The Real Real Reason HP Dumped Hurd – A Revolt and Bad Judgement – More Hurd Women Might Come Forward

The New York Times writer Joe Nocera wrote an article called “The Real Reason for Ousting H.P.’s Chief. I have been covering HP for many years and recently here on SiliconANGLE.  I have spoken to dozens of former and current HP employees over the past few weeks and the story is clear – 1) it was time for Hurd to go and 2) Hurd executed bad judgement.

Although I am getting reports from both HP and Hurd’s camp on what really happened, the story is a fairly straightforward one – Mark Hurd was the wrong executive for HP going forward and he had no integrity -That’s it folks.  The rest of the story is subplots to what Joe was saying in his NY Times article.

Joe Nocera’s story is pretty much on the money except that his assertions that the HP board acted like cowards is totally wrong.  Yes, Joe you are WRONG big time on accusing HP board.  Hurd was the coward not the HP board. Update: Wall Street Journal is reporting that Hurd paid off Fisher to obstruct the investigation by the board – “it was hush money”.

The Mark Hurd Era – A Short Term Strategy

Mark Hurd took over HP from Carly and the company was a mess.  Carly was dismantling the HP Way across the board.  It is well documented that Carly was on a tear to remove all remnants of the HP Way and the founders.  The HP Way and employees including the board rejected Carly’s power play.  Enter Mark Hurd the operational guru to save the day.  Mark was the opposite of Carly (at least on paper – the record will show he was just a self serving),

Yes, Mark did straighten things out in terms of operational or short term financial stability.  The price of the Hurd strategy was a huge expense – the erosion of the HP culture and the HP Way.

Mark operated HP, the employees, and the executives with a “gun to the head” management style.  His style was in deep contrast to the HP Way culture set by the founder Dave Packard and Bill Hewlett know as “management by walking around”.  The HP Way was people management not dictatorship way which was Mark’s Way.  A major disconnect from the beginning, but no one cared HP was a sinking ship.  If there was no HP then there is no HP Way.  Hurd was the only answer at that time.

Hurd’s Big Mistake – Serving the Wrong Master

Mark was serving Wall Street not the employees and shareholders.  Mark’s compensation and style reflected that.  Mark was basically operating the business at “red line” and the engine of HP (the employees) burnt out.  HP was tapped out and didn’t have “legs’ in both the people and product side (killing R&D as a percent of revenue in particular).

Add to the fact that Mark was consistently showing bad judgement in his style and inequity relative to his compensation.  The company and employees had enough.  A revolt was taking place for over a year.  It finally came to a head when it was clear that HP had to compete on value of their products and assets not some “jury rigged” financial shell game which Mark Hurd was operating.  Case in point was the recent Palm acquisition.  According to sources inside the company Hurd had no clue to even why HP should be in the smartphone business.    The Palm acquisition was the straw that broke the camels back.  Hurd was an idiot at many levels including product knowledge, technology, and dealing with people. A source inside the company told me that “Hurd didn’t have one strategic bone in his body”.

Hurd Bet Against the HP Way

The master that Hurd should have been serving was the HP Way not the Wall Street Way.  Hurd took his eye off the ball and some say he never even had his eye on the ball.  He was a ruthless financial engineer there to serve one purpose – engineer the books for Wall Street – at any expense.   He bet against the HP Way and lost.

Although many say the HP Way has lost it’s presence at HP, the HP Way is very much the fabric of Silicon Valley and the technology business.  The force of the HP Way is very “Jedi-like”.  Much of the HP Way is outside of the walls of HP. Since Lew Platt stepped down as CEO, the ghost of the HP Way has played a hand in all of the companies major dealings.  Think about how much Bill Hewlett and Dave Packard have contributed to society, to families, to Silicon Valley, to education, to charities, and to innovation.  The HP Way is alive and well as a culture not just a company and one person.

Just read this from a long time HP engineer Chuck House. He talks about the Hurd issue but mainly he’s talking about the HP Way culture:

Charles House, a former longtime H.P. engineer who now runs a research program at Stanford University, openly rejoiced when he heard that Mr. Hurd was leaving. “I think the sexual harassment charge was a total red herring,” Mr. House told me. He didn’t care. “I was delighted,” he said.

Mr. House’s brief against Mr. Hurd went well beyond his outsize compensation and penchant for cost-cutting. As Mr. House saw it — indeed, as many H.P. old-timers saw it — Mr. Hurd was systematically destroying what had always made H.P. great. The way H.P. made its numbers, Mr. House said, was not just cutting any old costs, but by “chopping R.&D.,” which had always been sacred at H.P. The research and development budget used to be 9 percent of revenue, Mr. House told me; now it was closer to 2 percent. “In the personal computer group, it is seven-tenths of 1 percent,” he added. “That’s why H.P. had no response to the iPad.”

