Tuesday, August 10, 2010

Into the Abyss

There is so much that is distressing in the sudden forced resignation of Mark Hurd (pictured) from Hewlett-Packard.

The distress level is so high because there is no reasonable explanation for the personal tragedy that unfolded. A man living a life of accomplishment and acclaim falls in a flash into the abyss of disgrace. And those who are in the know about why and what really happened aren't telling.

Of all the reporting and analyzing that I have read since Friday's ouster, I suspect Business Insider's Henry Blodget gets pretty close to the truth with this review of the situation — but he even has to qualify that his truth seeking is "as best we can tell."

As the shock wave of the ouster subsides, here is the next reason to be distressed about this whole affair: the early line seems to indicate that the H-P board will be going outside for a new CEO. For a company with such a history of turmoil at the top (even predating Carly Fiorina's reign), the H-P board should be one of the least likely to have yet again bungled an orderly CEO succession by not ensuring there was one or more eminently qualified internal candidates.

Why does CEO succession planning produce so few successors? That is a question that Stephen Miles, vice chairman of executive search firm Heidrick & Struggles, raised last year when he looked around at Corporate America's C-suites. Then crunching 2008 data, this expert in leadership succession issues noted that of the 80 new CEOs who were appointed among Fortune 1000 companies that year, only 44 of them — 55% — were promoted from within.

"While almost all companies technically have a succession plan in place," Miles stated, "the fact that 45% of them had to go outside to hire a CEO means that many of these plans failed to hit the mark."

He has pinpointed several ways that boards trip themselves up, which I review in the follow-on posting of August 11th. Will we see clues to how H-P "failed to hit the mark"? (No wordplay intended.) Almost surely.

Now that we have witnessed a CEO falling into an almost unimaginable personal abyss, we are about to witness a board falling into the abyss of a succession nightmare — one that, maddeningly, is all too imaginable.