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If Your Only Tool is a Hammer

06 Sep 2012

Consider the following three men:
1. Leo Apotheker, who claims to have introduced enterprise software to the IT industry, held a number of senior positions in the IT business, including CEO and founder of SAP France and Belgium from 1995 to 1997, president of SAP’s South West Europe region from 1997 to 1999, president of SAP Europe, Middle East and Africa from 1999 to 2002, member of the SAP executive board and president of global customer solutions and operations from 2002 to 2007, deputy CEO of SAP from 2007 to 2008, and CEO from April, 2008 until February, 2010, at which time he was fired. He was then recruited to Hewlett-Packard, where he was CEO from November 2010 to September 22nd, 2011, at which time he was fired.

2. Antonio M. Perez, a Spanish engineer and businessman who spent 25 years at Hewlett-Packard, then became CEO of Gemplus International in 2000, where he was responsible for “substantial job reductions”. He joined Kodak in 2003 as President, and became CEO in 2005, and the value of the company has declined ever since.

3. Jon Corzine, joined Goldman-Sachs in 1975 as a bond trader and worked his way up to Chairman and CEO in 1994, where he successfully took the company public. He was forced out in a board room coup, led by Henry Paulson in 1999, although he made $400 million when the company went public. Corzine was elected to the U.S. Senate (from New Jersey) where he served from 2000 to 2004. He resigned to run for governor of New Jersey, served a four year term, was not re-elected in 2009. In March, 2010 he joined MF Global a successful multinational futures broker and bond trading firm. By October 31st, 2011 MF Global was bankrupt, had lost $1.2 billion in investors’ money, and it was one of the 10 largest bankruptcies in U. S. business history.

What do these three men have in common? I think they have three big things in common. First, by conventional business standards, they had fabulously successful careers fueled by their brains, work ethic, and ambition—they are truly talented individuals. Second, their business careers have ended in public failure and even disgrace. And third, their failure was precipitated by a single, wrong-headed, but highly predictable, decision. Because we are developing a new focus at Hogan on judgment and decision making, these cases are particularly instructive-because they follow the same pattern.

After Leo Apotheker was recruited to Hewlett-Packard to reverse HP’s slide into mediocrity, his solution and new vision was to turn the world’s premier manufacturer of printing equipment and supplies into a software company that would compete with SAP-from which company he had just been fired. Investors were initially dismayed, then finally disapproving, while HP stock steadily sank.

Antonio Perez became CEO of Eastman-Kodak with a mandate to reverse the long, slow decline of legendary multinational imaging and photographic equipment materials and services company located in Rochester, New York. Perez, who had come from Hewlitt-Packard, decided the key to saving Kodak, was to turn the world’s premier imaging equipment service provider into a manufacturer of printing equipment and supplies and compete with Hewlitt-Packard. The markets responded and the
stock is sinking even more rapidly. Rumors abound regarding Perez’ departure, but the Kodak board is slow to respond to bad news.
Jon Corzine became the head of a small but profitable futures broker and bond trading firm with a mandate for rapid and profitable growth. His explicit goal was to turn MF Global into a small version of Goldman Sachs where he had been famous and successful as a high risk trader.

These three case histories are instructive. Each company was damaged by a single decision made by the new CEO. The decision was to import the only business model that the CEO knew into circumstances where the model was inappropriate, and where that fact was apparent almost immediately. Why did they do this? Could it have been predicted? Could it have been avoided? It is hard to answer these questions because we lack any assessment data. But the decisions follow such a consistent pattern that we can make some (informed) guesses. It is easy to imagine that all three men are smart (Corzine was Phi Beta Kappa, Apotheker was a prodigy), arrogant, and unafraid of risk. So why would they not try something new? The answer seems to be a lack of imagination (low HPI Inquisitive and HDS Imaginative) and a preference for the tried and true (low HPI Inquisitive and HDS Imaginative, high MVPI Tradition). The price collapse of Hewlitt-Packard and MF Global was so fast, there was no time to correct the decision. Meanwhile, Kodak resembles a slow motion train wreck.

If your only tool is a hammer, every problem looks the same.

Robert Hogan
Hogan Assessment Systems

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