CHAPTER SEVEN

DESIGNING ORGANIZATIONAL STRUCTURE

BUSINESS WEEK CASES IN THE NEWS

Case Synopsis: Information Technology: Stopping the Sprawl at HP
Randy Mott, the new CIO at Hewlett-Packard, has embarked upon a $1billion, three-year
project to makeover that companys internal IT systems. He wants to replace the companys
85 loosely connected data centers around the world with six cutting edge facilities to be
located in Austin, Atlanta, and Houston. Mott is pushing for sweeping changes in the way his
company operates. He plans to slash thousands of smaller projects in H-Ps decentralized
organization and take a much more centralized approach to management by focusing on only
a handful of corporate initiatives. The goal is to integrate all of H-Ps data so that everyone in
the organization is working from the same set of information, thereby providing executives
with the tools needed to make better decisions. If Mott is successful, H-Ps annual spending
on technology will eventually be cut in half and thousands will be laid off.
Questions:
1. In what is Randy Mott trying to change H-Ps structure and the way it works?
H-Ps IT staff has long resisted centralized control. They have grown accustomed to having
the freedom to purchase their own equipment and make their own decisions concerning
projects to be pursued. Under Mott, they most likely will have to adjust to less freedom
regarding decision making and a more centralized chain of command from which they will be
expected to take directions.
2. What impact will his changes probably have on H-Ps culture?
Typically, decentralized organizations are usually quite flexible while centralized
organizations are more rigid with less room for autonomy, individual creativity, and personal
ownership of projects. These are some of the changes in culture that H-P probably should
expect.
3. How will the changes he has made affect H-Ps competitive advantage and
performance?
One of Motts objectives is to create a single customer management database, much like a
CRM system. Such a system will allow managers in the organizations various departments
to approach and service customers as a unified team and share information regarding best
practices, thus enhancing overall responsiveness to customers.
AACSB Standards: 1, 3, 9, 10, 12

Jones and George, Essentials of Contemporary Management, Third Edition

7-1

CHAPTER SEVEN
DESIGNING ORGANIZATIONAL STRUCTURE
When Randy Mott joined Wal-Mart (WMT) fresh out of college in 1978, its in-house tech
staff had only 30 members and company founder Sam Walton had not yet become a believer
in the power of computing to revolutionize retailing. But Mott and his cohorts developed a
network of computerized distribution centers that made it simple to open and run new stores
with cookie-cutter efficiency. Then in the early 1990s, Mott, by this time chief information
officer, persuaded higher-ups to invest in a so-called data warehouse. That let the company
collect and sift customer data to analyze buying trends as no company ever had -- right down
to which flavor of Pop-Tarts sells best at a given store. "Information technology wasn't Mr.
Sam's favorite topic. He viewed it as a necessary evil," recalls fellow Wal-Mart Stores Inc.
alumnus Charlie McMurtry, who has worked with Mott for years. "But later, Randy got
[Walton's] ultimate compliment. He said, 'Man, you'd make a great store manager."'
By the time Mott took his latest job last summer, as CIO of Hewlett-Packard Co. (HPQ), he
had become a rock star of sorts among the corporate techie set -- an executive who not only
understood technology and how it could be used to improve a business but how to deliver
those benefits. Besides his 22-year stint at Wal-Mart, Mott helped Dell Inc. (DELL) hone its
already huge IT advantage. By melding nearly 100 separate systems into a single data
warehouse, Mott's team enabled Dell to quickly spot rising inventory for a particular chip, for
instance, so the company could offer on-line promotions for devices containing that part
before the price fell too steeply.
Now, Mott, 49, is embarking on his boldest and most challenging project yet: a three-year, $1
billion-plus makeover of HP's internal tech systems. On May 17, the company announced it
will replace 85 loosely connected data centers around the world with six cutting-edge
facilities -- two each in Austin, Atlanta, and Houston. Mott is pushing sweeping changes in
the way HP operates, slashing thousands of smaller projects at the decentralized company to
focus on a few corporate-wide initiatives -- including scrapping 784 isolated databases for one
companywide data warehouse. Says Mott: "We want to make HP the envy of the technology
world."
If it works, Mott's makeover could have more impact than any new HP advertising campaign,
printer, or PC -- and could turbo-charge the company's already impressive turnaround. HP
posted profits of $1.5 billion in its second quarter, up 51% from the year before, on a 5%

