Lingering Aftershocks: Hewlett-Packard

Hewlett-Packard (HP) is still learning the hard way. In the immediate aftermath of a crisis, every decision made is weighed against the crisis. Every decision, including the acquisition of 3PAR.

Three weeks of being unwilling to match Dell’s $18 per share offer for 3PAR, HP re-entered with a $24 per share bid. The switch has some people wondering whether the change of heart is tied to HP's apparent need to prove that it is "business as usual."

Without Closure, Every Decision Becomes A Comparative.

You can hear the rumbling in the background. Even if the acquisition of 3PAR is lucrative for HP, the unwritten questions remain. What would Hurd do? And, more telling, are the board of directors pushing for the acquisition for public relations?

These questions might not be asked as often had HP been more aggressive in closing out the crisis as opposed to attempting to operation it out of the picture. Worse, they've spun up several new allegations and stories, some of which don't add up (hat tip: Ben Tremblay) while leaving plenty of questions unanswered.

No one can blame HP for insisting that they want to "look forward and not back," which basically means they intend to shrug off transparency. It also reinforces the idea that the universe doesn't understand negatives. Every time those words are uttered, it means the opposite for everyone else.

The evidence is all over the 3PAR discussions. HP has put itself in a position where winning or losing looks equally questionable. (Note, I'm not saying the acquisition is vital for HP or not.) If they don't see it through to the end, people will wonder if the acquisition about-face was public relations driven. And if they do win, they might ask the same thing.

The primary question people ought to be asking is how much is too much to pay for 3PAR. But, with the scandal still lingering in the background, the merger (win or lose) won't clear HP from the crisis it picked. What will it take? A new CEO who delivers gains for two quarters ought to do it. Their crisis communication should have this benchmark built in.

Finding The End Of A Crisis Is Harder Than Managing A Crisis.

Most crisis communication plans never consider the situational challenges that occur long after the immediate crisis has ended. One might even say that this is the caveat missing from the Toyota concept that all is forgotten after 70 days. While there is some truth to that, crisis communication planners need to have a realistic view of when to start that 70-day ticker.

In this case, closure didn't occur with the resignation of Hurd. (You can see it in the stock valuation.) Had he not resigned, the company could have started the ticker on the date of the harassment settlement. More importantly, companies have to be careful in how they make bold movements while still suffering from crisis aftershocks.

As long as the motivation is only to deliver shareholder value, it's easy to back bold moves. But if decisions are being made because there is something else to prove, then they've done more than lose the HP way. They've lost any semblance of purpose.

Inviting A PR Disaster: Hewlett-Packard

If there is any doubt that Hewlett-Packard implemented the wrong crisis communication strategy, look no further than abundant speculation. Speculation doesn't happen by accident. It happens when the public doesn't have any semblance of clear, authentic communication.

Stanford scholar and longtime Hewlett-Packard watcher Chuck House has come out strong for HP. He says chief executive Mark V. Hurd's resignation is tied to red herrings. The real reason, he says, is Hurd, nicknamed Mark Turd by ex-HPites who worked directly for him, was a thug.

The Los Angeles Times has taken a different tact. It reports that the HP board of directors ought not to flash a high standard of ethics too liberally. They cite how employees and top brass are treated differently when it comes to compensation, including an unusual formula to calculate the lump sum value of pensions that increased John H. Hammergren's pension from $11 million to $85 million.

James B. Stewart, a columnist for SmartMoney magazine, takes yet another approach on The Wall Street Journal, claiming that the HP board of directors didn't disclose enough. He writes that "by withholding information, the HP board is only prolonging the agony and feeding the press a juicy mystery." Perhaps not on the front end, but certainly now, HP has bought a crisis communication plan that caused more pain than if it would have not reacted to the threat of scandalous publicity.

Bad Crisis Communication Plans Magnify, Multiply, And Amplify.

There are more than 10,000 HP speculation stories across the globe today. And by the looks of things, it's only the tip of the iceberg.

Even if we just look at these three stories, they are all bad, even the pro-HP piece penned by House. It makes you wonder how powerless the board of directors was, waiting for a misstep to bring the "evil" executive down. The Los Angeles Times makes it look like the board is engaged in selective ethics. And the Stewart write-up makes it look like they are holding back, perhaps even lying.

Any time the crisis flies in more than several hundred directions, you know it's botched. Now, business reporters (people who are always looking for exciting stories because the daily stories aren't always so exciting) are looking at every angle. They are making mountains everywhere and they are doing it well beyond the scope of the initial crisis, which was a mole hill by comparison.

Situation Analysis Is Always The First Step In A Crisis.

If there were any internal politics as some suggest, they do not belong on the boardroom table at a meeting to discuss disclosure in order to avoid a public relations disaster. Handling a crisis can only have one objective: minimize damage.

So, if we take the board of directors' word that there is nothing more than what they disclosed — that Hurd was engaged in a non-sexual close relationship but fudged expense reports to hide the relationship to avoid the perception of an affair — then there is no other conclusion than they botched the plan.

