Commentary: Three Simple Rules Carly Ignored

Why things went wrong at HP -- and went right at P&G , UTC, and IBM

Carleton S. Fiorina faced a daunting task when she took over as CEO of Hewlett-Packard Co. (HPG ) in 1999. She was an outsider brought in to revive a troubled tech giant. Iconic though HP was, its deeply rooted engineering culture was badly in need of an overhaul. Her failure to achieve her goals was a fiasco that reflected the quirks of both Fiorina as an executive and HP's corporate milieu. So are there any lessons here about how to handle the job of shaking up a company or its business model? Certainly, it is difficult to generalize -- every CEO has his or her own style, every company has its own culture. But Fiorina broke three key rules that most CEOs would do well to heed.

MAKE IT ABOUT THE COMPANY, NOT YOU. By the time CEOs rise to their post, most have a healthy ego, and Fiorina was no exception. She was also a sales whiz known for high-profile marketing events and a fondness for global gatherings packed with A-list politicians, celebs and CEOs. Problem is, many who spent time around her came away with the impression that she was as interested in burnishing her own image as she was in turning the company around. As Jim Collins noted in his 2001 book, Good to Great: Why Some Companies Make the Leap...and Others Don't, the defining hallmark of market-beating long-term leadership is the exact opposite -- CEOs who place their companies' well-being above all else, including themselves.

Nowhere has that difference been starker than at Procter & Gamble Co. (PG ), which has seen both kinds of leaders over the last decade. Durk I. Jager sought to shake up P&G's insular culture and jump-start innovation when he took over the helm in 1999, but his abrasive nature and insistence on rapid change alienated the troops. Under Alan G. "A.G." Lafley, who also has a broad agenda but a less contentious and more patient style, P&G has made a comeback. Lafley also has no qualms about letting others take credit for success -- a critical trait for enlisting subordinates to your cause.

KNOW YOUR COMPANY INSIDE AND OUT. As skilled an executive as she was, Fiorina focused on marketing and didn't fully comprehend the impact on operations of her vision to transform HP's structure and strategy. She also resisted board efforts to name a strong chief operations officer to compensate for that weakness. As difficult as it is, successful CEOs must immerse themselves in the details of their empires -- or have a sidekick who does.

United Technologies Corp.'s (UTX ) George David is no back-slapper and lacks Fiorina's marketing flair. But he is obsessed with the minutiae of production techniques that can make or break his company -- and has quietly amassed an extraordinary record: 10 straight years of higher profits.

General Electric Co. (GE ) under Jack Welch was likewise a study in total management immersion. Talent, in particular, was a Welch obsession. He participated in hundreds of executive evaluations each year. If one slipped, he was among the first to know it, not the last.

HOLD PEOPLE ACCOUNTABLE -- INCLUDING YOURSELF. Fiorina's decision to fire three top executives after the company missed third-quarter earnings targets last year went down poorly. Many inside the company thought it looked more like scapegoating and a way to assuage Wall Street than good management.

Contrast that with the dismissals Louis V. Gerstner Jr. made after coming to IBM (IBM ) in 1993. The first item on his agenda was to learn everything he could about the troubled tech giant's business, staff, and customers. So when it came time to hand out pink slips, workers had confidence that the cuts were necessary and that the right people were being fired for the right reasons.

Much of this sounds obvious, the sort of thing any executive should know by the time he or she reaches the corner office. What's surprising is how many of them don't.

By Louis Lavelle

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