The Carly Chronicles

By crafting the garage commercial as she did, Fiorina was turning HP's heritage into a fable. The ad included black-and-white footage from the '30s, shared by the Packard family. But as Fiorina stood in front of the faux garage, HP's birthplace was becoming something akin to Abe Lincoln's log cabin. Reality and imagination now blurred together. If HP could redefine itself faster by taking liberties with its own history, well, so be it. Everyone involved in the "Rules of the Garage" project nudged Fiorina that way. The rules didn't need to be literal precepts from Packard's writings. As the company's chief mythmaker, Fiorina now possessed extra-ordinary powers. It was up to her to use them wisely.

Carly Meets the System
Less than a month into her new job, Fiorina held an off-site at the Seascape Resort, near Monterey, California, where she argued for greater centralization. "We aren't growing fast enough," she declared. "We aren't profitable enough." Unconnected divisions were driving customers crazy. Ford Motor Co. and Boeing were grumbling that HP pestered them with dozens of separate sales teams, each pushing a narrow line of products rather than addressing their total needs. HP's executives were saying that various operating units had great potential to help one another, but it just wasn't happening. "We're leaving diamonds on the floor," she declared.

As a remedy, Fiorina borrowed a page from her Lucent playbook. Instead of letting each division handle its own research, manufacturing, sales, and marketing, she decided to reorganize HP into quadrants. Two vast sales-and-marketing groups -- known as the "front end" -- would take command of customer relationships. One group would talk to mass-market consumers; the other would focus on the Fords and Boeings of the world. Meanwhile, the research and manufacturing for all of HP's products would be redefined as the "back end." That would be split in two as well, with printing and imaging making up one-half, and all of the computer initiatives the other half.

Those ideas looked great on a whiteboard, but some sub-ordinates shuddered. "I was a deer caught in the headlights when she described the front and back end," the longtime head of laser printing, Carolyn Ticknor, remarked in mid-2000. Before long, it emerged that HP couldn't precisely allocate costs between the front end and back end. As a result, some salespeople raced to beat quotas, only to saddle the company with unprofitable orders. Fiorina retooled her system to meet employees' concerns. She was right that HP needed to show a better face to its customers. She was wrong to think she could transform a company so rapidly without creating new snarls.

Fiorina was running into the hardest challenge of all: the inevitable tug-of-war between a radical new CEO and a skeptical workforce. Mid-level managers and rank-and-file employees didn't openly attack her new ideas. They just meandered around them. In public forums, Fiorina appeared to win support. Then managers huddled privately to decide whether they liked what they heard. They softened goals, adjusted timetables, made some exceptions. By the time they were finished, they had gutted whatever it was that Fiorina was trying to achieve. Resistance was so subtle and pervasive that she couldn't accomplish anything by getting angry. There was no obvious opponent. It was just the system.

Carly Finds Her Voice
In mid-2001, Fiorina and HP's directors bet everything on a giant merger with Compaq. The deal was supposed to shore up both companies' computer operations, permit major cost cutting, and give the combined enterprise a better shot at competing against IBM. Everything had seemed logical in the summer's secret boardroom negotiations. But once the acquisition plan became public, shareholders, employees, and customers balked. Fiorina was a chief executive in peril. Her early efforts to win supporters misfired badly.

What Fiorina really wanted was to change the conversation, infusing audiences with her conviction that HP could be a stronger, bolder company by acquiring Compaq. She needed to win loyalty with a vision of better times ahead. When fellow director Walter Hewlett -- the oldest son of company cofounder Bill Hewlett -- announced his opposition to the deal, Fiorina found her voice.

She recast herself as a brave woman, alone on a podium, crusad-ing for the dreams and aspirations of her entire company. If people thought she was vulnerable, all right, she was. Before her opponents fully realized what had transpired, she had turned that appearance of vulnerability into her greatest asset. In a major speech, she declared, "To the skeptics who say it won't work, it won't sell, it won't succeed, it's not the HP Way, I say, 'You don't know the people of the new HP.' "