This report is an attempt to investigate Hewlett Packard, a huge corporate, to gain an insight into how change management was implemented and how it was dealt with. It’s a contribution to the understanding of change management and leadership in general, and to the understanding of practical application in an international company in particular. This report is divided into three main parts: The first part is concerned with literature review. The literature review explains change management and leadership in context to the organisation in addition to discussing the theories relevant to each of the areas.
The second part consists of sub parts. The organisation of discussion is introduced and background information leading to the change initiatives is discussed. It ends with the research findings and comments on the change initiatives and leadership displayed. The final part summarizes the outcome and limitations and explores future directions. INTRODUCING CHANGE Mintzberg (1998) quote ‘no intended strategy can ever be so precisely defined that it covers every eventuality, realised strategies have emergent as well as deliberate characteristics’.
History has witnessed no organisation being able to sustain its competitive edge for long (Peters, 1989). Daft (1983) discusses four types of change which affect organisations, i. e. technology, product or service, administrative changes and people attitudes (culture). I feel that any of these changes would affect the other and lead to a total change encompassing the organisation. Although change is present everywhere and in every form, resistance to change is not surprising (Kotter and Schlesinger, 1979).
Organisational change can be described as strategic or non-strategic change (Pettigrew, 1987), incremental or quantum change (Greenwood and Hinings, 1993), planned or emergent change (Wilson, 1992), and change in relation to scale (Buchanan and Boddy, 1992). Change typically touches upon process, design, culture, and politics (Cao, Clarke and Lehane, 1999). Management of change exhibits four key features, dissatisfaction with the present strategies, vision of the better alternative, a strategy for implementing change and resistance to the proposals at some stage (Margerison and Smith, 1989).
Changes result from the impact of a set of driving forces upon restraining forces. The extent to which change takes places is a result of which force is stronger, the driving forces or the restraining forces (Lewin, 1951). INTRODUCTION OF HEWLETT PACKARD (HP): Bill Hewlett and Dave Packard founded HP in 1939. HP is a leading global provider of products, technologies, solutions and services to consumers and businesses. The company’s offerings span IT infrastructure, personal computing and access devices, global services and imaging and printing.
NATURE OF CHANGE THE STINT AT HP During the late 1990s, HP faced major challenges in an increasingly competitive market. In 1998, HP’s revenues grew by just 3% and its competitor Dell’s rose by 38%. The company failed to capitalize on the PC and Internet boom and missed its target earnings forecasts in eight continuous quarters. Problems Identified: * Loss of Market Share * More Bureaucratic * Failure to capitalize on the PC and Internet boom * Failed to introduce new products * Needed a new leader to cope up with change
HP’s culture, which emphasized teamwork and respect for co-workers, had over the years transformed into a culture of consensus. This was proving to be a major disadvantage in an era of fast-growing business. The company had 83 different product divisions and was more bureaucratic. Executives left HP because they had to spend most of their time managing internal bureaucracy. The bureaucracy at HP affected its innovations too. Managers were often reluctant to invest in new ideas for fear of missing their quality goals. HP had not had a mega-breakthrough product since the inkjet printer in 1984.
Despite the absence of new products, Former CEO at HP did nothing to motivate the product development teams. Instead, he focused on promoting diversity in the workplace and on ensuring a more humane balance of work and personal life for HP employees. While these efforts were praiseworthy on their own, they did little to help HP face the tough business environment in which it was operating. HP badly needed a complete change and a new leader to cope with the rapidly changing trends in the industry. In her attempts to revive HP, Carly Fiorina, the CEO of HP, devised a three-pronged strategy.
The key components of this strategy included revamping the organisational culture, changing the organisational structure and acquiring a large PC manufacturer. I will be discussing these three key components in which the change was managed. Based on these, soon after taking the charge at HP, Fiorina decided to change HP’s consensus-driven culture to a performance-oriented culture. This was a challenge for her to retain the competitive edge in engineering and innovation while making the employees more adaptable and responsive. Fiorina immediately introduced several changes at HP. She demanded regular updates on key units.
She also injected the much-needed discipline into HP’s computer sales force, which had reportedly developed a habit of lowering sales targets at the end of each quarter. Sales compensation was tied to performance and the bonus period was changed from once a year to every six months. Fiorina linked compensation to the improvements in customer-approval ratings. She instituted the concept of 360-dergree feedback at HP which meant that the pay of managers would be based on the results of employee surveys. HP Labs, the company’s R&D center, had for long been making only improvements to the existing products.
The engineers’ bonuses were linked to the number, rather than the impact, of their inventions. To encourage innovation and product development, Fiorina increased the focus on breakthrough projects. She started an incentive program that paid researchers for each patent filing. The measures resulted in doubling the patent filings from HP, placing the company among the top three patent filers in the world. Fiorina also changed the HP way of management that promised lifelong employment, employee satisfaction and work-life balance (Refer Appendix 1).
The HP way had come to mean a set of bad habits- for example, being slow. In the 1990s, it came to mean, ‘We can’t do anything unless we all agree. ‘ In December 1999, Fiorina replaced the HP way by ‘the Rules of the Garage’ (Refer Appendix 2). The compensation structure was changed. Previously, a percentage of the company’s profit was divided among the employees based on their salary. Bonus was paid when the company beat its own numbers for revenue, profit and returns on assets.
Fiorina came up with a new system, where the bonus was based on HP’s performance vis–vis its competitors. Even though HP reported profit, employees did not get their bonus for the first time in 39 years. Several cost cutting measures were implemented to streamline the company’s operations. Some of the measures included postponement of wage hikes for three months and layoff of employees. This was to make HP’s ratio of managers to employees less top-heavy and more in line with the industry standards. This can be analysed through Lewin’s Force Field Analysis. Carly Fiorina followed the change as a 3 way process.