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Hewlett-Packard: Culture in

Changing Times
Case Analysis

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 HPs 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.

Changes made by Fiorina

More concentration on HPs 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-forresults 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

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.

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.

ANALYSIS
The culture of the organization, The HP Way is the image created
for the employees and market. HPs 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.
Fiorinas 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.