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Case in focus Reorganizing Hp The case discusses the problems faced by HP durin the mid!"##$s because of its hi hly decentrali%ed or ani%ational structure& The case is desi ned to facilitate a critical analysis of the chan es that occurred in the or ani%ational structure o'er the years( as the company increased its si%e of operations( product portfolio and eo raphical reach& The case also analy%es the a ressi'e mana ement reor ani%ation plan implemented by )EO )arly *iorina and its effect on the company& The Problems +n the mid!"##$s( lobal computer ma,or HP" was facin ma,or challen es in an increasin ly competiti'e market& +n "##-( while HP.s re'enues rew by ,ust /0( competitor Dell.s rose by /-0& HP.s share price had remained more or less sta nant( while competitor +B1.s share price had increased by 230 durin "##-& 4nalysts said HP.s culture( which emphasi%ed teamwork and respect for co!workers( had o'er the years translated into a consensus!style culture that was pro'in to be a sharp disad'anta e in the fast rowin +nternet business era& 4nalysts felt that instead of 5ewis Platt( HP needed a new leader to cope with the rapidly chan in industry trends& Respondin to these concerns( the HP board appointed )arleton S *iorina 6 in 7uly "### as the )EO of the company& Re'enues rew by "30 for the financial year ended October 6$$$ 8Refer E9hibit +:( promptin industry watchers to say that *iorina seemed all set to put HP.s troubles behind for ood& Howe'er( for the ;uarter ended 7anuary /"( 6$$"( net profits were well below the stock market e9pectations& There was more bad news from the company& +n late 7anuary 6$$"( after forcin a fi'e!day 'acation on the employees and puttin off wa e hikes for three months in December 6$$$( HP laid off "(<$$ marketin employees& By early *ebruary 6$$"( HP.s share price fell "-&#0 from =>3 in 7uly "### to =/2& +n 4pril 6$$"( citin a slowdown in consumer spendin ( *iorina announced that HP.s re'enues would decrease by 60 to >0 for the ;uarter endin 4pril /$( 6$$"& She also said that HP would in all likelihood show no rowth for the ne9t two ;uarters& 1any analysts and competitors were surprised at this announcement& 4ccordin to some analysts( the ma,or reason for the shortfall in re'enue was *iorina.s a ressi'e mana ement reor ani%ation& They said that with lobal slowdown in the technolo y sector( it was the wron time to reor ani%e& Thin s worsened when HP laid off 2($$$ more workers in 7uly 6$$"& The layoffs came less than a month after -$($$$ employees had willin ly taken paycuts& The mana ement also sent memos sayin that layoffs would continue and ,ust 'olunteerin for paycuts would not uarantee continued employment& 4ccordin to company insiders( thou h these chan es were necessary( they had affected employee morale& 1any employees had lost faith in *iorina.s ability to e9ecute her reor ani%ation plans& ac!groun" #ote Stanford en ineers Bill Hewlett and Da'id Packard founded HP in )alifornia in "#/as an electronic instruments company& +ts first product was a resistance capacity audio oscillator( an electronic instrument used to test sound e;uipment& Durin the "#>$s( HP.s products rapidly ained acceptance amon en ineers and scientists&

