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