“Planned” versus “Forced” Succession Planning – 08/10/10

AUG 10

It’s hard to grasp the bizarre post-market close news from last Friday – HP’s successful CEO, Mark Hurd was being forced to resign the post he’s held for five years because of inappropriate conduct and erroneous expense reports.  News on the story is still evolving, but HP has had a fantastic run in the post-Carly era…integrating EDS; while also acquiring Mercury, Palm and 3Com and reestablishing massive credibility up and down the stack.  Now, HP finds itself without a leader, and scrambling to find a credible replacement as Wall Street accuses its Board of overreacting and harming Company market value.

As long time advisors and analysts of the tech-sector, it’s hard to not draw comparisons to IBM, who faces the planned exit (via retirement) of CEO Sam Palmisano – an equally successful (but longer tenured) rival CEO.   The difference is that IBM has been architecting the departure of Palmisano for well over a year.

In late July, IBM finally announced details regarding an executive reorganization which was seen largely as succession planning for Palmisano’s retirement – (he is almost 60, the magic age at which IBMs chief executives historically hang it up). Under the IBM reorganization, Steve Mills who runs the software group will inherit the systems and server group (STG) and Michael Daniels will expand his role to take over all services (he has previously split services with Ginni Rometty).  Rometty will take on a new role for global sales and strategy…IBM essentially has teed up one of these executives (Mills, Daniels or Rometty) to succeed Palmisano, all of whom are capable and long-in-the tooth Big Blue executives.

Contrast this with HP.  Hurd’s unplanned departure leaves a leadership void.  Similar to IBM, the Company has very capable executives running key segments (PSG, enterprise, imaging and printing, services), however their succession plan is muddier as the Company works though organizational changes still in process since acquiring EDS.  It will be interesting to see how HP handles its succession challenge – Hurd earned a reputation as turn-around leader and operational expert.  His sudden departure will reverberate, and we’re all watching to see if HPs Board can replace Hurd as deftly as they replaced Carly Fiorina in 2005.

Have a great week!

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Scott Donahue