Organisational Behaviour Issues That Contributed to the Leadership Challenges at HP - Case Study Example

Analysis of the organisational behaviour issues that contributed to the leadership challenges at HP Introduction and Background Hewlett-Packard has undergone dramatic changes at the senior-executive level. A few of the decisions led to positive financial returns but most of them did not. These leadership issues can all be tied to organisational behaviour. The latter term refers to the study of how individuals and teams work together to achieve organisational goals. It may also refer to the analysis of behaviour and attitudes of persons in a company (Mullins, 2007). In the 1990s, HP was one of the most desirable places to work. It featured in management magazines and business journals as a trendsetter. However, things took a turn for the worse starting from the early 2000s. Organisational challenges were so dramatic that they impeded financial performance. Currently, HP is yet to recover from this downfall because it has not attracted any of the positive attention that it enjoyed in the past. Financial performance is also unimpressive at the company. HP began humbly at the back of its entrepreneur’s garage. Engineers David Packard and Bill Hewlett established an unconventional company in the 1950s. They wanted to build a business environment in which members were free to express their ideas and make contributions; they thus created a flat structure. Many individuals in Silicon Valley praised the organisation for its revolutionary ways. During the mid 1990s, employees had a profound respect for the institution. They carried on with their jobs despite the tumultuous environment that pervaded the IT industry. Several individuals felt loyal to the organisation even though the company had to subject them to pay cuts. Members trusted the company’s leaders as strong levels of communication existed in the organisation. These trends altered dramatically when the company decided to hire an external executive for the first time in the late 1990s. The move was initiated by the departing CEO who felt that HP had become complacent. Some of its competitors in Silicon Valley were exemplars of innovation and growth. It was assumed that an external leader would inject the much-needed fresh insight into the company. However, such a move proved to be ill-conceived because it was the beginning of several tumultuous events in the organisation. At the beginning, CEO Fiorina seemed like a forward-thinker. She initiated various restructures within HP and even lobbied for the acquisition of a competitor - Compaq. The latter move would prove to be her downfall as it failed to yield the expected outcomes. Shortly after a period of disappointing results, Fiorina resigned and made room for Mark Hurd. He was a transformative leader who engaged with his employees. He also supervised a massive layoff and delayered the firm structures. However, he was involved in a personal scandal that led to his elimination. His replacement, Leo Apotheker, was a pale comparison to Hurd. He failed to improve stock performance and even discontinued winning strategies. The final straw fell when he bought a business analytics company called Autonomy. Stock prices decreased tumultuously thereby signalling his elimination. These leadership challenges were also amalgamated by disputes in the board. The paper will examine organisational behaviour issues that led to the firm’s woes. Analysis of the situation Leadership The situational leadership theory assumes that different situations require different leadership traits. Therefore advocates of the school of thought believe that no profile of leadership is perfect for all situations (Hope and Hendry, 1995). Instead, utmost attention should be given to the variables within a certain situation and the right approach selected for them. These variables include the nature of work tasks, peer expectations, other leaders’ expectations, the culture and climate of the organisation, and followers’ responses. In some instances, a leader may need to be a risk taker while in some scenarios; the person may have to exhibit nurturing traits (Buchanan and Boddy, 1992). Sometimes it may be preferable to be charismatic while in some situations it would be best to focus on results. Hewlett Packard may have benefited from applications of situational approaches to leadership during the three tenures under analysis. CEO Carl Fiorina appeared to apply the same leadership traits in divergent situations and this could have explained her dissatisfactory performance. She was highly transformative; as soon as she entered Hewlett Packard, she began making changes in the institutions. The compensation structure was the first target as well as several other human resource structures. She then organised for the purchase of Compaq computer using the same leadership approach. Her strategy largely revolved around her vision for the organisation and not really what the rest of the institution thought about the changes. If Fiorina had considered other senior leader’s expectations of her leadership, then it is likely that she would have changed it to suit them. During the Compaq acquisition, many board members felt that the company needed to concentrate on service based acquisitions rather than the direction that Fiorina’s plan was taking. If Carly had been more consultative than transformative, she