About Case Study oh HP Way

1. Hewlett-
Packard:
Culture in
Changing
Times
Case Analysis

2. Scenario
– HP - Inception in a garage in 1939, founders - William Hewlett and David Packard
– Hewlett-Packard (HP) grew to be a leading technology
solutions provider in the 1990s. It attributed its growth to the unique culture that the company
had fostered - 'The HP Way'.
– Carly Fiorina appointed as HP’s new CEO in July 1999.
– In September 2001, HP, led by Fiorina, announced acquisition of Compaq Computers.
– Walter Hewlett opposed the acquisition.
– HP narrowly won a shareholder vote in March 2002 favoring acquisition.
– Hewlett filed a lawsuit alleging discrepancies in voting regarding acquisition of Compaq
computers by HP.

3. Changes made by Fiorina
– .
– More concentration on HP’s total solution offering compared to individual products.
– Reorganization into a front-back structure with sales & marketing on the front end and R&D and
manufacturing on the back end.
– More emphasis on using pay to motivate executive behavior by tightly coupling incentives with
performance targets Pay-for-results plan.
– Advocated emphasis on revenues over profits in contrast to founders’ importance of profit and
people.
– Availed perks like private jets against the egalitarian culture of HP nurtured over the years.

4. Basis of the Acquisition
– A combined company would be better able to face the changes under way in the
industry.
– Can Leverage on the strength of one company in key areas where the other held a
weak position.
– Can enable significant Cost Savings, achieved in part through job cuts.
– Can gain business efficiencies, especially in manufacturing and distribution systems.
– Can achieve significant operational efficiencies, by reducing annual costs by $2.5 billion
by 2004

5. Acquisition Aftermath
– Held a strong No.1 market position in both servers and desktop PCs.
– On the efficiency front HP reduced costs by $3.5 billion and headcount by nearly 20,000.
– HP obtained several large outsourcing contracts that it was unlikely to have won prior to the
merger.
– By end of 2002, Dell overtook HP in PCs and by mid 2003,IBM overtook HP in servers.
– Employees gave low rating on management credibility, respect and fairness.
– The HP Ways and the high-commitment culture to which it had given rise was largely gone.

6. ANALYSIS
– The culture of the organization, The HP Way
– is the image created for the employees and market. HP’s culture gives importance
to people by giving the sense of belonging and reward for collective performance.
– When Carly Fiorina took over, she bypassed the HP way. By being oblivious to the core issues
that made the organizational architecture of HP, she undertook change steps that contradicted
with the existing setup and conflicted with the thinking held by workers of the company.
– Fiorina’s approach to the organization and its vision reflected towards individualism, and left
the workers stranded to understand their role especially during the changes being made.
– The strategies have to be made by taking impact on organizational culture in to consideration.
The employees may be reluctant to the changes and may question the core vision and
objectives of the organization.