When you think of Hewlett Packard, development and manufacturing of computer equipment comes to mind. These days, the company is typically associated with the tech industry. Never would you think that its initial revenue stream came from the first electronic shock jiggler fat machine. The company can be credited for creating products ranging from medical equipment to audio oscillators, from welding equipment to public address systems. What made the company successful was not the range of products it created, but rather what became known as the HP way – five fundamental principles that drove the company forward.
This ideology reflected the personal core values of the co-founders, Bill Hewlett and David Packard. These values would extend into a comprehensive set of operating practices, business strategies and cultural norms. In 1937, Hewlett Packard exemplified the power of building a company based on a framework of principles. Today, we take these beliefs for granted, but when they were first conceived they were visionary – and – quite radical at the time.
The HP Way
From the beginning, Hewlett and Packard rejected the “hire and fire” management style of the early 60s and 70s. David Packard once said:
“A company has a responsibility beyond making a profit for stockholders; it has a responsibility to recognize the dignity of its employees as human beings, to the well-being of its customers, and to the community at large.”
Most entrepreneurs ask the question “How can I succeed?” From day one, Packard and Hewlett pursued a different question “What can we contribute?” This alone helped the company attain extraordinary success. In turn, this enabled the company to invest more into contributing, which, for a while, created a ‘contribution to success’ cycle. This belief of ‘contribution’ extended to Hewlett Packard’s employees, who were given stock options, allowed to work four day work weeks, and treated as family members. Hewlett–Packard invented strategies such as, ‘flextime’, and ‘quality cycles’. Always aware of the needs of its employees, Hewlett–Packard achieved massive growth that far outshone its competitors’ wavering fortunes, even with radically different products from those responsible for its initial boom. If you think Google was the first company to allow its employees to spend a portion of their own time working on their own projects, think again. HP gave its employees the freedom to innovate and to explore without hindrance. This led to a wave of cutting edge products, such as the printer, the calculator, the scanner and the world’s first desktop computer. As one Forbes journalist said:
“I started to understand the key to the greatness of Bill Hewlett and David Packard. They held no attachment to things, only people. Audio oscillator and thousands of other products–all abandoned in the endless pursuit of something better. Only the people remained, and they were cherished and respected, far more than by any corporation in history”
Today, the ‘HP Way’ is seen as a model for corporate culture, and many firms have tried to imitate the model by adopting measures such as stock options, innovative work rules and team-work, but none were able to emulate what HP had. According to Bill Packard, one key element to the company was the pioneering policy of Management by Objective (MBO). David Packard said:
“No operating policy has contributed more to Hewlett-Packard’s success than the process of MBO. This gave our people the flexibility to work toward goals in ways that they determined best for their own areas of responsibility”
In the process of MBO, overall objectives are clearly stated and agreed upon. People are given the freedom to reach the overall goals in whichever way they please. Defining MBO’s hinges on the entire organisation agreeing on what each manager should be working toward and then breaking that down into what their teams, and what individuals should be doing. The management team then monitors a range of performance measures, designed to help stay on the correct path towards its objectives (either bi annually or annually).
HP loses its way
Today the modern Hewlett Packard is a ghost of what it once was. In the late 90s, the company brought on its first outsider CEO, Carly Fiorina. This marked a turning point for what was the most innovative and disruptive company the world had seen.
During her tenor as CEO, Carly Fiorina started dismantling the ‘HP Way’, as the company had become complacent and, consensus driven decision making was hindering company growth. Shortly after she had arrived, she began making major changes to employee benefits. The company replaced the profit sharing benefit scheme, for a bonus award system whereby employees would only receive additional funds provided the company met financial expectations. What’s more, she removed a number of employee back office functions and cut the product lines from eighty four, to twelve. She implemented dysfunctional operating practices, such as management by walking around, which meant managers would randomly ‘pop in’ and check to see the employee was doing his or her work. One executive explained,
“The feeling was, here was Carly, who wasn’t a long time in the HP culture, who doesn’t understand our business and the HP Way, and doesn’t understand our strengths, particularly in businesses that were viewed as so successful for so long.”[…] “The HP we knew is gone”
Another mistake Carly made was the merger between HP and Compaq. The companies were built on values that were polar opposites of each other. Hewlett Packard had a culture of consensus decision making, engineering focused and sales driven. Compaq was built on a culture of rapid decision making. The poor fit resulted in nine years of bitter internal fights, and an estimated loss of thirteen billion dollars. Culture clashing can be a large stumbling block when attempting to create a profitable merger. In a recent Society for Human Resources Management study, it found that HR professionals listed incompatible cultures as among the biggest obstacles to success. Companies may go in and do due diligence, look at finances, think it’s a good market fit. But, in reality the culture and people issues cause the demise of a successful merger.
When mergers occur, not every aspect can be controlled. Having a culture where employees know and understand each other can protect the company from many bumps and bruises that occur. It’s important the company protects its core values. Before the merger, the executives must understand how the values of each company will fit together. At Hewlett Packard, the company’s core value meant innovating, and contributing. According to a Gallagher study “an organisation that reinforces it core value is more likely to be successful then those that don’t. When a company, like Hewlett packard, fails to integrate these core values into their way of business, it eventually fails. Employees from every department must understand the core values the company believes in.
Mergers can be disruptive to employee workflows. When companies merge, it generally calls for a management reshuffle. This destabilizes the hierarchical structure and drains employee confidence. During this delicate stage, it’s important that managers listen to employees’ concerns and problems. Open up communication channels and allow employees to be heard. Nothing is worse for team morale than lack of communication. Impraise facilitates the communication between manager and employee. What’s more, through anonymity, the platform facilitates open and honest discussions. Hewlett Packard’s problem was that the company was not listening to its employees, which resulted in very low engagement levels across every department. It’s important to encourage the forging of relationships between companies when a merger occurs. Make it possible for employees to recognize and appreciate their team members.
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