I Guess Carly Thinks Performance Doesn’t Matter

Jan 19 2007

By Ira Winkler

If Carly Fiorina can’t figure out why she was fired, maybe she should ask the 25,000+ people who were fired, or the shareholders who lost $60Billion, because of her poor performance.

Poor little Carly Fiorina. She is going around pitching her new book, talking about how she was wronged by HP. Along the way, she tries to stress that her book is an inspirational story about a secretary growing up to be CEO of one of the largest companies in the world. She is pitching herself as the paragon of a successful business woman. During her interviews, she talks about how she couldn’t get out of bed in the morning following the weeks after her firing. She bemoans the HP Board of Directors for not telling her to her face as to why she was being fired, and she claims that to this day she still doesn’t know why she was fired. If she doesn’t know that, then she was not qualified to be HP’s CEO in the first place, and was definitely not qualified to continue as the CEO.

Let’s first acknowledge that Carly was not really qualified to be CEO of HP in the first place. She was first touted as leading Lucent into being a highly successful company. It was this supposed success that gave the world the impression that she was qualified to lead a $115Billion company. Soon after her leaving Lucent though, the stock collapsed when it was revealed that much of Lucent’s success was due to their customer financing programs; which meant that Lucent loaned customers the money to buy their equipment. The loans started to default and Lucent took years to recover, if it can be said that they recovered. Therefore Carly’s stellar success at Lucent was artificially inflated, and she left right before the resulting collapse.

Carly soon began to assume the role as the celebrity CEO of HP. It was prior to the dot com bomb, and HP was doing as well as other companies. Then of course came the collapse of the dot com era, and HP sunk more than other companies.

Many of my readers know that I was with HP for awhile, and I can tell you that there was serious talk inside the company about Carly being fired. Then came the Compaq merger announcement. There was no way that she could be fired until the merger was complete, and then not for awhile after that or it would look like a proclamation that the merger was a failure.

Along the way though, at least 25,000 people inside HP were being fired. Managers didn’t sit around and fire people because they weren’t performing. It was basically decided at the executive level of the company as to how many people in each business unit of the company had to be fired. Then the firings trickled down, as lower level managers were directed as to how many people had to be fired in their reporting divisions. Then lower level managers had to determine how many people had to be fired in each of their divisions, and so on, until you got to the line managers.

The line managers weren’t told that particular individuals had to be fired, but that they had to fire a specific number of individuals. Then they had to choose whom to fire. Even if everyone in a particular workgroup was a reasonably good worker and producer, if it was determined that a certain number of people had to be fired, these good workers were fired.

The firing process was that they were invited to a meeting, for which they didn’t know the specific purpose. When they showed up, they were met by a manager whom they never met before. That manager informed them that due to overall company problems, the company was downsizing and that their position was being eliminated. After that was laid out, their real manager met with them and went through all the required transition and outplacement issues, and then all the other workers had to pick up the extra work for no extra pay.

Generally people received three months severance pay. I would say that this averaged out to approximately $20,000 for professional workers. This process was repeated for more than 25,000 workers.

Much like Carly, I imagine that many of these people had a hard time getting out of bed in the following weeks. Unfortunately, though $20,000 really doesn’t allow many people the comfort to wallow in their own bed for long periods of time.

Poor little Carly though had a $21,000,000 severance package; roughly 1,000 times larger than the typical worker that was laid off because of her poor performance. They received 3 months of severance pay, while Carly received 3 decades of severance pay. I know that this must have been hard for her to work with. All told though, Carly received almost $63,000,000 in salary, signing bonus, and severance pay.

People must realize that the primary purpose of the CEO and Chair(wo)men of the Board is to maximize the value of a company. That is their reason for being employed. Let’s then look at Carly’s performance.

On July 16, 1999, the last stock market close before Carly was announced as CEO and Chairman of HP, HP’s market capitalization was $115,481,940,000 per HP’s own data. Now according to Yahoo! Finance, taking all stock splits, dividends, and other issues into account, the HP stock price can be normalized on that day to $40.46 per share.

On February 8, 2005, the day before Carly was fired for no apparent reason according to her, the HP stock price was $19.74. That is a loss of 51.3%, which translates to an overall loss of $59,242,235,220 of market capitalization. That is a loss of almost $60Billion under her leadership. This is just the loss of HP’s legacy stock value, and doesn’t even include the loss from Compaq’s legacy business.

