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TRANSFORMATION LEADERSHIP AT HP
Arab Academy Graduate School of Business (AAGSB), Master of Business Administration program (MBA),
Presented to:Dr. Ahmed Farouk
By: Omar Shams, Ehab Shafei,Walid Sobhi, Ahmed Abdo,
Yasser SalehJanuary 30, 2012
OBJECTIVE
Understanding the nature of transformation
leadership and its Role in HP Corp.By:
1) Exploring the HP Corp. Background.
2) Exploring the Role of the transformation leader (Carly Fiorina) in forming the New HP Corp.
3) Discussing the different stages of the transformation process and HR challenges.
HEWLETT PACKARD (HP)
An American information technology corporation headquartered in California.
One of the world's largest information technology companies.
Specializes in developing and manufacturing (personal computing devices, data storage devices enterprise servers, printers and other imaging products as well as networking hardware and designing software).
HEWLETT PACKARD (HP) Vision :
Future is Worldwide, connected, continuous, secure computing through automated data centers,
Power of digital technology in low-power, low-cost, lightweight that it could display multimedia information in formats as small as a watch or as large as wallpaper
Mission: Profit Employee
commitment Growth Field of Interest Customer loyalty Market
leadership Global citizenship
HP: MAJOR DATES 1935: Bill Hewlett & Dave Packard
graduated from Stanford University. 1939: Bill and Dave established HP
with capital of US$538. 1947: HP was incorporated. 1957: HP shares went on public. 1958: HP created Dymec company,
to specialize in digital equipment. 1961: HP purchases the Sanborn
Company.
1963: HP partnered with Sony and the Yokogawa companies.
1966: HP Laboratories is formed, which become Agilent Labs splitted in 1999 taking all computer business.
1985: Company establishes first high-tech joint venture in China.
1986: "the HP.com domain“ was opened to help marketing their computers.
1989: HP purchases Apollo Computer for US $476 million.
HP: MAJOR DATES
1995: HP purchased Convex Computer. HP launches the Pavilion line of home computers in China.
2002: HP and Compaq merged on May 3, 2002; HPQ is unveiled as new stock ticker for combined company.
HP: MAJOR DATES
HP: FOUNDERS & CO’S
John Young: (77-92) 15 years
Lewis Platt: (92-99) 7 years
Carly Fiorina: (99-05) 6 years
Mark Hurd: (05-10) 5 years
Leo Apotheker: (10-11) 1 year
Meg Whitman: (11-12) Current
David Packard
(Chairman 1964-1996)
Bill Hewlett
(President 1964-2001)
HP’S: REVENUES
1960 1965 1970 1980 1985 1990 1994 1997 1999 2002 20110
20
40
60
80
100
120
140
160
180
200
220
240
0.03 0.165 0.365 3 6.5 13.225
42.9
80.1
145
233
Revnue ($B)
HP’S: WORKFORCE
1960 1965 1970 1980 1985 1990 1994 1997 1999 2002 20110
50,000
100,000
150,000
200,000
250,000
300,000
350,000
1,778 9,00016,000
57,000
85,00091,500109,700
121,900
179,200
290,516
325,000
Workforce
Diversity policies Equal opportunities and
Nondiscrimination
HP Workforce
HP WAY: 20 YRS EXP.Fundamental Precepts1. Contribution2. Superior Performance &
Profitable Growth3. Responsibility to the
communities4. Integrity and period5. Best results come when you
get the right people, trust them, give them freedom to find the best path to achieve objectives, and let them share in the rewards
HP WAY: HR PRACTICES MBO, innovative thinking = higher
productivity Decentralized Decision-Making Reassignment, creating loyal work force Careful Screening Management was part of the team Trust Problem solving teams insure information
flows Job Rotation = Multi-tasking Flexibility, better communication Training in problem solving, team skills Group Incentive Pay small groups is
effective
HP WAY: HR PRACTICES
Results: Innovative HR system: 6.7% higher productivity High teamwork: 3.2% higher productivity High communication: 1.4% higher productivity
This mean higher profits with innovative HR
HP WAY: HR PRACTICESCompared to Traditional HR Practices:
Wage tied to performance appraisal Narrowly defined jobs Limited screening “non-managerial
jobs” Tight supervision Little training Layoffs in hard times
HP: SIGNIFICANT TRANSFORMATION There Are Several Stages And Things
That Happened At Hp Over The Years. But The Most Significant One Was: “The Merger With Compaq” That
Happened During 2001-2002.
Carly Fiorina: Mike Capellas:
C.E.O. of HP C.E.O. of Compaq
PRE-MERGER: HP-COMPAQ POSITIONS HP, the second largest computer
company behind IBM
High end server market was dominated by IBM, HP struggling to keep up HP was number 3, with Dell being the market leader and Compaq no.2.
Both HP and Compaq were struggling companies HP alone could not compete with Dell in the Low-cost, high volume PC market.
Compaq wanted to achieve expertise in High end UNIX servers.
