THE HP WAY OUT OF A MORASS
THE HP WAY OUT OF A MORASS
2005-03-16 at 9:46:00 am #10887
The HP Way Out of a Morass
The culture that ousted CEO Fiorina tried to change is also the
one that turned the outfit into a tech powerhouse — and could do so again
In 1999, Antonio M. Perez traveled to the posh San
Francisco offices of AirTouch Communications. He was there to interview for the
position of chief executive of Hewlett-Packard with AirTouch CEO Sam Ginn, the
head of the HP board’s CEO search committee.
After a few pleasantries,
Ginn laid out his top priority for the new boss: “The first thing we have to do
is get rid of the HP Way,” Ginn said, according to sources. Perez, who had
overseen the construction of HP’s inkjet printer and ink empire, protested that
Ginn, who could not be reached for comment, was wrong. Needless to say, Perez
was never seriously considered for the job.
PHILOSOPHY. Perez, who went on to become president of Eastman Kodak, may
have the last laugh. HP’s board went on to hire Carly Fiorina, who did in fact
declare war on the HP Way. Yes, lip service was paid to saving elements of HP’s
famous culture, which is often described as “egalitarian” and
“consensus-oriented.” Early on, Fiorina often said the goal should be to
“preserve the best, and reinvent the rest.”
Truth is, perhaps more than
anything, it was the culture Fiorina set out to change that needed to be
preserved. Her top-down management just wasn’t what HP needed, even though it
was no longer what it had been during its best years.
Now it’s time for
HP’s board to get back to the philosophies that made the company into a Silicon
Valley icon. Certainly, the HP Way has come to mean many things to many people.
The original premise when HP was founded in 1938 — a company’s workers are its
primary asset — may seem obvious now, but it was groundbreaking back then.
AUTONOMY WORKED. That basic concept led HP’s
management to empower its employees. There were no illusions that the exec (or
in the case of the founders, the execs) in the corner office had all the
answers. Rather, ideas bubbled up from below. And authority was pushed as far
down into the company as possible, allowing the people closest to the businesses
to make the calls. That turned HP into a hypercapitalistic amoeba — a
collection of small, competitive groups that attacked new markets with a
The best thing a CEO could do in that environment was hire
the right employees, give them the tools and incentives to do their jobs, and
then get out of the way. And let’s be clear: The HP Way, when practiced
correctly, was not about consensus management. Everyone got their say, but unit
chiefs had to make decisions. Those unit chiefs were then expected to use that
autonomy to deliver. They sweated it out at annual business reviews, terrified
that co-founder David Packard, a 6-foot, 5-inch mountain of a man, would
eliminate their unit for not making its numbers.
The carrot, the stick,
and the autonomy worked. From 1938 to 1998, HP grew more than 20% a year without
a loss — giving it the longest period of fast growth in the history of American
LOST FAITH. Still, life was
simpler in those days. Over the past decade, HP has gone from being an
innovation leader in dozens of smallish tech businesses to a giant in a few
huge, cutthroat markets — particularly PCs. When margins are razor-thin, it’s
hard to pay for the perks and niceties HP once had been able to afford. Making
matters worse, many HP employees had come to see those perks — the
profit-sharing checks, the Taurus company cars — as entitlements, rather than
rewards for a job well done.
Also, Fiorina justifiably concluded that
the tribal attitudes of HP’s various management groups were making it difficult
for the company to deliver a coherent message to investors and customers. But
try as she may, Fiorina wasn’t able to overlay her corporatewide organizational
structures on the vast company. While they looked great on paper, they often
merely replaced old forms of bureaucracy and inefficiencies with new ones.
Unfortunately, Fiorina’s efforts tore at less tangible but nonetheless
important employee morale. Rather than believing they were at a special
enterprise, many HP employees came to think of their jobs as just the source of
a paycheck. They lost faith in the outfit because they sensed that HP had
adopted a new view of them.
THE HP SOLUTION.
That was justified. The night the merger with Compaq was announced, execs said
the deal would lead to 15,000 layoffs — though insiders already believed it
could go as high as 30,000. All this at a concern that hadn’t had a major layoff
There is good news, however. The HP Way isn’t dead. It’s
dormant — and waiting for the right executive. “A little of the HP Way would
probably work pretty well right now,” says Quantum (DSS ) Chief Executive
Richard E. Belluzzo, a 22-year HP executive who left in 1997. “The strength of
HP has always been its culture and its people. By unleashing people and making
them feel like they made a difference, we got great results. That hasn’t been
there for the past few years.”
Certainly, it won’t be easy. Any new CEO
will have many, many hard problems to solve. But HP still has assets such as a
world-class research and development lab, enviable distribution power, and
tremendous market clout.
Most of all, its culture is waiting to be
harnessed. The HP Way was never the problem. But it may be part of the answer.