This organizational structure, though very effective in the 1960s and 1970s, didn’t fair well during the early 1980s. The organization was highly decentralized with the divisions operating much like independent businesses. The organization failed to address the need for overall coordination. Autonomy had resulted in some overlapping products, customers complained that products developed in one HP division were not compatible with those from other divisions. The company’s position in the personal computer market, was threatened by a lack of cohesive effort among three geographically separated divisions, and so it was time for a change.
There were two main phases in the reorganization at HP in the early 1980s. The lack of coordination between HP’s three separate divisions was the most obvious problem which lead to phase I. To assess this problem, HP announced the consolidation of the Personal Computation Group, and the Computer Terminals Group. Each of the two groups now could make decisions in a more centralized system. For example, decisions about marketing and R&D could now be made at the group level by a single manager, but before the reorganization the only common manager was the company’s president.
Phase II was implemented in February 1983, when HP announced a realignment of its computer products organization. The realignment would: provide an improved strategic focus, and strengthen channels of customer interaction. Top management was not modified within the reorganization, but specific group names and some responsibilities changed. Paul Ely, head of all HP computer operations stated, “In some ways it follows IBM’s restructuring in October 1981 in that it provides for single sales interface with the customer and common development and manufacturing for all common products.
However, the groups for developing vertical markets and personal workstations, which HP added, recognize important new directions in the computer industry.” The benefits that resulted from this reorganization were, that it gave more freedom to divisions to work on new ideas and to be creative and entrepreneurial which leads to a better allocation of resources, which would also reduce costs. Another benefit was that HP was in a better position to clearly define jobs, which helped the employees to see how the pieces fit and what their particular role is.
The reorganization also contributed to Members of the Computer Strategy Council to concentrate more on what the Council had been established for, discussion of longer-term strategic issues. In addition to the benefits was also one big cost. This cost was time, which was a result of the reorganization. Time had to be allocated for the reorganization of HP, and the restructure of their corporate culture. In this case though, the benefits outweighed the costs by far.
I believe that this type of reorganization was definitely necessary for the success of HP. During the early stages of HP, when computers weren’t common, besides maybe the workplace, HP had success with their separate divisions because mainly everything was custom. More recently computers have become almost identical and so different division aren’t compatible within the industry. HP will experience continued growth because not only of their reorganization, but because of their past history. Every time they have had a problem, they have managed to handle the situation correctly and abruptly.