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September 23, 2011

HP, Yahoo! and Apple - Lessons Learned from Doing the CEO Shuffle

By Peter Bernstein, Senior Editor

We are constantly reminded that we live in an era where perception, fortunately or unfortunately, increasingly is reality. Given the changing of the guard at the top of three of the tech world’s largest and most influential companies in the past two months, it seems appropriate to see what lessons can be learned from how the boards of HP, Yahoo! and Apple handled things in terms of the perceptions created.

I will be brief, since this is not about some great new technology or business strategy per se. It is, at a high level, about brand stewardship or lack thereof. It is also not trivial. After all, brand stewardship is by extension a core part of a board of directors’ fiduciary responsibilities. When investors and other critical audiences (customers, partners and employees just to name the top critical ones) lose confidence in the leadership capabilities of those entrusted with guiding a company, the brand is tarnished and no good can come of it. In fact, as we were all taught as kids, trust and respect are easily lost and extremely difficult to regain. This is true even in the U.S., where we seem enamored sometimes with stories of reclamation and redemption.

First, a head’s up. My rankings are:

  • HP —atrocious
  • Yahoo! — not so good
  • Apple — well done given the circumstances

HP —atrocious

It is not worth recounting all of this missteps HP has made in the past decade, and I am only referring here to the revolving door at the CEO and board. This has been very public (very bad form) and, literally, books have been written about it. Plus, if you Google (News - Alert) articles about the company and just read a sampling, most reference the “dysfunctional” board in an early paragraph. It has almost become mandatory when writing commentary about the company. But why, in this instance, have they lived up to the description one more time? Why do they continue to leave the damning perception they could mess up a one-car funeral?

I will put aside, for the moment, the question of whether former eBay (News - Alert) and, as of yesterday, now HP CEO Meg Whiteman, with a whole 8 months under her belt as an HP board member, is the right choice to head HP at this critical juncture.  Process, in this case, is perception.

First, a rumor leaks early in the day that the HP board is considering replacing troubled CEO Leo Apotheker. In the same rumor, Whitman is mentioned as a likely successor. But wait a minute. If Whitman was already the board’s choice as successor, and she was/is a board member, one would have thought, based on the HP press release announcing the changes, that she could have used her alleged talents as “a strong communicator who is customer focused with deep leadership capabilities” to have managed the revelation of the transition correctly.

It should not have been a surprise that Apotheker was out and she was next in line. If this came as a shock, then HP’s board is even more hapless than even its harshest critics have portrayed. It is not like there was a precipitating event that required a crisis management type reaction.

Instead of doing the obvious, i.e., announcing that the board was replacing Apotheker with Whitman, the board let the change become a rumor and then let the rumor linger. All this did was further the perception of the gang that couldn’t shoot straight. As I said, in a word, atrocious. Not a good omen for the start of the Whitman era, and certainly a contributing factor as to why my colleague, CEO Rich Tehrani (News - Alert), is giving her 12 months in the job at best.

 Yahoo! — not so good

Okay, so former Yahoo! CEO Carol Bartz turned out to be a problem with a seemingly terminal case of “terrible two” temperament. Maybe she deserved to be told of her ousting via a phone call instead of face-to-face. However, deserving less than proper etiquette and actually administrating it are two different things. The Yahoo! Board, in its failure to hold a private meeting to dismiss Bartz according to some negotiated conditions about name-calling (at least for some period of time), gave her an open invitation for one final shot. Not surprisingly, and totally in character, she took it. Again, this creates the perception that the board is so weak it could not confront her in person. Really!

That said, at least from the perspective of managing financial markets and other stakeholder reactions, Yahoo! does deserve credit for carefully outlining the steps it would take to ensure operational continuity while it conducted what, from all appearances, seems to be a thorough and comprehensive evaluation of all their leadership options going forward. Yahoo! for Yahoo!

Apple — well done given the circumstances

For the past several years Apple has done just about everything right. And, lesson to the above, its financial performance and market valuation in some measure are reflections of the confidence people have in the leadership of the company, and I am not talking about merely Steve Jobs (News - Alert). A succession plan was in place, and Jobs’ retirement was incredibly well orchestrated given the circumstances. In short, they got it right. Given that part of Steve Jobs’ genius is being one of the great marketing people of our generation, this was not a surprise. Like it or not, regime change at any company of any size is a marketing issue precisely because perception is reality and a show of real leadership at critical junctures helps the brand. So let’s put even a little more polish on this Apple.

Lessons Learned 

There are a few things that may seem obvious, but are worth repeating as a result of the C-level tumult of recent days. This is not a case, as musician Sting sings, where “Everything You Do Is Magic.” Lessons learned should include (and this is not an exhaustive list and pertains mostly to the announcement process and not the selection process):

  • Along with everything else, regime changes are huge marketing events that can have profound and lasting impacts.
  •  Unless there is a precipitating crisis, like the motto of the Boy Scouts, “Be Prepared!”
  •  Mitigate risks:

a.       Don’t air laundry, even if clean, in public on any timetable other than your own. It is critical to control the story and not let the story control you.

b.      Do the right thing in dismissing someone so to the extent possible there can be a honeymoon period — a break from the airing of bad feelings, and a chance for the new leadership to put some stakes in the ground.

c.       Understand that while the whole world is watching, different audiences need messages tailored to their concerns.

Marketing 101 courses in college typically start with explanations as to why the old adage that, “you never get a second chance to make a first impression,” should always be top of mind. Changes in leadership are first impression events. They are new beginnings.

The bottom line is that leadership changes have powerful reverberations that effect corporate reputations and ultimately the bottom line positively as well as negatively. This is why there must be a premium put on getting them right.

Let’s hope that those in charge of other companies, especially name-brand public ones, have learned their lessons.

Peter Bernstein is a technology industry veteran, having worked in multiple capacities with several of the industry's biggest brands, including Avaya, Alcatel-Lucent, Telcordia, HP, Siemens (News - Alert), Nortel, France Telecom, and others, and having served on the Advisory Boards of 15 technology startups. To read more of Peter's work, please visit his columnist page.

Edited by Rich Steeves
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