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HP's Board of Directors Hasn't a Clue

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Those familiar with the game Cluedo (Clue in No. America) know it as a popular murder/mystery-themed deduction board game...

CluedoThe object of the basic game is for players to strategically move around the game board (representing a rich mansion), in the guise of one of the game's six characters (Colonel Mustard, for example) collecting clues to deduce which suspect murdered the game's victim-- and with which weapon (dagger, lead pipe, rope and a few other choices) and in what room.

In the case of the murder of the Hewlett-Packard business, we already know several clues. We know which room harbors the killers: the Board Room.

And the weapon: lack of leadership.

And the murderers?

All fingers point towards the HP Board. Being a board member is generally a cushiony, honorific job. You get to back-seat drive the management: take credit when times are good and be a voice of dissent when not. You get paid well for this. And the biggest sweat you will break is when you have to hire a CEO or decide the executive compensation plan.

Most of the board, it turns out, never met SAP-head Apotheker face-to-face. It was one of those situations where you need a CEO and not many folks are applying. It's not a celebrity CEO...and the board,  a far-flung group, doesn't want to make a special effort to reconvene. You can just about hear how it went: " You think he's OK. Yes, I saw the resume you sent. Looks good. Well, if everyone on the committee thinks it's a good choice...let's go ahead. OK, well, I am in Aspen at the moment, call me if you need any further consultation."

Apotheker got the job. But he cut financial forecasts in each of three straight quarters as HP sank.

After criticism that it paid too much for 3PAR, he OK'd  a 60% premium on stock (nearly $12 billion) to buy the software firm Autonomy.

Under Apotheker, HP blabbed about acquisition talks with Autonomy, leaked that it was considering spinning off its PC business, predicted missed forecasts and launched/killed/relaunched the TouchPad tablet.

After this, HP shares lost $16 billion of value in the worst single-day fall since the stock market crash of October 1987.

All that in just 11 months.

Cluedo CharactersThe previous CEO was Mark Hurd, who was pushed out after re-routing expense money to a former soft core porn star. Those questionable ethics made Hurd a perfect candidate to join Larry Ellison at Oracle.

While cost-cutting and violating HP employment traditions made Hurd popular with investors and unpopular at home office, Hurd made some major acquisitions including 3COM for $2.7 billion and Palm for $1.2 billion.

The famous R&D of HP was decimated by his budget cuts so Hurd shares some of the blame for HP's trouble today. Even Lane told Reuters that Hurd "burned the furniture to please Wall Street."

Then there was the scandal of Patricia Dunn, chairman of HP before Hurd. She actually authorized private investigators to impersonate directors and reporters while investigating boardroom leaks. The Board is famous for talking...and she badly wanted to stop the leaks.

Patricia Dunn, chairman of the board, left under a criminal probe as Hurd was being hired.

Hurd had replaced Carly Fiorina, accused of being too much of a showboat and not attentive enough to the operations.

That's 3 CEOs and one Chairperson that the Board has had to fire in a few years and that's just not the HP Way. "The HP Way" is the company's legendary management culture that once championed openness, honesty, and flexibility throughout the organization. Executives were planted and cultivated in a gatherer culture not hunted down.

In January 2011, Hewlett-Packard announced a major board of directors shuffle, with four members stepping down and five new directors joining the board.

The five incoming members of HP's board included Meg Whitman, former CEO of eBay.

Ray Lane has now moved from non-executive chairman to executive chairman of HP's board. Lane, a former Oracle executive and currently a venture capitalist, got the job as HP Chairman just as Mark Hurd went over to Oracle (doing essentially the job Lane once had.) Lane became chairman at the same time Aptheker got the CEO position. Allegedly, the full board never met Lane in person either. The board uses 4-person committees to facilitate these hires.

That's how the 14-person board, with some of America's smartest executives, ended up selecting two software experts to head HP, the world's largest maker of personal computers and printers.

The board, underestimating what it takes to run a hardware company, believed HP was in good shape financially and only needed an executive who would keep the company running efficiently while it built a new future in the software business.

Let's put that in perspective: you own Manchester United and want to diversify by adding a rugby team. Hey, your team already knows how to play football so instead of a new football coach, you hire a rugby coach that can bring in the know-how for a new direction. What could possibly go wrong?

WhitmanAnd now the HP Board have elected one of their own members, an internet executive.

Sure, Meg Whitman took college at Princeton followed by Harvard Business School. She moved from New York state to San Francisco with her neurosurgeon husband. She took eBay from a young start-up into a high-tech powerhouse. And she ran for state governor of California (OK. she spent a lot of money and lost...but that's politics.)

Whitman is no wallflower. She is known for her fierce temper and rough-riding manner with employees. One eBay employee won a settlement after she insisted Whitman shoved her (out of frustration in a Second Life session), no less). And the eBay billionairess got caught employing an illegal alien maid (presumably one does that to save money).

Whitman's strength is consumer and Internet retailing, not an ideal choice for a company whose business is still a lot of hardware. A company who so famously outmaneuvered the Asian makers to take control of the printer industry.

Does her success at floating eBay prepares her to steer the giant ship of HP enterprise?

Some think a more ideal candidate for HP would have had extensive experience in the enterprise market-- if this was Dell hiring they would have had to look at someone like... well, HP enterprise chief Dave Donatelli or HP PC head Todd Bradley.

It seems so obvious that bringing in outsiders is the last thing HP needs. It needs a HP insider who already knows the culture and can use that knowledge to marshall the troops-- in the HP way that made the company great.

HP's problems go back much further than Apotheker and it doesn't take a Cluedo genius to suspect a board of directors who lack an understanding of the company's fundamentals. That's a lead pipe cinch.

Go Meet the HP Board

Go A Brief History of HP's Totally Dysfunctional Board (Business Insider SAI)