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TED SIELAFF |
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PSYCHOLOGY = BAD MANAGEMENT |
 CARLY FIORINA ...out at Hewlett-Packard |
Giving a bonus for bad work? Real bad idea!
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for TheColumnists.com |
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I’m flabbergasted. Let me explain. If a person does good work, there should be a reward. If a person does poor work, there should be no reward. And...there might be mild punishment to remind the person that the wrong thing has been done. This simple principle of behavioral psychology works with people as well as animals. It is really a good idea. Very sound. It is something every parent and every person in business should understand. Bosses, especially, should understand this idea.. When I was a college professor and taught students something about management, I always pointed out this idea to them. And, I told them that if some action was important, bosses ought to figure out a way of offering a reward to reinforce the behavior. I had case studies on this subject because it is important. I should say that not all rewards need to be tangible. Many, many times recognition is all that is needed as a reward. Having said all of that I am appalled at the Board of Directors of Hewlett Packard. They fired their president, Carly Fiorina, because she did such a terrible job of running Hewlett-Packard. (Nice talk says she "resigned.") Now she's going to get over $22 million from the company. This happened a couple of months ago, but I am still flabbergasted. Let me give you a thumbnail sketch: At one time, H-P was considered a premium employer. For years it was near the top of Fortune magazine’s list of the “100 Best Companies to Work For.” The H-P Way was held up as a model for employers. People who worked for the company were secure, happy, and loyal. They were applying the principles of psychology in bringing out the best in people. H-P engineers were constantly finding new products and new markets. Maybe you remember the hand-held calculator that made the slide rule obsolete. That was an H-P innovation. But, when Carly Fiorina came along, she disregarded all of that and was going to shake up H-P. She had big plans to merge H-P with Compaq Computers, reduce duplication, reduce employment, and increase profits. Make the company big overnight. Forget about the H-P Way. That’s not important. Lay off thousand of employes. Improve profits. In addition, she had a fondness for burnishing her own image and had big marketing events with top politicians, celebrities and CEOs in attendance. Big TV pictures of Carly while she talked. High profile stuff personified her. She set it up so she was the superstar. Also, it is my opinion that she was a cruel, heartless executive. For example, when H-P missed third quarter profit targets last year, she fired three top-executives. Made no effort to get at the real problem. That is the kind of thing that dictators do. Also, stockholders were hurt mightily. I have been looking into the investment side of this business. If you invested $10,000 in H-P five years ago, when Carly took over, your investment would be worth only $4,893 today. So, in the five years that Carly reigned over H-P, all she did was drive down the market value of stockholders' investments. Maybe you can see why the Board got fed up with her. Now, I know why she will get over $22 million. She was clever enough to arrange a severance package when she took the job five years ago that awarded her that amount in case she was terminated. That’s bad enough, but she got a $3 million bonus in the first place for taking the job. What a schemer! I wonder what she does with all her money? My YMCA could use some of it. What the H-P Board did was to say to Carly: “If you do a bad job and we fire you, we will award you $22 million.” That's a bonus for bad work. That’s crazy! Bad psychology. The Board at Hewlett-Packard has some terrible flaws. First, they were too liberal in writing the contract for employment of Carly Fiorina. The Board made a huge mistake by agreeing to give her a golden parachute. I believe if the Board were putting up their own money they would not have been so liberal with the contract. But, like many things where a third party pays (in this case the stockholders), the Board was not as careful as they would be if their own personal funds were involved. Now the Board of Directors is looking for a new chief executive. It has engaged a national firm to “search” the world for such a person. I believe the Board is making another big mistake. Within Hewlett-Packard, with its thousands of managers, executives, engineers, and top scientists there are surely some who could take over the president’s role and do a fine job. Promote from within. They don’t need to look outside. They need only to look in their own backyard. People in big business sometimes make terrible errors. I’m flabbergasted at the decisions these highly paid people make. Do you have much respect for them? ©2005 by Ted Sielaff. This column first posted March 21, 2005. |
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website at www.sielaff.org. |
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