HP.s rowth was aided by hea'y purchases made by the ?S @o'ernment durin the Second Aorld Aar& Exhibit I: HPs Consolidated Condensed Statements of Operations (in $ mn, except per share data) Year ended October 31, !!1 $et %e&en'e Costs and expenses: Costs of products sold and services #esearch and development %ellin&, &eneral and administrative #estructurin& char&es ,otal costs and expenses (arnin&s from operations )nterest income and other, net *iti&ation %ettlement *osses (&ains) on divestitures )nterest expense Earnin- from contin'in- operations before taxes +rovision for taxes ,et earnin&s from continuin& operations ,et earnin&s from discontinued operations $et earnin-s ,et earnin&s per share: -asic /iluted %ource: 0+ 1nnual #eport !000 Till the "#3$s( HP had a well!defined line of related products( desi ned and manufactured at one location and sold throu h an established network of sales representati'e firms& The company had a hi hly centrali%ed or ani%ational structure with 'ice!presidents for marketin ( manufacturin ( RBD( and finance& HP had #$ en ineers in product de'elopment& To ha'e a clear demarcation of oals and responsibilities( and to promote indi'idual responsibility and achie'ement( HP be an to or ani%e these en ineers into smaller( more efficient roups by formin four product de'elopment roups& Each roup concentrated on a family of related products and had a senior e9ecuti'e reportin to the 'ice!president of RBD& The product de'elopment staff functions were so restructured as to allow a desi n en ineer to concentrate only on the di'ision.s products and to work closely with the field salespeople& 4s HP rew lar er( it mo'ed towards a di'isional structure& By the "#2$s( HP had many operatin di'isions( each an inte rated( self!contained or ani%ation responsible for de'elopin ( manufacturin and marketin its own products& This structure( it was thou ht( would i'e each di'ision considerable autonomy( and create an en'ironment that would encoura e indi'idual moti'ation( initiati'e( and creati'ity in workin towards common oals and ob,ecti'es& +n the words of Packard( CAe wanted to a'oid bureaucracy and to be sure that problem!sol'in decisions be made as close as possible to the le'el where the problem occurred& Ae also wanted each di'ision to retain and nurture the kind of intimacy( the carin for people( and the ease of communication that were characteristic of the company 0.3! 0.! .$7 .$ .73 .67 .4! .3" ' * ( +! 7$ 6! (,* ) ,064 3,56 36 3,*"+ (,1"( ,0"0 3, 04 3$7 3,("1 3,*"( ,0 6 !,67$ !67 ,"() ' 33,474 !,670 7,!5" 3$4 (3,+#+ ,43" 7 400' 53 ' 35,046 !,634 7,063 0!' ((,#() 4,0!5 356 ' !44 !0! !35 3#,*# 3,6$$ 70$ ' 34, 35 !,440 6,5!! ' 3*,! ! 3,3"" 530 !7,7"0 !,3$0 5,$50 (), * !!! (#,#+! 1""" ( ,3+! 1""# 3",(1"

when it was smaller&C +n the "#2$s( HP made or ani%ational chan es for the sales representati'e firms& These firms represented and sold the products of other non!competin electronics manufacturers alon with those of HP& This arran ement was creatin problems / in the "#2$s due to HP.s rapid rowth& To et around these difficulties( HP set up its own sales or ani%ation( takin care not to break ties with the e9istin representati'es who were encoura ed to ,oin the sales di'isions of the company& +n "#2-( HP adopted a roup structure in response to the increasin number of operatin di'isions and product lines& Di'isions with related product lines and markets were combined into a roup headed by a roup mana er& Each roup was made responsible for the coordination of di'isional acti'ities and the o'erall operations and financial performance of its members& The new structure had two ob,ecti'esto enable compatible units to work to ether more effecti'ely on a day!to! day basis( and to decentrali%e some top mana ement functions so that the new roups would be responsible for some of the plannin acti'ities and other functions pre'iously assi ned to corporate Vice!Presidents& The roup structure impro'ed HP.s field marketin acti'ities by enablin sales en ineers to understand and sell the entire line of HP products& ?nder this structure( the sales en ineer became the representati'e of a specific roup( sellin and supportin only that roup.s products& Packard said( C4s the company mo'ed to a roup structure( + stressed to our people that this chan e did not represent any de'iation from our traditional philosophy of mana ement& *rom the be innin ( we had a stron belief that roups of people should be i'en full responsibility for specific areas of acti'ity with wide latitude to de'elop their own plans and make their own decisions& Our new or ani%ation did not alter this basic concept( but stren thened it&C By the early "#<$s( HP had rown from a hi hly centrali%ed( rather narrowly focused company into one with many widely dispersed di'isions and acti'ities& HP be an to use a concept called Dlocal decentrali%ation.( wherein a di'ision was i'en the full responsibility for a product line 8when it had rown lar e enou h: at a separate but close location& HP.s or ani%ational charts pro'ided only eneral uidelines& 4s one di'isional mana er said( C+n no way do charts dictate the channels of communication used by HP people& Ae want our people to communicate with one another in a simple and direct way( uided by common sense rather than by lines and bo9es on a chart& To et the ,ob done( an indi'idual is e9pected to seek information from the most likely source& HP systems increasin ly include products from different roups and di'isions& E'en thou h an or ani%ation is hi hly decentrali%ed( its people should be re ularly reminded that cooperation between indi'iduals and coordinated efforts amon operatin units are essential for rowth and success& 4lthou h we minimi%e corporate direction at HP( we consider oursel'es one sin le company( with the fle9ibility of a small company and the stren ths of a lar e onethe ability to draw on corporate resources and ser'ices( shared standards( 'alues and culture( common oals and ob,ecti'es( and a sin le worldwide identity&C Eotwithstandin the efforts made by the top mana ement to enerate syner ies across di'isions( the decentrali%ed structure that HP had till the "#-$s( created ma,or problems for the company& HP be an to be percei'ed by users as three or four companies( with little coordination between them& Ahen users of HP /$$$ computers went to buy HP printers( they found that the software loaded on their computers 8which were made by another HP di'ision:( wouldn.t allow them to use it for raphics& +n the "##$s( HP found that its elaborate network of committees was slowin down its ability to take ;uick decisions( especially those pertainin to new product de'elopment& To address this problem( the then )EO( 7ohn Foun ( dismantled the committee network( and as a part of reor ani%ation( also cut a layer of mana ement from the hierarchy& He further decentrali%ed decision!makin and di'ided the computer business into two primary roups& One roup was made responsible for P)s( printers and other products sold throu h dealers and the other

