HP head resigns: What does it mean for organizational theory?

Hewlett-Packard CEO Carly Fiorina stepped down on February 9, 2005, after a dispute with the board about the direction of the company. Patricia Dunn, an HP director, was named chairman of the board, and Robert P. Wayman, current CFO, was named interim CEO (Boulton, 2005).

The firing (or resignation) was reportedly not due to a change in strategy, but simply a desire to accelerate the company's current strategy. Though Dunn praised Fiorina for revitalizing the company, she also implied that Fiorina was not as active as she could have been during her stint as CEO. Dunn and Wayman stated that the move did not have anything to do with earnings. Rumor has it that it was due to “fundamental disagreements between Fiorina and the board over how the multi-billion-dollar company should be run” (Boulton, 2005, ¶ 16). Sources have said that the company is frustrated by its second-billing to IBM, inconsistent earnings, and unclear goals. HP is not planning on making any more big structural or executive changes in the near future.

Strategy will be a major consideration when looking for new a CEO, but company officials claim that there will not be a requirement that a new CEO will have to follow a board-specified strategy. Wayman says that the new chief must have excellent strategic skills and the ability to execute that strategy (Boulton, 2005), something that Fiorina was likely missing.

Fiorina was “one of the most powerful women in corporate America” (La Monica, 2005, ¶ 1), and was cited in the Sunday Times as being “possibly the most powerful businesswoman in the world ” (Times Online, 2005, ¶ 1). She was the only female CEO of a company in the Dow Jones industrial average.

The top prospects for the position of CEO are Vyomesh (“VJ”) Joshi, the current head of HP's printing and imaging division, and former Compaq (now merged with HP) head Michael Capellas. The decision depends on whether the board wants someone that is currently with the company, or if they decide to hire an outsider with fresh ideas (La Monica, 2005).

This event relates to organizational theory in the area of strategic decision-making. Strategy is very important for a big company like HP, and having all employees in agreement about that strategy is even more critical. When one person dissents, and especially someone in a position of power like Fiorina, things can go downhill quickly. In this situation, the board acted in the role of top management in order to force Fiorina from power and allow them to implement their strategy in the way that they wanted.

In terms of the actual decision-making process, the board seems to have attempted to act rationally. They had a shared goal in mind and thought that giving Fiorina the axe would be the best way to accomplish that goal. When deciding on a new CEO, the board will again need to decide on a goal and a way of achieving it; if they agree, the hiring will once again be a rational decision. If not, the situation could deteriorate and run the gamut from a coalition model of decision-making, all the way down to the garbage can model. These models make decision-making more difficult, because there is often more ambiguity and uncertainty than when making a rational decision.

Although modern theorists generally think that the rational process is the best way to make a decision, Swedish organization theorist Nils Brunsson believes otherwise. He promotes the idea that irrationality is a useful way to make big decisions. He describes decision irrationality as a process that analyzes few alternatives, only positive consequences, and avoids the planning of objectives. The positive focus of this method allows for the optimism that any decision would be a good one, and therefore deciding on one option is easier (Hatch, 1997). HP could already be employing decision irrationality in hiring a new CEO, because they have unofficially narrowed the choice down to only Joshi, Capellas, and perhaps a few others.

As the situation at Hewlett-Packard shows, it is clear that strategy and decision-making are critical parts of any successful organization. Carly Fiorina, though often touted as a powerful businesswoman, differed from the board in her strategy to run HP, and she is now paying the price. Ensuring that everyone in the company is behind goals and values is the best way to avoid another fiasco like the one at HP.

Katy H.

References

Boulton, C. (2005, February 9). HP CEO Carly Fiorina steps down. Internetnews.com. Retrieved February 13, 2005, from http://www.internetnews.com/busnews/article.php/3481866.

Hatch, M. J. (1997). Organization theory: Modern, symbolic, and postmodern perspectives. New York: Oxford University Press.

La Monica, P. R. (2005, February 10). Fiorina out, stock price soars. CNN Money. Retrieved February 13, 2005, from http://money.cnn.com/2005/02/09/technology/hp_fiorina/.

Times Online. (2005, February 9). Fiorina 'stands down' from H-P. Times Online. Retrieved March 15, 2005, from htp://business.timesonline.co.uk/article/0,,9075-1476889,00.html.

By: Katy H.