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Hewlett-Packard Company’s Structural Challenge Case Study

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Updated: Jul 7th, 2021

Introduction

The case of H-P offers an example of a company suffering from an incorrectly chosen or developed structural organization. The evidence shows that the first decision of the company’s new CEO, Mark Hurd, was linked to changes in the levels of the firm’s hierarchy. The choice to remove some management layers and establish closer relationships with customers aligns with two major approaches—a shift toward organic organization and customer-focused objectives (Homburg et al. 459; Őnday 30). This paper will examine the problems that H-P encountered, discuss the appropriateness of either an organic or mechanistic structure for the firm, and evaluate Mark Hurd’s solutions in relation to the prospects that different organizational structures offer.

Case Analysis: Problems

According to the case, most of the issues that the business encountered pertained to relationships between employees and clients. First, the most prominent customers did not have access to a designated point of contact in the company if they had any problems or simply wanted to make a purchase. Second, the salespersons also experienced challenges in interacting with consumers because a large portion of their work time was filled by bureaucratic processes. Third, managers could not hire new salespersons or collaborate with the existing sales staff due to similar issues. All these difficulties can be attributed to an underlying flaw in the organizational structure of the company.

In his investigation, Mark Hurd found that the company’s sales structure alone imposed 11 layers of employees between CEO and client. One serious drawback to such a system is the extreme potential difficulty for a customer or even a manager to negotiate any decision. As a result, all processes were slow and inefficient, and bureaucratic tasks took up more time than problem-solving. In addition, salespeople comprised less than 60 percent of the employees in the corporate sales department, meaning that almost half of all sales-focused employees were not engaged with clients in any way. While it is clear that support staff and some managers comprise a necessary part of any department, the demonstrated distribution of workers, in this case, revealed that the firm was not focusing on its clients as much as on its internal processes.

Solutions

Mechanistic and Organic Systems

Two opposing systems, mechanistic and organic, can be used to describe how companies choose to establish an internal hierarchy and ascribe roles to employees. Mechanistic organizations prefer a rigid system involving layers for each employee level. Each group of workers has a specific purpose connecting to a set of duties that are assigned and pursued in a particular way. Therefore, the system of control is also founded on hierarchies in which people communicate in a formal way through organized channels (Őnday 42). The knowledge of a business’s processes, goals, and predictions is concentrated at the top of the hierarchy, and company personnel treats access to this data as exclusive. Relationships in such companies are vertical: subordinates report to their superiors, who in turn contact those in the next upper level. Examination of the company’s operations indicates that H-P’s previous organizational structure resembled a mechanistic system. For example, as mentioned, the company’s sales department had 11 layers of management, each level separate from others and having individual duties.

In contrast, an organic organization places no strict separation between the duties of its employees. Workers are considered professionals, contributing to a common goal by completing individual tasks and participating in teamwork. The interaction between employees is informal; an internal network distributes knowledge to all involved persons and allows for feedback. Knowledge about specific concepts is not concentrated at the top but is spread throughout areas relevant to necessary duties. In this case, the structure is obviously horizontal rather than vertical. H-P could benefit from moving toward an organic organization as a new system of this type would be likely to reduce the time spent on bureaucratic tasks while making interactions more efficient than before. In that light, Mark Hurd’s choices could be interpreted as a shift toward a less-vertical system by removing some of the original 11 layers of management. Also, as a result of assigning teams of employees to customers, the CEO eliminated the multiple formal channels that had previously slowed down interactions.

Quantum Organizational Structure

Another approach to describing organizational frameworks involves ten main types of structures. Hunter argues that of the ten, the quantum structure is the most advantageous for companies in an industry that values innovation (19). Quantum businesses are self-organizing; they have a horizontal hierarchy that consists of units of professionals working on tasks (Hunter 14). In such companies, managers motivate employees and encourage learning and improvement. In addition, the workforce is multi-skilled, meaning that each person has experience in different spheres and is knowledgeable enough to participate in group projects. Communication is informal in these settings, and the firm’s flexibility is enhanced by its efforts to encourage continuous knowledge exchange between workers.

H-P can implement some elements of the quantum structure to resolve its issues. At present, the company suffers from ineffective teamwork that is disrupted by the need to adhere to hierarchical rules. The practice of eliminating levels of management and educating employees to work together will enable salespersons to make informed decisions quickly. Moreover, this approach will increase the proportion of salespersons in the department since they will be able to self-manage. The sales staff’s interaction with customers can change as well because the system will allow them to spend less time in the office dealing with superiors or subordinates.

Some actions taken by Hurd are in line with the proposed approach, but H-P can take further steps to maintain and increase flexibility and regain leading status in the market. For example, by means of training, the CEO can reduce the number of people on each team working with a client. Employees versed in marketing and sales who also possess technical knowledge will collaborate with developers and better understand the core of each product than previously. The strategy to eliminate levels of management will also create a sense of personal and group responsibility and contribute to self-regulation and commitment to the firm.

Customer-Focused Organizational Structure

Apart from investigating internal hierarchy, the company can also review its current focus. Product focus and customer focus are two opposite strategies that work for different types of businesses. In sales, customer focus is regarded as the most effective way to improve performance (Homburg et al. 460). Moreover, Homburg et al. state that the structuring process of an organization should depend on the needs of its customers (459). Therefore, the grouping of professionals and their goals can be explained with clients in mind, and departments can be aimed to maximize the comfort and satisfaction of the audience. This strategy allows firms to be flexible in their relations with clients, revising policies as necessary and adapting to the evolving needs of the market.

In the case of H-P, the main complaint from major customers involved a lack of direct channels of communication. A customer-focused approach would center on creating these channels and helping clients to reach out to salespersons or managers more easily. Homburg et al. demonstrate how to shift the emphasis from products to customers (471) while noting that customer-focused structures are complex because they need to address the requirements of different audiences. However, analyzing only H-P’s corporate clients reveals that this change does not require a full restructuring. Solutions, in this case, include reducing the number of levels of management, assigning salespeople to particular consumers, and providing all potential clients an open channel to a separate group of managers that they can access for future negotiations. In fact, the CEO implemented some of the mentioned solutions, potentially increasing the efficiency of the sales department.

Conclusion

The analysis of this case study shows how the lack of an appropriate organizational structure can affect the success of a company. It also demonstrates the impact of bureaucratic procedures on employee effectiveness. H-P’s problems were not based on incompetence on the workers’ part but on their inability to engage with customers. In that light, this case illustrates the benefits of an organic structure resulting from its lack of rigid hierarchy and focus on learning and teamwork. Arguably, H-P’s new CEO introduced customer-focused changes that made the company’s system more flexible and open for both the firm’s salespersons and corporate clients. Thus, overall, the study of H-P’s problems underlines the need for proper structural organization.

Works Cited

Homburg, Christian, et al. “Fundamental Changes in Marketing Organization: The Movement Toward a Customer-Focused Organizational Structure.” Journal of the Academy of Marketing Science, vol. 28, no. 4, 2000, pp. 459-478.

Hunter, Judy. “Improving Organizational Performance Through the Use of Effective Elements of Organizational Structure.” Leadership in Health Services, vol. 15, no. 3, 2002, pp. 12-21.

Őnday, Őzgür. “Modern Structural Organization Theory: From Mechanistic Vs. Organic Systems of Burns & Stalker to Technology of Burton & Obel.” Global Journal of Human Resource Management, vol. 4, no. 2, 2016, pp. 30-46.

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