for workstations and minicomputers sold to lar e customers& To enable the company to respond faster to market needs( each roup was i'en its own sales and marketin team& These chan es enabled HP to ain market share in workstations and minicomputers( and till the mid!"##$s( HP performed well& The company.s hu e success in printers and P)s had increased re'enues from ="/&6 bn in "##$ to =/-&>6 bn in "##2( with profits increasin at a fast pace& Howe'er( alon with the rowth in si%e of operations came problems as well& Aith -/ different product di'isions( the bureaucracy had increased si nificantly& *or instance( when Best Buy( a retailin company wanted to buy some computer products( 3$ HP employees came forward to sell their units. products& 4 former e9ecuti'e at HP said( C+ left HP because + did not want to spend -$0 of my time mana in internal bureaucracy anymore&C He re'ealed that he once had to et an operational chan e cleared by /< different internal committees& There were reports that the bureaucracy was hinderin inno'ation as well >& 1ana ers were often reluctant to in'est in new ideas for fear of missin their ;uarterly oalsHP had not had a me a!breakthrou h product since the ink,et printer was introduced in "#->& Despite the lack of new products( Platt did nothin to moti'ate the product de'elopment teams& +nstead( he focused on promotin di'ersity in the workplace and on ensurin a more humane balance of work and personal life for HP employees& 4nalysts felt that while these efforts were praiseworthy( they did little to help the company face the tou h business en'ironment in which it was operatin & 1eanwhile( HP spun off its test and measurement unit 8See E9hibit ++: and di'ided its hu e portfolio of products into four di'isionsHome P)s( Handhelds( and 5aptopsG Scanners( 5aser Printers( and Printer PaperG )onsultin ( Security Software( and ?ni9 Ser'ersG and +nk )artrid es( Di ital )ameras( and Home Printers& The head of each of these di'isions was i'en the same powers as that of a )EO& Howe'er( the company.s sta nant re'enues and the declinin profit rowth rate in "##compounded its problems& +t was at this sta e that *iorina took o'er the company.s reins& The Fiorina Reorganization *iorina immediately introduced se'eral chan es( in an attempt to set thin s ri ht at HP& She be an by demandin re ular updates on key units& She also in,ected the much!needed discipline into HP.s computer sales force( which had reportedly de'eloped a habit of lowerin sales tar ets at the end of each ;uarter& Sales compensation was tied to performance and the bonus period was chan ed from once a year to e'ery si9 months& HP 5abs( the company.s RBD center had only been makin incremental impro'ements to e9istin products& This was because en ineers. bonuses were linked to the number( rather than the impact of their in'entions& To boost inno'ation and new product de'elopment( *iorina increased focus on Dbreakthrou h. pro,ects& She started an incenti'e pro ram that paid researchers for each patent filin & *iorina de'eloped a multiyear plan to transform HP from a Dstrictly hardware company. to a Aeb ser'ices powerhouse 8See E9hibit +++:& To achie'e this plan( *iorina dismantled the decentrali%ed or ani%ation structure& +n early 6$$$( HP had -/ independent product di'isions( each focused on a product such as scanners or security software& The company had -/ product chiefs ha'in their own RBD bud ets( sales staff( and profit and loss responsibility& +n a bid to make HP an effecti'e sellin or ani%ation( *iorina reor ani%ed these units into si9 centrali%ed di'isions 8See E9hibit +V:& Three of these were product de'elopment roupsprinters( computers( and tech ser'ices B consultin 8the Dback!end. units: and the other three were sales and marketin roupsfor consumers( corporate markets( and consultin ser'ices 8the Dfront!end. units:& The back!end units de'eloped and built computers( and handed o'er the products to the front!end roups that sold these products to consumers as well as corporations& *iorina e9pected the new structure to stren then collaboration(