would have listened to other leaders’ concerns and changed her approach. Rigidity in leadership application of traits was her downfall. Mark Hurd seems to have mastered this concept quite well. He was able to change his leadership traits when the situation necessitated. For instance, when the organisation needed transformation through de-layering, he adopted that approach. When it required engagement, he was deeply involved in management. This sort of flexibility explains his success. He might have had certain traits that were preferable but was willing to change them when they did not serve organisational goals. Leadership styles have a direct impact on the way an organisation performs. If a match exists between the organisational culture and the concerned leadership, then this will determine the overall effectiveness of that particular leader. Directive leadership styles are best suited to organisational cultures in which subordinates demonstrate little independence. It is a style that involves laying out the schedules and processes for getting work done and monitoring people’s performance. Conversely, the delegative leader is one who delegates duties without listening to employees’ input on the same. When consultation is not part of the company culture, then this approach can be well suited. Conversely, the participative leader is one that attempts to get the most from a team by getting their ideas and reaching a consensus in the best way. The consultative leader will collect ideas from members but his or her decisions will be final. Negotiative leaders focus on persuading and motivating followers to work towards certain objectives (Pugh, 1997). In the 1990s, when HP was quite successful in the market, the leaders established an environment in which members could be free to express their ideas and make contributions. Therefore, it may be stated that a participative leadership style dominated the company. The outgoing CEO felt that too much reliance on this leadership style had caused the company to become complacent; therefore, it needed to be altered. While it may be true that the organisation needed a new leadership style, it may not have been wise to go from one approach to the other so dramatically (Pettigrew, 1987). Perhaps the incoming leaders should have created a hybrid between participation and decision making. For this purpose, they might have considered the consultative leadership style, which accommodates input from members but leaves final decision making to the leader (Hatch, 1997). Employees in HP often claimed that they appreciated how their leaders trusted their abilities. However, this view changed as soon as new leadership stepped in. Consultation does not just include input from employees; it should also involve perspectives from leaders who are senior to the CEO. Some leaders in the company did not really have any strong leadership style that they prescribed. One such person is CEO Apotheker. He was appointed after demonstrating very little success in his previous organisation. Apotheker had not made a strong name for himself in the industry, so it is surprising that he was selected for the job. His failure to commit to at least one strong leadership style may have led to the poor performance in the company. People did not know what to expect from him. They lacked direction on how to proceed with their tasks. Managing change One may argue that Carly Fioriana and Apotheker instated changes just for the sake of it (Morgan, 1997).An effective leader must examine his internal and external environment and establish concrete reasons to change. Customer expectations keep altering, especially in the digital world. Companies that do well are those that focus on increasing value for their consumers. This ought to be a continuous process for senior leaders (Vroom and Jago, 1988). Carly Fiorina knew that something had to change in the company in order to reverse the fortunes of her organisation. She thought that merging with Compaq would create the leverage she needed to outdo her competitors. This decision cost the company $25 billion, yet it was not a justifiable. If Fiorina had considered customer expectations in her decision, then she would not have made this decision (Mintzberg, 1994). At the time of the acquisition, most companies were moving towards software or service provision. HP was going in the opposite direction, which was in the hardware section. The CEO should have listened to some of the board member’s views on the buyout. Their objections were founded on their knowledge of the business enterprise market, in which Fiorina had little experience (Rollinson, 2002). In situations where senior executives clash with board members, it is critical for both parties to consider consumer expectations. Their needs should be at the heart of any transformations (Drucker, 1989).Likewise Apotheker also failed to put consumer needs ahead of other drivers for change. He discontinued a program that had worked in the past- tablet computing (Linstead et. al., 2004). The literature notes that change is a complex process in which several dynamics come into play at one time. It is not possible to attribute every effect to one cause. Therefore, such a dynamic process requires equally flexible decision-making (Kotter, 1995). Leaders ought to try and incorporate as many of the parameters as they possibly can. Therefore, CEO Apotheker and Fiorina