The HP Way, also known as The Packard Way, and simply The Way by insiders, was a business philosophy implemented by Hewlett-Packard (HP) founders David Packard and Bill Hewlett at their technology firm from the 1940s through the 1990s.[1][2] A form of management by objectives rather than top-down control, it emphasized teamwork in the workplace, constant but careful innovation, fiscal responsibility with a view to the future, and the moral duty to improve the surrounding community.[3] It involved company management and the labor force cooperating to attain HP's goals of customer service, relevance and longevity. The concept infused HP's corporate governance and their public reputation for many decades. It produced fiercely loyal and highly motivated employees, and it promoted corporate social responsibility.[4][5]
The HP Way developed over time at HP as founders Bill Hewlett and David Packard discussed, shaped and implemented their business philosophy. Initially inspired by the vision of engineering professor Fred Terman,[6] the HP Way was the creation of both Packard and Hewlett, the result of years of development,[7] characterized later by Hewlett as Packard's greatest legacy.[8] The company designed its first product in 1938, and from the start they encouraged innovation and self-motivation in their employees. The HP Way first appeared formally in 1957 as a set of six written objectives for the company, with a seventh added in 1966.[9][10] This practice ended during 2001–2002 under the direction of CEO Carly Fiorina who controversially merged HP with Compaq and fired thousands of HP employees rather than reassigning them.[4]
HP's sense of collaboration and the idea of working toward the common good spread to much of the Silicon Valley high-tech industrial complex, becoming part of its culture for the first 50 years.[11] Notably, Agilent Technologies, a laboratory instrumentation company spun off from HP in 1999, retained and celebrated the HP Way concept even as it was being abandoned at HP.[12]
Background
David Packard and Bill Hewlett first met as engineering students at Stanford University in the early 1930s. They looked up to Professor Fred Terman, and listened to his business advice. Terman imbued his students with a sense of collaboration and cooperation, which Packard and Hewlett adopted. This creed helped shape the growing Silicon Valley culture, and was a factor in giving the area a significant regional advantage over the next few decades.[13] Terman's influence on Packard and Hewlett was foundational.[6] In turn, the Terman-style business philosophy of HP influenced other Silicon Valley companies such as Intel.[11] HP maintained its connection with Terman and Stanford, helping HP engineers gain advanced degrees from Stanford. HP was the second tenant at Terman's Stanford Industrial Park, a collaborative engineering project at the heart of Silicon Valley.[14]
The seven objectives were described as follows in HP's own July 1977 publication, The HP Way.[15]
Profit: "To achieve sufficient profit to finance our company growth and to provide the resources we need to achieve our other corporate objectives."
Customers: "To provide products and services of the greatest possible value to our customers, thereby gaining and holding their respect and loyalty."
Fields of Interest: "To enter new fields only when the ideas we have, together with our technical, manufacturing and marketing skills, assure that we can make a needed and profitable contribution to the field."
Growth: "To let our growth be limited only by our profits and our ability to develop and produce technical products that satisfy real customer needs."
Our People: "To help our own people share in the company’s success, which they make possible: to provide job security based on their performance, to recognize their individual achievements, and to help them gain a sense of satisfaction and accomplishment from their work."
Management: "To foster initiative and creativity by allowing the individual great freedom of action in attaining well-defined objectives."
Citizenship: "To honor our obligations to society by being an economic, intellectual and social asset to each nation and each community in which we operate."
In 1995, David Packard published a book titled The HP Way: How Bill Hewlett and I Built Our Company, describing how the concept worked in practice. He said that the HP Way was a clear case of management by objectives to give employees a set of goals without restricting the worker's method of obtaining results. Packard said that the HP Way directed the company leadership to interact frequently with the workers in the workplace. Packard called it "management by wandering around", as it involved many casual, unplanned visits with employees. As well, the company managers were encouraged to maintain an open door policy to enable employees to bring their concerns or suggestions directly to the manager.[3]
The HP Way survived a severe test in 1970 when orders dropped lower than production capacity. HP decided to weather this crisis by reducing everyone's schedule and pay by ten percent such that the usual ten days of work during a two-week period was shortened to nine days, described as the "nine-day fortnight". Executives, managers and workers all joined in this reduction for six months until orders rose again in 1971. Using this solution, the company saved ten percent on labor across the board rather than laying off ten percent of the workforce.[16][17][18]
Packard wrote that a company should not be focused solely on profit; instead, profit is necessary because it allows the company to meet its other objectives. Under the leadership of Hewlett and Packard, HP reinvested much of its profit to finance its own growth. They avoided borrowing capital despite the attraction of short-term gains.[3]
Decline
Carly Fiorina worked against the HP Way during her time as CEO from 1999 to 2005.
The company founders, Hewlett and Packard, stepped back from direct management of the company in the 1980s. This allowed others to interpret the HP Way as they saw fit.[20] HP prospered in the 1990s from sales of the HP DeskJet printers and other products, but Dell and IBM were taking computer market share.[1] Some observers were criticizing the company for its plodding pace, as CEO Lewis E. Platt was keeping the HP Way tradition rather than chasing fast profits from the internet boom. Platt architected the spinning off of Agilent Technologies in 1999, and at the same time he helped select his successor, Carly Fiorina.[21]
As CEO of HP, Fiorina "paid lip service to the HP Way", according to the Los Angeles Times—she did not set the same example as previous company leaders. She did not practice management by wandering around, nor did she maintain an open door policy. She pushed HP to modernize its corporate policies, importing the profit-seeking style of Lucent Technologies from which she had come.[5] She wrote her own version of the HP Way titled "Rules of the garage". Fiorina battled the HP board, especially the Hewlett and Packard families, to implement her goals. In September 2001, Fiorina announced that HP would purchase Compaq for $25 billion, with the media calling it a mega-merger. MarketWatch writer Mike Tarsala wrote that this was the death of the HP Way.[1] Other observers point to the 2002 firing of 15,000 HP employees as the end of the HP Way; these employees would have been offered new assignments under the former leadership style.[4][10]
1 2 3 Burrows, Peter (2003). Backfire: Carly Fiorina's High-Stakes Battle for the Soul of Hewlett-Packard. John Wiley & Sons. pp.55, 146. ISBN9780471465041.
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