between sales and marketin e9ecuti'es and product de'elopment en ineers( thus helpin to sol'e the customer problems faster& +ndustry e9perts said that this was the first time a company with thousands of product lines and scores of businesses had attempted a front!back approach( a strate y that re;uired laser focus and superb coordination& The new arran ement sol'ed a number of lon !standin HP problems( makin the company far easier to do business with& Rather than too many salespeople from 'arious di'isions( now customers dealt with one person& +t helped HP.s product desi ners focus on what they did best and a'e the front!end marketers authority to make the deals that were most profitable for the company& *or instance( now they could sell a ser'er at a lower mar in to customers who opted for lon !term consultin ser'ices& The new RBD strate y resulted in the doublin of patent filin s from HP in 6$$" to /$$$( puttin the company amon the top three patent filers in the world& Howe'er( the reor ani%ation soon ran into problems& +n the past( HP.s product chiefs had run their own operations from desi nin of the product to pro'idin sales and support& +n the new set!up( they had a 'ery limited role& Thou h they were still responsible for keepin HP competiti'e( achie'in cost oals( and ettin products to market on time( they had to pass on those products to the front!end or ani%ations responsible for marketin and sellin them& Aith no authority to set sales forecasts( back!end mana ers were unable to allocate the RBD funds accordin ly& 4t the same time( front!end sales representati'es had trouble meetin their forecast if their back!end collea ues came up with the wron products& Aith HP.s --($$$ employees ad,ustin to the bi est reor ani%ation in the company.s history( e9penses had risen out of control& 4ccordin to one HP mana er( C+t was frantic& The financial folks were runnin all around lookin for more dollars&C *reed from the decades!old lines of command( employees be an spendin hea'ily( with dinner and posta e e9penses runnin far o'er the normal amount& Such la'ish spendin was rare under the old structure where product chiefs kept a ti ht control on their e9penditures& 4nalysts also claimed that in the new structure( the back!end product desi ners would not be able to stay close enou h to the customers to deli'er products as per their re;uirements& Eeither would the e9ecuti'es responsible for sellin thousands of HP products be able to i'e sufficient attention to each of the products& 1oreo'er( while producti'ity!linked commissions to the salesforce were intended to boost re'enues and profitability( they only helped in raised sales for low!mar in products that did little for corporate profits& The new structure did not clearly assi n responsibility for profits and losses& Aith responsibility for rowth and profits shared between front and back!end mana ers( there was less financial control and more disorder& Aith employees in "6$ countries( redrawin the lines of communication and ettin personnel from different di'isions to work to ether was pro'in 'ery troublesome& 4ccordin to one HP mana er( CThe people who deal with *iorina directly feel 'ery empowered( but e'eryone else is runnin around sayin ( DAhat do we do nowH.C HP.s customers were not happy either& The front!back reor ani%ation had created confusion internally( and many customers said they had noticed little impro'ement& 4ccordin to one computer reseller who had stru led for two months to et HP to work out a customi%ed confi uration for one of its new ser'ers( C+t.s beyond my ability to communicate our frustration& +t.s painful to watch them mess up million! dollar deals&C HP in Trouble 4part from these structural problems( *iorina.s tenure reportedly did little to impro'e HP.s business performance& The market share ains made in *iorina.s first year as )EO had be un to recede in late 6$$$& Ahile HP continued to dominate the ink,et and laser printer business with a >"0 market share( its P) share had fallen