Jones and George, Essentials of Contemporary Management, Third Edition

7-2

CHAPTER SEVEN
DESIGNING ORGANIZATIONAL STRUCTURE
increase in sales. HP shares had been slipping, but they jumped on May 17, the day of the
earnings call. All told, the stock is up 65% since new CEO Mark Hurd took over in April,
2005. If Mott is successful, HP's annual spending on tech should be cut in half in the years
ahead, from $3.5 billion in 2005, say insiders.
More important, a Wal-Mart-style data warehouse could help HP make headway on its most
vexing problem in recent years: how to capitalize on its vast breadth. While HP sells
everything from $10 ink cartridges to multimillion-dollar supercomputers, the company has
operated more like a conglomerate of separate companies than a one-stop tech superstore.
"We shipped 55 million printers, 30 million PCs, and 2 million servers last year," says CEO
Hurd. "If we can integrate all that information, it would enable us to know exactly how we're
doing in Chicago on a given day, or whether the CIO of a big customer also happens to own
any of our products at home."
A REAL FIX-IT JOB
It's a gargantuan challenge, even for someone with the credentials of Randall D. Mott For one,
this will be his first real fix-it job. FedEx Corp. (FDX) Chief Information Officer Robert B.
Carter, who counts himself a big fan, points out that Mott had the advantage at Wal-Mart and
Dell of building infrastructure largely from scratch. "Randy never had to go corral all the
horses that had gotten out of the barn," says Carter.
Also, Mott's initiatives may well stir up a hornet's nest within HP. They will likely require
thousands of layoffs, while requiring the support of remaining staffers in a company that has
long resisted centralized control. Mott is testing the limits of the HP culture, taking away the
right of thousands of IT workers to purchase their own tech equipment and, for some, their
ability to telecommute. That's not to mention the stress of tearing up the tech innards -- and
putting many existing IT initiatives on hold -- at the same time that Hurd is demanding a
revamp of everything from sales to product lines. "Everyone is already averaging 60 hours a
week," gripes one veteran HP manager, who requested anonymity. "At some point, you hit a
breaking point."

Jones and George, Essentials of Contemporary Management, Third Edition

7-3

CHAPTER SEVEN
DESIGNING ORGANIZATIONAL STRUCTURE
But Mott has the absolute backing of Hurd, who began recruiting him shortly after arriving at
HP in February, 2005. The pair have known each other for years. At both Wal-Mart and Dell,
Mott bought data warehousing gear from Hurd, who was a leading evangelist for the
technology during his years at NCR Corp. (NCR) Hurd eventually wooed Mott in July on the
strength of a $15 million pay package and a promise to support him if he'd sign on for the
aggressive three-year transformation.
NO DREAMER
Since Then, Mott has been methodically building his team. He has quietly added nearly a
dozen respected executives from his days at Wal-Mart and Dell, including McMurtry and Ron
Griffin, the former CIO of Home Depot Inc. (HD) who is now HP's senior vice-president in
charge of application development and support. A key turning point came in September, when
Mott won the HP board's commitment to buy or build the new data centers and the servers,
storage banks, and networking gear to fill them. "Randy is the right leader at the right time for
HP," says Michele Goins, a long-time HP executive who now reports to Mott, running the IT
systems for the huge printer division. "If he'd come here three years ago, he would have left.
Carly [former CEO Carleton S. Fiorina] didn't understand IT. She had a lot of things she was
focused on, but IT wasn't one of them."
Still, Mott's greatest strength may be that while a technologist, he has the management skills
to actually make IT take root in a company's culture. Linda M. Dillman, a onetime Wal-Mart
CIO and now its executive vice-president for risk management and benefits administration,
recalls how Mott championed the deployment of IT by showing how it achieved Wal-Mart's
business goals. "Randy is very, very pragmatic," says Dillman. "He understands you can't just
follow a dream."
Underlings say Mott's low-key Southern charm belies an intensity that typically brings him
into the office by 6:15 a.m. He has no patience for quick summaries during grueling two-daylong business reviews he convenes once a month. "People will want to give him 50,000-foot
Powerpoint presentations, but he wants the numbers -- not the picture," says Sue Braun,
another new HP arrival who worked with Mott at Wal-Mart and Dell.

Jones and George, Essentials of Contemporary Management, Third Edition

7-4

CHAPTER SEVEN
DESIGNING ORGANIZATIONAL STRUCTURE
That certainly jibes with Hurd's view of the world -- which is why he's centralizing HP's
balkanized information systems, even while working to decentralize the operational control
grabbed by Fiorina during her tenure. The idea is to make sure all of HP's businesses are
working off the same set of data, and to give them the tools to quickly make the best decisions
for the entire company -- say, a single customer management system, so executives can know
the full breadth of what any account buys from HP.
"NEVER ANY END DATE"
But Hurd and Mott also believe in speed over endless analysis. So within months of his
arrival, Mott had trimmed 1,200 individual projects -- such as an e-learning application for
new hires -- to just 500. But he also imposed real deadlines to make sure projects were
completed. That way, teams could reap real benefits, then move on to the next priority. "In the
past, there was never any end date, just lots of phases," says Mott. While HP had five or more
IT workers in 100 different locations, he decided to reduce that to 25. To break the news of
impending layoffs, Mott has held close to 20 "coffee talks" with HP employees in various
countries. "I tell them that part of the reason we need to move so fast is that the problem
doesn't get better with time," Mott says.
No doubt, that could lead to some trying times in the next year. But the benefits may be
surprising. For example, HP has built its own fiber-optic network connecting the six new data
centers to outposts around the globe -- an approach that should cut its monthly networking bill
to phone companies by 40%. It's enough to prompt HP veterans such as Goins to wonder if
Mott can do for his new employer what he did for his first one. "When I listen to Randy, I
think `Why can't we have the kind of success that Wal-Mart has had?"'
By Peter Burrows

Jones and George, Essentials of Contemporary Management, Third Edition

7-5