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414 CHAPTER 12 STRATEGY DEVELOPMENT PROCESSES

ILLUSTRATION 12.4

Boardroom battles at Hewlett Packard

Political processes in organisations can influence the development of

strategy.

By 2012 Hewlett Packard’s (HP’s) turnover exceeded

$120 billion but profits were declining and it was

losing share in its markets. For over a decade the

difficulties in arriving at a coherent strategy were

exacerbated by the infighting within the board.

In 2002 the then CEO, Carly Fiorina, publicly

criticised Walter Hewlett, board member and son

of the founder, for his opposition to the Compaq

acquisition. According to Fortune, the HP board then

was leaking confidential information to the press,

accusing each other of lying and even refusing to be

in the same room with one another.

Then under Mark Hurd’s five years as CEO the

emphasis was on cost cutting. Though the share price

increased significantly, this disguised a demoral-

ised workforce and a lack of innovation, not helped

by Hurd’s autocratic leadership style. In 2010 Mark

Hurd departed. The exit was fractious with a fellow

director, Hurd supporter Joel Hyatt, openly criticising

the investigation headed by two other directors that

led to it.

The next CEO was an outsider, Leo Apotheker,

who had been sacked as CEO of SAP in 2010 – a

surprise appointment not least because SAP was

much smaller than HP. Initially, however, he improved

employee morale, undoing Hurd’s salary cuts and

making known his wish to return to innovative ways.

The decision was taken to reshuffle the board.

Board members lobbied, both for themselves but

also against other board members, not least Hyatt.

Chairman Ray Lane asked that Hyatt and another

of Hurd’s supporters stand down, but ‘as a matter of

balance’ asked the two who had led the Hurd invest-

igation to stand down too.

In May 2011 Apotheker issued a profits warning

internally, with a plea to ‘watch every penny’. The

email was leaked and, made public, contradicted

the positive messages given to investors. It became

apparent that ‘Apotheker seemed not to trust (some)

longstanding HP executives . . . they returned the

sentiment’.

Apotheker believed that HP should focus on

business-to-business sales for PCs and printers, move

into higher-margin areas, spin off its PC division and

invest significantly in its software business. There was

also the launch of a tablet computer in 2011 but

it was ‘ungainly, slow . . . with a subpar battery’ and

flopped.

Apotheker also wanted to acquire the British data

company, Autonomy. CFO Cathie Lesjak and Apotheker

discussed the matter privately, but she then argued to

the board that it was overpriced and ‘not in the best

interests of the company . . . Lesjak was considered

a voice of sobriety and here she was on the verge

of insubordination, directly resisting a key element of

her boss’s strategy’.

In August the Autonomy deal, the possible spin-

off and the decision to end the tablet initiative were

announced to investors. Shares plunged, many PC

customers ceased dealing with HP and investors

objected to a major acquisition.

In mid-September Apotheker learnt of his dis-

missal in the press before he was told personally

by Lane that he had lost board support. Lane then

argued that the failures were Apotheker’s not the

current board’s, since it had not selected him.

Meg Whitman was then appointed CEO. Her

strategy seemed to be ‘better . . . execution of what

(HP) were doing to give time to sort out a long term

strategy’. The share price dropped still further.

Source : Based on quotes from Fortune Global Forum, 8 May 2012

James Bandler, Doris Burke; http://tech.fortune.cnn.com/2012÷05/ 08/500-hp-apotheker/ .

Questions 1 Identify other examples of political activity

at the top of organisations that affected

strategy.

2 What bases of political influence might

executives draw on in disagreements between

themselves?

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