TRANSFORMATION LEADERSHIP AT HP

Presented to: Dr. Ahmed Farouk January 30, 2012

By: Omar Shams, Ehab Shafei, Walid Sobhi, Ahmed Abdo, Yasser Saleh

Arab Academy Graduate School of Business (AAGSB), Master of Business Administration program (MBA),

OBJECTIVE
Understanding the nature of transformation leadership and its Role in HP Corp.
By:
1) 2)

Exploring the HP Corp. Background. Exploring the Role of the transformation leader (Carly Fiorina) in forming the New HP Corp.

3)

Discussing the different stages of the transformation process and HR challenges.

HEWLETT PACKARD (HP)

An American information technology corporation headquartered in California. One of the world's largest information technology companies. Specializes in developing and manufacturing (personal computing devices, data storage devices enterprise servers, printers and other imaging products as well as networking hardware and designing software).

HEWLETT PACKARD (HP)

Mission:

Vision :

Profit Employee commitment Growth Field of Interest Customer loyalty Market leadership Global citizenship

Future is Worldwide, connected, continuous, secure computing through automated data centers, Power of digital technology in low-power, low-cost, lightweight that it could display multimedia information in formats as small as a watch or as large as wallpaper

HP: MAJOR DATES

1935: Bill Hewlett & Dave Packard graduated from Stanford University. 1939: Bill and Dave established HP with capital of US$538. 1947: HP was incorporated. 1957: HP shares went on public. 1958: HP created Dymec company, to specialize in digital equipment. 1961: HP purchases the Sanborn Company.

HP: MAJOR DATES

1963: HP partnered with Sony and the Yokogawa companies. 1966: HP Laboratories is formed, which become Agilent Labs splitted in 1999 taking all computer business. 1985: Company establishes first hightech joint venture in China. 1986: "the HP.com domain was opened to help marketing their computers. 1989: HP purchases Apollo Computer for US $476 million.

HP: MAJOR DATES

1995: HP purchased Convex Computer. HP launches the Pavilion line of home computers in China. 2002: HP and Compaq merged on May 3, 2002; HPQ is unveiled as new stock ticker for combined company.

HP: FOUNDERS & COS

John Young: (77-92) 15 years Lewis Platt: (92-99) 7 years

David Packard (Chairman 1964-1996)

Carly Fiorina: (99-05) 6 years Mark Hurd: (05-10) 5 years

Leo Apotheker: (10-11) 1 year Meg Whitman: (11-12) Current

Bill Hewlett (President 1964-2001)

HPS: REVENUES
240 220 200 180 160 140 120 100 80 60 40 20 0 0.03 1960 0.165 0.365 1965 1970 3 1980 6.5 1985 42.9 80.1 145 233

Revnue ($B)

13.2
1990

25

1994

1997

1999

2002

2011

HPS: WORKFORCE
350,000 300,000 250,000 200,000 179,200 121,900 109,700 85,00091,500 57,000 325,000 290,516

Workforce

150,000
100,000

50,000
0 9,000 16,000 1,778 1960 1965 1970 1980 1985 1990 1994 1997 1999 2002 2011

HP Workforce

Diversity policies Equal opportunities and Nondiscrimination

HP Workforce

HP WAY: 20 YRS EXP.

Fundamental Precepts
1. 2.

3. 4. 5.

Contribution Superior Performance & Profitable Growth Responsibility to the communities Integrity and period Best results come when you get the right people, trust them, give them freedom to find the best path to achieve objectives, and let them share in the rewards

HP WAY: HR PRACTICES
MBO,

innovative thinking = higher productivity Decentralized Decision-Making Reassignment, creating loyal work force Careful Screening Management was part of the team Trust Problem solving teams insure information flows Job Rotation = Multi-tasking Flexibility, better communication Training in problem solving, team skills Group Incentive Pay small groups is effective

HP WAY: HR PRACTICES
Results:

Innovative HR system: 6.7% higher productivity High teamwork: 3.2% higher productivity High communication: 1.4% higher productivity

This mean higher profits with innovative HR

HP WAY: HR PRACTICES
Compared to Traditional HR Practices: Wage tied to performance appraisal Narrowly defined jobs Limited screening non-managerial jobs Tight supervision Little training Layoffs in hard times

HP: SIGNIFICANT TRANSFORMATION

There Are Several Stages And Things That Happened At Hp Over The Years. But The Most Significant One Was:

The Merger With Compaq That Happened During 2001-2002.

Carly Fiorina: C.E.O. of HP

Mike Capellas: C.E.O. of Compaq

PRE-MERGER: HP-COMPAQ POSITIONS

HP, the second largest computer company behind IBM High end server market was dominated by IBM, HP struggling to keep up HP was number 3, with Dell being the market leader and Compaq no.2.

