Lessons from the Hewlett-Packard debacle

There should be no objections to "boards within boards," per se. In fact, some very successful teams routinely appoint committees to conduct due diligence and make either recommendations or decisions on important issues. The difference between them and Hewlett-Packard is that everyone on the team agrees on which issues the committees will deal with, how much authority they will be given, and what decisionmaking mode they will use: unilateral (made by one person or group with no input from others), consultative (made by one person or group after getting input from others), or consensus (everyone on the full team has input and all must agree to live with the decision).

No board at the top of its game ever would permit a single committee or individual to make unilateral decisions on matters that affect the-furore of the company. One approach that works successfully is the inventory method: listing all the decisions a board is responsible for making and then grouping them into categories--staffing, investment, those relating to shareholder communications, etc. The board next decides, together, which categories of decisions would best be made unilaterally, consultatively, and by consensus. It also decides which type of decisions can be delegated to committees and whether the committees will be given full decisionmaking authority or just asked for recommendations.

Patrick McGurn, executive vice president and special counsel for Institutional Shareholder Services, made this telling comment on Hewlett-Packard's board struggles: "People are missing the real story at HP. Post-Enron, boards have been granted all this new power, but they haven't had time to deal with their own internal issues--like setting ground rules for conflict."

True enough. Conflict is a fact of life on business teams. On the uppermost team--the board--the stakes are highest, making it a potential tinderbox of dysfunctional conflict. Whether conflict is destructive or constructive depends on how it is managed, which is why having agreed-upon rules for dealing with conflict is critical to a board's success.

Borrowing from our work at senior levels in a variety of companies such as Applied Biosystems, Chico's, Johnson & Johnson, L'Oreal U.S.A., Mars Inc., Novartis, Pfizer, the HP board would have benefited from having the following ground rules firmly in place:

Do not triangulate. Triangulation entails bringing an issue to a third-party "rescuer" for resolution instead of resolving it head-on between the two people who "own" it. The leaking of confidential information by HP directors was a case of triangulation in the extreme. It has no place on any board.

Do not recruit supporters to your point of view. When HP Director Jay Keyworth was identified as the leaker, Perkins came to his rescue with the board and the press, and they formed an alliance against Dunn. Such recruiting is contrary to effective conflict management; it leads to underground behavior.