from <&-0 to 2&#0 for the "6 months ended 7anuary /"( 6$$"& Sales of HP.s Aindows ser'ers had dropped from "$&20 to -&60 in the same period& HP did not perform well in the software( stora e and consultin businesses( where it had only a sin le!di it market share& Howe'er( HP.s share of the hi h!end ?ni9 ser'er business had increased to 6-0 in the ;uarter ended 7anuary /"( 6$$" 8up from 6/&/0 the year before:& 4ccordin to analysts( *iorina had tried an approach that had ne'er been attempted before at a company of HP.s si%e and comple9ity& She was accused of bein o'erambitious in tryin to tackle all of HP.s problems to ether at the same time& They said that puttin in place such sweepin chan es was tou h anywheremore so in the case of the tradition!bound HP( already sufferin from the slowdown in the technolo y sector& ! The author is a Faculty Member at ICFAI Center for Management Research. References 1. Burrows Peter, HPs Carly Fiorina: The Boss, BusinessAeek( August !, 1""".

!. Burrows Peter, Making a New HP Way, BusinessAeek( August !, 1""". #. Burrows Peter, Can Fiorina Reboot HP? BusinessAeek( $o%ember !&, ! '. Burrows Peter, The Ra ical, BusinessAeek( February ! 1. 1. .

(. Burrows Peter, Carly to HP: !na" to #t, BusinessAeek( February ! ). *ellen Barry, Rein$enting the Heart of HP, www.intere+.org &. www.h,.com -. .P Annual Re,ort ! .

I +)*4+ )enter for 1ana ement Research 8+)1R:( an affiliate of +)*4+& 4ll Ri hts Reser'ed& *or accessin and procurin the case study lo onto www&ecch&cranfield&ac&uk& Aith net re'enues of =>-&<- bn( HP ranked "#th in the lobal Fortune 3$$ list in 6$$"& The company was the second lar est computer manufacturer in the world( and was the market leader in desktop computers( ser'ers( peripherals and ser'ices such as systems inte ration&
"

The first )EO from outside HP( *iorina had 6$ years of e9perience at 4TBT and 5ucent&
6 /

HP.s rowin product portfolio demanded more attention by the sales firms&

+n "##/( a researcher showed Platt( a prototype Aeb browsertwo years before Eetscape )ommunications became the first +nternet )ompany to release its Ea'i ator browser& Platt reportedly told to show the same to the company.s computer di'ision& E'entually( it was not accepted&
>

