Experts scrutinize HP's response to crisis

PALO ALTO, CA: As Hewlett-Packard's board of directors leak crisis enters its second week, analysts and PR pros are saying the company acted quickly, but needs to take specific measures to restore the public and media's confidence in the organization.

PALO ALTO, CA: As Hewlett-Packard's board of directors leak crisis enters its second week, analysts and PR pros are saying the company acted quickly, but needs to take specific measures to restore the public and media's confidence in the organization.

Gordon Haff, an analyst at Illuminata, said he thinks HP made quick decisions, even though it is getting a ton of bad press.

"There is a lot of hand-wringing on blogs, writers saying the whole board should commit hara-kiri," Haff said. "[But HP] took some strong action very quickly. They did not stick their heads in the sand. I think they did what they are going to do for the near term. I would not expect to see more personnel changes."

The crisis began when HP chairman Patricia Dunn ordered an investigation into potential leakers, after CNET wrote an extensive January 23 article on the company's long-term strategy, sourcing an unidentified person within HP. The company was allegedly trying to ascertain if a board member was the cause of the leaks. In the process, an investigator hired by the company accessed phone records of nine reporters through a process called pretexting, where he lied to phone companies by impersonating those journalists.

"HP worked to notify affected journalists and Pattie Dunn apologized individually to each journalist," said Ryan Donovan, HP director of corporate media relation, via e-mail. " The HP media relations team fielded literally hundreds of press calls to provide reaction to this development and during that effort, we relayed HP's dismay to the discovery of certain inappropriate techniques which were used."

Dunn will step down as chairman in January, replaced by current CEO Mark Hurd. Longtime director George Keyworth, who confessed to leaking information, is leaving the board.

Even though the investigation is expected to last a while, experts said the crisis could cool down as it progresses. Whether HP's PR efforts are effective or not, McGrath/Power Public Relations CEO Jonathan Bloom said the company's biggest salve would come if investigators clear Hurd of any wrongdoing.

"I think this whole thing could just go away if Hurd were not involved," said Bloom, whose firm does not work with HP.

Analysts and PR experts have different ideas of how HP could regain public trust.

Bloom said it's important for HP to distinguish the actions of the board of directors as separate from the company's day-to-day operations, such as marketing and production. He added that it would be wise for Hurd to show consumers and HP's constituency that he's got a handle on the board and, by proxy, the situation.

"He must handle this as a politician would: get out, state what happened, and talk about what [HP] will do moving forward," Bloom said.

The company has some amount of stored goodwill. Business Ethics magazine has ranked HP in the top 10 on its corporate citizens list all seven years of its existence.

Michael Connor, editor and publisher of Business Ethics, said that rating is based on several factors, among them diversity, environmental responsibility, governance, community investment, and human rights.

"HP has always had good rankings from a governance standpoint," Connor said. He noted that the current HP crisis is not purely bad news, saying when the company suspected board leaks, it took action, notified the SEC, and made changes.

"In a funny way, it shows this governance system is working," Connor added.

However, given the phone records search, what may be most in need of repair is the tech company's trust level among the press.

Despite Dunn's interaction with the affected journalists, Kelly McBride, media ethics expert at the Poynter Institute, said most journalists covering HP will be very wary of the current administration from now on.

"I think it will seriously affect their relationships," McBride said. "[HP] might as well have broken into those reporters' offices and read through their notes. There is bad blood."

As always in such cases, contrition is an important tool in the company's arsenal.

"They must make it clear that this was an aberration and that it won't happen again," Illuminata's Haff added.

HP believes it has done its job.

"The board believes that the measures taken are appropriate to address the events that have occurred and to enable HP to put these events behind it and fully resume its focus on the business," Donovan said.

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