The Rise and Fall of the HP Way - Case Study Example

?"The Rise and Fall of the HP Way" Case Study As one read the case en d “The Rise and Fall of the HP Way”, written by Jocelyn Dong and published online in the Palo Alto Weekly on April 10, 2002, one noted that there were several incidents which could be perceived as mistakes that apparently led to the organization’s near collapse. The initial quotation immediately preceding the main article, it was revealed that “Merger may spell the end of company's guiding philosophy” (Dong, 2002, p. 1). To assist in outlining one’s view on the mistakes that were made that led to this near collapse, the discourse would initially present what the HP way was all about and determine how, under the governance of Carly Fiorina, HP's chairman and CEO, it was interpreted that the HP Way’s demise had started. What was the HP Way? In the HP Alumni Association, Inc. (2012), it was revealed that the HP Way had five clearly stipulated corporate values to wit: “We have trust and respect for individuals. We focus on a high level of achievement and contribution. We conduct our business with uncompromising integrity. We achieve our common objectives through teamwork. We encourage flexibility and innovation” (HP Alumni Association, Inc. 2012). The date stipulate for these corporate values to be designed, instituted and implemented within the organization is in 1992. Accordingly, the HP corporate objectives designed as early as 1966 focused on seven explicit goals: (1) profit, (2) customers, (3) field of interest, (4) growth, (5) employees, (6) organization, and (7) citizenship (HP Alumni Association, Inc. 2012). In an article written by Peter Burrows entitled “Hewlett & Packard: Architects Of The Info Age” on March 2004 and published online in Bloomberg Businessweek, the author described the HP Way as focusing so much on the employees and maintaining trust and complete confidence in an “egalitarian, decentralized system that came to be known as "the HP Way." The essence of the idea, radical at the time, was that employees' brainpower was the company's most important resource” (Burrows, 2004). Likewise, from among the most prominent practices mentioned were: profit sharing plans; offering tuition assistance, flex time, job sharing; encouraging free flow of ideas and open communication; supply closets kept open; trust and confidence in people were predominant (Burrows 2004). Governance under Carly Fiorina Case facts revealed that Carly Fiorina was a former sales executive that was hired to shake up HP. She was reported to become HP’s Chairman and CEO in 1999, three years after the death of one of its founders, Dave Packard. It was specifically noted that she was hired from external sources and was instrumental in changing various corporate values that were identified to be an integral part of the HP Way. From among the tranformations attributed to Fiorina were: (1) mishandling of lay-offs; (2) valuing profits more than people; (3) creating a ‘cult of personality’; and (4) creating a culture of fear (Dong, 2002, p. 1). To expound on the aspect of laying-off employees, according to Jaime Ash, a retired engineer who stayed with HP for more than 28 years, the HP way that employees and management had been talking about focused on “co-workers (who) were reassigned to new jobs rather than fired; how the company for a time implemented a shortened work week for all employees so certain individuals would not lose their jobs” (Dong, 2002, p. 1). In sum, the differentiated practices under Fiorina’s helm and the HP Way are detailed below: Corporate Practice HP Way Fiorina’s Helm Firing/lay-offs Job reassignment Laid-off 6000 employees Corporate culture Trust, respect Distrust, fear Motivational program Motivated by hugs Motivated by fear Management practice To be part of the team; Distant and aloof; decentralized top-down approach Communication practice Open, sharing information Close, secret, discreet Mistakes that Led to HP’s Near Collapse From the information and assessment of the facts, one could deduce that the following mistakes led to HP’s near collapse: Selecting Carly Fiorina, an outsider, to lead the company. This is a crucial mistake because Fiorina, being sourced from the outside, apparently did not have any previous experience or feel of the HP Way. As such, she could not have imbibed the corporate culture that embodies the values and corporate objectives that were defined in the HP Way. Application of an anti-thetical leadership style. All HP personnel have been accustomed to the management style applied and practiced by Dave Packard and Bill Hewlett. Their focus and thrust is in showing trust and