)ase 4nalysis Reor ani%in Hp

% &r' ( )enkat Ra*an +n Hewlett!Packard( a popular story oes like this& Bill Hewlett( co!founder of HP( was walkin throu h one of the production plants& He came across a supply cabinet that was chained shut& Hewlett cut open the lock and said he ne'er a ain wanted to see the tools employees needed to do their ,obs locked up& This story is told in many ways& But the moral of the story encapsulates the mana ement philosophy known as the HP Aay& The HP Aay is one of Hewlett.s chief le aciesthis open mana ement style that Hewlett and Da'id Packard pioneered made a lastin impression& HP was the source of mana ement strate ies that are now widely practiced( includin fle9ible work hours( Dmana ement by walkin around.G open doors and cubicles instead of offices( and the idea of allowin people to share the wealth created& The HP Aay e'en became standard mana ement practices in many companies& E'er since she took o'er the helms at HP in 7uly "###( )arly *iorina has been tryin to o'erhaul the HP Aay& +n December "###( she be an to rewrite the HP Aay into Dthe Rules of the @ara e.& 4ccordin to her( the new rules are a return to the spirit of how Hewlett and Packard founded the company& +n an inter'iew she stated( CDa'id Packard acknowled ed as early as the mid!"#<$s( the problem with the HP Aay is( it can mean anythin people want it to mean&C She further added( CThe HP Aay had come to mean a set of bad habitsfor e9ample( it came to mean( we can.t do anythin unless we all a reeC 8Steen( 6$$":& +n a speech early in 4pril 6$$/ at the Aharton )lub of Eorthern )alifornia and Har'ard Business School 4ssociation of Eorthern )alifornia( *iorina said( CAhile HP had a reat culture( it consistently missed performance tar ets nine ;uarters in a row durin the technolo y boom& HP.s culture had become disconnected from performance& The phrase DHP Aay. was a shield a ainst chan e&C 8Poletti B Takahashi( 6$$/:& 7erry Porrus( co!author of the book Built to /ast and a Stanford ?ni'ersity professor emeritus a reed( C+ think the HP Aay was headed for obli'ion&C 1ore than anythin else( the mer er with )ompa; has lead *iorina to undertake one of the most dramatic and bitterly fou ht reor ani%ation of HP& On September /( 6$$"( two years after *iorina took the ,ob of )EO at HP( she announced plans to ac;uire )ompa; )omputers& Ahat followed was one of the most acrimonious pro9y battles in Silicon Valley.s history& *iorina was immediately confronted with three comple9 sets of challen es& *irst( ha'in initiated the reor ani%ation of HP with an ob,ecti'e to build a new culture from its hallowed DHP Aay.( she had to pro'e the merits of reor ani%ation( includin the cost!cuttin s( layoffs etc& Second( she had to complete the procedural and le al mine field( which became a dauntin task due to internal and e9ternal opposition to the deal& 4nd third( the tou hest of them all was( to find ways to con'ince the shareholders( make peace with the Hewletts and Packards( with her own employees( and address the an9ieties of the customers( the merits of the mer er& She was also under tremendous scrutiny from Aall Street o'er the mer er.s financial performance& +n fact( her outsider 8to HP: ima e( her a ressi'e style( and her ender 8bein amon select women )EOs in a hi h technolo y company:( and the fact that she operates in a world where women ha'e to work harder to pro'e themsel'es( had attracted a reat deal of attention amon analysts& 1any employees sided with dissident directors Aalter Hewlett and Da'id Aoodley Packard( who ar ued that *iorina was destroyin their fathers. le acy with her plans to buy )ompa;( and layin off lon !ser'in HP employees& Others sided with *iorina and her mana ement team( who ar ued that )ompa; would bolster HP.s lines of business and help moderni%e its culture to thri'e in a hi hly competiti'e technolo y& *iorina.s autocratic( top!down mana ement style bothered some employees( who were used to HP.s tradition of consensus mana ement& HP.s culture had i'en employees a stron 'oice and the freedom to air concerns durin meetin s( but it has also slowed the decision!makin process& *iorina has been workin to shake up the culture( while mer in with )ompa;( which is known for mo'in faster& She also had to brid e an internal di'ide amon

her --($$$ stron employees( while workin to inte rate )ompa;.s 2>($$$ employees& *or some employees( these were refreshin chan es( with more a ressi'e mana ers leadin them on& But for many others( the chan es came alon with fear and confusion& This was because the employees not knowin whether they would retain their ,ob with the mer ed company& 8+n 7uly 6$$$( HP retrenched 2($$$ employees after introducin a tou her employee ratin system( and many employees felt that the layoffs were made in a random manner( with the company firin some hi h performers for no apparent reason& E'en *iorina admitted that the company made some mistakes& Thus( keepin the two!way communication channels open was the tou hest ,ob faced by the HP mana ers& This task became dauntin because of uncertainty o'er the le al fate of the mer er( which sharply di'ided the HP.s shareholders( family( mana ers( consultants( and employees& ?ntil the mer er could be officially closed( the companies could not disclose any product plans( name key mana ement and sales personnel or announce ma,or staffin mo'es& HP.s workforce felt an D?s 'ersus Them. di'ide e'en before the mer er was announced& Therefore( *iorina had to work towards Dbuildin peace. while assertin the mer er.s finality& +n 1ay 6$$6( after much inte ration plannin ( *iorina announced that a Dnew HP. was ready to do business& Eow( HP had four le'els of mana ement& +t had put in place a complete customer support and mi ration plans( three!year product road maps( and a o!to!market model for each customer se ment& The company also identified financial tar ets and established accountability for those tar ets& The combined company was broken into four core business unitsJ Enterprise Systems @roup 8ES@:( HP Ser'ices 8HPS:( +ma in and Printin @roup 8+P@: and Personal Systems @roup 8PS@:& The company had also instituted a Aorldwide Operations unit to pro'ide support for the product business roups( includin supply chain( e!business( customer operations( total customer e9perience and ;uality( finance and information technolo y& Did *iorina.s reor ani%ation efforts and her decision to ac;uire )ompa; make HP fare betterH +n a recent article Takahashi and Poletti 86$$/:( pro'ide some useful insi hts into the post! reor ani%ation HP& *iorina promised shareholders that the mer er deal would i'e HP the economies of scale to make the computer business profitable& 4ccordin to @artner Data;uest( the market research a ency( HP has taken the top spot in the ?ni9 ser'er market from Sun( and it also leads in 5inu9 and Aindows!based ser'ers& HP is Eo& " in stora e and Eo& / behind +B1 and Electronic Data Systems& 1any lar e industrial clients like Telecom +talia( )anadian +mperial Bank of )ommerce( Procter and @amble( Volkswa en( Ericsson etc&( ha'e done business with HP& The company is winnin deals because it can support a wide ran e of ser'ers( P)s and printers& *iorina 'owed to cut =6&3 bn in annual costs by 6$$>( and within the first year she was able to sa'e =/ bn& HP.s stock price is down by //0 since the deal was announced in 6$$"( but its market 'alue of =>- bn is bi er than the combined worth of Sun( @ateway( E1) and EDS& CEo one could ha'e foreseen the past "# monthsthe September ""( Enron( plummetin stock prices( recession and war(C *iorina said at HP.s annual meetin in 4pril 6$$/( Cit was clear "# months a o( as it is today( that bi er really is better&C HP has rown its share in printers( now holdin a commandin 3#0 unit market share worldwide( compared to 3/0& +t continues to reap hu e profits sellin refill ink cartrid es for the 63# million printers that customers ha'e bou ht& HP.s si%e is forcin competitors to respond& 5ast ;uarter( HP ed ed out Dell as the lar est P) maker( accordin to market researcher +nternational Data )orp& Howe'er( the layoffs of "<(#$$ employees ha'e clearly had an impact on morale& 4nd *iorina.s continued efforts to chan e HP.s worker! friendly culture( DHP Aay. ha'e made it difficult to heal the wounds left by the di'isi'e mer er battle&

