A star executive does not make a company

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It is not always a mistake to hire an outsider for the top job. This move can be effective when the culture of an organisation has become so dysfunctional that it is almost necessary to start again. But the outsider who brings his or her own blueprint will almost invariably fail: as did Carly Fiorina at HP.

The share price of Hewlett-Packard jumped when Carly Fiorina was appointed chief executive in 1999 and it jumped again when she was fired last week. In the meantime, it fell by more than half.

Ms Fiorina was headhunted by Hewlett-Packard from Lucent, then flying high. HP, once the most revered name in Silicon Valley, was looking for an exceptional person to restore the company’s fortunes. Ms Fiorina, who had reportedly stuffed crumpled socks in her pants to show the sales people that she had balls, apparently met this requirement.

Beauty contests for executive talent are common today. The competitive hunt for the best people in other companies supposes that general management skills are more important than specific organisational knowledge and that supremely talented individuals can single-handedly transform businesses with their vision and charisma. Rakesh Khurana’s Searching for a Corporate Saviour and Henry Mintzberg’s Managers not MBAs cruelly dissect these fallacies.

Ms Fiorina did the things expected of transformational leaders. She embarked on a public relations offensive. Within the company, “coffee with Carly” took over from “the HP way”. On public appearances, the immaculately tousled hair of America’s leading female executive quickly made her the most readily recognised business figure in the country.

She demanded rounds of cost reduction from subordinates. Sometimes such economies lead to greater efficiency, sometimes they undermine the long-term prospects of the business. In the absence of intimate knowledge of the organisation in question, it is hard to tell. No matter: in either case the process enhances earnings per share in the short run.

But the real test of the corporate saviour is whether she can land the big deal. Ms Fiorina first made a pitch for the consulting business of PwC, only to learn that many of the opinionated folk in that business were unenthusiastic about a merger with a manufacturing company under her leadership. But she completed the acquisition of the ailing Compaq. The results were disappointing and last week Ms Fiorina paid the price.

The lesson from Hewlett-Packard is not simply that Ms Fiorina was not up to the job. It is that the role in which she so willingly cast herself is not one in which anyone is likely to succeed.

It is not always a mistake to hire an outsider for the top job. This move can be effective when the culture of an organisation has become so dysfunctional that it is almost necessary to start again. But the outsider who brings his or her own blueprint will almost invariably fail: the better approach to this task is to find and release the frustrated energy already present in the business. As the American pro-consuls in Iraq can testify, such reconstruction is no easy task. There is also a business role for larger-than-life personalities – such as Bill Hewlett or Dave Packard. Such figures make their principal contribution in the early stages of corporate development, when the positioning, identity and values of the business need to be established.

But there is a world of difference between the attributes appropriate to the founding entrepreneur and the political skills demanded of the effective manager of a larger organisation. Henry Ford defined the products and technology of the car industry but Alfred Sloan at General Motors defined the structures needed to run it, something of which Ford himself was quite incapable. It has been fashionable – and lucrative – for consultants, gurus and especially chief executives to blur this distinction between the entrepreneur and the professional manager. But the results of that elision have generally – as at HP – been unsuccessful and frequently – as at WorldCom or Vivendi – disastrous.

Great businesses depend on the talents of thousands of people, not just one. Their management requires a multiplicity of incompatible talents: both vision and attention to detail, both emotional intelligence and analytic capability, both self-confidence and self-criticism. The most effective managers possess an idiosyncratic balance of attributes appropriate for the situations they face, and the range of abilities successful companies require must be sought across a team rather than in a single personality. Rows of suits are less photogenic than Carly Fiorina but they are what really makes modern business work.

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