should have thought about these things before making a decision. Change management may also assist in understanding why some of the outcomes never came to fruition. Elizabeth Kuebler Ross established the loss life cycle. In it, she explained that individuals often go through a five-step grieving process. This includes denial, anger, bargaining, depression and acceptance. The best time, to introduce new changes in an organisation is at the acceptance stage. At this phase, the attitude and frame of mind needed to make change successful is already in place (Thornhill, 2000). During the dismissal of Mark Hurd, a number of board members thought that he was too valuable to go. There were intense arguments that arose in the boardroom because of this decision. They picked a replacement when in the angry phase and messed up. Oversights also prevailed on the intricacies of change within the organisation. When leaders assume that change will take place sequentially, then they put their organisations in very precarious situations. The CEOs at HP met solid resistance from board members in most of their key decisions. These eventually led to the failure of their choices because they did not take into account others facets of organisational change. Studies indicate that process, context and politics of change can all come in the way of successful transitions (Beer et. al., 1990). In the case study, Fiorina met a lot of resistance from key board members (Walter Hewlett and Packard Junior) concerning her decision to purchase Compaq. These individuals were crucial to the success of the decisions because they were attached to the organisation’s history. Furthermore, they accounted for 15% of the company stock. If one passed a decision without their consent, then one was bound to encounter problems in the future. Carly failed to plan for this politics of change. If she had, then chances are that the decision would have been more successful. Even the response to resistance during the change process was not a wise one for this institution. Leaders have the option of negotiating, manipulating, coercing, facilitating or involving their members in change (Lindell et. al., 1998). It seems that the CEOs of the company were quite good at making changes but they had a poor strategy for dealing with resistance after implementation. In the same fashion, CEO Fiorina dealt with resistance in a counterproductive manner. When the two critical members of the board felt that Carly’s choice to buy Compaq was counterproductive, she chose a confrontational approach. She decided to manipulate and coerce the board members into supporting her choices. Participation is another way in which managers can guarantee the success of their change initiatives (Adair, 1983). CEOs at HP appeared not care about the extent to which individuals participated in their change processes. Most of them assumed that the rest of the organisation would quietly follow the new path. No direction was laid out on the manner in which individuals would contribute to new strategic plans. Additionally, education of the company employees about the new direction did not take place. The company failed to get buy in from managers as well as team players who were crucial to the success of the initiative. Organisational culture Organisational culture may defined as those values, norms, styles of management or priorities that affect how people plan, communicate and make decisions. Culture emanates from organisational founders and is then passed on to members of the organisation who solidify it through their goals as well as their approach to work. Studies indicate that when a work culture is coherent and dominant, then it has a direct effect on how effectively companies perform. However, this culture needs to be oriented towards the marketplace in order to create effective outcomes (Tannenbaum and Schmidt, 1973). Prior to the introduction of external CEOs, previous leaders used to apply a consensus culture in which people were consulted and involved in idea generation. However, HP operated in a highly competitive technology industry. The pace at which their rivals dished out new ideas was incomparable to theirs. Their consensus culture may have worked for the company internally but it was not in tandem with the marketplace. This explains why it was not working; the shared values of the company conflicted with organisational effectiveness (Bass and Avolio, 1994). In the subsequent decades, it became evident that something had to be done about the organisational culture. One of the hardest things to change is culture because it takes years to build. Every time a new CEO entered HP, they tried in one way or another to reorient the company norms. Some of them did not even take the time to understand aspects of culture that had caused the company to do well in previous years. Fiorina was one such person; she came into the organisation with very firm ideas in mind. Employees started complaining that they had lost their identity. They did not understand what HP was about any more. Literature indicates that organisational culture gives members a sense of purpose and identity. It enables them to behave and think in a certain way (Schein, 1993). The new CEOs that entered the organisation appeared to have lost sight of this aspect as they cared little for its outcomes. Furthermore, the pace at which cultural change takes place was detrimental