordered new ones planted. But she understands why people were so eager to gossip.
“People didn’t know me,” Fiorina said. “Of course rumors swirled. I was unexpected. I came from outside. I wasn’t an engineer.”
Two-thirds of the way through her three-year journey to reinvent the venerable Silicon Valley company, Fiorina the outsider has reached some milestones. But the most prominent female CEO in America also has taken some wrong turns, and the global economic storm has slowed her progress.
Fiorina has shaken up HP’s management structure, reorganizing 83 independent product units into six businesses to cut costs and make it easier for customers.
She has won some key accounts, such as Amazon.com and AOL Time Warner. She has bolstered HP’s promising software, storage, services and consumer products businesses. And she cranked up HP’s vaunted research labs.
Wins and losses
But Fiorina also has made mistakes. After her first year, when a booming economy helped HP post impressive 15 percent revenue growth, she set overly ambitious financial targets, then failed to meet those expectations, eroding her credibility with Wall Street.
Her audacious $18 billion bid last September to buy the consulting arm of PricewaterhouseCoopers fizzled, and her overaggressive sales tactics angered reseller partners.
Internally, Fiorina has had difficulty winning over many of HP’s 93,000 employees, some of whom accuse her of destroying the company’s entrepreneurial, engineering culture in favor of a top-down style that emphasizes customers.
“Because Carly is very high profile with the investment community, with customers and with the public, she shouldered a lot of the praise during fiscal 2000,” says Toni Sacconaghi, a Sanford C. Bernstein analyst. “And a lot of frustration has been directed at her in the last few quarters.”
Fiorina urges patience. “This is a journey, and no, we haven’t arrived,” she said. HP is in the “middle game” of its reinvention, referring to the most challenging part of a chess match. “It’s going to get tougher because now the change gets personal,” she said.
When Lew Platt announced in July 1999 that Fiorina would succeed him as chief executive of Hewlett-Packard, the Lucent executive was heralded as a radical agent of change who would reinvigorate HP, a pioneer in computing and printing technologies that had somehow missed the Internet.
Founded in a Palo Alto garage in 1939, HP is famous in Silicon Valley as the original tech start-up, inventing the calculator and commercializing the ink jet printer. Equally well known is the “HP Way,” the company’s employee-centered workplace culture, developed by founders Bill Hewlett and Dave Packard.
But by the late 1990s, the company had become stodgy.
Fiorina, now 46, had earned a reputation as a master marketer at Lucent, the communications equipment giant. The Stanford University medieval history graduate also had a captivating, high-energy style–a sharp contrast to Platt and his predecessor, John Young, both low-key engineers.
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“We asked her to totally re-create and reinvent HP according to the original HP Way, but we wanted a company that was poised for the next generation of computing,” said Jay Keyworth, an HP board member. “She said, `This kind of a change that you’re asking is going to take a minimum of three years. Are you going to stick with me?’ And we absolutely said yes.”
First move: to unify
Fiorina’s first major decision was to unify the company’s independent product units.
“They all had everything–their own profit-and-loss, their own marketing, their own HR, their own finance, their own databases, their own Web pages, their own training, their own sales force, their own everything,” she said. “We were a thousand tribes.”
Fiorina initially centralized the company around two product areas, printers and computing systems, later adding services and consumer products. She also created two sales and marketing organizations, one for businesses and one for consumers, to serve as the interfaces between the product groups and customers.
Some managers and workers, who had long identified themselves by their specific product lines, weren’t quite sure where they fit in.
Several top executives departed. “Before, each of the presidents inside of HP very much was managing their own business,” said Ann Livermore, who heads HP’s services unit and was the lead internal candidate to succeed Platt. “And the goal was to not have anybody else put their fingers in your business, just let me run my own thing. … With the new structure, you have to be willing to have people help you.”
Fiorina implemented a tougher review process last year to get rid of more underperformers. Modeled on the process at Cisco Systems, HP raised the percentage of employees that are ranked as non-performers and as high performers.
Unlike previous CEOs
Employees say that Fiorina’s glamorous, even regal demeanor has made it more difficult for them to relate to her.
Previous HP CEOs were regular guys. Platt, for example, would stand outside the office building chatting with colleagues while he indulged in a cigarette break.
However, the real measure of a CEO is a company’s financial performance.
Fiorina wowed Wall Street with 15 percent revenue growth for the year ending Oct. 31, 2000, her first full year at the helm. She won over new customers, such as Cadence Design Systems. Investors cheered, sending HP stock to a split-adjusted high of $67.44 last July.
But despite signs of an economic slowdown, Fiorina surprised analysts last December by predicting that HP’s sales would continue to grow at 15 to 17 percent a year.
Since that meeting, Fiorina has been forced to lower forecasts twice. And last month, she said HP might not meet her May prediction that revenue would be flat to down 5 percent. Last week, she said third-quarter revenue would be down 14 percent to 16 percent from the year-earlier period.
Overall, since Fiorina took the helm, HP shares have fallen more than 40 percent, closing Friday at $24.36
Whether Fiorina can eventually succeed in restoring HP’s lost luster–a challenge some say is similar to the one Lou Gerstner faced at IBM–won’t be clear until the economy improves.