Mark Hurd served as the CEO of HP since 2005. He was known on Wall
Street as a cost-cutter. Cost cutters tend to be loved for their short-term financial gains, but there is a flaw to their management style in
that they typically find it difficult to build the long-term value of
their corporate brand.
I have no comment on Hurd's conduct that caused him to be fired but I do
find it interesting that the board voted 6-4 to fire him based on the
advice of a public relations consultant. Was the Board concerned about
the corporate reputation of HP? Or, as Larry Ellison, CEO, Oracle, said, "the HP Board just made the worst personnel decision since the idiots on
the Apple Board fired Steve Jobs many years ago."
If the board was concerned about the reputation of the company, they had
a case. The corporate brand equity value (the value of its corporate
reputation) has declined from 15.6% of HP's market cap in 2005 to 13.2%
as of the 1st quarter 2010, which was worth $14.13 billion in brand
equity value. [See illustration #1] Dropping 2.4% from market cap is
significant, but the computer industry dropped 8.5% to 4.2% during this
same period which averages half of the brand equity value of every
company in the industry. So, during Hurd's tenure at the helm of HP he
did a mediocre job of managing the corporate brand, but the industry did
a whole lot worse.
Taking a broader view of the company, it is clear that HP's brand image
hit its' high water mark in 2003. [See illustration #2] Leading up to
that the brand had momentum and was energized. The decline of the
corporate brand began in 2004 and picked up downward momentum through
Hurd's tenure. The decline showed no abatement through the time of his
Further evidence of Hurd's poor management of the HP brand is how the
image attributes of the company declined during his tenure. Cost
cutting might have helped to maintain the "investment potential" of the
company, but the "overall reputation" has been in radical decline since
2003. "Perception of management" has also been in decline since 2003 and
reached a critical juncture when the perception of management fell below
investment potential in 2008. This is a critical vote of no confidence
as represented by our quantitative research of business decision makers.
[See illustration #3]
PC Industry Lacks Strong Leaders
The computer industry is hurting on perception of management. It no
longer has high profile CEOs who dominate the industry. Michael Dell is
certainly the brand of Dell, but even his low "perception of management"
scores are indicative of an industry that lacks leadership. Even Apple
with Steve Jobs is showing perception of management scores as the
weakest attribute of those measured. [See illustration #4]
HP had a chance to bury Dell when Hurd took office. HP had momentum
while Dell was struggling withits leadership and an attitude that
revenue was more important than its brand. When Michael Dell took the
reigns back from Kevin Rollins it marked the turnaround of the Dell
brand as king, but the rebound in its brand has been slower than
expected by a lack of conviction, if not vision. During that time of
vulnerability, HP had a strong and clear brand with the energy to own
But cost cutting always destroys momentum even when it is at the point
of generating the most return on investment. CEOs like Hurd represents
the kind of cost cutter that destroys the future of the brand in favor
of immediate bottom line results.
Since the board acted so fast to fire Hurd one wonders if this could
have been their excuse to shake things up a bit? Losing $8 billion in
market cap in a single day certainly shook things up, perhaps a little
more than they expected. They've been down this road before of changing
leadership without a clear successor. Interim leaders don't build
confidence, at best the maintain the interregnum status quo.
It is time that HP's board of directors begins searching for a CEO who
has a long-term vision, can differentiate HP's offerings from its
competitors and can leverage the power of its brand. That is how
companies like Apple stay on top even in the face of economic
uncertainty, today AAPL is trading near its all-time high.