Troubleshooting Tips From HP's CEO

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It started sloppy but ended neat. Three months ago, Hewlett-Packard CEO Mark Hurd was sitting atop a huge corporate embarrassment. Board members were feuding and leaking their gripes to the press, the company was spying on them, and government regulators, sensing criminal activity, had begun to investigate.

In the equivalent of one fiscal quarter, HP has wrapped up all of those problems. This week's $14.5 million settlement with the California attorney general officially resolves a state lawsuit against HP, with no specific findings against the company. The agreement requires the computer giant to take a number of measures to ensure proper corporate behavior—including many steps the company has already taken. And none of that has stopped HP's business momentum. HP stock has risen about 9 percent since the scandal broke in September, including a small bounce following news of the settlement. "It's turned out incredibly well," says Eric Johnson, a professor at Dartmouth's Tuck School of Business. "Hurd has done a great job of shielding HP as a company."

With CEO greed and corporate malfeasance grabbing so much of the spotlight lately, it's worth stepping back and taking a look at something a CEO has done right. I asked Johnson to offer a two-minute case study on Hurd's troubleshooting at HP. Future CEOs take note–here's how to solve a major corporate problem:

—Act quickly. The worst corporate scandals fester for months. Hurd cleaned house and achieved closure rapidly.

—Accept some responsibility. Hurd admitted he should have paid more attention to HP's plans to monitor board members' phone calls. Importantly, however, his personal involvement with the scheme was minimal, which let him troubleshoot the problem without losing credibility. Others who were more deeply involved—like former Chairman Patricia Dunn—faced no choice but to leave the company.

—Rebuild internal morale. Shortly after the scandal broke, Hurd expanded the responsibilities of board member Richard Hackborn, a legendary exec known for emulating the old-school "HP way," to include independent oversight of sensitive matters. The move signaled to insiders familiar with Hackborn that the company was changing its behavior, not just its rhetoric. Giving independent experts the authority to oversee company investigations also made it easier to agree to those kinds of steps in the California agreement.

—Achieve closure externally. That's what the California deal signifies: HP is putting the whole matter behind it. Some federal inquiries are still open, but odds are good they'll wind down, now that California has had its say. And Dunn and a few others still face criminal charges. But since they've left the company, that's not HP's problem anymore.

--Rick Newman

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Hewlett-Packard
executives
  • Rick Newman

    Rick Newman is the author of Rebounders: How Winners Pivot From Setback to Success and the co-author of two other books. Follow him on Twitter or e-mail him at rnewman@usnews.com.

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