In this scenario, a better course of action would have been to clear the chief executive's name, make him pay the $20,000 back (which becomes a personnel matter), manage any crisis in the event it becomes a crisis, and move on. After all, in this case, there was no evidence that Hurd's transgression (which isn't even clear as a transgression) would have been as big of a blip on the media radar. Even if it was, it seems the intent — if it was to avoid a crisis — has backfired exponentially.

This leaves us with two possible outcomes. Either HP created a crisis out of nothing or there is much more to the story.

I'm not big on crisis communication rules other than treating them as situational. I look at the classic tenets of crisis communication and see guidelines that help us ask the right questions given the readily available information we have.

However, if you do want a rule to hang on your shingle, I might suggest this one: in for a pinch, in for a pound. And once you are in for a pound, you'd better hope your only motivation was to articulate the crisis as authentically as possible.

Evaluating A Living Crisis Communication Situation.

Almost every time we evaluate a living crisis communication case study, someone inevitably says that it is too soon to conclude anything. In general, I agree with that assessment. For example, I would be doing you a disservice if I said this will kill HP.

I don't think it will (operative word is "think"). I buy HP products because the hardware is good. The ink, on the other hand, is very pricey. But I suppose it's possible.

However, public relations professionals and crisis communication managers ought to know by know that they have to draft crisis communication plans based on readily available information (not all information) and build in dozens of contingencies if and when that information turns out to be inaccurate. It happens all the time.

Sometimes the people in the field make a mistake. Sometimes public perception turns bad regardless of the facts. And sometimes, clients aren't always forthcoming. They might not lie, but I have heard "Oh, I probably should have told you ..." enough times that charging clients one dollar per utterance would have meant my retirement.

Running Into Fire: Hewlett-Packard

Ask most public relations professionals what is the first thing to do during a crisis and the pat answer is "get ahead of the crisis." That was the advice given to Hewlett-Packard’s (HP) board of directors as it related to chief executive Mark V. Hurd.

And now everyone on the board is under fire, with an unlikely charge by Lawrence J. Ellison, the chief executive of Oracle. According to Ellison, he was familiar with the sexual harassment claim against Hurd. He was familiar with the debate that raged between the board of directors. And he was familiar with the fact that the board had investigated the claim and found it to be false.

So what happened? APCO, the public relations firm advising the directors, advised that the company would face a firestorm if the accusations of sexual harassment were made public, regardless of whether or not they were true. They went so far as to make mocked up newspapers to show what the damage would be like.

According to Ellison, the board was originally split 6-4 over disclosure. On Friday, board member Marc Andreessen said the decision was unanimous.* Andreessen joined the board last year. He is co-founder and general partner of Andreessen Horowitz and co-founder and chairman of Ning (another social network that has made questionable decisions recently). He reportedly played a key role in the ouster.

What Went Wrong With The Mark V. Hurd Public Relations Debacle?

Some public relations pros are still second guessing the backlash against HP. They stand by the principle to get ahead of the problem and disclose everything. They obviously don't understand media relations whatsoever.

While Hurd had allegedly been found padding expense reports to hide a questionable relationship (approximately $20,000), most members of the media would have found the sexual harassment charges a non-event if they were false. There might have been a firestorm or not, no matter how juicy the story might have been.

Michael Holston, HP's general counsel, told investors on the conference call Friday that Hurd "had a close personal relationship" but Allred's law firm clarified "there was no affair and no intimate sexual relationship between our client and Mr. Hurd."

Stated plainly, it seems like the board of directors created an illusion of a unanimous disclosure vote to show solidarity to disclose what amounts to a non-event. The tension this caused between the board and Hurd was insurmountable, ultimately leading to the resignation (despite the breach in conduct).

The fudged expense reports could have been a quiet personnel matter, easily resolved as Hurd paid them back. It was certainly a lapse in judgement to fudge them in order to hide a relationship. However, the $20,000 compared to the reported millions in severance. Some people are baffled by this settlement. Don't be. The amount is reflective of the mistake.

What One Quote Stands Out As Grossly Misguided?

It didn't come from Hurd. It was Andreessen who said "HP is not about any one person." But unfortunately, that is precisely what the new message seems to be. Andreessen has suddenly risen to become the face of the company. And, he is already named as one of the people deciding on a replacement.

That may smell funnier than anything Hurd did. But that aside, if politics and public relations pat answers weren't involved in the decision making process, this might be be a good time to ask how differently it might have played out. We'll explore this in a second post tomorrow or Thursday. In the interim, PR pros ought to consider that crisis communication is situational.

I often illustrate the point in classes by contrasting up real life crisis situations between a tiff between a homebuilder and a handicapped elderly woman and also a tiff between a homebuilder and a vandal. Students are frequently surprised at the outcomes. We handled the one that turned out right.

HP did it wrong, and now it will still face months (and maybe years) of unflattering media coverage. You know, the stuff they wanted to avoid. Worse, we suspect it may become uglier, depending on who they pick as a replacement and how well that person performs.

* Having served on many boards, directors often revote on issues to show solidarity, even if the minority has reservations. Ergo, they knuckle.