Hewlett-Packard, a global information technologies corporation has been known for its favorable human resource policies appreciated by the majority of employees. This paper will discuss the changes in the human resource management strategies at Hewlett-Packard which resulted in the loss of the HP way, decrease of the employees’ satisfaction and the increase of the turnover rates and will offer the measures to be imposed for improving the situation.
Summary of the case
Founded in 1939 by Bill Hewlett and Dave Packard who started their enterprise in a one-car garage, Hewlett-Packard commonly referred to as HP has grown into a global information technology corporation with its headquarters in Palo Alto, California.
The founders developed a number of management concepts, including the participative management, emphasis on the process and trust and openness in the working relations which have been known as the HP way and became the basis for the employees’ strong satisfaction and the company’s successful growth (Beer & von Werssowetz 1985).
After the decades of successful leadership in the market sector, in 1997 and 1998, HP did not meet its business targets due to the intense competition from Dell and the economical crisis in Asia. The changes were required for improving the situation, and a new era in HP started in July 1999, when against the traditional hiring principles of the corporation, an outsider Carly Fiorina was announced as a CEO of the company (Beer et al 2005, p. 8).
Fiorina made significant changes in HP and reconsidered the well-known HP way making it history. Starting from reconsidering the brand image, Carly proceeded to the reorganization of HP into a front-back structure and changing the payment principles by placing more emphasis upon using pay as motivation instead of traditional salary-based pay at HP.
Though the impact of these changes in the strategy upon the overall company’s performance is rather controversial, it resulted in significant decrease of the employees’ satisfaction and commitment and increase of the turnover rates. After the spread of rumors concerning the possible fraud in voting for the acquisition of Compaq, the legacy of acquisition decision was even investigated by the court which approved the acquisition considering the data on misinformation and fraud as not convincing.
In 2003, HP which was previously in the list of the 100 best companies to work for, was not included into his list according to the results of the employees’ survey which clearly demonstrates the level of their dissatisfaction with the changes fostered by Fiorina.
Reconsidering the management style
Participative management has been considered as one of the most important principles of the HP way. The openness of the working relations allowed the employees to express their considerations concerning the necessary measures o be implemented within the company and making their small contributions to the company’s success, feel their involvement into it which enhanced their commitment.
As opposed to the openness in the working relations promoted by the founders of the corporation, Fiorina preferred to eat at her office and rarely wandered around the territory of the organization. Even creating a media ad for the company, she concentrated on self-promotion which caused the employees’ detachment and increased the rates of the turnover (Beer et al 2005).
However, the strategy was changed after Fiorina was fired by the board members in February 2005. The HR optimization model adopted by Perez de Alonso, the head of the human resource department focused on the cost, productivity and employee’s involvement as the main variables to be measured for evaluating the company’s performance (Davis 2010).
Thus, Fiorina’s dismissal due to the decreased business performance at HP clearly demonstrates the ineffectiveness of the management style she adopted compared to the HP way. The inclusion of the metrics of the employees’ involvements into the performance evaluation model represents the growing recognition of the value of the human resource assets in the company’s top management.
Changes in the payment system
The transition from the traditional salary-based payment system towards the payment for the performance patterns was one of the most significant changes implemented by Fiorina. On the one hand, it was conducted in the frames of the program intended to update the company’s policies to the generally accepted standards, whereas the pay-for-performance scheme was used at the competitors.
On the other hand, it indicated the shift of the traditional focus on the process, placing it on the results and the achieved targets. Thus, on one of the meetings Fiorina even interrupted a manager’s report, admitting that nobody was interested in the difficulties he experienced and that if he was not able to meet the targets, she could find somebody who would (Beer et al 2005).
This situation clearly demonstrates that the skillful human resources lacked support and could be underestimated at HP after the loss of the HP way. Not making attempts to retain the valuable human resources, the company’s management of that period, on the contrary, contributed to the turnover rates within the corporation.
Regardless of the fact that the monetary compensation can become a valuable motivator for the employees, the excessive emphasis upon meeting the targets and neglecting the working processes can have a negative impact upon the company’s performance in general. Serious consideration should be given to the improvement of the training programs and working environment instead of strategy overemphasizing the achievement of business targets which has shown its ineffectiveness.
The principles of corporate clarity
The openness in working relations has been prioritized in HP way, but was lost in the course of the company’s reorganization and changes of the HR management principles.
The lawsuit associated with the merger with Compaq coupled with public criticism of the human management and business strategy had a negative impact upon the HP branding as an employer. In that regard, the issues of corporate clarity and openness need to be emphasized for improving the company’s reputation and enhancing its attractiveness for the potential employees.
After the cultural shifts caused with the acquisition of Compaq and the management style of Fiorina, the company’s business strategy was criticized as unclear, compared to the models adopted by its competitors (Shuvanil & Srikanth 2009).
Thus, though the HP way had to be adapted to the rapidly changing market of the information technologies, some of its principles nurtured by the founders of this global corporation need to be preserved in the company’s policies as valuable for improving the employee’s satisfaction and company’s business performance.
In general, it can be concluded that the participative management style, relative flexibility and openness of the working relations fostered by the HP way adopted by the founders of the corporation and nurtured by their followers were significant to the business success of the corporation and need to be adapted to the current realities and included into the company’s human resource management strategies.
Beer, M. & von Werssowetz, R. (May 1985). Human Resources at Hewlett-Packard. Harvard Business School.
Beer, M., Khurana, R. & Weber, J. (January 2005). Hewlett-Packard: Culture in changing times. Harvard Business School.
Davis, N. (February 2010). The HR optimizer. HR Magazine, 55(2).
Shuvanil & Srikanth, G. (June 2009). Hewlett Packard – Losing the HP way. The Economist.