Two years into an epically challenged tenure, Meg Whitman may yet emerge as the best CEO HP has had since the founder days of Bill and Dave
To understand what Meg Whitman, the former eBay chief executive who now runs Hewlett-Packard, is up to, it’s essential to revisit something she did 26 years ago. She had just become a junior partner at Bain Consulting, working for the brilliant but domineering Tom Tierney. One morning Whitman walked into his office, impromptu. The 31-year-old asked her feared boss if he wanted staff feedback about his leadership style; he nodded. With that, Whitman grabbed a felt-tip marker and sketched a giant steamroller on a nearby whiteboard. “This is you, Tom,” she explained. “You’re too pushy—you’re not letting us build consensus leadership.”
Tierney was stunned. But he eventually absorbed the message and toned down his stridency. All of Bain benefited. “There was a real courage to her,” recalls Tierney. “What she told me was a gift. Even though her feedback was negative and unsolicited, it left me liking Meg more.”
Jump ahead to last year, soon after a boardroom uprising brought Whitman to power as HP’s chief executive. She stepped into a mess: HP’s stock had tumbled 42 percent in the year before she took office, while operating margins had sunk to just 2.5 percent. Arch rival Dell was gaining ground in the server market, and HP seemed powerless to stop it. When the two computer makers vied for a $350 million server order from Microsoft’s Bing search engine team in April 2012, Dell won the job. Familiar story: Bing’s previous four face-offs had all gone Dell’s way, too.
Whitman refused to shrug off defeat. Within minutes, she was on the phone to Microsoft CEO Steve Ballmer, demanding the same candour she once offered Tierney. “Tell me where we came up short,” Whitman asked. “Don’t sugarcoat it. I’d like to know so that we can do better the next time.” Soon afterwards, Microsoft sent a multipage memo to Whitman, listing nine ways that HP had fumbled its opportunity. “Even if your bid had been price-competitive, you wouldn’t have won,” a Microsoft lieutenant declared.
For Whitman, the memo wasn’t an insult; it was a battle plan. She convened a war team of HP’s enterprise computing chief, Dave Donatelli; the company’s operations chief, John Hinshaw; and supply chain wizard Tony Prophet. Their job: Figure out how to make HP more competitive. Match Dell’s ability to suggest cost-saving steps that hadn’t occurred to Microsoft. Done. Promise to fix software bugs in two days, not four weeks. HP was on it. By summer, HP had crafted a far more customer-friendly approach. When Bing bought a further $530 million of servers in January, vindication arrived. This time HP, not Dell, seized the order.
Blunt, folksy and persistent, Meg Whitman is the leader that Hewlett-Packard desperately needs. She’s decisive without being abrasive, persuasive without being slick. She’s a team builder who knows that turnarounds call for repairing hundreds of small failings rather than betting everything on a miracle cure that might be a mirage. In the words of HP director Marc Andreessen, one of Silicon Valley’s top venture capitalists, “She’s the best CEO the company has had since its founders.”
But fixing the world’s biggest tech company—with $120 billion in annual revenue and 330,000 employees—is a Herculean task. Bloated by more than 70 acquisitions in the past 15 years, HP isn’t just sprawling and stalled out; it may actually be running in reverse. Revenue has been shrinking for most of the past seven quarters. HP’s return on capital is a pitiful 7 percent over the past five years. (By comparison, IBM is at 29 percent, and even Dell, which has its own troubles, is at 24 percent.) HP is still profitable before its enormous asset writedowns, but with its stock trading at a feeble price/earnings multiple of six, one major investor suggests HP can’t totally shake the fear that it might go to zero.
Too gruesome for Whitman’s tastes? Guess again. “Problems are good, as long as you solve them quickly,” says Whitman over a Cobb salad lunch at HP’s facilities, now chock-a-block with posters of Whitman’s favourite sayings, including this aphorism: “Run to the fire; don’t hide from it.” “Meg thrives on these sorts of challenges,” says Howard Schultz, the Starbucks CEO and a longtime friend who has known her since their time together on the eBay board.
When Whitman took command 20 months ago, following her own hiccup—a personally expensive thumping in the 2010 election for governor of California—she walked into a company that had squeezed out its previous four CEOs. In 1999, genial insider Lew Platt didn’t deliver enough sizzle, charismatic marketer Carly Fiorina couldn’t hit earnings targets in 2005, and hard-nosed numbers guy Mark Hurd got tangled up in an expense-account scandal in 2010. Whitman’s immediate predecessor, aloof European import Léo Apotheker, lasted just 11 months. His undoing: Ill-advised strategic thrusts that sent HP’s stock crashing.
Previous CEOs hoped that big ad campaigns would make HP seem cool again. Whitman’s brand messaging, centred on the motto “Make It Matter”, seems most likely to bolster the spirits of HP’s workforce. For wooing the public at large, she is taking a page out of Jobs’ playbook. “Look at Apple,” says Whitman, referring to its design. “Or look at websites like Zaarly, Path or One Kings Lane. When I got involved in the internet in the 1990s, websites weren’t beautiful. Now they are. Design is a differentiating characteristic in our markets. We need to take advantage of that.”
HP AND THE STONE-THROWERS
(This story appears in the 28 June, 2013 issue of Forbes India. To visit our Archives, click here.)