PRE-MERGER: (CONT…) HP-COMPAQ POSITIONS
The company lost more money in the three years following the merger than in its entire previous history: more than $2 billion by the end of 2000.
Compaq also lost its position as America’s leading PC maker, having been passed by both Dell and HP in the retail market.
PRE-MERGER: (CONT…) HP-COMPAQ POSITIONS
PRE-MERGER: STATISTICS
HP’S: FALLING STOCK PRICES
As a result, HP was forced to cut jobs and also to ask employees to take unpaid leave, in 2000.
By September 2001, HP’s stock value had fallen to less than half of its level.
HP’S: STOCK VALUES
HP-COMPAQ: MERGER DATES
September 4, 2001 - HP and Compaq announced a definitive merger agreement to create an $87 billion global technology leader.
Eights months later on May 3, 2002 HP and Compaq officially merge.
HP’S CARLY FIORINA: HP’S CEO AND LEADER
Fiorina the CEO of HP.
Fiorina the Transformation leader of HP.
CARLY FIORINA: THE HP’S CEO
Following an intensive search that involved lengthy interviews and a 900 question psychological test, Fiorina was hired as the CEO.
Carly Fiorina has a silver tongue and an iron will.
Fiorina not only brings leadership to HP but also savvy marketing and sales techniques.
Fiorina also understands that what customers need is not always what they ask for.
She also shares five lessons she has learned: Leaders create something new Don’t fall in love with your product Competition requires risk-taking Ethics matter The 21st century is about brainpower
CARLY FIORINA: THE HP’S CEO
CARLY FIORINA: LEADERSHIP PROFILE Networker
Carly Fiorina is a brilliant networker. She is good at meeting people and making a positive initial impression.
Analytical Thinker Carly Fiorina's strength lies in selling ideas. She is not
good at breaking ideas down and looking at their pluses and minuses.
Charisma Carly Fiorina is known for her charisma. She has a
magnetic personality and is an electric speaker. Relationship Builder
Carly Fiorina's strength lies in forming short-term relationships that are created by networking rather than long-term relationships that are built over time.
CARLY FIORINA: THE TRANSFORMATION LEADER
Fiorina and her executive team countered Hewlett’s and other shareholders objections with five key points:
1. Information technology industry rapid change and changes of new environment.
2. Comprehensive benefits and opportunities from Compaq merger.
CARLY FIORINA: (CONT…) THE TRANSFORMATION LEADER3. Combination addresses industry dynamics and
customer requirements, creates stronger company and is financially compelling.
4. Management is experienced and focused on execution, and integration planning is ahead of schedule.
5. Walter Hewlett filings (filings against merging) are based on a static and narrow view of HP and the industry, selectively ignore synergies, offer no alternatives and rely on faulty financial assumptions and analyses.
While pursuing the shareholder approval of its merger, HP management issued several projections of anticipated growth for the various segments of the resulting combined company.
CARLY FIORINA: (CONT…) THE TRANSFORMATION LEADER
CARLY FIORINA: (CONT…) THE TRANSFORMATION LEADER
MERGING PROCESS: IT ALL STARTS WITH PEOPLE
The Main Objective is: Creating an Integration Process.
By Performing Culture Due diligence. Appointing Integration Leaders.
CREATING THE INTEGRATION PROCESS
In deciding to acquire Compaq, HP would create a company with $80 billion, with over 155,000 employees with a presence in 178 countries.
Managing this change Needs “massive inspection and discipline,” (Fiorina )
“I used the phrase: ‘We will over gun this, not under gun it.’ (Fiorina )
DUE DILIGENCE: ASSESSING THE CULTURAL DIFFERENCES
Due diligence is a term borrowed from the financial due diligence is a part of any merger or integration Process.
HP-Compaq Cultural Due Diligence is the process which analyzes key cultural domains that includes: Leadership and management practices, Styles, and relationships, Formal Procedures, Informal practices, Employee satisfaction, Organizational characteristics,
DUE DILIGENCE: HARMONIZING 4-FACTORS
Source: HP AND COMPAQ COMBINED IN SEARCH OF SCALE AND SCOPE: http://www.cendix.com/downloads/education/HP%20Compaq.pdf
CULTURE DUE DILIGENCE: FAST START PROCESS To liven up the core values of new hp, they
developed: Fast Start: Two day business meeting for intact teams
designed to speed execution excellence. Fast start provides the structure and
content of every team’s first staff meeting. It was designed to:
1. Provide directions and roles so that people can execute effectively in the new company,
2. Engage managers and their teams in taking action to assure successful integration.
CULTURE DUE DILIGENCE: FAST START PROCESS (CONT…)
INTEGRATION LEADERS:APPOINTMENT Fiorina and Capellas (CEO of Compaq) each
selected an executive from their respective companies to co-lead the integration effort.
Fiorina chose Harry McKinney (a longtime HP veteran who ran worldwide sales and marketing for enterprise accounts).
Capellas selected Jeff Clarke (Compaq’s CFO), at that time Compaq's chief financial officer.
