Hewlett-Packard Is Counting on Organization Change to Boost Revenue Growth

Introduction

Meg Whitman became CEO of Hewlett-Packard Co. (HP) in 2011. Since the time HP's revenue peaked in 2011 at $127 billion, it has dropped every subsequent year. On the positive side, the company had two consecutive quarters of growth in 2014. HP also is trying to right-size and reduce costs by planning to lay off 16,000 employees. HP earlier decided to lay off 34,000 people, resulting in a total reduction of 50,000 employees.100

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Whitman described the job cuts "as an opportunity to streamline the company further and make it more nim- ble. An expected $1 billion in cost savings in fiscal 2016 would allow HP to invest in new technologies and skills to revive growth." Others, like UBS analyst Steven Milunovich, believe that these job cuts will erode employee morale and may lead to increased turnover.101

"But fixing the world's biggest tech company-with $120 billion in annual revenues and 330,000 employees- is a herculean task. Bloated by more than 70 acquisitions in the past 15 years, HP isn't just sprawling and stalled out; it may actually be running in reverse."102

Whitman decided to change the organizational structure to fuel growth. She created two clusters of businesses. One focuses on corporate technology customers. This group, which sells servers, storage, and networking, delivered 43% of the company's overall operating profits according to Forbes. Unfortunately, the software and services that accompany all this hardware have not been as successful. HP tried to build the software side of the business via acquisitions, which according to Forbes have not been very successful. The magazine noted that "when it comes to software acquisitions, Autonomy [HP's enterprise software company] was merely the most high-profit misstep. All told, over the past decade HP squandered nearly $19 billion to buy myriad outfits that contribute only 7% to overall profit. The services unit, which staffs other companies' tech projects, is barely at breakeven."103 HP is currently "looking for small to midsize acquisition candidates in cloud computing, security, and analytics software."104

The second structural cluster sells printers, PCs, laptops, and mobile devices to people worldwide. This segment of the business contributed 29% of operating profits in 2013. The problem here is that the lucrative printer business is shrinking. Technology is simply moving more toward ink-free photo and document sharing, which benefits companies like Google, Face book, and Dropbox.;

Strategically, HP also is trying to get back into the fast-growing tablet market. The company attempted to gain entry in this market in 2011 with the TouchPad model, but it was a failure. Since February 2013, the company has introduced new models, and they are being well received in the market. In a similar vein, HP has created an overall vice president for design. This was done to create a strategic focus on product development.

H-P didn't stop at just a reorganization or a new tablet strategy, according to Forbes. A survey of the company's 20,000 salespeople revealed that employees rated the internal sales tools a mere "7" on a scale of 1 to 100. For example, it took HP as much as three weeks to prepare a sales quote, when competitors could do it in a matter of days. The company decided to upgrade its sales process by using new tools from Salesforce.com.

Whitman also took to the road to reassure customers that HP was doing the "right things." In the last year, she conducted "305 one-on-one meetings with customers or sales-channel partners, aides say, as well as another 42 roundtable chats with small groups" around the world.

It did not take Whitman long to realize that the organizational culture also needed to be changed to foster consistency between the company's strategies and culture. According to Forbes, she eliminated the barbed wire fence and locked gates that separated parking lots for the executives and the general employee population. "We should enter the building the same way everyone else does," she said. She also decided to work from a cubicle, like most employees, instead of from a larger, more private location. She keeps a picture of her mother in her office. She also role models when she travels by staying at more modestly priced hotels.

While HP is positive about the changes taking place, some analysts are more skeptical. Bill Shope, an analyst from Goldman Sachs, concluded that "serial restructuring cannot solve HP's secular challenges, particularly following years of underinvestment." He forecasts that HP's revenue might fall to $107 billion in fiscal 2015.

Source: Hewlett-Packard is Counting on Organizational Change to Bookst Revenue Growth. In Kinicki, A., Williams, B.K. (Eds.), Management: A Practical Introduction (pp. 333). New York, NY: McGraw-Hill.

Case Analysis Questions

Answer the following in up to 175- words each:

Describe supertrends that are driving HP to change.

The various supertrends that influence organizations to change their ways of operations in order to modify their future business activities include disruptive technological innovations, market segmentation based on the unique customer demands, offering customized and specialized solutions to customers by competitors, and global market acquisitions (Hall, 2013).

One of the supertrends that drive HP to change its ways of doing business is conforming to new technologies because Whitman sees an opportunity in job cuts that will save $1 billion that the company can invest in new skills and technologies to rejuvenate its growth. Another factor is the market segmentation, in which Whitman created two business clusters to help diversify its market positions. The competitive advantage that rival companies have, for instance, while HP took approximately three weeks to prepare its sales quote, its competitors did it in a few days. Therefore, that is also a key supertrend that influences HP to change its business process.

