Perfect Enough: Carly Fiorina and the Reinvention of Hewlett-Packardby George Anders
When Carly Fiorina took command of Hewlett-Packard in 1999, she was venturing further than any woman previously had into traditional men's territory. Leading the
In this bestselling work of investigative journalism, Pulitzer Prize winner George Anders presents a behind-the-scenes account of a struggle that rocked Wall Street and stunned the computer industry.
When Carly Fiorina took command of Hewlett-Packard in 1999, she was venturing further than any woman previously had into traditional men's territory. Leading the opposition against her daring plan to rescue the $40 billion-dollar company from declinewhich included the $20 billion acquisition of archrival Compaqwas Walter Hewlett, son of HP's late co-founder and defender of “The HP Way.” Not since Wall Street operatives battled over the fate of RJR Nabisco had a takeover drama so captivated the media and the public.
Drawing on unparalleled access to HP insiders and written with a novelist's flair, Perfect Enough is a spellbinding chronicle of hope, ambition, betrayal, and family pride.
Author Biography: George Anders, author of Merchants of Debt and Health Against Wealth, is currently a news editor with the Wall Street Journal and formerly a senior editor at Fast Company. He was part of a team of Wall Street Journal reporters awarded the Pulitzer Prize for national reporting.
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Ever since Carly Fiorina arrived at Hewlett-Packard in 1999-in a blaze of publicity as the first woman ever to run such a giant enterprise-critics had been predicting she would fail. In their eyes, she was too inexperienced, too slick, too different ever to succeed as the chief executive officer of the legendary Silicon Valley company. It was hard enough to guide one of the fifty largest companies in the world. She also needed to be the new face of leadership at an enterprise where everyone talked constantly about "Bill and Dave," two self-effacing billionaires who started Hewlett-Packard in a tiny garage in 1939, soldering together the first products themselves. Retirement and even death couldn't diminish the founders' impact. Some commentators talked delicately about the "tremendous pressures" that Fiorina faced. Others used the taunting language of the playground or the gutter. "Pack it in babe, you stink!" one columnist wrote, before Fiorina had finished her second year in office.
Now Fiorina's opponents were closing in. At the start of her third year in office, she had staked everything on an audacious plan to remake Hewlett-Packard by carrying out one of the biggest takeovers of all time. She planned to acquire archrival Compaq Computer for $20 billion, but she couldn't execute the deal without shareholder approval. As she raced across the United States in the winter of 2001, trying to rally support for her plan, descendants of Bill Hewlett and Dave Packard campaigned just as hard against it, suggesting that a No vote by shareholders could save the company and oust the intruder. "I don't see how Carly could be effective if the merger is voted down," saidWalter Hewlett, the fifty-seven-year-old son of HP's cofounder. "It would be better if she left."
Defeat seemed imminent-and she was doomed if she lost. Or was she?
On the evening of Thursday, March 14, Carly Fiorina and six Hewlett-Packard directors pieced together an extraordinary way to strike back. They did it during a late-night dinner at HP headquarters, less than a week before shareholders cast their ballots. Pushing aside half-eaten meals of squab and sugar snap peas, they talked for hours about the possibility of losing the merger vote, a subject that had been taboo for months. They confronted the prospect of chaos at HP and their immense obligations as representatives of all the company's shareholders. It was frightening enough to make people shiver, and that was just what Fiorina desired. Each of the directors in the room believed she was the right leader for Hewlett-Packard, no matter what. Losing her would only make things worse. By the end of the evening, a rescue plan for the embattled CEO was taking shape.
For months, Fiorina had been reaching deep into Hewlett-Packard's history, pulling out black-and-white photos of the founders when they were young men in the 1930s and 1940s. Those photos of Bill Hewlett and Dave Packard inspired nationwide ad campaigns, in which Fiorina argued that she was the rightful heir to their courage and optimism. "This company's history has always been about being daring," she reminded audiences. "It's been about doing things that others said it was not possible to do. Somehow, in the course of time, the daring part of it got lost. It became timid. I came to HP because I have a passion for this company and this business. We negotiated this merger because it is what's necessary to keep the company vibrant and leading."
The directors in the room agreed with every word of her message. They had recruited her three years earlier, believing she was their best hope of reviving a proud, aging company. The only director who opposed her, Walter Hewlett, hadn't been invited to this meeting. And now Fiorina was ready to address failure the way she wanted. If her opponents blocked the merger and squeezed her out, she warned, "This company will not dare again. And that would be a tragedy." Could she stay in office if she lost the merger vote? Fiorina portrayed grave dangers. Dissenters' attacks against her were likely to turn even nastier. Employee morale would be in tatters. "If I lose," she said, "I will be a damaged, even more controversial CEO. Do you understand what that means?" She looked all around the long table. "You must now talk about what happens if we lose."
