From 1999 to 2004 Carly Fiorina was CEO of Hewlett-Packard Companies. Those years were characterized by declining profits, dissatisfied employees, and alienated retailers. Mark V. Hurd took over as CEO in 2005. After three years under CEO Hurd, Hewlett-Packard has achieved turnaround status in the eyes of investors and industry analysts. (Guglielmo 2008) Hurd’s accomplishments have recently earned him the designation of business person of the year by BusinessWeek magazine. (Shoat 2008) Hurd’s results were not achieved by accident or by luck.
His results were achieved through deliberate planning and execution of three primary initiatives that would meet the stated corporate objectives of Hewlett-Packard. What organizational initiatives has CEO Hurd implemented in order to turn Hewlett-Packard around? First, taking a look at the corporate objectives of Hewlett-Packard brings an understanding of what duties that CEO Hurd was charged with and a sense of how he would achieve them. Then, a discussion of how CEO Hurd cut basic operating costs, refocused personnel operations, and repaired the breach with retailers will answer the question at hand.
Hewlett-Packard’s corporate objectives At the top of the corporate objectives page on Hewlett-Packard’s website lie these words of wisdom. “It is necessary that people work together in unison toward common objectives and avoid working at cross purposes at all levels if the ultimate in efficiency and achievement is to be obtained. ” Dave Packard, Co-founder. Hewlett-Packard views profitability as a combination of short and long term objectives that creates more cash and enables their business units to operate at a lower cost.
A motivated, loyal, and inventive work force is identified as key to the company’s success. Leaders must have focused goals to support seemingly risky strategies that lead to growth. The most driving statement in all of the corporate objectives is “We must be No. 1 or No. 2 in our chosen fields. ” (Hewlett Packard 2008) Initiative 1: cutting costs Through the team planning approach CEO Hurd developed specific financial goals to reach by 2008. The first step was a personnel reduction of less than 15,000 that immediately created a $3. 5 billion annual budget for research and development.
(Burrows 2005) By switching from a centralized sales force, and returning sales personnel back to the business units they represent Hurd gave managers of the company’s operating business units more control over their own operating costs. This act led to a greater ability to invest in doing business that will create more profit for the company as stated in the corporate objectives. CEO Hurd’s most recent strategy is to cut down on the cost of corporate real estate. A recently implemented plan to replace eighty-five older data facilities with six updated facilities is expected to cut real estate costs in half. (Guglielmo 2008)
Initiative 2: refocusing personnel In the spirit of co-founder Dave Packard, CEO Hurd saw an urgent need to recreate a culture of accountability that had preciously been lost at Hewlett-Packard. (Burrows 2005) Using a “skills map” of required leadership qualities (cited in Burrows 2005) CEO Hurd promoted Cathy Lyons, to Chief Marketing Officer based on her twenty-six years of success at Hewlett-Packard which includes eleven years of successfully heading business units within the printer division. Hurd also brought in Randall D. Mott as Chief Information Officer, who served in the same capacity at Dell.
He also recruited R. Todd Bradley, who was responsible for the turnaround at Palm Inc. , to head Hewlett-Packard’s personal computer division. Hurd eliminated the centralized sales force that former CEO Fiorina had developed. By returning sales people back to the business units they represent, CEO Hurd created an environment where managers of the business units have more control over spending, profits, and results. Fiorina left behind a compensation system that left many employees confused and unmotivated. Hurd recreated a compensation sytem that brought back the loyalty and productivity that is essential to Hewlett-Packard’s continuing success.
CEO Hurd took personal responsibility for the 2006 boardroom spying and information leaking scandal. As a result, the company lost only it’s chairman, general counsel, and two directors. This gave others the confidence to remain while all worked to repair and rebuild Hewlett-Packard’s image. Initiative 3: realigning retailers and resellers Despite the fact that resellers and retailers accounted for sixty percent of Hewlett-Packard product sales, Carly Fiorina had taken the company toward the direct sales model. (Burrows 2005) Not only did this affect Hewlett-Packard’s profitability, but also took a major profit center away from retailers.
CEO Hurd is now aggressively returning to retailers with incentives for more profitable bundled-product sales. He has increased Hewlett-Packard’s market position, and put profits back in the pockets of resellers by offering redesigned notebook PCs through 100,000 retailers in the U. S. alone. Conclusion Fast forward to 2008, and CEO Hurd’s results are impressive. Hewlett-Packard is now the industry leader in personal computer sales. Having exceeded his profit goals and reaching the $100 billion sales point, CEO Hurd has remained true to Hewlett-Packard’s objective to be number one.
Profit margins have reached a five year high. In November of 2007 Hewlett-Packard shares reached a seven year high of $53. 41. Hurd’s work force and facilities reduction strategies helped Hewlett-Packard to double its profit between 2004 and 2006. (Guglielmo 2008) Cutting personnel and real estate costs, refocusing operations and returning control to the managers of business units, redeveloping products and partnership marketing with retailers have proven to be the most successful initiatives of CEO Mark V.
Hurd and have turned Hewlett-Packard around.
Burrows, P. (2005, September 12). HP says goodbye to drama. Business Week, 3950. , pp. 83-86. Guglielmo, C. (2008, February 11). Hurd’s key to H-P’s turnaround: squeezing dimes (CEO has made cuts, shifted managers and raised profits since replacing Carly Fiorina) Austin American Statesman. Hewlett Packard. About us: corporate objectives. HP company information. Retrieved February 13, 2008, from http://www.hp.com/hpinfo/abouthp/corpobj.html