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Hp's Fall

In: Business and Management

Submitted By engorgium
Words 1475
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Since Carly Fiorina’s tenure as CEO, surveys conducted by HP have shown that employee morale has “cratered”. (7) This can be attributed to several major negative motivational factors that have hindered HP's work environment, such as poor job security and weak communication between leaders and employees.
The period under Carly Fiorina and Mark Hurd was dominated by excessive cost cutting, and as a result fear was said to be the main source of motivation during their tenures. As stated previously, Carly Fiorina began a trend of mass layoffs in an attempt to make HP more efficient. Hurd and current CEO Meg Whitman have continued this trend with a series of unexpected announcements. However, various studies have shown that a sense of job security is a major “hygiene” factor, a basic need that is required to maintain worker satisfaction and morale. By initiating massive job layoffs, HP has harmed worker morale.

Later, as one of his first acts as CEO, Hurd announced that HP would be cutting 14,500 jobs, or 10% of its workforce. In 2008, he announced plans to cut 24,000 jobs. In total, these layoffs amounted to an almost 20 percent reduction in the company’s workforce over just seven years. In 2009, Hurd began a series of large company-wide pay cuts. During the 2009 recession, Hurd imposed a 5% pay cut on all employees and removed many benefits. While Meg Whitman promised that job layoffs were over when she became CEO, this trend has continued. This broken trust may have caused even more feelings of insecurity over salary. In 2012, she announced new plans for layoffs totaling 27,000 by 2015, but this number was adjusted upwards multiple times. From 2012 to the end of 2014, 44,000 layoffs occurred, and the number is estimated to rise to 55,000 by the end of 2015. (
Market analysts were skeptical of HP’s claims that these layoffs actually alleviated the company’s difficulties. Deutsche Bank said in a note to their clients that HP “has been restructuring for the past decade,” and that past layoffs have done little to “reduce its reliance on declining or troubled businesses.”

Another important factor that demoralized employees was the movement away from HP’s employee-centric model. For instance, in the past, employees were “cherished and respected” and this worker-centric model resulted in the implementation of radical policies at the time, such as tuition assistance and flex time. (2) However, Fiorina and Hurd took away many of these employee benefits, which may have made workers feel less valued.(5) In addition, Mark Hurd was known to have had a stiff approach to communicating with employees. In one instance, he sent a memo to employees that coldly explained the reality of layoffs. “The math is pretty straight forward. From a productivity standpoint, you’re supposed to reduce headcount on par with declining revenue.”(4)
In addition, HP uses many ineffective industrial engineering approaches to motivating employees. Fiorina and Hurd advocated the use of bonuses and raises to increase employee productivity. However, these were hygiene factors that were shown to be ineffective in motivating employees. In another instance, Hurd introduced HP’s “pay for performance” policy, which meant that employees salaries were heavily at risk if the company was not doing well. (10) This policy placed the fate of employee’s salaries on external factors, such as poor economy or leadership decisions, that have little to do with their own work ethic and talents.

HP was originally created with an open, collaborative culture governed by a flat organizational structure.(3) This came to be known as the “HP Way,” and it was designed under the idea that “employees' brainpower was the company's most important resource”. (3) The founders of the company believed that this would promote the exchange of ideas crucial for innovation, and this is exemplified by the popularity of this model among creative industries in the present day. However, while technology companies such as IBM, which used to be infamous for formality and hierarchy, have rushed towards an open model, HP has instead gone in the opposite direction, beginning with Carly Fiorina’s tenure.
In an attempt to transform HP, Fiorina emphasized a marketing based approach to HP’s business strategy. (5) As a part of this process, she implemented a bottom-line policy which heavily tied individual results to salary, she implemented her bottom-line policy, delineated strict roles for her employees, reshaped the company into a hierarchy, and established sales goals as the company’s top priority. However, many see these actions as a failure in understanding the culture that best fit HP. This marketing based model does not fit HP well because it inhibits innovation. By delineating employee roles and linking individual contributions to bonuses, employees have more of an incentive to focus on their own work rather than to collaborate. (7) In addition, as sales became its highest priority, resources were channeled away from its own research and development in order to support elaborate marketing campaigns. Instead, HP began to emulate popular models of products rather than creating its own products in order to gain sales. Since Carly Fiorina’s tenure, innovation began taking a backseat, and it was clearly not as much of a priority as it was in the past. In order to save costs, fewer resources were being devoted to innovation. Under Mark Hurd, R&D was reduced by half.
HP’s acquisition of Compaq is also blamed as one of the reasons why the “HP Way” disintegrated. During the process, a large “Post-Merger Integration” team was created to help blend both cultures, but it disbanded within a year, a period that is said to have been too short to truly understand the consequences of the merge. (8) While “blending,” or taking the best of both cultures, is the ideal outcome after a merge, this was not possible simply because of the sheer number of employees that HP absorbed. One of the major cultural differences between the two companies include Compaq’s consensus based culture and HP’s rapid decision making culture. (8) Instead of blending, the cultures are said to have become an average of their predecessors, perhaps losing their unique yet positive traits. In addition, decision making processes slowed from clashes in management style, and HP became more hierarchical to alleviate this problem. All these factors contribute to a cultural environment that inhibits idea exchange crucial for a technology company’s innovative power.


HP should try to motivate employees with effective motivators rather than hygiene factors. This means that several policies which came from Fiorina and Hurd’s “tenures of fear” should be replaced. For instance, the bottom-line approach to determining employee wages should be replaced with a policy that does not place so much pressure on individual results, especially because this inhibits collaboration. As shown in multiple studies, one of the best motivators has been shown to be the ability for people to take ownership of their work, but these bottom-line policies work against this ideal since its makes employee wages vulnerable to external factors they have little control over.
HP also needs to improve worker morale by restoring employees’ sense of job security. The company has often initiated layoffs to cut costs. However, by prioritizing efficiency over employee morale, HP may have decreased worker productivity. HP should limit its mass layoffs and certainly avoid its tendency to abruptly announce layoffs.

Furthermore, HP should not place sales as its utmost highest priority. Because of its negative effects on R&D and collaboration, this mindset has turned the company into a straddler rather than an innovator. Instead, HP should return to the HP Way to encourage idea exchange. In order to make employees more willing to collaborate, HP should reduce the relationship between individual performance and salary in order to decrease the competition between employees.

For the most part, the current state of employee morale and culture has been defined by a two decades of poor leadership. This means that integrating more positive motivational factors and removing harmfully demoralizing aspects of HP's work environment may not be immediate remedies. For instance, the salary and job stability of HP's employees has been jeopardized so often that workers will likely feel insecure about them for years to come. HP can only restore their employees' trust by maintaining stability in the long term. This will have to evolve from a shift in thinking away from the idea that cost cutting is priority over employee morale.


(6) (*1)

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