Kick-start or kindergarten?

After a series of product delays and manufacturing missteps, one CEO issues an angry e-mail—leaked to the press—to his 80,000 employees, declaring their performance to be unacceptable. After a bad quarter, another CEO publicly fires three of her top executives.

Such actions, taken

by Intel 's Craig Barrett and Hewlett-Packard 's Carly Fiorina, respectively, run counter to conventional wisdom, experts say: Dirty laundry and executive firings should stay in the boardroom. Nevertheless, Barrett issued the stern memo in late July and Fiorina held the public hanging when she announced quarterly earnings in early August.

Usually, management gurus say, these are high-risk tactics, because the CEO has no control over how employees will react. Actions such as these appear to absolve the CEO of responsibility for problems, sow seeds of fear and confusion and demotivate workers.

"If you have to manage with fear, you've already started to lose," says John O'Neil, president of the Center for Leadership Renewal, a consulting firm. He says the risk is that workers will react in a way exactly opposite to what the CEO intended. "Employees will hunker down, wait to figure out what you want and set puny goals."

Sometimes public pillorying may be necessary, but it should be undertaken as part of a broad strategy to move management and employees to the proper course, says Sue Bethanis, an executive coach and president of Mariposa Leadership, a management consulting firm.

Not knowing what transpired beforehand, Bethanis, author of the recently published Leadership Chronicles of a Corporate Sage (Dearborn Trade, 2004), gives Barrett and Fiorina the benefit of the doubt: "I hope what we saw was a result of hours of decision-making behind the scenes. Most executives I know don't just fire people or send off scathing e-mails. They talk with various members of their executive team, including the heads of internal and external communications." Barrett and Fiorina are both savvy enough to have done that, she believes.

Both CEOs, Bethanis notes, described company performance as unacceptable. "Nothing wrong with that, showing their disappointment, as long as it's quickly followed up with brainstorming and coaching about how to correct the situation. The rub here is that they made it so public; normally they would keep these things inside the family. I assume they both did what they did to get people's attention after previous attempts had failed."

Whenever a CEO faces similar circumstances, she adds, it is essential for that person to sit down with the senior management team and strategize. The Barrett memo suggests he did just that and states that Intel's managers would follow up with specific long-term course-correction measures. And, although major personnel announcements are often made when a company announces earnings, Bethanis says public firings are uncharacteristic for Fiorina. In this case, Bethanis says, Fiorina could have just reached the end of her rope.

When initiating course corrections, O'Neil says, CEOs should first take responsibility for their part and then invite the management team to be part of the solution. Concurring with Bethanis, he can't imagine that Barrett didn't put the memo idea to his top executives and let them throw it around. It is also possible, says O'Neil, that the sentiments are widely held by other Intel executives and Barrett chose to put them in his own words. Such a gesture by Barrett, who will step down as CEO in May, would save heir apparent Paul Otellini and the new management team the grief of having to say them.

The Intel and the HP examples underscore some difficulties CEOs face in handling tough situations, says Linda Ford, a consultant and assistant professor of management at the Graduate School of Management at St. Edwards University, Austin, Texas. It is hard for large companies to link individual employee performance to the bottom line. For that reason, she says, a Barrett-type e-mail could bewilder workers. "If I'm a sales rep in Detroit, how am I supposed to know if what I did yesterday is the right thing for this quarter's bottom line? Very few employees below the CEO level are clear about how their behavior affects the stock price."

Ford says a company that is misfiring may have to realize that its goals aren't realistic, but CEOs don't like to own up to this kind of problem. It takes a culture that encourages self-examination, but most CEOs are clueless about how to change culture. Unless they're willing to look at their own shortcomings and work on them, they won't be able to initiate real change in the company, she adds.

The Barrett memo, says Ford, also illustrates how uncontrollable e-mail is. She and others say they hope Barrett and his team fully understood that they weren't going to send a harsh e-mail to 80,000 without its getting leaked. The lesson is, don't say anything angry in e-mail unless you have a plan to deal with its inevitably becoming public, she advises.