Managers at Hewlett Packard Reinterpret the HP way

Reorganization was not a new idea at Hewlett Packard when Platt took the reins in 1992. In fact, the company had undergone two reorganizations in the previous decade. Prior to 1984, HP had two major divisions – computers and scientific instruments each with its own separate sales force.

To streamline operations, HP managers combined the two sales forces. This change helped focus company attention on meeting customer needs. Unfortunately, the sales force reorganization did nothing to address the fact that the computer market is made up of different segments with very different needs.

The need for second reorganization had become obvious by 1990, when then CEO John A Young got a nasty shock: HP’s “Snakes” project was slipping a year behind schedule, taking with it the company’s best chance to remain an industry leader. Snakes was the code name for a new line of workstations one of the few segments of the computer market that was still growing.

Young created two major divisions; the Computer Products Organization would be responsible for computers, printers, and similar products sold through retail outlets, the Computer Systems Organization would focus on the workstations. Each division would have its own sales and marketing force. In addition, Young swept away the committee system and introduced an early retirement program to reduce staff, creating a leaner, flatter organization. Young tapped Richard A Hackborn, head of the company’s thriving laser printer business, to be head of the computer products division, and Platt was named head of the work stations division.

Hackborn’s unit, based in Idaho, was free of the committees that characterized the California headquarters. This allowed Hackborn and his managers to make a number of vital decisions quickly. First they decided to buy an existing “engine” from Japan’s Canon Inc rather than developing a HP engine. Second, they decided to market their laser printer to the entire PC market, instead of designing it to be used with HP equipment only. Third, they lined up an extensive network of retailers. Finally, they put strict controls on operations, making possible the steady introduction of new printers offering more features at increasingly lower prices. Sales took off immediately and got an additional boost when Apple Computer Inc. began to promote desktop publishing in 1984. Today, HP offers dozens of low cost ink jet and laser printers.

Learning New Lessons:

How much Hewlett Packard people can do themselves in enacting a strategy for the digital era is a question Platt faces. Increasingly, partnerships and virtual organizations are part of the organizing process at the company. In 1992, HP formed a partnership with AT&T and Citizen Watch Co of Japan to accelerate a project on disk drives. Says Platt, we know we can’t do it all ourselves.

Still there are skeptics watching the organizational design process at Hewlett Packard John B Jones Jr and analyst at Solomon Brothers Inc, says: The most critical issue is relationships haven’t seen enough announcements to see that they are assured of success. They are clearly not a shoo-in.

Hewlett Packard managers are learning an important, but not new, lesson. When it comes to organizational design, you make it up as you go. Identify the key assumptions that make the virtual corporation different from traditional structures.

The possibility that traditional organizational design processes and the resulting traditional organizational structures can discourage creative action and responsiveness to the environment has spawned numerous experiments in short duration, ad hoc, often smaller organizational forms. The so called virtual corporation is a common approach to what Tom Peters calls “necessary disorganization”. It is a temporary network of independent companies linked by information technology to share skills, costs, and access to one another’s markets. It will not have a central office, organization chart, hierarchy, or vertical integration.