HP Challenges Hallowed Tech-Industry Axiom

Only those employed or formerly employed at HP can tell us what it’s really like inside the compound, but a feature article posted on the Forbes website prompts some obvious questions about what’s happening behind the security checkpoints.

Then, of course, there are all the rumors about monthly layoffs. But let’s deal with the Forbes story, because it includes some fascinating details.

Mostly, when I see these CEO profiles in the business press, I prepare myself for the worst. I expect unquestioning hagiography, and, too often, that’s exactly what I get. There’s some of that in the Forbes story on HP CEO Mark Hurd, but there’s much else besides.

We learn that Hurd is driven, never satisfied, always pushing himself and his people for better results. He’s eliminated waste from HP, but he’s also relentlessly chopped at departments and their personnel. Is he still cutting fat or is he now slicing into muscle, sinew, and bone? It’s hard to say.

One thing seems certain: The natives within HP are restless. Quoting from the article:

Below the senior tier, however, HP is more miserable than restless. It consistently ranks at the bottom of its big-scale competitors on Internet sites where employees compare notes. On one (www.proletar.com/by-employees/HP.html) it scores 1.6 out of a possible 5 stars, compared with 3.3 at Cisco and 3.7 for IBM. At Glassdoor.com HP managed a 2.5 out of 5 among 1,045 employees (“If you want to be kicked like a dog, come work here!” is typical), three slots above Countrywide Financial, and Hurd got a 30% approval rating (IBM’s Samuel Palmisano, 40%; Chambers, 60%). Common complaints concern overwork, favoritism and managers looking over their shoulders in fear of not meeting Hurd’s inexorable goals. “A sweatshop,” says one low-level manager who recently departed. “No one wants to quit now, but watch them go when the economy recovers.”

The pain seems particularly acute for some of the dwindling population of long-term vets who remember HP, perhaps wrongly, as a warm and caring place. Founders William Hewlett and David Packard devised the cuddly idea of management by walking around and hosted company cookouts to buffer their hard-nosed, hard-driving approach. By contrast, HP’s executives staff arrives at headquarters in Palo Alto through a secure entrance, surrounded by barbed wire.

Wait a second. Did you catch it? “HP’s executive staff arrives at headquarters in Palo Alto through a secure entrance, surrounded by barbed wire.” Hmm. Is it Palo Alto’s version of the Green Zone? Does Hurd address the HP masses from a raised lectern on a stage protected by chicken wire?

Can a corporate culture be said to be healthy when the company’s uppermost executives are protected as though they’re in a war zone, presumably under real or imagined siege from their own employees? The mind (mine, anyway) boggles.

But here’s the truly disturbing thought, a question I tried not to ask myself: Can HP continue to churn out profits and growth even as it alienates and physically distances its own employees?

The old truism in the technology trade is that employees are a company’s greatest asset. Pursuant to the philosophy of enlightened self-interest, technology companies realized they were in an industry where success largely was predicated on innovation, knowledge, and intellectual property. As a result, people — employees who provided all that value creation — were indispensable.

But is it still true? While not alone, HP has been at the forefront of a technology-industry sea change. In recent years, but preceding the ascension of Hurd, HP has moved from a business model that relied on qualitative differentiation based on research and development to one more dependent on quantitative differentiation based on relentless commoditization of technology markets.

It’s pending acquisition of 3Com is a case in point. That deal was driven by HP’s desire to use 3Com’s standards-based, relatively low-priced networking gear as a commoditizing cudgel to put price and margin pressure on Cisco. The vast majority of 3Com’s engineering talent is in China, where engineers are not nearly as expensive as they are in Silicon Valley. Hence, HP’s cost of networking goods decreases, giving it the latitude to undercut Cisco on price.

As Ernest Park, CIO at 3M, says in Forbes piece:

“IBM doesn’t like to move on price, and Mark is very aggressive. He’s a great salesman, and he wants to get share.”

IBM doesn’t like to move on price, and, believe me, neither does Cisco. Margin is very important to Cisco, and to its shareholders. Part of Hurd’s strategy is to make Cisco bend or break on the margin issue, which is why Cisco is scrambling so hard and fast to define a network-centric vision for cloud computing and to move aggressively into those vaunted market adjacencies.

If HP wins, though, we might have to question that axiom about employees being a company’s greatest asset. According to a growing number of accounts, HP increasingly views its employees as cost factors as opposed to value generators.

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