confidence to the talents, knowledge and skills of their people and have thereby encouraged a culture of sharing, integrity, trust and teamwork. They have both been seen frequently making roads and interacting with people from across the organizational heirarchy. In contrast, Fiorina was distant, aloof, never walked within the organization to interact and communicate with the people. Change in corporate culture. Despite Fiorina’s apparent and supposed support for the HP Way, her actions and implementation of new policies run counter to all the values and objectives outlined therein. As such, she changed the corporate culture from one of complete trust to breeding distrust and harboring fear (due to job insecurity brought about by the lay-offs). Lack of Immediate Management and Board Oversight. With the announced merger with Compaq, it was evident that there ensued a proxy fight, defined as “a strategy that may accompany a hostile takeover. A proxy fight occurs when the acquiring company attempts to convince shareholders to use their proxy votes to install new management that is open to the takeover. The technique allows the acquired to avoid paying a premium for the target” (Web Finance, Inc. 2012). The presence of conflict proved that there had been some management and strategic decisions proposed and implemented by Fiorina that were deemed contrary to the HP Way. This could have been managed or prevented with the executive team’s oversight or through a review of the performance of HP by the board of directors to gauge the effectiveness of Fiorina’s strategies on the financial performance of HP. As emphasized in an article written by La Monica (2005), he noted that “the company's controversial deal to buy Compaq in the spring of 2002 -- after a bruising proxy fight led by one of the Hewlett family heirs -- has not produced the shareholder returns or profits she had promised” (par. 4). Overall, as summed, the causes of HP’s decline in market position and leadership in the computer industry is that Fiorina broke “three key rules that CEO's must follow: place the company's well-being above all else, including yourself; know your company from the inside out—some say that Fiorina did not fully comprehend the impact on operations of her vision to transform HP's structure and strategy; and hold people accountable, including yourself” (Mendenhall: Hewlett Packard, 2012, par. 3). The Approach or Strategies that Should have been Made After analyzing the facts, the leadership style of Fiorina, the conflicts that ensued from the merger, and the various comments and insights from different personnel and management of HP, it was apparent that there were strategies and approaches that should have been made to maintain and preserve their position in the market place. For one, although Fiorina’s leadership style had been evaluated to be contrary to the HP way, other business practitioners and experts on executive governance have given Fiorina good reviews on her leadership prowess. According to professors, Michael Useem, a director of the Wharton’s Center for Leadership and Change Management, and Kevin Werbach, a professor of legal studies, Fiorina apparently “scored high on leadership style, but she failed to execute strategy” (Knowledge@Wharton, 2005, p. 3). Further, it was also noted that “the main problem was that apart from buying Compaq, Fiorina did not have a concrete strategy for HP” (Knowledge@Wharton, 2005, p. 3). In this regard, the following strategies could have been made to maintain and preserve HP’s position in the market place: (1) assigned a chairman and CEO from internal sources, one who is highly familiar of the HP Way; (2) evaluate and assess the factors in the external environment that influences and impinges on the operations of the organization and develop goals and strategies based on these; and (3) design and implement strategic planning and management from the newly defined mission, internal and external assessments, vision, as well as goals and objectives (Mendenhall 2012). Hiring from the Inside. Since Fiorina was hired from external source, at the onset, personnal and management at HP viewed her as an outsider: not one among them. As such, she was distrusted and her leadership style run counter to what people from HP had been accustomed to. According to Mendenhall (2012), “most of the failure can be traced lack of trust and support among the players—the board members, some members of the board and Fiorina, the employees and the company, the shareholders and the board, and the shareholders and Fiorina. Also, Fiorina never had the loyalty of the employees” (Mendenhall: Hewlett Packard, 2012, par. 3). Evaluate and