$%hibit &&&' Fiorina's Three Phase Restructuring Plan

Phase &( )***' Prepare the +roun"

,prea" the +ospel' Held D)offee with )arly. sessions in 6$ countries to boost morale& )on'inced top lieutenants that hp needs to match the rowth of ri'als& -ne &mage' 1er ed hps fra mented ad effort under one all! encompassin D+n'ent. campai n& ,par! &nno.ation' Reoriented hps rBd lab away from incremental product impro'ements and toward bi ban pro,ects such as nanotechnolo y for makin superpowerful chips& usinesses

Phase &&( /000' &mpro.e +ro0th an" Profits in Core

Consoli"ate' Reor ani%ed hps -/ product di'isions into four unitsJ Two product de'elopment units that worked with two sales and marketin roupsone aimed at consumers( the other at corporations& ,et ,trategy' )reated a nine!member Strate y )ouncil to allocate resources to the best opportunities( rather than lea'in strate y to product chieftains& 1hac! Costs' lowered e9penses by =" bn by re'ampin internal processes to tap the power of the Aeb& phase &&&( /00) an" beyon"' buil" ne0 mar!ets

Trigger #e0 pro"uct Categories' Established cross!company initiati'es to de'elop alto ether new Eet!related businesses& 1oo Customers' offered soup!to!nuts solutions for customers by creatin teams from across hp that sold to ma,or accounts& +oo" Corporate Citizen' ?sed hps resources to create subsidi%ed or low!cost computer centers and ser'ices to make the Eet a'ailable to e'eryone& 0ource1 BusinessAeek( February 1", ! I +)*4+ Press& 4ll Ri hts Reser'ed& 1

If there are ,eo,le who thought it woul2 be o%er an2 2one within 1! months, I woul2 ha%e sai2 to them that they 2o not ha%e an a,,reciation for what it ta3es to change a %ery large, %ery com,le+, %ery successful com,any because this com,any has been successful for 2eca2es. % HP C+,, Carly Fiorina co**enting on the restr-ct-ring, in Febr-ary .//0' 0he4s ,laying C56, %isionary, an2 C66, an2 that4s too har2 to 2o. usiness1ee!( Febr-ary .//0'

