reorganisationof HP-- Saurabh

8/6/2019 reorganisationof HP-- Saurabh

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ReorganisationReorganisation of HPof HP

Presented bySaurabh



A bout Hewlett Packard (HP)A bout Hewlett Packard (HP)y

Founded in 1939y Founders: Bill Hewlett & David Packard

y First Product: Resistance-capacity audiooscillator

y Rapid growth in 1940s

y Established well related line of products till1950s

y By 1960s HP had many operating divisions



HEWLETT PACKA RDHEWLETT PACKA RDy

The divisional structure wasexpected to give:

y A utonomy to divisions

y Encourage individual motivation

y Encourage initiatives, creativity



OR GAN IISATIO NOR GAN IISATIO N

y

In 1960s made changes for salesrepresentatives firms

y HOW? :

Set up its own sales organisations andencouraged previous representatives to join the company

y In 1968 adopted group structure:-Resulted in improved field marketingactivities

y Early 1970s: ¶Local decentralisation·



O N SET OF PROBLEMS IN HPO N SET OF PROBLEMS IN HPy Late 1980s: The decentralised

structure started creating problemsin HP

y C ustomers perceived HP ascombination of 3-4 companies with little co-

operation

y In 1990s: Decision making becamedifficult and slow



ReorganisingReorganising processprocessy Then C EO, John Young, dismantledcommittee network and cut a layer of

management

y

Decentralised decision making

y Divided computer business in two groups

y Each group given sales and marketing team

y This helped HP to increase market share inmid 1990s



G ROWTH AN D PROBLEMSG ROWTH AN D PROBLEMS

y Bureaucracy increased significantly

y Less innovations

y Lack of motivation to develop newproducts

y Ex C EO Lewis Platt concentrated moreon humane balance at work



RESTRUC TURINGRESTRUC TURING

y HP divided its huge portfolio of products in four divisions

y

Head of each division was given apower of a C EO

y

Still, the stagnant revenues anddeclining profit growth rate in 1998added to problems



CA RLY FIORINA TAK ES OVERCA RLY FIORINA TAK ES OVERy

WHA

T FIORINA

DID:y Demanded regular updates from key units

y Injected strict discipline in the sales force

y Increased focus on breakthrough projects inHP Labs and linked incentives to patentfilings rather than number of projects

y Developed a plan to transform HP from a¶Strictly hardware company· to ¶Webservices powerhouse·



WhatWhat fiorinafiorina diddidy

Dismantled decentralised organisationalstructure

y For effective selling, reorganised the 83indipendent units having 83 product chiefs

y THEY WERE SIX C EN TRA LISED DIVISION SThree were product development groups:Printers, computers, tech services andconsulting (BACK -EN D U N ITS)Three were sales & marketing groups forconsumers, corporate markets andconsulting services (FRO N T-EN D U N ITS)



Under the new arrangementsUnder the new arrangementsy

BACK

EN

D UN

ITS:Developed and built productsy FRO N T EN D U N ITS:Sold products to consumers

and corporationsy The structure was expected to:

strengthen collaborations between sales andmarketing executives and development engineers

Solve customer problems faster

y The new arrangement solved number of longstanding problems for HP



Under the new arrangementsUnder the new arrangements

y R&D strategy resulted in doubled patentfilings

y

Put HP among top three patent filingcompanies in the world



FIORINA ·SFIORINA ·S ReorganisationReorganisationruns into problemsruns into problems

y Back-end managers were unable toallocate R&D funds according to salesforecasts

y Front-end sales representatives hadtrouble meeting their forecasts in caseback-end people came up with a wrongproduct

y Rise in expenses was out of control as88,000 employees tried to adjust withreorganisation




y Back-end product designers were unable to knowexact requirements of customers

y Front-end sales representatives were unable to givesufficient attention to each of the products

y Productivity-linked commissions to sales force

helped in rise of sales of low-margin products only.

y This did not help much to grow corporate profits




y There was less financial control and moredisorder

y C ommunication and work in co-ordinationwas difficult as employees were spread outin 120 countries

y C ustomers were not happy as their wasinternal confusion in company because of front-back reorganisation




y HP·s market shares of P C went down from7.8 to 6.9 per cent in one year

y Sales of HP·s Windows server went downfrom 10.6 to 8.2 per cent in same period

y HP·s performance in software, storage andconsulting was not well



analysisanalysisy Disadvantages of Fiorina·s strategy:

y The reorganisation of such a large company having 88,000employees and 83 different departments was a very difficulttask.

y Fiorina applied too many changes at one go

y The reorganisation was focused more on structure of thetraditionally bound culture of HP

y The focus on profit and sales growth was not clear

y The re-arrangement lacked the basic purpose of satisfying thecustomers with company·s services

y Downfall in profits cost 7,700 employees their jobs and

80,000 others a slack in salaries



analysisanalysisy A dvantages of Fiorina·s strategy:

y The strategy of centralising six departments helpeddesign engineers and sales and marketingrepresentatives focus on their respective work only

y The R&D department came up with innovationsand ideas

y HP stood among the top three patent-filing

companies in the worldy Sales of products increased due to restructured

incentives· policies



analysisanalysisy Reorganising in pre-Fiorina era:

y Restructuring was done keeping in mindhumane balance

y A ssigning of responsibilities was done tomotivate employees

y Decentralisation was done to create a good

environment in departments wherecommunication gap would be minimum

y The strategies were focused more on team

work

reorganisationof HP-- Saurabh

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