HP’s Meg Whitman on split: ‘Succession planning is absolutely essential’

October 7, 2014, 3:23 AM UTC
Photograph by Stuart Isett — Fortune MPW

Meg Whitman knows better than anybody that a company is only as strong as its team. When the CEO of Hewlett-Packard (HPQ) took over the struggling tech giant in 2011, she was one of a handful of new chief executives who had come and gone. Now, as she works to split the 75-year-old company into two separate firms, she is focused more on her staff more than ever.

“Succession planning is absolutely essential,” Whitman told Fortune Senior Editor At Large Pattie Sellers Monday night at the Most Powerful Women Summit in Laguna Niguel, California. “Bill Hewlett and David Packard founded the company when they were 25 years old in 1939 and they ran the company for 50 years… When they left the succession planning was not what you would hope it to be. Over the course of the last 15 years there has been about 7 different CEOs. This is the fundamental problem: The CEOs had different strategies, different approaches and the organization sort of went from strategy to strategy.”

Whitman spoke just hours after HP announced plans to separate its enterprise hardware and services business from its PC and printer business. With succession planning top of mind, Whitman promised her board that the CEO of the newly named Hewlett Packard Enterprise would come from within. She will lead the enterprise company, and serve as chairman of the PC and printer company, named HP Inc, which will be run by company insider Dion Weisler.

“To come from the outside as I did and learn five new businesses in a time of incredible change is not the right thing,” she said.

The CEO promised analysts that the two tech companies will aim to be “two big Fortune 50 companies.” Hewlett Packard Enterprise, the business Whitman plans to lead, earned about $58.4 billion in revenue in 2013. Hardware spinoff HP Inc. earned $57.2 billion in revenue last year. Before it splits, the parent company plans to layoff 55,000 employees.

When Whitman took over HP’s helm in 2011, she touted a message of “One H-P” as being integral to turning around the struggling tech company. Now that HP finds itself in a slightly stronger position, she has reversed her position to make the new separate companies more competitive.

“Being nimble is the only path to winning,” Whitman said on a Monday morning earnings call. “Three years ago, this company was in a fairly difficult position and we needed to rebuild and we needed to do that as one H-P.”

The news of HP’s pending separation comes in the immediate wake of splits at two of Whitman’s alma mater companies: eBay and Procter & Gamble. Whitman was CEO of eBay when it acquired soon-to-be spinoff PayPal in 2002 (“one of the all-time greatest acquisitions,” she says), and now the company will separate the payment system from its website. Whitman began her career at P&G as a brand manager, and the company announced two months ago that it is getting rid of more than half of its brands.

Before the news of HP’s split into two companies, the tech company was reportedly in talks to merge with sometimes-rival EMC (EMC). In the interview with Sellers, Whitman did not rule out the possibility entirely.

“[Our M&A strategy] is very much returned base and what is in the best interest of shareholders,” she said.

As she looks to build out HP Enterprise’s new staff, Whitman must tackle building out a new board. Calling HP’s current board “one of the best boards in America,” she says she is a “big believer in situational leadership.” Not everybody is fit to work with a company during a turnaround, she added. A contributor of Fortune’s newly launched MPW Insider Network, Whitman wrote recently that when you are at a turnaround company like HP, you need to hire people with a particular skill set.

“Those skills are probably not the same as the skills you need when it’s business as usual,” says Whitman.

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