The face of America's decline - Fabius Maximus website

Summary: Sometimes a news story not only makes visible an important historical trend, but puts a human face to it. Here we look at Mark Hurd, until recently CEO of HP. See the face of America’s economic decline. Part two of this series is Slashing R&D in favor of more important things, like wars and profits. Who cares about America’s future?

Excerpt from “The Real Reason for Ousting H.P.’s Chief“, Joe Nocera, New York Times, 13 August 2010 — About Mark Hurd, and the damage he did to HP, to the cheers of Wall Street.

Here’s a guy who walked into a very troubled situation … In his 5 years at H.P., every metric Wall Street uses to judge companies had gone in only one direction: up.

Stories about Mr. Hurd lavished praise on his no-nonsense style. H.P. under Mr. Hurd has “become the benchmark for efficiency in an industry known more for its whiz-bang appeal than its operational excellence,” wrote Adam Lashinsky of Fortune in 2009. Four months ago, Forbes put Mr. Hurd on its cover, attributing H.P.’s success to “dramatic cost-cutting” and “a brutalizing culture of accountability.” Even Mr. Hurd’s temporary replacement, the chief financial officer, Cathie Lesjak, who seemed to go out of her way to diss him, said in the press release announcing his resignation that “our ability to execute is irrefutable.”

… In fact, the directors should be called out for acting like the cowards they are. Mr. Hurd’s supposed peccadilloes were a smoke screen for the real reason they got rid of an executive they didn’t trust and employees didn’t like. The stand-up thing would have been to fire Mr. Hurd on the altogether legitimate grounds that the directors didn’t have faith in his leadership. But of course Wall Street would have had a conniption if the board had taken such a step.

… The consensus in Silicon Valley is that Mr. Hurd was despised at H.P., not just by the rank and file, but even by H.P.’s top executives. … “He was a cost-cutter who indulged himself,” was one description I heard. His combined compensation for just his last two years was more than $72 million — a number that absolutely outraged employees since their jobs were the ones being cut.

… Rob Enderle, a well-known technology consultant, noted that in recent internal surveys, nearly two-thirds of H.P. employees said they would leave if they got an offer from another company — a staggering number. “He didn’t have the support of his people,” Mr. Enderle said. Although he was good at “holding executives’ feet to the fire, he seemed to be the only one benefiting from H.P.’s success,” Mr. Enderle continued. “He alienated himself from the people who might have protected him.”

… Charles House, a former longtime H.P. engineer who now runs a research program at Stanford University, openly rejoiced when he heard that Mr. Hurd was leaving. … As Mr. House saw it — indeed, as many H.P. old-timers saw it — Mr. Hurd was systematically destroying what had always made H.P. great. The way H.P. made its numbers, Mr. House said, was not just cutting any old costs, but by “chopping R.&D.,” which had always been sacred at H.P. The research and development budget used to be 9% of revenue, Mr. House told me; now it was closer to 2%. “In the personal computer group, it is 0.7%,” he added. “That’s why H.P. had no response to the iPad.”

Mr. House was also offended by Mr. Hurd’s dictum that H.P. executives had to resign from all civic boards, as well as his decision to cut off many of H.P.’s philanthropic activities. “H.P. has always been a model corporate citizen,” Mr. House said. … “He was wrecking our image, personally demeaning us, and chopping our future.”

Are any of these firing offenses? They probably should be, but they’re not, not in the culture we live in. That is especially true when the leader who is busy chopping the future is also posting fabulous short-term profits.

Here we see America’s formula for decline. We’ve taken these steps in sequence, to the applause of our leaders — and their cheer-leaders in the news media.

Fantastic pay for leaders
Stagnant pay for employees
Cutting jobs (efficiencies, forcing harder work, moving off-shore)
Slash investments in the future (capex, training, R&D)

The first three are by now obvious. The next posts examines at #4, specifically at expenditures on research and development. This is a new trend, as our leaders have reached the limits of the first three means of extracting the nation’s wealth.

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