Lessons from the Hewlett-Packard debacle

THE BROUHAHA at Hewlett-Packard, over the conducting of illegal investigations (spying!) to track down troublesome leaks, caused by warring board members and their gumshoe retainers has subsided, but the question remains: What leads a board of directors (and business teams from the executive suite to the plant floor) to engage in the kind of shenanigans that can wreak havoc on a company's reputation as well as its competitive position and share value? The HP saga is emblematic of a widespread malady: The inability of teams to ratchet up their game, to replace lack of transparency, foxhole thinking, side games, underground conversations, and sub-rosa actions with the muscle of high performance.

Think of a board of directors as a team of players created to produce results. It is no different from any other business team. For a board to become a high-performance unit, it must keep the focus squarely on business issues; members must be willing to "go there"--to that uncomfortable gray zone where tough questions and disagreement trump camaraderie and consensus. A high-performance board is comfortable with confrontation, dissent, and even conflict; members ask all the tough questions and they hold one another accountable for the organization's success.

No organization can afford to have a conflict-prone, fractious board of directors, nor can it afford one on which dissent and disagreement are muffled. Successful boards, like any successful team, have learned to thread their way through the extremes. Here is the secret to creating a high-performance board: Make sure that all board members, including the chairman, are "aligned" in four key areas:

* They understand and agree to the key strategic and operational goals that management is working towards.

* The role of the board needs to be delineated carefully so directors know exactly what they are responsible for and what they are authorized to do--individually and as a full board.

* Protocols, or ground rules, must be established for how decisions will be made and how conflict--among the board members and with the company's executive team--will be addressed.

* Interpersonal relationships--the range of personal behavior styles that directors adopt when interacting with one another and with management, as well as their expectations of one another--must be understood and managed.

Let's take a look at how a board can become tightly aligned in each of these four areas and, in the process, move up to become a high-performance team. First off, you would think that all board members have a clear understanding of--and commitment to--the organization's strategic direction and the operational goals that flow from it. This, however, often is not the case. In her memoir, Tough Choices, Hewlett Packard CEO Carly Fiorina, who was ousted before the scandal broke, speaks of the limitations of board members, saying that they loved to talk about technology but, when the board discussed other areas, they were disruptive and "didn't know what they didn't know."

Directors frequently are not as familiar as they should be with the specific product, market, finances, and growth targets that form the basis of company strategy. Often, top management itself is strategically fuzzy. Even when top management is clear, many boards are given a fly-by briefing, rather than a detailed discussion of the strategy, underlying assumptions, and operational implications. Without entering into the long-standing debate about the role of the board in the strategy-setting process, clearly, boards must have a film grasp of the future strategic direction and an appreciation for the tough choices needed to get there.

Within weeks after Patricia Dunn became the new chairman of HP, she found herself "in open warfare" with Director Tom Perkins, according to the Wall Street Journal. "They argued over how the board should be run. He has called her 'a stickler for process and procedure.' She says he was a 'controller.'" Just who is responsible for setting the rules for how the board should be run? Without clear-cut assignment of responsibilities-and agreement from all board members--it likely will remain an open issue that compromises performance.

Here is a test we suggest be given to each of a firm's board members. Ask each outside director to answer this question privately: How clear am I about my role and accountability on the board, the other board members' roles and accountability, and the role of the board versus that of management? Then, ask the CEO and other inside members of the board the same question. Next, bring the board together to discuss the responses. Such a session typically reveals a number of misapprehensions on the part of directors and executives. More importantly, it offers an opportunity to hammer out new agreements by which to conduct business going forward.

One of the complaints made by Dunn about Perkins was that, as a member of the board's powerful technology committee, he was conducting high-level strategy discussions that belonged in front of all directors, as well as making decisions on which she did not have a vote. "It was becoming a board within a board," she told BusinessWeek.