PRE-MERGER: (CONT) HP-COMPAQ POSITIONS

Both HP and Compaq were struggling companies HP alone could not compete with Dell in the Low-cost, high volume PC market. Compaq wanted to achieve expertise in High end UNIX servers.

PRE-MERGER: (CONT) HP-COMPAQ POSITIONS

The company lost more money in the three years following the merger than in its entire previous history: more than $2 billion by the end of 2000. Compaq also lost its position as Americas leading PC maker, having been passed by both Dell and HP in the retail market.

PRE-MERGER: STATISTICS

HPS: FALLING STOCK PRICES

As a result, HP was forced to cut jobs and also to ask employees to take unpaid leave, in 2000. By September 2001, HPs stock value had fallen to less than half of its level.

HPS: STOCK VALUES

HP-COMPAQ: MERGER DATES

September 4, 2001 - HP and Compaq announced a definitive merger agreement to create an $87 billion global technology leader. Eights months later on May 3, 2002 HP and Compaq officially merge.

HPS CARLY FIORINA: HPS CEO AND LEADER

Fiorina Fiorina

the CEO of HP. the Transformation leader

of HP.

CARLY FIORINA: THE HPS CEO

Following an intensive search that involved lengthy interviews and a 900 question psychological test, Fiorina was hired as the CEO. Carly Fiorina has a silver tongue and an iron will. Fiorina not only brings leadership to HP but also savvy marketing and sales techniques.

CARLY FIORINA: THE HPS CEO

Fiorina also understands that what customers need is not always what they ask for. She also shares five lessons she has learned:

Leaders create something new Dont fall in love with your product Competition requires risk-taking Ethics matter The 21st century is about brainpower

CARLY FIORINA: LEADERSHIP PROFILE

Networker Carly Fiorina is a brilliant networker. She is good at meeting people and making a positive initial impression. Analytical Thinker Carly Fiorina's strength lies in selling ideas. She is not good at breaking ideas down and looking at their pluses and minuses. Charisma Carly Fiorina is known for her charisma. She has a magnetic personality and is an electric speaker. Relationship Builder Carly Fiorina's strength lies in forming short-term relationships that are created by networking rather than long-term relationships that are built over time.

CARLY FIORINA: THE TRANSFORMATION LEADER

Fiorina and her executive team countered Hewletts and other shareholders objections with five key points:

1. Information technology industry rapid change and changes of new environment. 2. Comprehensive benefits and opportunities from Compaq merger.

CARLY FIORINA: (CONT) THE TRANSFORMATION LEADER

3. Combination addresses industry dynamics and customer requirements, creates stronger company and is financially compelling. 4. Management is experienced and focused on execution, and integration planning is ahead of schedule. 5. Walter Hewlett filings (filings against merging) are based on a static and narrow view of HP and the industry, selectively ignore synergies, offer no alternatives and rely on faulty financial assumptions and analyses.

CARLY FIORINA: (CONT) THE TRANSFORMATION LEADER

While pursuing the shareholder approval of its merger, HP management issued several projections of anticipated growth for the various segments of the resulting combined company.

CARLY FIORINA: (CONT) THE TRANSFORMATION LEADER

MERGING PROCESS: IT ALL STARTS WITH PEOPLE

The

Main Objective is: Creating an Integration Process. By

Performing Culture Due diligence. Appointing Integration Leaders.

CREATING THE INTEGRATION PROCESS

In deciding to acquire Compaq, HP would create a company with $80 billion, with over 155,000 employees with a presence in 178 countries. Managing this change Needs massive inspection and discipline, (Fiorina )
I used the phrase: We will over gun this, not under gun it. (Fiorina )

DUE DILIGENCE: ASSESSING THE CULTURAL DIFFERENCES

Due diligence is a term borrowed from the financial due diligence is a part of any merger or integration Process.
HP-Compaq Cultural Due Diligence is the process which analyzes key cultural domains that includes: Leadership and management practices, Styles, and relationships, Formal Procedures, Informal practices, Employee satisfaction, Organizational characteristics,

DUE DILIGENCE: HARMONIZING 4-FACTORS

Source: HP AND COMPAQ COMBINED IN SEARCH OF SCALE AND SCOPE:

CULTURE DUE DILIGENCE: FAST START PROCESS

To liven up the core values of new hp, they developed: Fast Start: Two day business meeting for intact teams designed to speed execution excellence. Fast start provides the structure and content of every teams first staff meeting. It was designed to: 1. Provide directions and roles so that people can
execute effectively in the new company, 2. Engage managers and their teams in taking action to assure successful integration.

CULTURE DUE DILIGENCE: FAST START PROCESS (CONT)

INTEGRATION LEADERS: APPOINTMENT

Fiorina and Capellas (CEO of Compaq) each selected an executive from their respective companies to co-lead the integration effort. Fiorina chose Harry McKinney (a longtime HP veteran who ran worldwide sales and marketing for enterprise accounts).

Capellas selected Jeff Clarke (Compaqs CFO), at that time Compaq's chief financial officer.

