If HP Swallows Compaq, Is It Still HP?
Posted Wednesday, Sept. 5, 2001, at 3:00 AM ETIn 1949, Hewlett-Packard co-founder David Packard attended a gathering of business leaders. "I suggested at the meeting that management people had a responsibility beyond that of making a profit for their stockholders. I said that we ... had a responsibility to our employees to recognize their dignity as human beings, and to assure that they should share in the success which their work made possible. I pointed out, also, that we had a responsibility to our customers, and to the community at large, as well. I was surprised and shocked that not a single person at that meeting agreed with me."
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StumbleUponThis reminiscence is quoted by James C. Collins and Jerry I. Porras in their book Built To Last: Successful Habits of Visionary Companies. The spirit that Packard articulates there is a good part of what made the company founded by him and William Hewlett one of the most celebrated tech companies ever. There is something close to mythology in the way the firm's story is told over and over, from the garage (an actual garage!) where it was born in 1939 through the creation of a corporate culture so distinct it came simply to be known as "the HP way." The aspect of this that so many find attractive is the simple idea that there is more to a business than the bottom line; that there is, or can be, a greater purpose. What Collins and Porras liked about this was that Hewlett and Packard had thoughtful answers to the question of why their company existed—answers that transcend the pursuit of profit and are what ultimately made the firm a (profitable) success.
So, with the news that Hewlett-Packard now plans to swallow up a company as big as Compaq, it's reasonable to wonder whether "the HP way"—or whatever intangible things seemed to make the company special—can survive. The new company will be called Hewlett-Packard, but will it really be Hewlett-Packard?
The firm famously reached outside to land its current CEO, Carly Fiorina, whose arrival has coincided with a tough time for the tech business and whose tenure has won decidedly mixed reviews. Partly because it's far too early to judge her actual effectiveness, there's something jarring about her decision to merge with Compaq. There's something about the plan that smacks of an attempt to solve everything in one bold stroke. If the deal goes through, it will take a long time to evaluate whether and how it makes sense—which is always the case with bold strokes.
The early round of chatter and analysis is rather insistently focused on management's responsibility to make a profit for shareholders. In fact, it sounds almost like a direct rebuke to Packard's musings above. It's no surprise that a figure that seems to have caught everyone's attention is the promise to save $2.5 billion in the next several years. "This has got to be an epitome of cost cutting," one analyst told Reuters. "They can't afford the luxury of being nice.''
Maybe so. Certainly there isn't an immediately obvious story to be told about a greater purpose in the merger or even about growth opportunities the two companies would have when merged that they might not have enjoyed separately; it's true that the new firm would be the market leader in PCs, for instance, but right at the moment that's not a pitch that many people are going to be excited about. As it turns out, HWP shares have been punched down more than $3 (or almost 15 percent) today.
But that's a short-term issue. The long-term question is whether the HP that was once an inspiration to many can survive—or whether, in an era when pleasing the shareholders is all that matters, that HP has already ceased to exist.
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Reader Comments From The Fray:
[Notes from the Fray Editor: A number of readers made the same point as Jason Reeves, whose question was: "Is Compaq the problem or Carly Fiorina?" Meanwhile Scott J says "If you are an IT professional you know that the question to be asked is "Will HP ruin Compaq?"]
Houstonians are worried about Compaq. We're all worrying about whether we're going to have to call the Rockets' playpen "The Hewlett-Packard Center" instead of the "Compaq Center." Hell, we just got used to the latter and can't pronounce "Hewlett."
--Donjon8
(To reply, click here.)
Packard sounded communist in 1949:
--"responsibility beyond that of making a profit for their stockholders." What is he SAYING! This is anti-capitalism and Anti-American.
- "responsibility to our employees to recognize their dignity as human beings, and to assure that they should share in the success which their work made possible." Dignity of common non-management employees? And this is the last straw: actually share with them the success that their sweat built?
--"responsibility to our customers, and to the community at large, as well." He said the word! "Community"! That's the root word of "communism"!
We can't have any such talk then or now. Smart people know how to do things and should be allowed to do them. Common employees don't understand the things that management does. And let's have no more talk of sharing the profits, because I have to pay for my boat and my summer home and my kids at Stanford!
--Jay
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If there is anything that is guaranteed to survive for all of time, it is the HP Way. Even if HP as a company ceases to exist, the HP Way will live on forever. As Rob points out in his article, in 1949 nobody at the "gathering of business leaders" agreed with Packard's view of management. If someone were to make that statement today, at a similar gathering, the audience would likely wonder why this person was stating the obvious. The HP Way is alive and well and is no longer unique to the company called HP.
When Bill and Dave ran HP, the number one corporate objective was--and still is--profit. The logic is inescapable. When a company is profitable its remaining objectives are possible; if the company is not profitable then turn out the lights the party's over. So let's not confuse the issue of making a profit with the health of the HP Way. They are separate entities, although they are easily confused.
Over the years, people have confused the HP Way with symptoms like: no layoffs, doughnuts at the coffee station, profit sharing, company picnics, stock options, etc. These very visible signs are just symptoms of the underlying values that are the HP Way. However, these symptoms are only possible when sufficient company profit and the HP Way coexist. When profits get slim, these symptoms disappear or are reduced and people start screaming that the HP Way is faltering. In reality, the HP Way is alive and well and still being demonstrated, although not in the way people have become accustomed to seeing it.
HP and Compaq will both change as a result of the merger and if managed properly the resultant company will save the best and trash the rest. Some of this trashing may come in the way of people being laid off and that's okay. The HP Way doesn't dictate "no lay offs", however it does dictate that layoffs be accomplished in a respectful way that allows people to maintain their dignity and move on to something even better for them.
What about the culture though? Will the company reach steady state being more like HP or more like Compaq? My guess is that the company will become the best of both over time. It is not the HP Way to run roughshod over conversations or dictate, so you can bet that all ideas will come to the surface for consideration and the best ones will be adopted and institutionalized. In the end, the world will get something better than HP is today.
Management's lack of clairvoyance may ultimately kill both Compaq and HP, but the HP Way will always show up in the most successful companies in any industry.
--Doug McGhee
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