On the or ani%ational 8culture: inte ration front( both current and past employees are stated to be impressed at how ;uickly some of the inte ration efforts ha'e

one& 4nd many also admittedly ot alon well with their new )ompa; collea ues or bosses& HP carried out a series of D*ast Start. trainin pro ram to et the HP and )ompa; team members to ether so they could learn how to work to ether in the combined team& O'er a period of si9 months( HP conducted as many as "2($$$ meetin s( where employees talked about how they percei'ed their companies& Throu h such meetin s it became apparent to e'eryone that( while HP was considered deliberate( in'enti'e( and consensus!focused( whereas )ompa; was a ressi'e and fast mo'in & On the other hand( the Tandem and Di ital E;uipment parts of )ompa;( which were themsel'es ac;uired( resembled HP& Rather than impose one company.s culture on the other( mana ement tried to blend the two& Ahile some employees felt that HP.s culture seem to be losin out( there was a stron feelin that many HP mana ers were replaced with )ompa; mana ers( purely to in,ect new blood into the company and to implement their more a ressi'e( faster!mo'in ways& Typical reaction of a HP employee was how could one mana er take ;uick decisions on a lot of products( without the usual inputs of en ineers and others( ,eopardi%in inno'ationH Howe'er( ettin the employees of HP and )ompa; to work to ether in teams was not e9ceptionally difficult& *or years( HP and )ompa; had been close nei hbors in Silicon Valley& Tandem in fact was founded by former HP e9ecuti'es& Di ital E;uipment( which )ompa; ac;uired in "##-( with its stron need for lon !term research pro,ects strained to find a place within )ompa;( but ha'e a much more ob'ious home within HP( where the culture of research is stron and the corporate slo an is Din'ent.& The continued economic downturn makes it difficult to predict whether HP has been able to meet the ultimate oal of the me a!mer erJ To boost re'enues and the company.s stock price& *iorina has admitted publicly that the mer er can.t yet be declared a success& But other stron er ri'als seem to be followin *iorina.s Dbi er is better. consolidation model& The lon technolo y slump had helped HP to consolidate the mer er& Employees did not lea'e since they had nowhere else to o& Ri'als couldn.t capitali%e on the disruption caused by the mer er because of the drop in technolo y spendin which a'e the new HP a chance to establish itself& Despite the apparent successes of the Dnew HP.( a number of issues still need to be addressed( particularly the functionin of its top mana ement& +n'estors felt betrayed when 1ichael )apellas( HP.s president and former )EO of )ompa;( left HP in Eo'ember 6$$6 to Aorld)om( instead of helpin *iorina.s efforts to consolidate the HP& Business analysts ha'e ;uestioned the inte rity and forthri htness of top mana ement& E9perts also point out the need for better corporate o'ernance at HP& Aall Street analysts saw *iorina as an e9ecuti'e who o'er!promised and under! deli'ered& +n'estors and analysts said *iorina seems to ha'e toned down the hyperbole& *iorina.s immediate task is repairin the dama e done to the HP brand ima e& CAe are not declarin 'ictory by any means(C she said at the company.s annual meetin & CAe know we ha'e a lot of work to doC& The author is a Professor at Faculty of Management 0tu2ies 7FM08, 9ni%ersity of :elhi. References 1. 6la%sru2, T, The New HP is Rea y, +nternet Eews( May &, ! !.

!. Poletti, T an2 Ta3ahashi, :, ,ne 1ear 2ater, HP Way No 2onger R-les Work"lace: +*"loyees ( 3-st to C-lt-ral Change , 1ercury Eews( A,ril 1', ! #. #. Poletti, T, Fiorina4s Task: Heal the &i$i e (*ong HP Workers , 1ercury Eews( March !(, ! !. '. 0teen, M, HP Way has ha a 2asting #*"act on Manage*ent !tyle: Co*"any Pioneere a 2ea ershi" 2egacy that Foc-se on Res"ect for the

#n i$i -al Worker, 1ercury Eews( ;anuary !1, !

1.

(. Ta3ahashi, : an2 Poletti, T, HP5Co*"a6 ,ne 1ear 2ater the )er ict: !o Far, !o 7oo : Co*bine Co*"any is Faring Better than !o*e Ri$als, 1ercury Eews , A,ril 1', ! #. ). htt,1<<www.silicon%alley.com<ml2<silicon%alley<business< com,anies<hewlett= ,ac3ar2. Reference K ">!$/!$3!$"