HP’s earnings call this week set a record for embracing failure from an accounting perspective. I am not talking about a financial ‘loss’ (which it did have) and is not something to be particularly embraced. Rather, I am referring to their ‘$10.8 billion charge’ taken for “amortization and impairment of purchased intangible assets, the impairment of goodwill, restructuring charges, acquisition-related charges and charges relating to the wind-down of certain retail publishing business activities.” These charges is the equivalent of an accounting house cleaning tossing out a bunch of junk assets when you finally realise that they are not worth anything not even on eBay. Most of the charges were in that intangible accounting line ‘Goodwill’ and was associated with a deterioration in their professional services standing as well as the decline of the Compaq brand. Wiping eight-figures off your books is a brave step intended to be more transparent with shareholders and help build a more predictable and trustworthy investment.
Such a hit may possibly draw a line under the battering HP has endured since the travesty of former CEO Mark Hurd’s downfall. That low point was not the embrace of failure, but the lack thereof. Harvard Business Review explores it insightfully in Ron Ashkenas’ piece “At HP, Deference May Have Led to Deviance” (thanks Bret)…
- “Being a senior executive — and especially a CEO — is a heady thing. People defer to you and treat you like corporate royalty. You have an entourage that takes care of mundane tasks, writers that prepare your speeches and presentations, and a PR department that shapes your internal and external image. In the midst of this ‘heroic executive’ culture, it’s easy to unconsciously think that you can do whatever you want to do, particularly in seemingly minor or personal matters. Amplifying this sense of power is a lack of honest feedback and non-deferential dialogue. It’s not that CEOs, senior executives, and many managers have no one to talk to — many have no one to talk back to them. At the same time, many senior executives have no one to share doubts and underlying anxieties. They don’t want to appear weak or uncertain with their own people, which might, in their minds, undermine their authority or leadership. So in the absence of intellectual pushback and emotional empathy, senior people either lose perspective on what’s appropriate, or find external relationships that fulfill their needs but may not be appropriate. None of this excuses the bad behaviors of executives. But it does suggest that all of us may need to tone down the excessive deference that creates the ‘heroic executive’ culture. From the manager’s side, this means being more open to admitting mistakes and uncertainty, and encouraging real give-and-take with subordinates and colleagues. If this is difficult to do with your own team or peers, then find a consultant or coach from inside or outside the organization who is not cowed by your status and can be a confidential listener and effective devil’s advocate. For people who report to an executive or are part of an executive team, it means being more courageous in challenging your boss and your peers.”
Now that HP is more willing to embrace failure, hopefully it can find more success.