This paper will discuss the transformation of Hewlett Packard under CEO Carly Fiorina’s leadership, focusing on her distinctive style. However, criticism has emerged regarding her strategies for achieving success in the computer giant, particularly in terms of managing organizational change and corporate culture.
In this paper, the leadership style of Carly Fiorina and its effects on Hewlett Packard (HP) will be examined, with a specific focus on the HP-Compaq merger. The analysis will also delve into the consequences of this merger and how it influenced subsequent changes in HP’s strategy. Furthermore, suggestions for improvement will be presented.
In accepting the position, Fiorina achieved two significant milestones: she became the first woman to lead a DOW 30 company and the first external individual to take control of HP. HP, founded by Bill Hewett and Dave Packard in 1937, is a computer company that offers various products ranging from $25 ink cartridges to million-dollar supercomputers. By 2001, HP had a workforce of over 85,000 people and operated in 120 countries. While many companies downsized in the 1980s and 1990s, HP prioritized job security for its employees.
The HP Way is guided by certain principles, as evidenced in the company’s 1995 Corporate Objectives. One important principle is “Our People”, which emphasizes the importance of HP employees in propelling the company’s success. This principle seeks to empower individuals at HP to contribute to the company’s achievements and provides job security based on their performance. Furthermore, it recognizes individual accomplishments and endeavors to assist employees in discovering fulfillment and a sense of accomplishment through their work.
Building relationships between individuals and groups within the company requires cooperation, trust, and understanding. HP prioritizes job security by consistently producing innovative products rather than relying on contract-based business that results in employee turnover. Trusting in the intentions and integrity of peers, supervisors, and the company itself is vital for fostering good relationships among employees. Encouraging creativity and initiative necessitates granting individuals at all levels within the organization the freedom to pursue well-defined objectives. Each person should devise their own plans to contribute to achieving the company’s goals.
After obtaining approval from supervisors, each person should have a considerable level of autonomy to operate within the constraints set by these plans and our corporate policies. Despite having a leadership approach and strategic vision that had proven successful in her previous leadership roles at other companies, Fiorina faced difficulties in implementing the organizational transformation she believed was crucial for HP’s future. Fiorina demonstrated her distinct leadership style when she oversaw the separation of her company, Lucent, from AT.
The night before the company’s initial public offering, she dedicated herself to ensuring the stock offering was flawless. Additionally, she provided personal assistance to a fellow executive whose wife had fallen ill, ensuring the couple received medical guidance, access to doctors, and the emotional support they needed. It is this kind of attitude and leadership that distinguished her as an outstanding candidate for the top role at Hewlett Packard. A change in leadership was necessary for HP as the company consisted of more than 130 product groups, often in competition with each other for external customers.
Managers were hesitant to embrace innovation due to concerns about achieving their own goals. In 1997, an employee poll at HP indicated that staff felt the company required new thinking and a stronger customer focus (Burrows, 1999). Fiorina aimed to enhance revenue growth, profitability, and innovation at Hewlett Packard. Additionally, she sought to make the company customer-centric as it aimed to become a leader in the Internet Age. disruptive innovation
Despite Hewlett Packard’s initial intentions for organizational change and new strategies, Fiorina has faced criticism from business analysts and even the family of the company’s founders. Despite a downturn in the industry, Fiorina remained dedicated to boosting HP’s growth and profits. In 2000, HP experienced a 15% rise in revenues and a 5.9% increase in earnings compared to the previous year (Rothschild, 2001).
Fiorina’s drive to enhance profits led her to implement radical changes, including a shift towards top-down management. This new approach contradicted HP’s traditional decentralized management style, which had been in place for 60 years. Although change can be beneficial, Fiorina’s decision to eliminate the decentralized approach also meant discarding a long-standing company tradition.
The employees of the company were displeased with this situation as they were handling multiple ambitious projects simultaneously, including wireless service, digital imaging, and commercial printing. Unlike the original founders of HP who focused on improving existing product lines, Fiorina took on new innovations. During her time at Lucent, Fiorina became frustrated with HP’s buying process, prompting her to create selling teams and completely revamp the sales force’s compensation structure.
The job security of HP employees has decreased compared to the 80’s and 90’s when the economy and computer industry were lagging. By May, 2003, around 20,000 jobs were cut by the company (Fried, 2003). Fiorina, the leader of HP, implemented a strategy that merged HP with Compaq, which attracted significant scrutiny. Subsequently, most of the criticism has been directed towards HP management.
The start of the controversy surrounding the HP-Compaq merger stemmed from a newspaper advertisement featuring a quote from the late David Packard, seemingly approving of the merger. In response, David Packard Jr. expressed his anger, asserting that his father would have never supported the company’s expansion through such a massive acquisition, particularly with a culture that deviated from the renowned HP Way (Malone, 2002). When the descendants of HP’s founders learned about the potential merger with Compaq, they publicly announced their intention to vote against it, representing 18% of the shares.
In response to the critical remarks of Walter Hewlett, Fiorina counterattacked with full page advertisements and press releases (DiCarlo, 2002). With the collaboration of Fiorina and other top HP executives, the deal was successfully completed. In July 2002, HP-Compaq briefly outperformed Dell Computers and became the leading PC manufacturer in terms of worldwide shipments. However, by the end of the third quarter in October 2002, Dell regained its dominance with a 23% market share compared to HP-Compaq’s 15.5% share. The presence of a dual brand strategy adds further challenges for HP-Compaq.
Having the skill to market products from both Hewlett Packard and Compaq is crucial for top executives, given that the company intends to maintain both brands. Following the merger, Michael Capellas, then-president of the company, announced his resignation. Given HP’s financial state in 1999, it was evident that change was necessary. However, making multiple drastic changes swiftly was unwise on Fiorina’s part, particularly when there was no immediate risk of the company’s failure.
Fiorina should aim to bring back a decentralized approach, as autocratic management was unnecessary and went against a 63-year tradition. Senior HP-Compaq management should be involved in formulating strategies for the company, with careful consideration of what they could accomplish. The merger between Hewlett Packard and Compaq seems to have been successful, as shown by the increase in HP-Compaq earnings from 13 cents per share in Q1 2002 to 22 cents per share in Q1 of this year.
Analysts suggest that the merger could have been advantageous as it is in line with the principles of the HP Way, which were established by Bill Hewlett and Dave Packard. The HP Way emphasized the significance of employees and financial gains. To ensure success, it is crucial for the company to revive this mindset and prioritize employee well-being while embracing innovation in order to adapt to new technological advancements.