It is baffling to me that someone can lead a company to a $60Billion loss and claim not to know why she was fired, and the media isn’t asking her any questions. Look at it this way; HP basically paid Carly approximately $1,000,000 for every $1,000,000,000 that she lost the company. Stop and consider that for a moment.

Now some people would argue that the loss in market capitalization coincides with the dot com bomb, as well as the fact that many companies lost a significant amount of market capitalization. I already thought of that and examined how well HP’s competitors did during that time. IBM’s loss during Carly’s tenure at HP was 28.4% and Dell’s loss was 5.2%. Carly’s performance was twice as bad as IBM’s and ten times worse than Dell’s. NCR, the company that Mark Hurd, Carly’s replacement came from, GAINED 40.7%, during Carly’s tenure at HP. I think that says enough as to why Hurd is more deserving of the CEO position than Carly.

During a recent CNN interview, when asked about HP’s current scandal, Carly’s comment was that she believes that HP’s managers are putting their own interests above that of the company. I couldn’t agree more, as that belief was the primary reason that I resigned from HP back in 2004 during Carly’s tenure. Carly set that mood and attracted and retained managers who followed her values.

However I doubt that Carly realizes the irony as she clearly put her own interests above that of HP. Carly’s celebrity was skyrocketing as HP’s stock was plummeting. Let me give a comparison. Jack Welch, probably one of the most respected CEOs in history, technically ran NBC and Universal studios. He could have appeared with celebrities and attended the Oscar, Emmy, and Grammy events at will. Yet you never saw him near any celebrity. He maintained his dignity and allowed his company and employees to maintain the spotlight. However, all you need to do is look at the following picture of Carly with Gwen Stefani, taken during an HP media event, to see where her priorities lie.

41776_512.jpg or any similar picture from Google images or other archives.

So now as the media touts Carly as she touts herself, nobody is looking at Carly’s actual performance. She has caused the ruination of two consecutive companies, costing tens of thousand of people their jobs. Likewise between HP, Compaq, and Lucent, she has lost stock market investors probably over $100,000,000. Yet, she claims she doesn’t have a clue as to why she is fired.

As Carly laid in her bed, not wanting to get up, I wonder if she thought about Nicole. Nicole was a single mother making about $36,000 per year as an administrative assistant at HP. In my two decades in the profession, she truly stood out as having one of the best work ethics of any person I ever worked with. She was a person I and everyone else could always count on. Nicole was fired because she was the division admin assistant, and if she wasn’t fire, her manager would have had to fire a billable engineer.

So I wonder if Carly, who had tens of millions in the bank, and just received a $21Million severance package, could put herself in Nicole’s place, who didn’t have the luxury of just lying in bed the next day because Nicole had to get her son off to school, figure out how to tell her son that she might not be able to pay the rent, and find a job. The $9,000 severance pay she received just didn’t seem to give Nicole the luxury of lying in bed. Then decide whether or not Carly was thinking about the 25,000+ other Nicoles, having to tell their families that they don’t know where their next paycheck was coming from as she herself lied in bed bemoaning her fate of having nothing to do except spending the tens of millions of dollars that she had in the bank. For some reason, I didn’t see mention of Nicole in Carly’s book.

Poor little Carly received $50,000 as part of her severance agreement just for “Severance Financial Consulting”. That was not part of Nicole’s severance package for some reason.

So now as talk show hosts ask Carly about future political ambitions, they should instead be challenging her about her rewriting history. When she says she doesn’t know why she was fired, the business reporters should ask about the abysmal performance of HP and her policies that almost caused Lucent to go out of business, and the tens of thousands of people that lost their jobs because of her. Maybe instead of the title, Tough Choices, Carly’s book should have been titled, Performance Shouldn’t Matter.

We cannot allow a person with this track to rewrite history, and now spend her time talking about running for governor of California.

HP $19.74 Feb 8 2005
$40.46 July 16, 1999 (51.3% loss)

IBM $92.49
$129.10 (28.4% loss)

DELL $41.02
$43.25 (5.2% loss)

NCR $36.81
$26.16

41776_512.jpg

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