- 1 -

Executive Summary

William R. Hawlett & David Packard , the co-founder of hawlett & Packard

company started their journey in 1938 with $538. through the years they grew the

company into one of the leading IT industries of the decade. Along with updated

technology they discovered the unique managerial style and named it HP way.

This HP way later on became an exemplary managerial style for all the

organizations in the IT and cross industry. Even though the company boomed

with this style for many years, there was a down fall at a certain time. In the 21st

century the company merged with another giant Compaq and the court battle

took place which destroyed the moral of HP employees. All the facts due to

which HP way can no longer be maintained in HP and the conditions required by

other companies to follow HP way are discussed in the following chapters of the

assignment. With all highs and lows of the business cycle HP still remains the

leading industry of current time.

- 2 -

INTRODUCTION...............................................................................................................3i) Hewlett-Packard Company:.........................................................................................3ii)The HP way:.................................................................................................................4

Answer 1:.............................................................................................................................41.1. Introduction...............................................................................................................41.2. Implementation of “HP WAY”................................................................................51.3. Exception about HP way..........................................................................................8

1.3.1. Management by Objective (MBO)....................................................................81.3.1.1 Benefits of MBO..........................................................................................91.3.1.2. Drawbacks of MBO:...................................................................................9

1.3.2. Management by wandering around (MBWA)...................................................91.3.3. Combining MBO & MBWA...........................................................................10

1.4 Conclusion:..............................................................................................................11Answer 2:...........................................................................................................................11

2.1 Introduction..............................................................................................................112.2 The Large & Small enterprise:................................................................................122.3 Conditions for HP way to work:..............................................................................132.4 Conclusion:..............................................................................................................14

Answer 3:...........................................................................................................................143.1 Introduction:............................................................................................................143.2 The court battle & the damaged moral....................................................................153.3. Carly’s Way according to the Research Scientist at HP:........................................16

3.3.1 Experience of the Research Scientist................................................................163.4 Conclusion:..............................................................................................................19

Conclusion.........................................................................................................................19Reference...........................................................................................................................20

- 3 -

INTRODUCTION

i) Hewlett-Packard Company:

Bill Hewlett and Dave Packard graduated in electrical engineering from Stanford

University in 1935. The company originated in a garage in nearby Palo Alto

during a fellowship they had with a past professor, Frederick Terman at Stanford

during the Great Depression. In 1939, Packard and Hewlett established Hewlett-

Packard (HP) in Packard's garage with an initial capital investment of US$538.

Hewlett and Packard tossed a coin to decide whether the company they founded

would be called Hewlett-Packard or Packard-Hewlett. Packard won the coin toss

but named their electronics manufacturing enterprise the "Hewlett-Packard

Company". HP incorporated on August 18, 1947, and went public on November

6, 1957. Annual net revenue for the company grew from $5.5 million in 1951 to

$3 billion in 1980. By 1997, annual net revenue exceeded $42 billion and HP had

become the world’s second largest computer supplier.

ii)The HP way:The founders, known to friends and employees alike as Bill and Dave, developed

a unique management style that came to be known as The HP Way. In Bill's

words, the HP Way is "a core ideology which includes a deep respect for the

individual, a dedication to affordable quality and reliability, a commitment to

community responsibility, and a view that the company exists to make technical

contributions for the advancement and welfare of humanity." The following are

the tenets of The HP Way:

Trust and respect for individuals.

Focus on a high level of achievement and contribution.

Conduct our business with uncompromising integrity.

- 4 - Achieve our common objectives through teamwork.

Encourage flexibility and innovation.

Q.1. Is the HP way of managing creating a climate in which

employees are motivated to contribute to the aims of the

organization? What is unique about the HP Way?

Answer 1:

1.1. Introduction:

In 1956, Bill Hewlett, Dave Packard, and a handful of other HP executives

gathered at the Mission Inn in Sonoma, California, to create a set of values and

principles to guide their company. The six objectives that this small group

subsequently created not only helped shape “a new kind of company,” but

ultimately became the foundation for what came to be known as “the HP way”.

These six objectives, which later became seven, are:

1. Recognize that profit is the best measure of a company’s contribution to

society and the ultimate source of corporate strength.

2. Continually improve the value of the products and services offered to

customers.

3. Seek new opportunities for growth but focus efforts on fields in which the

company can make a contribution.

4. Provide employment opportunities that include the chance to share in the

company’s success.

- 5 -

5. Maintain an organizational environment that fosters individual motivation,

initiative and creativity.