With that, Fiorina stepped out of the room. For the next ninety minutes, she wanted HP's directors to caucus among themselves. Everyone knew the board faced nerve-wracking questions. Who would run the company? What hope was there of fixing HP's many business challenges without the Compaq merger? Would the company be governable in any form? Or was chaos inevitable and, if so, how long did each director want to stay? Fiorina wanted this to be a raw, painful conversation in which directors faced the apocalypse. Once they had done so, she would rejoin the meeting. Directors could find her in her office, just fifty feet down the hall. The CEO of Hewlett-Packard would be sitting at her desk, working. Even that late at night, there was a lot to do.
At about 9:30 p.m., director Jay Keyworth walked over to Fiorina's office. He was the longest-serving member of HP's board and one of the earliest champions of the Compaq deal. "We really need you to dig deeper," he said. "Come back in." His tone was friendly, almost pleading. They walked down the corridor together, noticing that all the other offices in the executive wing were dark. Everyone else had gone home. This was the last piece of business for the night.
Once Fiorina sat down, the directors went around the room, telling her, one by one, what they thought. The first to speak was Phil Condit, the gruff, heavyset CEO of Boeing. He had become a strong advocate of the merger, but he also treated Fiorina with the greatest personal reserve. Other directors often greeted her with a hug; he never did. This time, though, he spoke to her as a friend. "We believe very strongly that this company has a very important future," Condit said. "We believe you're the right person to carry this company forward. I'm here because of you. If you're not on this board, I'm not staying."
In rapid succession, the other five directors echoed his remarks. "We didn't hire you to do the merger," Keyworth said. "We hired you to fix the company." Each director vowed to keep Fiorina as chief executive, no matter what. She thanked each board member, by name, for his or her support. She said it meant an enormous amount to her. But she didn't fully accept the offer to stay on as CEO, and she quickly pushed the conversation on to the hardest topics. "If we lose, we cannot retreat," she said. "We have to think about what we can do next. Are you ready for that?"
For the next few minutes, directors talked about the company's strategic direction if it couldn't buy Compaq. Former HP chairman Dick Hackborn, the director widely regarded as the board's wisest strategist, had reluctantly been forming a backup plan. Without the merger, he believed, HP's big computer businesses were in perilous shape. The main hope of preserving overall shareholder value might involve taking HP's renowned printer business and spinning it off as a separate company, safe from whatever turmoil lay ahead for the computer operations. Then the company's leaders would seek the best destiny available for HP's unprofitable personal-computer business and its stumbling enterprise-computing divisions. That wasn't a pretty path. It might involve enormous layoffs or fire-sale divestitures of HP assets. But it was the least dismal of all the alternatives that Hackborn could see.
Could employees rally around Fiorina in such circumstances? "Things have already got very nasty, and they could potentially get much worse," Fiorina said. Walter Hewlett had been spotted in his late father's old office at HP Labs interviewing employees, which unnerved her greatly. She ticked off a series of other challenges to her authority, which she lumped together as "intrusive engagement." If the merger plan failed, Fiorina believed, all those pressures on her would intensify. Yet as she talked through all the perils, directors kept reassuring her. They believed she could win back the confidence of her employees, no matter what.
After nearly an hour of dialogue, Fiorina still wasn't ready to commit herself. "We have to be very clear-eyed about what this means," she said. "This isn't about quitting. This is about being realistic. Let's take a night to think about it and regroup in the morning." Directors filed out of the headquarters building, heading either to a local hotel or to their homes if they lived nearby. On the way out, HP director Bob Knowling puzzled over Fiorina's response. He had jousted with her for many years, going back to the days when both of them were rising young talents at AT&T. He hadn't ever seen her be indecisive about anything. Carly always knows what she wants, he told himself. And so, Knowling began to wonder, was Fiorina holding out for something? Was there one more thing she wanted from the board before she would agree to stay?
At first, Knowling thought Fiorina might want more money, or better severance terms if she ultimately were squeezed out. That didn't seem in keeping with her usual concerns, but CEOs were known to fixate on such things. He asked fellow director Sam Ginn, who had deep insight into boardroom pay discussions, but Ginn assured him that pay wasn't at issue. So Knowling pondered further. There's something she wants to bargain for, he told himself. I don't know what the hell it is.
The next morning, Knowling got his answer. Fiorina was ready to fight harder than ever, but only if she could be surrounded by directors who shared every aspect of her agenda. "It's time to make a break," she said. If the board really wanted Carly Fiorina to stay, Walter Hewlett had to go.
from Perfect Enough: Carly Fiorina and the Reinvention of Hewlett-Packard by George Anders, Copyright © February 2003, Portfolio Books, a member of The Penguin Group, Inc., used by permission.
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