Mississauga, Ontario. Hewlett-Packard (Canada) Co., established in Montreal in 1961, is a wholly owned subsidiary of California-based Hewlett-Packard Co., a technology solutions provider to consumers, businesses, and institutions around the world. H-P Canada has an extensive network of dealers and authorized service personnel in Canada and operates 28 offices across the country.

In the past decade, Hewlett-Packard has been plagued by a number of significant problems, the first of which was H-P's strategic vision, which the previous CEO had repeatedly described as "digital, virtual, mobile, and personal." While this sounded good, no one was quite clear what it meant. Was it a bad strategy, or was H-P just doing a poor job of executing it? Another problem was the confusing matrix organizational structure, which blurred lines of accountability and slowed decision making. A third problem was the reward system, which was so complex in its calculation that no one understood how their performance affected their bonuses. And finally, it was well known that H-P was struggling financially. Under the former CEO's guidance, H-P had paid $19 billion to acquire Compaq Computers and then spent an additional $10 billion to integrate Compaq into H-P.

But what was most worrisome was the deep sense of distrust that pervaded H-P, from first-level employees, to executive suites, all the way to the boardroom. Executive staff were leaving left and right, and H-P was unable to attract talented replacements. Out of several dozen top executive posts filled in the last few years, just one was filled by an outsider. The board of directors had become dysfunctional: After a board director leaked confidential information to the press, the board chair authorized an investigation to spy on board members' phone records to determine who was sharing company secrets. When the leak was identified and confronted, another board member angrily resigned, and contacted the press to air the story. The end result was a huge scandal.

Hewlett-Packard's former CEO was known for high-minded concepts, for her visibility with the press and within the industry, and for acting the part of the larger-than-life CEO: She even had her own portrait hung next to those of founders William Hewlett and David Packard. With her high profile, busy travel schedule, and frequent use of the company's private jet, the former CEO was distrusted first and foremost because workers and managers saw themselves as working for her rather than with her. She was a brilliant leader, but her style of leadership ran contrary to the "H-P Way," and that led to dissatisfaction and distrust in the ranks. She was the prototype of the celebrity executive and had been known to say that "management is a performance." However, insiders complained that she was too much of a big-picture thinker and that she didn't provide enough direction. Said one, "We had grown used to hearing vision and abstractions, but nothing you can sink your teeth into; the old CEO's rhetoric doesn't mean anything." In the end, said another insider, "The board replaced her because it wanted to focus on execution," not more leadership.

The new CEO, by contrast, was hired for his focus on execution. He stated, "I like being part of teams that go into things that people don't think are doing very well and getting into them to do better." The new CEO's work style was more in line with Hewlett-Packard's organizational culture: While the former CEO made use of private jets and limos, the new CEO used a Hertz rental car when he travelled; While the former CEO's presentations were choreographed like rock shows, the new CEO used a marker and wrote on a flip chart; While the former CEO put her portrait next to Hewlett's and Packard's, the new CEO refused to even sit for a portrait. Plus, managers and employees appreciated that the new CEO was willing to help them do their jobs. Indeed, instead of high-minded concepts and flashy presentations, the new CEO would frequently call people three or four levels down in the company to ask them specific operational questions about how things did or did not get done. Consistent with that approach, the new CEO regularly sat in on divisional reviews of performance, something that the former CEO never did. And then to make sure things got done, the new CEO held his managers and staffers accountable for following up.

As stated above, the previous vision for H-P was to be "digital, virtual, mobile, and personal," but no one knew what that meant. Rather than develop and implement a completely new strategy, the new CEO focused H-P on doing a much better job of executing the strategy it had. That means that he tackled key operational and implementation issues like H-P's confusing matrix structure and its complicated bonus system. The new CEO recast the strategy into specifics of financial targets and sales goals. Fortune described his version of the strategy as "selling big businesses every little thing they want for their IT departments, offering printing services as well as printers, and selling portable products like notebook and handheld computers." In just two years, sales were up by over $10 billion, operating margins were up from 4 percent to 6.9 percent, and the stock price was up 80 percent.

Then, just five years after the new CEO was hired and started to make positive changes, he resigned after being embroiled in a sex scandal.

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Questions

Short Answer

1. Describe the difference between leadership and management. Which CEO was more of a leader, and which was more like a manager?

2. What leadership behaviours did the new CEO exhibit that helped turn Hewlett-Packard around?

3. This case study best describes which situational theory of leadership?