UK: A tale of two lost heads ... BP'S HORTON AND COMPAQ'S CANION.

UK: A tale of two lost heads ... BP'S HORTON AND COMPAQ'S CANION. - It seems the age of consent really may have replaced the age of coercion.

by Robert Heller.
Last Updated: 31 Aug 2010

It seems the age of consent really may have replaced the age of coercion.

Two abrupt oustings, one on either side of the Atlantic, could be milestones on the march to modern management. Robert Horton of British Petroleum and Rod Canion of Compaq have important factors in common apart from a sudden departure after fraught meetings of directors. Both had gold medal track records: both copybooks were blotted by industry-wide agonies for which the ousted were not responsible.

But both bosses, facing their very different crises, were tried and found wanting by their peers - even though both had instigated swingeing reforms. Tracing back the boardrooms revolts to their roots, the ultimate cause lay in loss of confidence in the corporate government by the governed. A truism of today's management wisdom is that consent has replaced coercion. The two oustings hint that truism is becoming truth. Horton's case is made more piquant, even paradoxical, by his own commitment to sweeping cultural change. This followed faithfully on the approved lines. BP was to feature open management, with lines of communication shortened, processes simplified, second-guessing swept away, and empowered individuals taking decisions at the point of action. Civil service would give way to entrepreneurial drive.

Nor was this left to unaided chance. Again in the approved manner, Horton invested heavily, to a tune of perhaps £20 million, in the re-education that's deemed essential in cultural change. Highly successful in his previous role as BP's North American boss, Horton brought his US experience to bear. Horton, in the management sense, sought to Americanise British Petroleum.

Canion's Compaq, at its peak, was in many respects a model American model: highly entrepreneurial but disciplined down to the last digit; committed to leading-edge technology, but market-driven; collegial in style but fast-moving in action. No company had ever soared so rapidly, zero to $3.5 billion of sales in eight years, with such laconic, Texas-style self-discipline. But there it stuck; there super-profits turned to losses as PC prices plummeted, and Compaq was left stranded by an obsolete philosophy. No longer could it win premium prices by being first with the brightest and best technology. Buyers now wanted discounts, not premiums. Putting Compaq's label (or IBM's, for that matter) on a box with similar contents cut no ice.

Canion, like Horton at BP, saw clearly that, without reorganisation and redundancies, crisis could not be overcome. More specifically, the company needed a new, low-priced line to counter the clones. But this, under Canion's plan, would take 18 months: and down in the engine room, where managers had to shift computers, worried men contemplated the prospect of further losses.

Their unrest reached the alert ears of the equally worried chairman, the non-executive venture capitalist, Ben Rosen. At BP, too, the rumblings lower down reached the boardroom, though here the issue was less substance than style. Horton was expecting others to empower their subordinates and to rely on trust and teamwork. But he wasn't perceived as surrendering any personal power, on trusting anybody's intelligence as much as his own, or wanting the chief executive team to number more than one.

In the man-on-horseback tradition of the US, what the Financial Times calls Horton's "straight talking, his unconcealed ambition and determination to shake a moribund organisation into life" went down big. Within BP's conservative culture, the grit in the oyster produced not pearls but seething resentment. When that penetrated outside BP, Horton had plainly lost control of the hearts and minds of his managers.

In Compaq and BP, the board had an unusual asset. Both Horton and Canion had successors in waiting: the German Eckhard Pfeiffer at the computer company, David Simon at the oil giant. This made it easier for the directors to bite the hand that led them. The unpleasant necessity was also eased by the non-executive majority on both boards.

In BP's case, that was narrow and untypical: in America, Compaq was typical - the unusual feature was having a chairman with an investment stake to protect, deep knowledge of the industry and company, and a broad concept of his role. Rosen, as an absorbing account in the Wall Street Journal tells, acted in an amazing, underhand but most efficient manner.

After listening to one of the worried marketers, Rosen commissioned the man, behind Canion's back, to discover, using price quotations for components obtained at a trade fair, just how quickly and cheaply a low-priced computer could be made. The answer, which turned out to be half Canion's allotted time, helped turn the latter out of his job and turned many of Compaq's processes and procedures upside down as it broke away from its traditional culture.

The change was effected, note, not by education, but by action. The two cases emphasise that in management, ancient or modern, actions speak louder than words. The new style of chief executive, less and less executive, and more and more "chief" in the sense of primus inter pares - first among equals - dare not let gaps yawn open between words and deeds. If that does happen, the job of the board, by fair means, or even slightly foul, is to close that gap. That's far better than closing the company.

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