INTEGRATION LEADERS:APPOINTMENT (CONT…)
THE WORKING OF THE CLEAN TEAMS McKinney and Clarke assembled a 30
person integration team and set out to create and execute a plan to blend a single company out of two longtime rivals.
Clarke and McKinney’s team had grown to 500 members; by March 2002, it numbered >900.
The group grew to 2,500 members.
It became known as the “Clean Team”.
THE WORKING OF THE CLEAN TEAM: THE TEAM TASKS Adopt-and-Go:
The Clean Team would do the research to make “Product Roadmap”
Launch-and-Learn: a way of taking action that was fast and good
enough Launch the Moose:
help the company deal better with conflict Naming the teams:
The difficult job of selecting which executives from HP or Compaq for the top jobs at the combined company.
HP released the names of the 150 senior managers who would lead the combined organization around the world assuming the merger became official
THE WORKING OF THE CLEAN TEAMS: WATCH OUT THE ICEBERGS
Source: HP AND COMPAQ COMBINED IN SEARCH OF SCALE AND SCOPE: http://www.cendix.com/downloads/education/HP%20Compaq.pdf
MEETING WITH STEERING COMMITTEE
Source: HP AND COMPAQ COMBINED IN SEARCH OF SCALE AND SCOPE: http://www.cendix.com/downloads/education/HP%20Compaq.pdf
POST-MERGER: The company’s top and senior executives
seemed to feel that the organizational integration of HP and Compaq had been a success.
POST-MERGER: THE NEW HP (CONT…)
The merger called for a consolidation of HP’s and Compaq’s product lines into four major operating groups: services, imaging and printing, access devices, and information technology infrastructure.
POST-MERGER: THE NEW HP (CONT…) Merger Integration Team Size: 1200.
Both companies are in similar businesses: Combine Product road maps.
They don't need two Unix or NT development teams15,000 Jobs Eliminated (HP:6000 , Compaq: 8500).
Achieving the integration tied to peoples compensation packages.
Achieved merger-related cost savings of more than $1.3B annually.
Restructured direct material procurement to save $450M annually.
Consolidated multiple mfg sites achieving $120M in annualized savings.
Achieved manufacturing savings of $200M annually.
Realized logistics savings of $100M+ annually.
POST-MERGER: THE NEW HP: OPERATING EFFICIENCY
POST-MERGER: THE NEW HP: OPERATING EFFICIENCY
HP Stock Price Movement after the Merging
POST-MERGER: THE NEW HP (CONT…)
The challenge HR faced was ensuring the best aspects of both companies were incorporated into a single new company culture focused on achieving business goals.
The strategy for managing cultural change mirrored HP’s proven change management way, with specific HR initiatives and programs tied to the five stages in management of change (MOC):
1. Awareness.2. Coping.3. Internalize and align.4. Execute. 5.Reinforce and arrive
HP-COMPAQ MERGER: THE CHALLENGE FOR HR
FIVE STAGES OF CHANGE MANAGEMENT
STAGE ONE: AWARENESS
Awareness Define/clarify the end state Develop the steps to achieve this goal
Based on: ongoing communications and open, honest
dialogue.
Awareness helped to speed up and smooth the process of change. And employees to understand how their work contributes.
STAGE 2&3: INTERNALIZE AND ALIGN Coping
Overcome resistance
How? By Stabilizing and harmonizing two different
plans, two different sets of practices, policies and procedures from two separate companies, multiplied by the 54 countries where they do business.
By delivering an integrated set of HR plans, policies, practices and procedures.
STAGE 2&3: INTERNALIZE AND ALIGN Alignment of HP’s strategies and individual
objectives enables effective execution of those strategies and better understanding of how individual employees contribute to the business success.
How? the key criteria of the employee selection process
which is people’s capability and performance related to the business strategy as well as people’s understanding of company culture.
STAGE FOUR: EXECUTE: CREATING A HIGH PERFORMANCE WORKPLACE
HR continued to play a vital role in helping HP to deliver on its merger promises.
STAGE FOUR: EXECUTE (CONT…) The High Performance Workplace Program:
New ways of motivate, review and reward in order to align Employees performance and personal objectives to the overall business strategy.
Drive change throughout the organization and to accomplish behavioural change swiftly and comprehensively using reward as the motivator.
providing managers standard training programme, online tutorials and e-learning training.
STAGE FOUR: EXECUTE : HIGH PERFORMANCE MODEL
balanced scorecard, HP values and supporting behaviors
STAGE FIVE: REINFORCEMENT & ARRIVAL Reinforcing the employees day by day
desired behaviors Through
setting expectations, holding employees accountable and
responsible, providing the tools and resources that leaders
and teams need to drive these changes through the organization, and
actively promoting and rewarding positive examples
HP-COMPAQ MERGER: THE CHALLENGE FOR HR
organizationimplementati
on&
effectiveness
org design& selection
MRU
Fast Startculture
cornerstones
workforcereduction
totalrewards &
benefitsdesign
– job titles– job levels– pay/bonus
mix– structures
benefits– retirement– time-off– health