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Counterculture: Slash & Burn May Not Save HP

By now, you all know that Meg Whitman, the new CEO of {complink 2376|Hewlett-Packard Co.}, has decided to dump almost 30,000 US employees. She says she's able to do this without shedding any of HP's major businesses while increasing efficiency in the company's sales force and creating new products.

To a layman like me, this seems like bad news. But HP stockholders — the majority probably large corporations like HP — are popping the bubbly. The quarterly report is going to look great, and the dividends are going to flow like… well, champagne. Also, good news for HP's 324,000 workers in China: they're too cheap to need firing.

Now, I'm not the sort of corporate P&L nerd who usually follows news like this. I noticed this story because I'm a politics nerd. The name “Meg Whitman” recalled for me her unsuccessful 2010 bid (running as an ultra-conservative) for governor of California. By strange coincidence, another right-wing former HP CEO, Carly Fiorina, also lost a 2010 election in California, to Senator Barbara Boxer.

My favorite memory of Carly is a keynote “speech” — but not really a speech — at the Consumer Electronics Show years ago. Carly spent a lot of time on stage trying to dance with two gorgeous 20-something TV stars (whose names escape me and whose show was cancelled) while raving about HP's “hot” new line of cellphone surface decorations, including sexy designs like plaid, death's-head skulls, polka dots, and leopard spots. I recall wondering if this sort of performance by its CEO didn't compromise HP's dignity. But Carly, betraying nary a smidgen of shame, pulled it off.

Although a couple of male CEOs served between Carly and Meg, I can't help but identify today's Hewlett-Packard with these two women. This isn't because they're women, but because their mutual ideology is so vehemently conservative. This is not the Hewlett-Packard of yore.

Under the leadership of Bill Hewlett and Dave Packard, HP was famous beyond Silicon Valley because its founders treated their business as a family, paying above scale, providing generous benefits, and doing their best to retain workers even in an era when mobility was endemic in the booming electronics industry. HP, which continues to win recognition as one of America's most admired companies, sits alongside a handful of other companies of bygone days, such as Bell Labs and Johnson Wax, which faithfully took to heart the wellbeing of their workforces.

However, that sort of attitude toward workers seems as quaint today, among corporate leaders like Carly and Meg, as the repentant Ebenezer Scrooge vowing to save Tiny Tim's life and help Bob Cratchit raise his family. In today's Wall Street-driven corporate environment, Bob Cratchit would either have to prove that Tiny Tim's survival would juice the quarterly numbers, or else he'd better go casket-shopping.

So it goes, even at HP. The latest 30,000 or so casualties verify the company's change in workforce philosophy. HP's a family no more. Still, I wonder if this has to be. During the Great Recession, many German companies — with government encouragement — forestalled mass layoffs by reducing hours among all employees. This caused hardship but the pain was spread equally. Workers kept their jobs and benefits, and, when the economy began to improve, they got their hours back. German companies that embraced this strategy were able to ramp up faster, at lower cost, because they didn't have to hire and train new people.

A few US companies followed the German example, not only benefiting as businesses but winning the praise, loyalty, and outright affection of their workers. I'm not sure if anyone has ever measured the uptick in productivity for companies that fight to keep their people on the job, but I suspect it's there.

This leads me to one last reflection. Ruthlessness toward workers — an eagerness to sustain profit and reward executives by decimating the rank-and-file — has become a shibboleth common to both business orthodoxy and conservative politics. At the expense of being regarded as “liberal,” the founders of Hewlett-Packard defied this orthodoxy, occasionally sacrificing the bottom line to job security for the HP workforce. By contrast, HP's two contemporary celebrities, Carly Fiorina and Meg Whitman, have proved they can be as tough as any male CEO by proudly embodying the conventional, all-hands-off-deck wisdom.

The funny thing is that Hewlett and Packard built an empire by caring for their people. Forsaking that ideal, Carly and Meg have led the empire into decline. I can't help wondering if there's a lesson here.

12 comments on “Counterculture: Slash & Burn May Not Save HP

  1. Nemos
    June 11, 2012

    ” has decided to dump almost 30,000 US employees.” I wanted to ask why shareholders are always happy when workers losing their job? Only the customers could prevent this to be happen because if the CIO knows that will lose customers with moves like the above, then would not do it…

  2. Adeniji Kayode
    June 12, 2012

    @Nemos,

    well, its because most shareholders don,t work in the company they invested into.

  3. prabhakar_deosthali
    June 12, 2012

    I think this is the only mantra ,all these modern day managers are taught in their business schools.

