Change Management - Hp Case Study

Front 1

Introduction of Case Study -

Carly Fiorina

Back 1

• July 1999 – Hewlett Packard (HP) announced Carly Fiorina as CEO

• Climbed corporate ladder at AT&T and Lucent Technologies

• Highly charismatic – First outsider to be CEO at HP, first woman to lead a Fortune 100 company

Front 2

HP History

Back 2

• Inception in a garage in 1939

• Founders – William Hewlett and David Packard

• Traditional “HP Way”
o Eliminating hierarchies
o Embrace innovations
o Profit sharing
o Open door cubicles
o Emphasize teamwork, flexible hours
o Management by wandering around
o ==> Collective focus on profit and people

Front 3

Problem and Crisis (1998)

Back 3

• Lose critical market share to IBM and DELL

• Net earnings in 1998 decline by 6% to $2.9billion

• Independent consultants reviewed company to be 3 years behind competitors in terms of products

• Culture lacks aggressiveness and confidence

Front 4

Changes Implemented and Problems faced by Fiorina (1)

Back 4

• Vigorous overhaul of 83 different business units – Drastic structural changes

• Centralised all decision making
o Became bottleneck

• Revamp HP traditional culture which encourage employees to improve individual performance and bonuses paid based on company’s profit.

• Changed to:
o Dismissal of bottom 5% of under-performer
o By 2001, laid off 6000 workers and replaced 30% of the top management
o Payment of bonuses based on performance against competitors

Front 5

Changes Implemented and Problems faced by Fiorina (2)

Back 5

• Structural reorganisation of business into two groups: Front-end and back-end
o Implemented before revamp of company’s information systems
o Resulting in ambiguities in the assigning of responsibilities
o Lack of cohesion between the users of both groups

• In 2002, public battle with the board for merger with Compaq

• Dismissal as CEO in Feb 2005 due to:
o Lack of closure in the gap with competitors
o Anger over sloppy change execution
o Poor communication with the organisation

Front 6

(RESISTANCE TO CHANGE)

Kurt Lewin – systems theory perspective – Driving forces and restraining forces

Back 6

o Argues that organisations exist in a quasi-stationary equilibrium

o Effectively held in place by series of opposing forces

o Either acting to change the status quo or to reinforce it

o Driving (pull) forces and Restraining (push) factors

Front 7

Process of Change:

Back 7

1. Unfreezing
2. Changing behaviour
3. Refreezing

Front 8

Unfreezing

Back 8

1. Increasing driving forces
2. Reducing restraining forces
3. Introduce incentives

Front 9

HP Case

Back 9

Fiorina’s change implementation failure – did not manage to even unfreeze the current behaviour

• Failure to increase driving forces
o Did not receive employees’ buy in to her change mandate
o Jetted the world to visit customers, shareholders = Seldom mix with employees
o Abrupt and autocratic approach to leadership won her few fans within HP
o Lack of staff involvement in decision making = centralised decision making

• Failure to reduce restraining forces
o Instead built up of restraining forces
o Public battle with board for 2002 merger with Compaq
o “Pass the blame” – implemented layoff of 5% of under achievers = low job security

• Failure incentives
o Instead took away traditional profit sharing scheme
o Payment of bonuses based on performance against competitors

Front 10

Criticism of change strategy

Back 10

• Presented “resistance to change” in a very one sided and negative perspective

• Resistance can also be valuable in providing alternatives views, information and options

• Acceptance or indifference toward change can sometimes be much more problematic

Front 11

John Kotter (1995) – 8 Steps = David Collins = N-Step recipes for change

Back 11

o Establish a sense of urgency
o Form a guiding coalition
o Create a vision
o Communicate the vision
o Empower people to act on the vision
o Create “short term win”
o Consolidate improvements to produce further change
o Institutionalize new approaches

Front 12

HP Case Study

Back 12

• Fiorina began her actions prior gaining any understanding of the company, its current structure and processes
o Although change was executed with sense of urgency, no guiding coalition was formed due to her lack of staff support

• Solo effort to develop pathway for revamped image of HP
o Project was perceived as her individual objective rather than a collective task
o Resulted in failure to create a unified vision by her failure to communicate

• Centralised decision making
o Failure to empower people to act on the vision
o Become bottle neck

• Failure to create “short term win”
o Instead, lead by fear – dismissal of bottom 5% and 30% top management
o Changed profit share criteria

Front 13

Criticism of change strategy

Back 13

• Change do not unfold in logical, rational sequence
o Unfold in very untidy, complex manner

• Too simplistic and unrealistic

Front 14

Dictatorship and Participation

Dunphy and Stace – Leadership style vs change management strategies

Back 14

• Identify 4 different levels of change
o Fine-Tuning
 Refining of methods or procedures
o Incremental Adjustment
 Distinct but non-strategic adjustments to strategies structures and management processes
o Modular Transformation
 More radical restructuring, but only in particular parts of organisation
o Corporate Transformation
 Wholesale radical and strategic change


• 4 Leadership Styles
o Collaborative
o Consultative
o Directive
o Coercive

Front 15

HP Case Study

Back 15

• Fiorina’s leadership style == coercive approach
o Lack of attention to people and existent culture
o Few allies within HP
o One-way communication
o Centralised all decision making
o Aggressive stance of lay-offs
o Reduction in bonuses

• Changes Implemented ==Corporate Transformation
o Attempt to change “HP Way” culture
o Total reorganisation of business into two groups: front end and back end
o Vigorous overhaul of 83 different business units
o High staff lay-off
o Re-launch HP brand

•  Chosen to adopt Dictatorial transformation

Front 16

Problem with change strategy

Back 16

• HP was still financially fit by market standards at time of crisis / when Fiorina was appointed as CEO. HP was making profit of $2.9 billion, although profit was declining

• Grounded and well known market presence
o Should not be regarded as one in dire straits with little time for change
o There’s no need for abrupt and coercive change implementation
o Should take time to acclimatise herself with culture and involve stalwarts of the company in strategy planning

• HP is a traditional company with deeply rooted culture passed on by original founders
o Should employ a collaborative and consultative mindset
o Listen to people who will be involved in the change process

• Result  More conviction to her vision, ensured motivation among employees

Front 17

Criticism of Strategy

Back 17

• Simplify change situations
• Do not adequately capture the complexity

Front 18

Conclusion

Back 18

• When faced with change, organisations look towards leaders as the guiding light

• Established corporations have processes and roles deeply rooted to norms and values
o Enabling workforce to gain sense of belonging to their work

• Leaders who foster a feeling of togetherness with their employees find it easier to use motivational skills like charisma to effect change within the system

• Organisational change is complex in its causes and disruptive in the effects

• Renders careful management and selection of appropriate change strategy