6. Demonstrate good citizenship by making contributions to the community.

7. Emphasize growth as a requirement for survival.

1.2. Implementation of “HP WAY” 1:

1. Having trust and respect for individuals:

The management believes that people want to do a good job and will do so if

given the proper tools environment and support. Informality in personal

relationships is established by the use of first names. This involves an informal

organization in the formal organization. Managers are friendly with their

subordinates and employees. At times they have coffee or lunch with their

subordinates and talk about what has been going on. Through this process if the

employees are facing any difficulties that will be known to the managers and will

be solved eventually.

2. Focusing on a high level of achievement and contribution:

Customers expect HP products and services to be of the highest quality and to

provide lasting value. To achieve this, all HP people, especially managers, must

be leaders who generate enthusiasm and respond with extra effort to meet

customer needs. Techniques and management practices which are effective

today may be outdated in the future. For the management to remain at the

- 6 - forefront in all their activities, people should always be looking for new and better

ways to do their work.

3. Conducting business with uncompromising integrity:

 

The expectation is that HP people will be open and honest in their

dealings to earn the trust and loyalty of others. People at every level are

expected to adhere to the highest standards of business ethics and must

understand that anything less is unacceptable. As a practical matter,

ethical conduct cannot be assured by written HP policies and codes; it

must be an integral part of the organization, a deeply established tradition

that is passed from one generation of employees to another.

4. Achieving common objectives through teamwork:

 

Recognizing that it is only through effective cooperation within and among

organizations that one can achieve goals. Their commitment is to work as

a worldwide team to fulfill the expectations of the customers, shareholders

and others who depend upon them. The benefits and obligations of doing

business are shared among all HP people.

5. Encouraging flexibility and innovation:

 

Creating an inclusive work environment which supports the diversity of our

people and stimulates innovation. They strive for overall objectives which are

clearly stated and agreed upon, and allow people flexibility in working toward

goals in ways that they help determine are best for the organization. HP people

should personally accept responsibility and be encouraged to upgrade their skills

and capabilities through ongoing training and development. This is especially

- 7 - important in a technical business where the rate of progress is rapid and where

people are expected to adapt to change.

6. Demonstrate good citizenship by making contributions to the community:

HP believes in corporate social responsibility (CSR). In Singapore, HP staff

raised nearly $295,000 for charity in 2003 and received a SHARE Gold Award

from the Community Chest of Singapore for employee participation exceeding

50%. One event was Gladiathon, a fundraiser in support of the President's

Challenge 2003. Leading by example was the Managing Director from HP Asia

Pacific, who wore a gladiator costume and competed with other IT industry

leaders in the battle for charity. HP was the largest corporate donor of this event,

raising a total of $121,000. 2

1.3. Exception about HP way:

Almost all companies regardless of their financial ability have individual ways of

management. Among those some work and some end up with a disastrous

result. But the successes of each of these companies mainly rely on their

management. Same goes for HP. HP way is one of the major reason why the

company is standing at the position where they are now.

The exception is such that the management has sincerely designed the policies

and rules of the HP way. They have made sure that any deviation or lacking does

not go unnoticed. They have supplemented management by objective(MBO) by

management by wandering around(MBWA).

- 8 -

1.3.1. Management by Objective (MBO) 3:

The managerial system that integrates many key managerial activities in a

systematic manner and is consciously directed towards the effective and efficient

achievement of organizational and individual objectives. This system is widely

used in the industry.

1.3.1.1 Benefits of MBO:

Improvement of managing through result oriented planning.

Clarification of organizational roles and structures as well as delegation of

authority according to the results expected by the people occupying the

role.

Encouragement of commitment to personal and organizational goals.

Development of effective controls that measure results and lead to

corrective actions.

Although it is one of the most widely practiced managerial style yet there are

drawbacks which stops the system to work. Even leads to a disastrous result.

1.3.1.2. Drawbacks of MBO:

- 9 - Failure to teach the philosophy of MBO.

Failure to give guidelines to goal setters.

Difficulty of setting verifiable goals with the right degree of flexibility.

The overuse of quantitative goals and the attempt to use numbers in areas

where they are not applicable.

1.3.2. Management by wandering around (MBWA) 4:

Relax – People will sense genuineness and casualness, and they'll

respond accordingly. Stiff and formal conversation will probably lead to

equally rigid responses.

Listening and observing more than talking – Usage of active listening

with staff.

Asking for feedback and ideas – Let everyone know that their ideas are

valued.

Wandering around equally – one should not spend more time in one

department or section than another and should not always talk to the

same people, or to people with certain ranks.

