Beginning in 1999, with the arrival of the new chairman of the HP board, Cara Carlton Fiorina, the situation changed. She chose a bipolar system of management, close to authoritarianism. With her arrival, the company underwent a radical administrative transformation. As a student, she had already worked at Hewlett-Packard in the shipping department, was a secretary at a small real estate company, and worked as an English teacher in Italy. Fiorina spent twenty years at AT&T, starting as a sales representative and ending as president of Lucent Technologies’ Global Enterprise Services Department. This department was a division of AT&T, which, at Fiorina’s initiative, became independent in 1996. She was then recognized as America’s most powerful woman. She came to HP without any support, hence, many accepted her as an outsider and were afraid of change.
Hewlett and Packard pursued a policy of goal-oriented management, the essence of which was to clearly articulate common goals and align them with employees, allowing staff to determine how best to achieve those goals for their own areas of work. However, this led to a decentralization of management. Before Fiorina’s arrival, all departments had great autonomy, and all decisions were made collegially. Later, however, all departments had to coordinate their actions, while decisions were lowered from above. Thus, a rigid hierarchy with a very strong center was formed in the organization.
The policies of the new head did not conform to the ideals and principles enunciated in The HP Way. In early September 2001, Hewlett-Packard announced the takeover of Compaq Computer, a leader in the production of handheld personal computers. At the time, the deal was deemed very profitable and valued at $19 billion. The organizational cultures of the companies were different, so Fiorina merged them and created a kind of integrated culture. She failed to get the support of Walter Hewlett, son of HP’s co-founder, he was against the merger. The large number of layoffs resulting from the merger meant for him to abandon The HP Way. The situation was exacerbated by a 40% drop in the company’s stock price after the merger was announced. Despite this, Fiorina managed to boost the company, doubling sales during his five years at the helm.
However, the printer business was still generating 80 percent of its profits, and this income was mainly derived from the sale of replacement cartridges. In February 2005, Fiorina resigned as CEO of the company. She had built a good management team after the merger with Compaq, but she made the mistake of refusing to delegate authority to her high-level subordinates, managing numerous divisions of the company herself.
She also had a hard time getting them to work together; as a result, most of the valuable employees left the company. Fiorina managed HP for about six years and managed to achieve a lot, but she failed to adapt the company to innovation and, as a result, was left on the losing end.The fight against leakage of confidential information at Hewlett-Packard has become a major scandal. Patricia Dunn, who is suspected of organizing the illegal wiretapping of phone conversations between the company’s top managers and reporters from well-known agencies, may lose her position.
Since her appointment as head of the board, Dunn has pursued a tough anti-spy policy. Private investigators have been hired to uncover the sources of leaks of confidential information, often using not entirely legal means. For example, according to the Associated Press, the detectives used fake documents to pose as Hewlett-Packard executives and tried to phone companies to obtain details of conversations between HP executives and journalists at such agencies and magazines as The Wall Street Journal, BusinessWeek and CNET Networks.
In the course of such investigations, it was discovered that George Keyworth, a high-ranking Hewlett-Packard manager, was the source of the leaks. The HP board asked Keyworth to leave the company, but he refused. At the same time, in May of this year, HP board member Tom Perkins resigned in protest against the use of illegal investigation methods, having previously announced the necessity to dismiss businesswoman Patricia Dunn.
The scandal at HP provoked a flurry of publications in the press, and the Federal Bureau of Investigation, the California Department of Justice and other bodies joined the investigation into the illegal actions of the company’s management. Patricia Dunn, as well as others involved in the wiretapping, could face fines and imprisonment. In addition, a decision regarding Dunn’s future fate at Hewlett-Packard should be made shortly by the company’s board of directors.
The problems outlined above may have been provoked by the fact that the executives did not take into account certain principles of internal organization. First, the principle of constant development of the team was not followed. A team should develop as a living organism, and in order to do that a manager should constantly care about professionalism and personal growth both his own and that of the team members. A dangerous situation develops when team members are satisfied with everything, they are happy with everything, they do not want sharp disputes and discussions, but peacefully agree with each other on everything (Luthans et al., 2015).
Gradually the results of their work begin to decline. It is important for the manager to prevent such a situation, and he or she can do this by including new members in the team who bring “fresh energy”, new ideas and suggestions for business development. The principle of flexibility was also not respected. The conditions for the formation and functioning of the team, the requirements imposed on its members can change depending on the stages of business development, and therefore on changes in the goals and objectives of the team.
Moreover, goal-oriented management has been a fundamental part of Hewlett-Packard’s philosophy of action since its earliest days. Purposeful management — assumes a system in which the goals are clearly stated and agreed upon, and people are allowed the flexibility to work to achieve the goals in the ways they themselves find best within their area of responsibility (Robbins, 1997). This is the philosophy of decentralized management and the primary basis of free enterprise. Nevertheless, during difficult CEO situations, managers at all levels could not be assured that their people clearly understood the company’s goals as well as the specific objectives of their own enterprise or department.
Executives were unable to perform fully the duties that fostered good communication and rapport. Consequently, the people working under them were not equally interested in their work so that they wanted to plan it, propose new solutions to old problems, and jump in when they had the opportunity to contribute something. This organizational failure, caused by the company’s unwillingness to adapt to the mechanisms of decentralization, led to dramatic changes at HP.
References
Luthans, F., Luthans, B. C., & Luthans, K. W. (2015). Organizational behavior : an evidence-based approach. Information Age Publishing, Inc.
Robbins, S. (1997). Essentials of Organizational Behavior. Pearson Education. Web.