Mr. House was also offended by Mr. Hurd’s dictum that H.P. executives had to resign from all civic boards, as well as his decision to cut off many of H.P.’s philanthropic activities. “H.P. has always been a model corporate citizen,” Mr. House said.

Plus, he said, Mr. Hurd was “incredibly rude and demeaning, and relied on the fear factor.” Mr. House summed up the Hurd era this way, “He was wrecking our image, personally demeaning us, and chopping our future.”

Lets Talk Business – The HP Board Did The Right Thing

HP’s board didn’t act like cowards at all. In fact, the HP board should be commended for their move. Joe Nocera writes a great story, but he loses credibility in telling the NY Times readers that the HP board was cowardly. I believe that Joe is not plugged in to what’s happening and he’s jaded and still stung from the spying scandal that plagued HP many years ago.

Employee moral was not only in the toilet, but a general hatred to Hurd’s management style was hitting to close to the HP Way. Hurd’s personal judgement was out of control – to quote Top Gun “he was writing checks his body couldn’t cash”. Hurd thought he was untouchable.

The board’s job is to act in the best interests of the shareholders (employees and stockholders). The HP board did the right thing. They got rid of Hurd. The question of whether the board drum up any scandal and expense report violation is irrelevant. Those were mere facts that allowed the HP board to force Hurd to resign. Update: Hurd paid off Fisther on Aug 4 just prior to HP board interviewing her and her lawyer. Hurd was fired two days later not for sexual harrassment.

The board stepped up with courage and forced him to resign. The cost $40m. A drop in the bucket for HP to only take a minor haircut in market cap as compared to the haircut they would have taken if they came out and “shitcanned” the guy.

The “Real” Real Reason’s Hurd Was Ousted
Here are some reasons emerging from my sources in Silicon Valley.

1) Hurd was hiding the relationship with Fisher and executed a settlement behind the boards back to avoid them finding out.

2) Hurd wanted to stay and thought he could “play” the HP board and they wouldn’t have the guts to challenge him.

3) Hurd figured that he had the power over the company because in his mind “he’d owned Wall Street”.  Hurd called the HP Boards bluff.

4) He had zero support from the rank and file and top execs.

5) His bad judgement was visible to the entire company and out of control.

6) there are rumors that Hurd had other “encounters” with at least two other woman other than Fisher. This is a developing story and SiliconANGLE is trying to confirm.  Update: According to multiple sources close to the company that I spoke with in length I was able to verify it. The identity has not been verified.

Hurd’ s Failed Strategy – HP Board Prevailed – Saves HP’s Future

The real deal is:   Hurd needed to go, he was consistently showing bad judgement, had no one inside the company was following him, the company was in full revolt, he had no product or technology savvy, and he drew a line in the sand with the board.

In the end Hurd’s time at HP was up and he didn’t want to leave.  Hurd drew a line in the sand and called the board’s bluff that he thought he had more leverage then them.  HP board stepped up and with “courage and guts” and played their card.  Hurd lost his gambit with the board, took the severance, and then executed a full on PR effort to discredit the board.  Hurd made $72m from his time at HP and another $40m+ in serverance then went on a smear campaign against HP.

Business is grounded integrity and the big story here with Hurd is that he has no integrity.

Update: Industry analyst Rob Enderle makes the point that Karma (HP Way) was against Hurd and Carly. He notes that taking care of the employees is the need Karma.  Says that Carly and Mark Hurd got “fragged” (in reference to tactic used in Vietnam war).

Rob writes:

Increasingly, it appeared that there was a lot more smoke under this fire, and that Hurd had repeated many of the mistakes that got his predecessor Carly Fiorina fired — and effectively vindicated Patty Dunn, whom he helped unfairly force off the HP board after she helped hire him.

One of the first things I learned in business was that if you take care of your people, they will take care of you in a good way, but if you don’t, they will eventually bury you. In Vietnam, the only “managed war,” it was called “fragging,” and it meant actually shooting your own officers. It seems that whatever training most failed CEOs got, this part was left out.

Both Hurd and Fiorina showed little regard or loyalty to their people, and both seemed to treat layoffs as a tool to maximize their own bonuses, which seemed increasingly excessive to folks outside the company. To folks inside who were taking salary cuts or getting laid off, this sense of excess and unfairness had to be a morale killer.