Using the time for spontaneous recognition – Showing gratitude if

something good is observed by complimenting the person.

Communicate – Sharing company goals, philosophy, values, and vision.

"walk-around" are opportunities to mutually share information that helps

everyone understand and do their jobs better.

Chat – Effective organizations aren't all about work, work, work.

Should not overdo it – should not leave people feeling that one is

always looking over their shoulders.

- 10 -

1.3.3. Combining MBO & MBWA:

As HP grows bill Hewlett and Dave Packard create a management style that

forms the basis of HP’s famously open corporate culture and influences how

scores of later technologies companies will do business. Dave practices a

management technique MBWA which is marked by personal involvement, good

testing skills and the recognition that “everyone in an organization wants to do a

good job”. As managers Bill & Dave run the company according to the principle

later called management by objective communicating overall objectives clearly

and giving employees the flexibilities to work toward those goals in ways that

they determine are best for their own areas of responsibilities.

1.4 Conclusion:

Despite all ups and downs the HP way has proved to be the most effective

manner of management. This has set an example for all other companies. HP

management does not consider the organization as their job place. They think of

it as their home and the employees working there as their family members.

Therefore each and every person working for HP- regardless of the geographic

region they are in, they are all treated equally and with equal respect and

importance.

- 11 -

Q.2 Would the HP managerial style work in any organization?

Why or why not? What are the conditions for such a style to

work?

Answer 2:2.1 Introduction:

HP posted latest revenue in 2010 was $126.3 Billion in 2009 net revenue was

$115 Billion with approximately 40 Billion coming from services. HP started its

journey from one car garage in 1939 with $ 538 and eventually built a very

successful company with high level resource let it be human or business. These

72 years they have grown from level zero to the latest technological level. HP

way was one of the most important and basic reason why HP is called to be the

most successful and booming industry of current time. They are currently working

with 3, 24,600 employees and such high skilled and motivated workers are the

reasons behind HP’s success.

2.2 The Large & Small enterprise:The reason why HP could follow such managerial skill is because of their

financial ability. It takes expertise to understand own employees & high

technology to build the knowledge of these employees. All these cost money

which HP could pay off. HP could ensure job security at the time when the

- 12 - economy was facing high recession. This is not possible by all companies but

due to this the employees have grown faith and trust towards the organization.

The small and moderate companies can not afford to employ such large number

of employees. IBM, DELL, and APPLE such company can financially afford

managerial style similar to HP way but it also depends on their working

environment. It is not possible by all companies to employ large number of

employees, give them job security, flexibility and job enrichment. All these need

large finance and high level expertise who will understand the needs and wants

of the employees.

Yet among these ways that HP follows, there are once that the small

organizations can follow. Such steps do not involve money.

2.3 Conditions for HP way to work:HP management mainly follows three famous theory of motivation. It is a mixture

of MCGRAGOR’S Theory Y, Herzberg Hygiene Theory and Maslow’s Theory of

motivation. The contrast of the theories to prove the validity of HP way and

conditions for such style to work are:

The founders of HP way always think friendly job environment is essential

for working and McGregor’s theory Y also considered friendly environment is

more helpful than external control and the threat of punishment. The theory also

implies that physical and mental effort in work should be as friendly as play and

thus HP way always avoid formal relations between the managers and

subordinates and try to maintain a friendly relation and create a Herzberg

maintenance factor. This is affordable by both large and small company. Any

organization can follo such managerial style as it is effective and free of cost by

monetary means.

- 13 - HP way always promotes the team effort and always expect all employees

participation and that’s why they provide their employees proper scopes to proof

their qualities that’s how HP way fulfill the Maslow’s esteem need as well as the

Herzberg’s motivation factor. Like all companies, small and midsized businesses

need to update and upgrade IT equipment as new generations offering greater

capabilities and efficiencies are introduced, and as the company itself grows or

evolves. With limited resources, just staying in tune with what’s available and

appropriate for the business can be daunting. Therefore only large companies

with updated technology can encourage the innovation of the employees. The

small once can only encourage team work with limited resources.

Employees of HP rewarded with profit sharing, above market wages ,

generous work life balance and a culture where their contribution not only

appreciated but also expected and McGragors theory Y also talks about the

reward for the achievement. The large companies, as large as HP, which has

growth every year and earn a sufficient amount of profit can follow such

managerial style.

Maslaws Heirchy of needs always give importance to the job security and

safety and HP way also try to provide job security and safety for their employees.

