Can a company’s board of directors damage the company’s brand, even if the board has no stipulated brand responsibilities? I think the answer is “yes” if the board fails to execute wisely in two critical areas. First, if the board hires a CEO unable to articulate a brand vision that advances the company beyond competitors. If the brand vision fails everyone fails: customers, employees, partners, shareholders. Second, the board can damage the brand if the board’s own actions become so controversial and/or questionable as to taint brand credibility and trust.
Types of brand damage that can occur
As I see it, the types of brand damage that can be caused by a poorly performing board of directors can include:
- Loss of customer confidence if board decisions make the brand appear weak, unfocused, or without clear direction. The brand assumes an element of risk.
- Loss of employee confidence if board decisions appear reactive and non-strategic, or if the board-appointed CEO can’t articulate a coherent brand vision of what the compan stands for, where it’s headed, and especially “Why?”
- Loss of investor confidence if a pattern of board decisions points to lack of unity at the top, internal politics over strategy, and/or a designated CEO who seems ill-equipped to meet expected challenges. As investors sell shares the brand loses asset value, and may approach break-up value (sold for parts).
- Board missteps may lead to difficulty recruiting top CEO candidates because no executive wants to work for a company with an unsteady board. Consequently, the brand may be starved of executive leadership.
- Board missteps may lead to loss of confidence by channel partners if the company’s brand pales in comparison to brands of competitors. Competitors are quick to seize on any apparent band weakness.
The HP board and the HP brand
Available evidence suggests that the board of directors of HP would seem to meet the two brand-negative conditions noted in the opening paragraph. The Hp board has appointed CEO’s who turned out to be a bad fit for HP, and the board’s own missteps have compounded HP’s problems. HP’s recent CEO’s have been at the flashpoint of turmoil and controversy, and so has the HP board itself, most notably in its internal spying and pretexting scandal of 2006. This week the board named Meg Whitman as HP’s seventh CEO since 1999. Ms. Whitman replaces Leo Apotheker, whose fit with HP was questioned 11 months ago when he replaced Mark Hurd. Hurd had lost the confidence of the board after a highly publicized battle over sexual harassment allegations and expense report irregularities. The board’s actions in terminating and suing Hurd also drew criticism.
Brands are designed to be seamless vessels of seamless value, but at HP seamless transitions appear to be the exception rather than the rule.
A board described as “nearly dysfunctional”
From the New York Times, on the day prior to the Meg Whitman announcement:
The mystery isn’t why Hewlett-Packard is likely to part ways with its chief executive, Léo Apotheker, after just a year in the job. It’s why he was hired in the first place.
The answer, say many involved in the process, lies squarely with the troubled Hewlett-Packard board. “It has got to be the worst board in the history of business,” Tom Perkins, a former H.P. director and a Silicon Valley legend, told me.
Interviews with several current and former directors and people close to them involved in the search that resulted in the hiring of Mr. Apotheker reveal a board that, while composed of many accomplished individuals, as a group was rife with animosities, suspicion, distrust, personal ambitions and jockeying for power that rendered it nearly dysfunctional.
A board that didn’t interview the CEO that it named
As noted in the previous link, the HP board unanimously voted to appoint Apotheker as CEO in September, 2010, but only the four board members on the search committee had interviewed him. The remaining eight board members had no interest in meeting him for a face-to-face interview. This is disturbing from a brand perspective. One might ask: What was the board thinking? This was a candidate for the highest position at HP, a man who would define and execute HP’s vision, values and strategy going forward. Certainly he was a man critical to the success of the HP brand. How can you not look him in the eye, size him up, plumb his vision and values, measure him against the challenges confronting HP, and determine first hand if he is fit to be a successor to the esteemed William Hewlett and David Packard?
“Jarring strategy shifts” and a stock price plunge
Eleven months after the HP board unanimously agreed on Apotheker’s appointment, the CEO was sent packing. Apparently, Apotheker had no clue of his impending termination. The HP stock price had plunged a stunning 47% during his short tenure, during which he had proposed “jarring strategy shifts.” These included:
- Proposing to sell or spin off HP’s core PC business—which accounted for a third of HP’s revenue—without any plan in place at the time of announcement. This raised numerous strategy questions, sent investors reeling, and sent the stock price downward.
- First touting HP’s entry into fast-growing tablet market using WebOS software (from Mark Hurd’s $1.2 billion Palm acquisition), and then several months later abruptly cancelling it, and proposing to exit the WebOS line of business.
- Announcing the acquisition of software company Autonomy for $10.3 billion, without clearly defining how the acquisition would contribute to HP’s market growth and revenue. In addition, the price paid for Autonomy was questioned as being too high.
Saving HP from a brand of confusion
HP is a brand of . . . what? Brands provide clarity of company purpose. When brands are mismanaged the result can be a brand of confusion, where the company may struggle to fit a category, but falls short of a brand that can command a context. HP is an established brand and certainly not “broken,” but Apotheker’s recent announcements raised more questions than answers—and brands are answers. Apotheker’s legacy to incoming CEO Whitman is a gnawing sense of confusion regarding HP’s new direction. What’s the new context of HP? Is HP pulling out of consumer markets? How does Autonomy take HP to the next level? And how do proposed radical changes translate to the bottom line? What’s the vision, and the plan? As her first order of business Whitman needs to erase any potential brand confusion from the minds of employees, customers and investors.