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060908: Silicon Valley's Soul and the HP Board Scandal
Ed’s Threads 060908
Musings by Ed Korczynski on 8 September 2006

Silicon Valley’s Soul and the HP Board Scandal
A battle for corporate culture has been raging inside HP for seven years, and it starts at the top. Recently, someone on the board of directors was thought to be leaking info to newspapers. The board chair paid flunkies to spy on reporters and other board members, and some flunkies weaseled their way into personal phone records. Now the California Attorney General has determined that the spying was criminal and, “galactically stupid.” When cultures clash it can get ugly.

Culture inside of a company determines what, why, when, and how things get done, and culture starts at the top. The board of directors chooses the CEO whose personal style influences the senior executives, which influences managers, which influences workers. A dictatorial CEO creates a culture of one-way information flow (always top-down) and “doing what you are told,” which may be fine for certain manufacturing operations. In contrast, a CEO can create a culture of two-way information flow and individual creativity, which IMHO is better for high-tech engineering-focused companies.

Hewlett and Packard were not just smart technologists, they were gifted in intuiting how to structure a healthy high-tech organization that could grow to the scale of 100,000 employees. Many structures that work well at a scale of 100 employees fail at 1000, and a hierarchy to manage 1000 often breaks down if grown to 10,000. Yet HP was able to grow and prosper using what came to be known as “The HP Way.” The first company to hire me was run by ex-HP folks who brought the HP Way with them, and I learned to appreciate the culture as a very pragmatic way to motivate people to work hard and produce great products. Like many people, I consider it to essentially be the “soul” of Silicon Valley. Lew Platt, HP CEO 1992-1999, said, “Almost every one of the practices that people look at as soft or nice come down to being damn good business sense.”

When Carly Fiorina was made CEO at the peak of the “dot-com hysteria” in 1999, she was hired in part to invigorate a mature yet seemingly staid organization. She began to change the culture while remaining distant from other employees. She reportedly didn’t “manage by wandering around” (MBWA) or eat in the company cafeteria as had her predecessors. Then she forced the merger with Compaq, and it appeared to some that she was motivated mainly to do a big deal that would personally enrich her. Walter Hewlett (Bill’s son and member of the board at the time) attempted to block the merger that ultimately occurred by the thinnest of voting margins, after which he was not invited back to the board. Fiorina lasted just a few more years until given the “golden parachute” in 2005.

Tom Perkins, the legendary VC founder of Kleiner Perkins Caufield and Byer, resigned from the HP board in May and sent them a letter in August of this year urging a return to the HP Way, “My history with the Hewlett-Packard Company is long, and I have been privileged to count both founders as close friends. I consider HP to be an icon of Silicon Valley, and one of the great companies of the world. It now needs, urgently, to correct its course.”

The company cannot simply return to the past, since it now includes Compaq and doesn’t include Agilent, but it still must choose the way in which it will move forward. This is just another battle in the ongoing war for the culture of HP, and perhaps also for part of the soul of Silicon Valley.

— ed

posted by [email protected]
060908: Silicon Valley's Soul and the HP Board Scandal

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Anonymous Anonymous said...

Sad to see HP go the way of Compaq. Perhaps the merger has amplified the worst of both companies. Compaq lost its soul when Ben Rosen fired Rod Canion and installed Eckhart Pheifer as CEO. Compaq had a long history of spying on employees and tracking their every movement via cotag accessed office areas and RFID tags for automobiles. All phone calls and emails were monitored and the executives secured themselves on the top floors surrouded by armed security guards and special access elevators. A far cry from Rod's easy manner and management by walking around and getting involved. I sincerely hope HP finds its way back.

HP retiree and formaer Compaq employee

Tue Sep 12, 03:43:00 PM PDT  

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Ed's Threads is the weekly web-log of SST Sr. Technical Editor Ed Korczynski's musings on the topics of semiconductor manufacturing technology and business. Ed received a degree in materials science and engineering from MIT in 1984, and after process development and integration work in fabs, he held applications, marketing, and business development roles at OEMs. Ed won editorial awards from ASBPE, including interviews with Gordon Moore and Jim Morgan, and is not lacking for opinions.