HP has provided job security when the economy was below average and people

were laid off. Such ability was due to strong financial background of the

company, therefore it is only possible for companies with strong financial

background.

2.4 Conclusion:More or less, each and every step of HP way helps others realize and teaches

how to manage the organization. It is an exemplary managerial style for all

organizations let it be of IT industry or any other cross industry. It has shown the

world that to be successful, maintaining a proper working environment is as

- 14 - important as making profit. The growth of a company can only be expected when

the people working for it is satisfied.

Q.3 Do you think it is possible to maintain the HP way after the

merger with Compaq, the court battle, and the damaged morale

at HP? Why or why not?

Answer 3:

3.1 Introduction:

Carleton S.Fiorina 47, graduated from Stanford University with a bachelor’s

degree in medieval history and philosophy and master’s degree in Business

Administration from University of Mayland as well as Master of Science degree

from MIT. When she became chairman and CEO of HP in 1999, she became the

first woman to lead a so large company, and consequently, one of the nation’s

most prominent female executives, perhaps more important to HP’s future.

However, fiorina became the first outsider to take charge of the 62 years old

company.

3.2 The court battle & the damaged moral 5:

It took 62 years to build the moral of the employees. For all these years HP

maintained a family. Their values, dedication and honesty was as though for own

family. If a decision was taken it was taken with the consent of each and every

family member. But this moral was destroyed when, Carly Fiorina declared a

merger of HP with Compaq. This declaration created the court battle between

Walter Hewlett, the son of William Hewlett a board of director and Carly Fiorina.

- 15 -

The critics of merger, like Mr. Hewlett cited a long list of problem with the deal.

Some opponents of the deal believed that rather than accelerating growth,

merging the two companies would simply create a bigger company with bigger

problems. As one analyst explained, “This is not a case of 1+1=2 more like

1+1=1.5” (R.F).

In justification to the merger Fiorina emphasized that- “The HP way has always

been about change. It always been about innovation, it always been about

moves.” She as well counted that the important values of HP’s culture (that is

creativity, change and innovation) were the very values that justified the merger.

What she ignored was the emotion of the employees that was attached to HP.

HP has a history of offering job to unemployed people at the time of high

recession. It ensured job security to its employees. The combined company

would have about 145,000 employees, which called for and initial work force

reduction of 15,000 employees, with further reduction likely. This radical

redesigning threatened the security and safety needs of the employees. After the

merge, whenever the company faced a loss, Fiorina went for work force

reduction. Probably due to merger HP got rid of one giant competition in IT world

but it surely lost the trust and faith of its employees.

3.3. Carly’s Way according to the Research Scientist at HP:

An electronic engineer who worked as a Research Scientist at the Hewlett-

Packard Imaging Systems Laboratory starting in 1975 until he resigned in 2003.

G.S. thought HP represented the very best of American character -- "a spirit of

adventure and a belief in unlimited possibilities."

- 16 - He charges, though, that starting in 2000 the can-do attitude was killed by

management choices intended to placate nervous investors and board members

rather than benefit the company and its workers over the long-term. He warns

that sustained cut-backs to R&D budgets over the past half-decade may have

irreversibly damaged HP and the entire U.S. technology industry.

3.3.1 Experience of the Research Scientist 6:

“I snuck out of Hungary in 1973, one week after I was told that if I ever wanted to

advance as an engineer, I would have to join the Communist Party.

Being a good party member was far more important than your skill level, and so my boss

was a man who had been a pig farmer. After decades spent raising hogs, he suddenly was

supervising dozens of machinists, most of who had engineering degrees and had built

bridges and buildings until we were reassigned to "practical and useful" work -- making

parts for factory machines.

Working for Carly Fiorina reminded me of my days working for that farmer. I remember

the first time she walked into the Hewlett-Packard labs. She said that our new company

slogan was "Invent." Then she told us that the technology industry would never again

be as exciting and profitable as it was in the '90s. That we'd all need to grow up now

and face that fact.

I knew from that moment that HP's best days were behind us.

Carly was a marketing person put in change of engineers, a person who cared

nothing about the art and beauty of technology. She just wanted saleable stock to

bring to market.

- 17 - My uncle gave me a present when I first arrived in America -- an HP-35 Scientific

Calculator, the first handheld scientific calculator.

"People here don't use slide rules anymore," he says.

Well, that turned out to be not quite true, but my HP-35 was beautiful. It had integrated

circuits and LEDs, brand new things that had been developed in HP Labs. When I got a

job at HP's Palo Alto lab two years later, I was proud. You were encouraged to work on

whatever excited you.