Assess which forces for change are causing HP to undertake major organizational change.

There are a number of forces for change, which can cause organizations to create changes in their business models. These forces can emerge both from the external environment or from within the organization itself. In the case of HP Company, the decline in annual revenues is a key force that puts pressure on the organization to change. For instance, Whitman plans to reduce the operating cost by resizing and reducing the number of employees. Technological advancement is another force for change that affects HP. The shift of technology towards ink-free document and photo sharing is threatening HP's lucrative printer business. Therefore, the company is strategically turning its attention to the tablet market, which is growing at a tremendous pace.

Recommend how Meg Whitman could use Lewin's and Kotter's models of change to increase the probability of achieveing positive organizational change.

According to Lewin's theory of change, there are three basic processes through which change takes place in an organization. These include unfreezing, change, and refreezing (Cummings, Bridgman, & Brown, 2016). The declining annual sales are the primary force that drives change in the company. Therefore, in the initial stage of applying the Lewin's model of change, Whitman needs to communicate to the employees on the need for change and why the usual way of doing the business can no longer continue. For instance, she needs to have an explicit explanation of why downsizing is the best approach to solving the problem. In the second phase where the actual change now takes place, Whitman needs to revise the organization's values, brand promise, and changes the operating procedures to enhance efficiency. These are the core elements that will ensure that she successfully change and implement the new organizational culture. In the final phase, Whitman should ensure that every employee embraces the new changes and institutionalize the culture as well as having consistent job descriptions that define the organizational structure to conform with the two clusters of businesses she created.

Kotler's model of change contains eight steps that are critical for developing different ways of operation within an organization. While using this model, the first step Whitman should apply is creating a sense of urgency through identifying threats and examining opportunities that provide the basis for discussion and call for support from the stakeholders (Pollack & Pollack, 2015). The second step is to point out the true leaders of the organization to create an alliance with to ensure that she builds a strong team that contains people from different departments and levels within the company. The third and fourth steps have similarities to Lewin's model where strong values and communicating vision are the items of focus. The fifth step requires Whitman to remove obstacles that challenge and resist the needed changes by developing a structure for realignment and constant checking of possible barriers (Pollack & Pollack, 2015). The sixth stage is where Whitman should create short-term wins and develop a mechanism for rewarding the those who meet the set goals. Just like in the second phase of Lewin's model, the seventh step involves the dealing with the change itself through setting targets, analyzing every step taken, and onboarding new agents for change. Finally, Whitman will need to hold the changes to the foundation of the HP's corporate culture.

Determine how HP is following the four steps for fostering innovation.

The four fostering steps comprise of regular search, assessing, developing, and implementing innovation. Whitman understands that the HP Company has a declining performance and so there is a need to change. In the process, she identifies the problems and then comes up with ideas on innovating ways of boosting the business performance. For instance, created two clusters of businesses to exploit different market segments. Secondly, she deemed it fit to change the culture of the organization to help rejuvenate the HP Company to improve its performance. Despite having innovative ideas and implementing them, there were no clear visions and particular measures and procedures to execute the planned processes.

What has happened with HP since this case was written? Determine whether the implementation of these changes has been successful. Explain what could have been done differently.

HP witnessed some tremendous improvements in its operations and profitability. The company pulled out of the Autonomy cloud deal to resort back to its initial printers and PC business under HP Inc. and software business under HP Enterprise. In 2015, HP Inc. executed a corporate separation without a partner or customer disruption to develop two publicly-traded companies. In 2016 the company launched a multi-jet 3D printing solutions which provided an opportunity for acquiring Samsung's printer business to promote HP's A3 copier segment. In addition, the company established HP Tech Ventures that provide links with the cutting edge technology and the start-community in the Silicon Valley to promote its future growth. As a result, under Whitman, HP has positive financial growth that recorded $48.2 billion in annual financials for the fiscal year 2017 (Chan & Vasarhelyi, 2018).

References

Chan, D. Y., & Vasarhelyi, M. A. (2018). Innovation and practice of continuous auditing. In Continuous Auditing: Theory and Application (pp. 271-283). Emerald Publishing Limited.

Cummings, S., Bridgman, T., & Brown, K. G. (2016). Unfreezing change as three steps: Rethinking Kurt Lewin's legacy for change management. human relations, 69(1), 33-60.

Hall, D. S. (2013, January). TECHNOLOGICAL PROGRESS SUPERTREND. In NAAAS Conference Proceedings (p. 314). Nat...