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Clear Thinking Case Study of the Month

The Story

August 2010

“High Performers compared: Hewlett Packard v Reckitt Benckiser”

Prior to Mark Hurd’s sudden departure from HP, the Leaders of these two high-performing companies had two very different approaches to running their businesses.

Both companies have significantly outperformed the market but over the last five years Bart Brecht’s leadership has led to RB’s share price rising by 80% to Mark Hurd’s 60% (just prior to Mr Hurd’s resignation). [At end October the respective rises are 100% v 50%]. We suspect that Mr Brecht’s approach will continue to win out, and we explain our thinking (and that of these two Leaders) below, based on current press articles.

Key Points of the Story

If you look at the share prices charts of these two companies over the last five years you will see very similar out-performance. However, over the latter period, there is a marked difference. RB continued its steady rising trend whilst HP has suffered huge fluctuation (ranging from 0% to 80% rise). Whilst market factors must account for some of this difference the press articles do highlight the different approaches of the respective Leaders. We analyse these approaches and the consequences below.

How these two Leaders differ in their approach to Leadership

There are divided opinions on what sort of Leader HP needs. Mark Hurd achieved success for HP chiefly by cutting costs, particularly headcount, wages, marketing, and by outsourcing internal support operations. But also, significantly, he cut R&D budget from more than 5% to just 2%, in a company that presented itself as an innovator (“HP Invent”).

By contrast, Bart Becht has pursued a very clear (and highly effective) business growth strategy, and has been amply rewarded (£92million this year with no complaints from shareholders). He has developed a performance model based on tightly managed innovation. A third of sales come from products launched in the past three years. However, he is also noted for his attention to detail and has two permanent teams dedicated to cost-cutting. One examines issues such as product sourcing, whilst the other studies operational efficiencies.


Analysis and Lessons

Leadership Thinking Styles ... Culture … Customer Thinking
... Strategic Thinking 

The two Leaders Thinking Styles compared

The jury is out on Mark Hurd’s preferred Thinking Styles. On the evidence of these press articles, Mr Hurd would seem to have a clear preference for Task Thinking – operations management. Which, presumably, is the reason some analysts and HP insiders would prefer the next leader of HP to be more of a Visionary Thinker. It is this uncertainty over growth prospects that has caused HP’s share price to fluctuate lower recently. 

Bart Brecht would appear to be a more Whole-Brained Leader - able to engage the four quartiles of Visionary, Reasoning, Task, and People Thinking. He sees Innovation Thinking and Entrepreneurship Thinking as paramount (Visionary Thinking), but also likes the diametrically-opposite Detail Thinking and Performance Measures Thinking (Task Thinking). He has developed a clear Culture based on these ‘corporate values’, which requires strong People Thinking. And in setting up teams to analyse efficiency he is also good at Reasoning Thinking.

Customer Thinking

From a brief look at RB’s website the company seems very open to providing information and to being contacted. Compare that with HP which has (or had) a ‘No Names Policy’ – when we last rang the company the switchboard refused to give any contact names even at director level. We are customers of HP, yet have had zero communication initiated by them – Customer Relationship Management (judged from our experience) is non-existent. Customer Thinking is part of the People Thinking quartile.

 Strategic Thinking

This story is about one aspect of Fundamental Strategic Thinking - do you focus on growth or efficiency? Bart Brecht decided he would do both, and has succeeded. However Mark Hurd felt it necessary to concentrate on operational efficiency and cost-cutting, although he did make some small add-on acqisitions. Mr Hurd was also successful in these objectives.

Many HP shareholders and analysts however have become restless. They feel that HP should have started to think about growing the business, and the recent share price fluctuations reflect their concerns. There are calls by some analysts for a more visionary leader who can generate ideas for growth. Cost-cutting and effeciency drives can boost a share price, but only growth can provide sustained financial performance. And this means new products, new markets, and improving sales by whatever means practical. Strategic Thinking is part of the Visionary Thinking quartile of Whole Brain Thinking.

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