    Such kind of short-sighted approach ruins the decades old solid foundations on which these HP like companies were built.

     

  4. Barbara Jorgensen
    June 12, 2012

    In Wall Street's drive toward profits, publicly held companies are no longer beholden to their management or employees. Shareholders are the No. 1 constiuent of the corproation. Some companies are able to balance a humane corporate culture with profitability, but most come down tot he point that HP is at: fire people or lose your market cap. This is one fo the reasons I think Facebook is going to go through a real culture shock–if it hasn't already–when it figures out it is no longer in control of its own destiny.

  5. EBNBlogger
    June 12, 2012

     

    When HP dumped their Test Equipment division and sold it to Agilent, it would be, in my opinion, a matter of time before they ended up on the ropes.

    By the way Agilent is doing great.

    HP was a test equipment manufacturer, that was their bread an butter, but they had to go chase all those loose dollars on the other side of the fence. Chasing after the same dollars all the high risk players were.

    HP had a name in test equipment that compared to none worldwide. Everybody wanted HP equipment, They had their market carved in stone, all they had to do was to keep doing it.

    Motorola has made the same mistake. Motorola made parts, second to none. There were test pilots that would not fly in the plane unless there were bat-wings on the parts. But about the same time HP went chasing after the leprechauns money, so did Motorola.

    By the way OnSemi is doing just great on Motorola's legacy.

    Real companies have real products. Real economies have real exports. We cannot keep selling each other bits across a wire and that is because we are real people, not virtual. We need real things to live a real life.

    There is a lesson here, I think it is called the Prodigal Son, except in this case, HP has no home to go back to.

  6. bolaji ojo
    June 12, 2012

    How could anybody argue against that position? Of course, it's possible to say hindsight is always perfect but when companies focus more on “maximizing shareholder value” that's where they end up: in a ditch. The job cuts HP has announced would improve margins on a temporary basis but for the longer-term you need sales growth that far outpaces cost. That requires products that sell, have high barriers to entry and are not commodity PCs and printers.

  7. JLS
    June 12, 2012

    HP has been loosing market share at a steady rate, and it is just because of the focus on the bottom line.  They are no longer the quality leader they once were and getting rid of so many employees is not going to help it get back.  HP is in a death spiral, and doesn't know how to get out.

  8. bolaji ojo
    June 12, 2012

    One undeniable fact is that the regular/traditional global company is in jeopardy from “disruptive technologies” and processes. My feeling is that it is becoming increasingly difficult for many enterprises to make the transition to the new, more flexible structure that can keep them at the top of the food chain. Apple somehow managed to make that leap but the downward spiral we've seen or are seeing in so many other enterprises from Motorola to Nokia, HP, Nortel, etc., makes it clear the landscape will be different years from now.

  9. _hm
    June 12, 2012

    It is quite sad story. HP leader need to do much better to uphold their tradition.

     

  10. FLYINGSCOT
    June 13, 2012

    I enjoyeed reading your article and share your sentiment.  I no longer hold HP in the esteem I once did and the world is a sadder place for it.

  11. EBNBlogger
    June 13, 2012

     

    IBM made a break from the PC world a number of years ago, and are better off for it, just look at their stock. They went back to what they have always done; mainframes, software, services, research.

    This disappointed me greatly as I really liked their Thinkpad series, probably the best built laptop series ever. On the other hand, Lenovo is doing great. Which may say something about the American business traditions. It was a win win situation. What I learned recently is that IBM is in the top 10 silicon forges in the world, which gives them a great advantage in any products or research they do.

    The companies that play in the bleeding edge will always be a triumph/tragedy situation. That type of product is as much about fashion and fad as it is about technology. Life in the fast lane is a situation best handled by start-ups, they have more to gain and less to loose. Large companies like HP should stick to the bread and butter, they move too slow to follow that kind of action. It may appear that Apple was the innovator of their new products, more likely it was a start-up that sold their tech. to Apple.

    Other test equipment companies like Tektronix and Fluke are doing well, they advance their product lines as technology allows. Anyone can buy a gadget from an online store that will do just about anything, but, it will do in in a very limited environment and will not be stable over the long run. This is where the traditional equipment providers shine, some of them know it, others like HP did not.

  12. t.alex
    June 16, 2012

    Whitman may have lots of pressure from the board to bring in sales and/or to cut costs. Well, innovation needs time so she has to cut costs first. HP should maintain one of their core in software sevices.

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