INTEGRATION LEADERS: APPOINTMENT (CONT)

THE WORKING OF THE CLEAN TEAMS

McKinney and Clarke assembled a 30 person integration team and set out to create and execute a plan to blend a single company out of two longtime rivals. Clarke and McKinneys team had grown to 500 members; by March 2002, it numbered >900. The group grew to 2,500 members.

It became known as the Clean Team.

THE WORKING OF THE CLEAN TEAM: THE TEAM TASKS

Adopt-and-Go:

The Clean Team would do the research to make Product Roadmap a way of taking action that was fast and good enough help the company deal better with conflict

Launch-and-Learn:

Launch the Moose:

Naming the teams:

The difficult job of selecting which executives from HP or Compaq for the top jobs at the combined company. HP released the names of the 150 senior managers who would lead the combined organization around the world assuming the merger became official

THE WORKING OF THE CLEAN TEAMS: WATCH OUT THE ICEBERGS

Source: HP AND COMPAQ COMBINED IN SEARCH OF SCALE AND SCOPE:

MEETING WITH STEERING COMMITTEE

Source: HP AND COMPAQ COMBINED IN SEARCH OF SCALE AND SCOPE:

POST-MERGER:

The companys top and senior executives seemed to feel that the organizational integration of HP and Compaq had been a success.

POST-MERGER: THE NEW HP (CONT)

The merger called for a consolidation of HPs and Compaqs product lines into four major operating groups:
services, imaging and printing, access devices, and information technology infrastructure.

POST-MERGER: THE NEW HP (CONT)

Merger Integration Team Size: 1200. Both companies are in similar businesses: Combine Product road maps. They don't need two Unix or NT development teams15,000 Jobs Eliminated (HP:6000 , Compaq: 8500). Achieving the integration tied to peoples compensation packages.

POST-MERGER: THE NEW HP: OPERATING EFFICIENCY

Achieved merger-related cost savings of more than $1.3B annually. Restructured direct material procurement to save $450M annually. Consolidated multiple mfg sites achieving $120M in annualized savings. Achieved manufacturing savings of $200M annually.

Realized logistics savings of $100M+ annually.

POST-MERGER: THE NEW HP: OPERATING EFFICIENCY

POST-MERGER: THE NEW HP (CONT)

HP Stock Price Movement after the Merging

HP-COMPAQ MERGER: THE CHALLENGE FOR HR

The challenge HR faced was ensuring the best aspects of both companies were incorporated into a single new company culture focused on achieving business goals. The strategy for managing cultural change mirrored HPs proven change management way, with specific HR initiatives and programs tied to the five stages in management of change (MOC):
1. Awareness. 2. Coping. 3. Internalize and align. 4. Execute. 5.Reinforce and arrive

FIVE STAGES OF CHANGE MANAGEMENT

STAGE ONE: AWARENESS

Awareness Define/clarify the end state Develop the steps to achieve this goal

Based on:

ongoing communications and open, honest dialogue.

Awareness helped to speed up and smooth the process of change. And employees to understand how their work contributes.

STAGE 2&3: INTERNALIZE AND ALIGN

Coping Overcome resistance How?

By Stabilizing and harmonizing two different plans, two different sets of practices, policies and procedures from two separate companies, multiplied by the 54 countries where they do business. By delivering an integrated set of HR plans, policies, practices and procedures.

STAGE 2&3: INTERNALIZE AND ALIGN

Alignment of HPs strategies and individual objectives enables effective execution of those strategies and better understanding of how individual employees contribute to the business success. How?

the key criteria of the employee selection process which is peoples capability and performance related to the business strategy as well as peoples understanding of company culture.

STAGE FOUR: EXECUTE: CREATING A HIGH PERFORMANCE WORKPLACE

HR

continued to play a vital role in helping HP to deliver on its merger promises.

STAGE FOUR: EXECUTE (CONT)

The High Performance Workplace Program:

New ways of motivate, review and reward in order to align Employees performance and personal objectives to the overall business strategy.

Drive change throughout the organization and to accomplish behavioural change swiftly and comprehensively using reward as the motivator.
providing managers standard training programme, online tutorials and e-learning training.

STAGE FOUR: EXECUTE : HIGH PERFORMANCE MODEL

balanced scorecard, HP values and supporting behaviors

STAGE FIVE: REINFORCEMENT & ARRIVAL

Reinforcing the employees day by day desired behaviors Through

setting expectations, holding employees accountable and responsible, providing the tools and resources that leaders and teams need to drive these changes through the organization, and actively promoting and rewarding positive examples

HP-COMPAQ MERGER: THE CHALLENGE FOR HR

org design & selection
MRU Fast Start culture cornerstones workforce reduction total rewards & benefits design

job titles

job levels
pay/bonus mix structures retirement time-off health

organization implementation & effectiveness

benefits

Thank You For Your attention