HP’s crisis management–right or wrong?

August 23, 2010

I’ve seen a lot of debate in the last while about HP’s decision to fire their impressively performing CEO Mark Hurd. The two lines of argument are thus:

Anti-firing: the guy’s a superstar, he delivered the goods, you’re going to toss a guy that can do that much for your company and shareholders under the bus for some minor expense reporting errors?

Pro-firing: Well there’s this thing about sexual harrassment and then the supposed victim went ahead and got an attention-grabbing attorney so you know whether he is innocent or not you are going to face a mud fight. So spare yourself the agony. And your famous PR agency says you should.

If that was the way the argument really went I’d have a hard time making a decision. After all, one of the prime rules of PR, like the Hippocratic Oath, should be to do no harm. Firing a superstar CEO just because some lawyer who loves to see her name in the paper makes sounds like she’s coming after you would cause a reverse PR problem of acting like chicken little. But, clearly that is not the problem here.

PRSA Chair Gary McCormick in this post provides a reasoned explanation for what really happened. While investigating the sexual harassment charges which turned out to be false, the board discovered other problems–inappropriate contractor payments and personal expenses recorded as company expenses. Certainly they could have not disclosed those items. The focus was on the sexual harassment and they could do away with that.

I don’t know if APCO, their PR firm, advised them to release Hurd based on fears of the celebrity attorney or based on the reality that the guy was being dishonest and a cheat. Larry Ellison’s defense of him is based on the idea that whatever tiny little cheating he may have done, it is absolutely nothing compared to the huge value he was delivering. Ah, there is the problem isn’t it. Turn our backs on little violations of company ethical standards if you perform well enough. If the guy isn’t doing his job, and he cheats a little drum him out. But if he is making us big bucks, then we’re stupid to lose him for a minor little infraction.

It’s the Ellison kind of thinking that contributed to the collapse in judgment we saw in the financial crisis. It’s the Ellison kind of thinking that destroys public trust in business. It’s the Ellison kind of thinking that contributes to an atmosphere of moral and ethical ambiguity–and to bad decisions that lead to much worse problems. If the HP board which has a significant legacy of integrity to live up from its founders, and whose actions in the past relating to previous CEOs and board members leaves much to be desired, had chosen to take an ambiguous position on Mr. Hurd’s discretion much would have been lost. If you can’t trust your highest leaders, what does that do for the boardroom? What does it convey to the organization? To shareholders? To the public?

Coming out of this event there seems to be the Ellison Way and the HP Way. I’m glad they chose the HP Way.


2 Responses to “HP’s crisis management–right or wrong?”

  1. The ENRON bankruptcy established that “minor” ethical lapses and conflicts of interests, in particular with Skilling and others who were self-dealing and discovered rather openly and then ignored were to result in the destruction of the firm in the longer run. The willingness to get tough on small issues that may not really be so small and in the face of an immediate bottom line impact may just in the long run protect that bottom line not destroy it. But often governance issues, ethics, and conflicts are not made crystal clear but clearly self-dealing which I argue brought down ENRON, LEHMAN, and resulted in the financial collapse of the FIRE sector in 2008 was brought on by at a minimum non-disclosure of self dealing, ethics violations, and conflicts of interest. These factors also unfortunately are factors in the accuracy and efectiveness of crisis communications where the bottom line is not inform and protect the public even on health and safety issues, but instead to protect incumbent management and the financial bottom line. I keep wondering why more study of this in the Nation’s business schools is never conducted. And by the way, Gerald what is the best business text out there on “Crisis Communications” for small-caps, medium caps, large-cap firms and even NGOs? Is there a market for such a product?

    • gbaron Says:

      Well, of course I think Now Is Too Late2: Survival in an Era of Instant News is a good starting point. But, then I wrote it so why wouldn’t I. Seriously, there are a number of good books out there. Many of them focused on dealing with the media where my focus is a little more on “you are the broadcaster.”

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