Assess the External Environment. It was revealed the even before the demise of the founders, HP had been exposed to increasing competitive pressures (Dong, 2002, p. 1). As such, at hindsight, it was disclosed that “under Fiorina's direction, HP unsuccessfully battled IBM, Dell, Sony, EMC, and others” (Mendenhall: Hewlett Packard, 2012, par. 1). The fast technological developments and changes in the computer industry have significantly altered the behavior and buying patterns of diverse categories of consumers. In this regard, HP should have evaluated and focused on their strengths and core competencies and slowly progressed in venturing into new technological applications, depending on their capabilities and resources. Strategic planning and management. As indicated, Fiorina did not have a clearly defined strategy that went with the vision she earmarked to implement. For the merger with Compaq, Useem (2012) indicated that “the merger has not succeeded in building value for stockholders. That is where Fiorina's failure to execute may lie. HP could have done a better job marketing its products, or squeezing costs in order to increase profit margins” (Knowledge@Wharton, 2005, p. 3). Likewise, it was explicitly noted that Fiorina “fired or lost many executives, and she rigorously resisted changing strategies even as she made dramatic changes. She merged HP's 80-plus autonomous business units into a more centralized, four-division giant and eventually laid off thousands of workers. She had to also battle two cultures, HP and Compaq, both of which were very reluctant to change” (Mendenhall: HP, 2012, par. 2). These facts proved that Fiorina failed to design an appropriate strategy through careful planning and implementation. From the strategy of forcng the merger, Fiorina had initially gained significantly lack of support which contributed to increased tension, conflict and difficulty in implementing her vision. Also, the merger of two previously strong organizations with distinct corporate philosophies and values had made it more difficult to effect any planned change. Conclusion The current discourse has outlined the mistakes that led to the near collapse of HP and has enumerated the approach the company should have taken in order to maintain and preserve their position in the market place. As emphasized, there is a need to hire a more competent and qualified person from within the organization who would lead HP into the future and use strategic planning and management, as required. Any new strategies should be carefully planned depending on the internal and external forces that affect the organization’s current and future operations. As such, strategic planning and management is crucial as the assessment of the internal strengths as well as weaknesses, and from capturing the opportunities and addressing risks that abound from the external environment should be considered in defining mission and vision statements, as well as short-term and long-term goals. Likewise, in conjunction with an effective leadership style and in conformity to the HP way, the organization should successfully integrated relevant elements within their corporate philosophy and values to ensure that core competencies would assist in battling increased competition and ensure that HP could regain market leadership within the personal computer industry in the near future. Reference List Burrows, P. 2004. "Hewlett & Packard: Architects Of The Info Age." Bloomberg Businesweek, [Online]. Available at: http://www.businessweek.com/stories/2004-03- 28/hewlett-and-packard-architects-of-the-info-age (Accessed June 29, 2012). Dong, J. 2002. "The rise and fall of the HP Way ." Palo Alto Weekly, [Online]. Available at: http://www.paloaltoonline.com/weekly/morgue/2002/2002_04_10.hpway10.html (Accessed June 28, 2012). HP Alumni Association, Inc. 2012. The HP Way." hpalumni.org, [Online]. Available at: http://www.hpalumni.org/hp_way.htm (Accessed June 28, 2012). Knowledge@Wharton. 2005. "HP After Carly: What Went Wrong?", [Online]. Available at: http://knowledge.wharton.upenn.edu/article.cfm?articleid=1144 (Accessed June 29, 2012). La Monica, P.R. 2005. "Fiorina out, HP stock soars." CNN Money, [Online]. Available at: http://money.cnn.com/2005/02/09/technology/hp_fiorina/ (Accessed June 29, 2012). Mendenhall, M.E. 2012. "Strategic Planning Failure." Reference for Business, [Online]. Available at: http://www.referenceforbusiness.com/management/Sc-Str/Strategic- Planning-Failure.html (Accessed June 30, 2012). Web Finance, Inc. 2012. "proxy fight." Investor Words, [Online]. Available at: http://www.investorwords.com/3922/proxy_fight.html (Accessed June 29, 2012). Read More