Apotheker Out, Whitman In

Hewlett-Packard’s quick decision to replace CEO Leo Apotheker with Meg Whitman,former CEO of eBay,suggests that the H-P board wants to put the whole Apotheker blunder behind it and get on with running the business.

But was the move to appoint Whitman,already an H-P board member,to the top position a smart one? Wharton management professor Lawrence G. Hrebiniak suggests that she was hired “because of her communication skills, personality, her rapport with H-P board members and her experience. She will pursue the same strategy Leo Apotheker offered — divest the PC business, focus on software and services — so it’s not Leo’s strategy the board didn’t like. The board just didn’t like Leo, just like SAP’s board didn’t like him a year ago.”

If Meg Whitman’s “pleasing personality and ability to execute Apotheker’s strategy enable H-P to compete with the likes of a very formidable IBM,then I’ll take my hat off to her,” Hrebiniak says. “Will her style and good relations with a receptive,personality-conscious board result in competitive gains in a tough market? I’m skeptical,at best. She’s good,but the board seems wishy-washy.” Hrebiniak’s verdict about the wisdom of this appointment: “Time will tell.”

As for what Whitman’s first actions should be,“she should carefully develop and announce her plans for strategy execution,” says Hrebiniak. “She needs to obtain buy-in from the board and market on how H-P plans to compete in a new arena. Absent a sound execution plan and positive results,the board will be looking for a new CEO next year.”

According to Wharton management professor David Hsu, Whitman brings to the job “substantial experience in building an emerging enterprise with her tenure at eBay. H-P could use those general management and leadership skills with their new strategic orientation, and so I expect those general skills to be more important at this juncture rather than experience in any particular functional domain.”

Hsu suggests that it won’t be easy to “out-IBM IBM or out-Oracle Oracle in the business services or enterprise software spaces. However,having the mindset of a scrappy entrant in a new space rather than the mindset of an established industry incumbent will serve HP well at this stage.”

He interprets the H-P board’s decision to appoint Whitman without the usual long CEO search process “as partly a result of the thinness of the potential CEO labor market,particularly for organizations like H-P. So when Whitman agreed to take the job,I imagine the H-P board felt that securing a strong leader sooner was more important than carrying out a lengthier and uncertain CEO recruitment process. Furthermore,as an H-P board member of eight months,she is already familiar with many of the most pressing corporate concerns,at least at a high level.”

Whitman’s first set of actions on the job “should involve clearly communicating in relatively short order a roadmap for how H-P will achieve its strategic objectives,” Hsu says. “This should be done to both insiders and outsiders. Managerial reconfiguration at H-P may also be a necessary part of this.”

Knowledge@Wharton