With the management restructuring -- which added positions -- out of the way, Hewlett-Packard
Hewlett-Packard expects the reductions to save $1.9 billion annually beginning in 2007. Half of those savings will be used to fight competitive pressures, and the rest will flow to operating profit.
Operating profits are the visible Achilles heel at HP. For example, competitors Dell
The press release says, "Great companies grow and reduce costs. We will do both." Ah, but at what cost to the HP Way?
Since HP wrote its first set of business objectives in 1957, it has become a management innovator -- in many cases putting people ahead of profits. Although HP CEO Mark Hurd acknowledges that he recently read David Packard's book from 1995, The HP Way, it is worth noting that Hurd's book from April 2004, The Value Factor, is about information technology.
HP's objectives clearly address profits, but they also have words about employees that are, in a word, unique -- especially considering they were crafted in 1957, when top-down management was the style. Those objectives say employee loyalty is key, that employees should be trusted to do the right thing and make a difference, and that everyone has something to contribute. Well, "everyone" is going to be 10% fewer people. The question: Will the atmosphere of accomplishment, innovation, and individual learning remain when a seemingly radical ideological transformation is under way?
The HP Way will probably get little press coverage today. It was a hot topic in 2002, when HP shareholders were voting on spending $19 billion to acquire Compaq. Many questioned why HP would radically transform itself by buying a struggling personal computer maker when HP itself wasn't setting the PC world on fire. The battle lines were market size vs. growth through innovation. Few will remember, but 49% of the voting shares voted against that merger, and, for many, it forever changed the meaning of the HP Way.
Well, the big people changes have been announced. Management now has the hard job of transforming this technology conglomerate, with its prized printer business, into a more successful innovator in all areas. It will be a tough task. Its margins show HP is not performing at a top level, although the cash-rich balance sheet is rock solid.
The HP Way, at least for today, is about growth and reduced costs.
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Fool contributor W.D. Crotty does not own shares in any of the companies mentioned, but he is a former electronics industry employee and he's old-enough to remember when saying "The HP Way" scared competitors. Click here to see The Motley Fool's disclosure policy .