Bill Hewlett used to remind us that "The marketing guys said the HP-35 would be a

failure because it was too small, and then we couldn't make them fast enough to

meet the demand. The marketing folks don't know everything."

It was Bill's idea to start HP Labs in 1966. He figured there should be a place where

people could focus on building the future. I worked on projects such as thermal inkjet

printing because I thought dot matrix printouts were ugly. And I worked on miniaturizing

huge industrial inkjet printers because I thought it would be great if people could print

wonderful color images from their desktop PCs.

We had no idea when we started what these projects would lead. We just wondered "what

would happen if?".

Our biggest mistake at HP Labs came from being too cautious. We passed on developing

Steve Wozniak's cheap little personal computer. Woz was working in HP's lab, on

calculator projects, at the time. We knew the computer idea was great, but we couldn't

work out how to market it, so we passed.

The lab was never packed with genius marketers. Carly told us we had no business sense,

and that every project needed to make a profit within three years or less. She usually said

that right before the research budget got slashed again and more lab employees were laid

off.

- 18 - In mid-2002, HP's labs became solely focused on finding ways for other businesses to

save money. This led to some good projects – grid computing, self-maintaining servers,

self-healing systems. But the emphasis was not on creating new or better technology, just

technology that would boost the bottom-line.

I left in late 2003.

Profit is every CEO's major focus. Research almost always benefits an entire industry

more than any particular company. And research doesn't have immediate results.

Sometimes it doesn't have the results that CEOs want. You invent a product that has a

longer life-cycle, that doesn't need constant refills or upgrades. Research is expensive and

unpredictable. Things that today's business world frowns on.

New technology typically has a five-year development cycle. The U.S. technology

business stopped being serious about research in 2000 and the results are showing now.

People have a little more money but there's nothing they want to buy. There's nothing that

makes you say, “Wow!!” Ten years ago I was seeing something interesting every

month, but now we're touting bloated software and cute case designs as innovation.

The damage to HP and the U.S. technology industry at large may already be irreversible.

If we start investing today and let our engineers play we might have something exciting

to show people in 2010. That's a long time to wait for the next big wow.

To me, this rabid fixation on short-term profits is a bigger threat than outsourcing

-- it is killing our ability to make astonishing things.”

From the above interview it can be concluded that the basic of HP way was destroyed and

the motivation of employees to work for HP was completely damaged.

- 19 - 3.4 Conclusion:

Therefore after the merger it was not possible to maintain Hp way as now there

were new people with new leaders who focused more on profit and less on

innovation. The R&D department was now more responsible of finding new ways

of cost-reduction rather than new invention. Even after few down falls HP might

be enjoying the competitive advantage but at the cost of the moral of the

employees.

Conclusion

Even though the company struggled through the years of merger and faced loss,

yet it is still one of the leading companies in the world of Information Technology.

HP still leads its way with a revenue of US$ 126.033 billion (FY 2010) and

currently Employees 324,600 (2010) running the organization. The values and

views of the employees have changed with time but the dedication of working

with HP remains ever unchanged. Therefore with the change in time, the

managerial style has changed. Today HP offers thirteen or more numbers of

various products which satisfies the demand of their customers. With all highs

and lows, HP still remains one of the leading companies of the decade with a

strong and highly trained work force.

- 20 -

Reference

1. http://www.hpalumni.org/hp_way.htm

2. http://en.wikipedia.org/wiki/HP

3. Heinz Weihrich, Mark V Cannice & Harold Koontz, “Management- a global and

entrepreneurial perspective”, chapter-4 pp 104-6, the McGraw-Hill companies.

4. http://www.mindtools.com/pages/article/newTMM_72.htm

5. http://www.awpagesociety.com/images/uploads/HP-Compaq-case.pdf merger

6. http://www.signallake.com/innovation/CarlysWay030405.pdf

7. http://www.amazon.com/HP-Way-Hewlett-Built-Company/dp/0887308171

8. http://www.jimcollins.com/article_topics/articles/the-hp-way.html

9. see also http://www.smallbusinessnotes.com/small-business

resources/william-r-hewlett.html

10.http://www.paloaltoonline.com/weekly/morgue/

2002/2002_04_10.hpway10.html

11. http://www.ibscdc.org/Case_Studies/HRM/OB0011.htm

12. http://www.1000ventures.com/business_guide/cs_inex_hp.html

13. http://www.flipkart.com/hp-way-david-packard-kirby-book-0060845791