Two Hurds Make a Turd

 In Blog

In case you’re wondering why I haven’t written a new post in the last 6 weeks, the answer is twofold: first, I’ve been out west for the past 6 weeks enjoying a life without humidity and second, I really had nothing interesting to say. That all changed this past week when I read that Mark Hurd had been forced to resign from his spot as the CEO of Hewlett-Packard, and event which I believe summarizes all that is wrong with the state of our economy.

Let’s look at the facts. To being with, by all accounts Mark Hurd must be considered one of the finest managers in the world. Throughout his career, he has done nothing but create shareholder value and improve the businesses he has run. Second, during his reign at HP, he managed to instill momentum back into the company, streamline its operations, and create about $50 billion worth of shareholder value – not bad for a few years work. Third, because of $20,000 worth of inappropriate expenses, the company has now lost roughly $10 billion in market cap and has had to hand over an additional $35 million in severance, making this the single worst investment in the history of history. And finally, the public relations disaster that HP feared, has now come to life tenfold as the entire world is questioning the intelligence of a board that would remove such a talented manager over an “affair” that apparently was high on infatuation and low on sex. Not only did HP’s independent investigation conclude that he did not sexually harass Jodie Fisher, but she even came out days later saying she had the utmost respect for Mark, and couldn’t believe he was forced to resign over the matter.

Now I clearly don’t have all of the facts, and it’s hard not to respect HP as a company and their board members whom all have storied careers, (and if Mark Hurd really did sexually harass Jodie Fisher then he should have been asked to resign), but in my humble, midwest opinion, they couldn’t have messed this one up more. The company is worse off. The employees are worse off. The shareholders are worse off. Everyone is worse off — except HP’s competitors.

Ok, so how did it happen? How could a bunch of well respected, experienced people decide to remove someone like Mark Hurd and create so much havoc in the process? I think the answer is simple and unfortunate: in this country, PERCEPTION IS REALITY. I believe the board of HP was guided by how they felt others would react to the news of Hurd’s sexual harassment suit, and they let that paranoia guide their actions. Instead of saying, “this guy is world-class and we will never find someone as talented to run our company”, they said “once the news breaks that Hurd has been sued for sexual harassment we’re going to have a PR mess on our hands and so we better get rid of him quick”. One reaction is performance based, and the other is perception based. I would argue performance is always right and perception is always wrong.

By its very nature, perception is illusory. It’s a mirage. It’s not real. Performance on the other hand, is nothing but real. You can’t hide from performance. You can’t camouflage it or cover it up. If your company is doing well and exceeding expectations, people will want to buy your stock. If not, they won’t. HP’s board seemed to lose sight of this fact even though it was responsible for their stock price going from $25/share to $50/share during Mark’s five years as CEO.

Companies are not people. They are not born with a soul or a conscience. They are generally formed to make money and when you infuse non-monetary ideology into a business, you often confuse it, not because companies are exempt from doing what is right, but because what is right is often a matter of opinion. Take abortion. Those that are pro-life believe its morally wrong to support abortion, and yet many companies donate money (money that belongs to their shareholders, many of whom may be opposed to abortion) to democratic candidates that are pro-choice.

I think we all would agree on the simple stuff – companies can’t break the law, cause harm, hurt people, etc. And I’m sure we also would agree that good corporate culture necessitates that you treat people fairly and create a company that is respected by its customers. But when a company’s decisions are guided by how its managers or board view what is morally right or wrong, and they lose site of the reason they are there in the first place, people tend to get in trouble.

And, when companies are further guided not only by what they believe to be right or wrong, but also by how they think others will perceive their actions as was the case in Hurdate (it’s not really called that, but in light of antennagate, I’ve decided to put a gate on the end of every word I can), disaster ensues. Companies should act in their own self-interest, doing what is right, and doing what they believe is likely to generate more profits. If they follow that path and provide transparency to the market, the public is generally smart enough to come to the right conclusion. And even if they’re not, and a company suffers some short term public relations pain related to a decision they’ve made, in the end it’s all about execution anyway.

If HP would have kept Hurd on board and defended him, and if the next five years of HP’s execution were anything like the last five, my guess is that history would have been pretty kind to those involved, instead of pretty cruel…

-Eric Lefkofsky

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