to organisational behaviour at HP. Organisational culture promotes stability in an organisation (Watson, 2002). Members use it as standards against which to carry out their duties. The high influx of CEOs in the company may have led to the company’s underperformance during the change process. Many of them tried to shape company norms during their short tenure and this simply destabilised the company. Workers who had been in the company since its hey days may have felt uncertain about their future in the organisation owing to the changes in organisational culture. This explains why they may not have succeeded in their outcomes. Four types of culture have been outlined in the literature. Some of them include power culture, role culture, and task culture. Power culture is tuned towards serving the ultimate leader of the organisation and is high entrepreneurial. This would not have worked for HP because it had moved beyond the entrepreneurial stage and was an old enterprise. Role culture is highly bureaucratic and focuses on the structure. Aspects of this component existed in the company hence explaining why Mark Hurd had to dismantle structure and layoff individuals. Finally, there is task culture which acknowledged individual contribution while at the same time valuing expertise from people. When changing culture, this aspect should have been given the most attention, but no leader focused on it (Kotter, 1990). When making a crucial decision in an organisation, one must pay attention to complex resources. It is relatively easy for a company to purchase new equipment, hire new personnel and imitate its competitors. However, the way to build a team that works is what cannot be easily recreated (Hendry and Hope, 1994). A competitor may have a playful culture that endears them to their stakeholders. One may realise the value of such a culture but may not know how to instate such a complex shift. The prevailing culture in a firm also determines some of the other intangible assets in the organisation like trust and reputation (Handy, 1999). As the case as in Hewlett Packard, few leaders failed to understand and incorporate these intangible assets in their decisions. They merely assumed that the company was ready to change after their arrival. In fact, one of the reasons why Carly Fiorina faced a lot of opposition in her firm was that she rarely took into account the organisational culture of the company when making her decisions. HP culture had taken years to build, and it was not something that could be altered by a formulaic process (Burnes and James, 1995). One of the employees complained that Fiorina’s attitudes were superficial because she disregarded most of the merits of the previous culture. Consequently, she undermined other intangible assets like trust in the organisation. Employees became quite vulnerable because such a fundamental part of them had been taken away overnight. Recommendations and Conclusion An analysis of the organisational behaviour in the company reveals that leadership was a key problem for the organisation. Failure to exhibit flexibility in leadership traits led to the downfall of Carly Fiorina. She should have adjusted according to expectations from employees as well as the board members. Poor commitment of CEO Apotheker to any particular leadership style caused him to lack control over his subordinates. Followers did not know what to expect from him. Mark Hurd was successful because his leadership style fostered involvement from subordinates while at the same time gave him strong decision making power. Carly and Apotheker appeared not to care for employee engagement as much as their counterpart Mark Hurd. It is critical for HP leaders to establish a high level of trust with their employees. One way of achieving this is through communication with employees. Preparing individuals for dramatic changes in the strategy of the firm is essential. Getting buy-in from all members will prevent backlash and endless tension. Future leaders will need to strengthen communication in the company. Organisational culture was poorly managed by the new leaders. None of them had a systematic way of changing it, and instead tried to do it overnight. Furthermore, organisational culture in the company had been changed too many times to mean something to employees. They had lost their sense of identity and stability. Although the organisation has adopted an unworkable consensus culture, it would have been prudent to maintain elements of this culture through a participative approach. Leaders should have continued to obtain input from employees while at the same time making ultimate decisions in the company. HP had initially performed poorly because its organisational culture was in conflict with the needs of the marketplace. Change issues were also prevalent in the company. CEOs instated change for the sake of it. They should have focused on consumer interest firsts. No strategy was in place to win opponents during negotiations. This led to worse outcomes than had initially been assumed. In the future, the company should perform long-term changes if they want to involve culture; quick fixes will not work. Additionally, in cases where tension arises in the board, consumer interest should be given the greatest precedence. Overall, the decision to bring in external leadership was the biggest mistake by HP. 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