The Imperative for Change: Carly Fiorina's Change Initiatives at HP essay

Introduction

It is an evident fact that organizations are in constant evolution. Since the pace of change is accelerating, organizations’ capability to introduce organizational change qualifies as a strategic imperative. However, the failure rate of organizational change remains alarmingly high (Song, 2009). In 2002, HP underwent significant challenges, which necessitated a turnaround for the company. First, HP was adjusting to a major reorganization that restructured over 80 distinct business units into four global business units. Second, HP was completing and executing its merger with Compaq. Third, the changes occurred at a chaotic period of globally weakened economy, dot-com downfall, and 9/11 attacks, which forced the primary large-scale layoffs in HP’s history.

HP was also too reliant on its printing revenues. Moreover, introduction of innovation was slow, and the customers increasingly complained about poor service and inconvenient sale processes (Prevot & Prevot, 2010). Consequently, change was needed to guarantee HP a strong future. Fiorina was considered a perfect replacement for Lewis Platt, the retiring Chairman, and a leader capable of improving HP’s fortunes. Fiorina gained reputation for being results-oriented and highly competitive. During the reinvention program, Fiorina initiated an ambitious global retraining and rejuvenation program to aid the company’s managers hasten the process of change (Song, 2009).

 

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Background

HP is a globally reputed company that draws great admiration for its products, ethics, competitive spirit, and business innovations. HP was founded in 1938 by Bill Hewlett and Dave Packard (Prevot & Prevot, 2010). The first product made and marketed by the two Stanford University Engineering classmates detailed an audio oscillator or an electronic test instrument. Hewlett and Packard introduced a management philosophy labeled the HP Way. The philosophy promoted a value system based integrity, innovation, teamwork, employee retention, respect for individuals, and contribution to the community and customers.

The envisaged plans to acquire Compaq peaked in September 2001 involved stock transaction amounting to $25 billion (Bandler & Burke, 2012). Although the acquisition obtained poor reception from industry and Wall Street analysts, Fiorina did not refuse from the idea to follow the initiative. Fiorina contended that the merger would eliminate one player within an oversupplied computer marketplace and would enhance HP’s market share. The merger constituted a crucial step in competing effectively with the giant industry player, namely IBM. Furthermore, Fiorina held that the merger would generate a full-service technology firm with the capability of doing everything from selling computers and printers and constructing intricate networks (Bandler & Burke, 2012).

Discussion

HP instituted a broad initiative called “Total Customer Experience” in an attempt to deliver superior customer experience as the differentiating advantage. Total Customer Experience (TCE) represented a systemic and flexible, end-to-end approach to establishing and enhancing products, solutions, and services from a customer-centric perspective (Prevot & Prevot, 2010). The prominent customers had for years raised concerns about HP’s failure to evolve from transactional vendor selling products, services, and support to a strategic partner availing business guidance and consultation. The absence of internal connectivity was not only a challenge for the customer, but rather it fostered weaker protection and stifled profitability growth and innovation.

Carly Fiorina adopted TCE as a strategic reorientation of HP customer relationship to reverse customers’ perception that HP experience was purely transactional and commodity-based. Fiorina sought to ensure that HP instituted a more customer-centered approach to the design and development of its products. HP recognized the need to alter the organization processes, culture, and structure in order to entrench the customer-based approach. Fiorina directed the reorganization of HP into four global business units detailing personal computing solutions, HP Services, enterprise systems group, as well as printing and imaging group (Prevot & Prevot, 2010). The new business units were expected to collaborate in order to generate new, incremental value for the shareholders and customers. Fiorina transformed the coordination of services, products, and solutions from a customer problem to that of HP (Prevot & Prevot, 2010).

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Carly Fiorina also presented a case for accelerating strategic execution via learning solution called Dynamic Leadership, which would train HP managers to improve the value of leadership conversations. HP’s Dynamic Leadership program was innovative in the sense that it allowed all of those engaged to deal with the change and become change required. The approach fostered a value-based entrepreneurial concept, in which the manager imposed the necessary changes even amid unstable business environment. The program also sought to minimize conversational waste responsible for demotivation and dampening of valuable action. The dynamic leadership program focused on the acceleration of high performance, alignment, and collaboration. The goal of Dynamic Leadership centers on substantial enhancement of HP managers’ capability to accelerate “time-to-value” for HP employees, customers, and shareholders. The objective was to make HP more customer-focused, centralized, but agile (Prevot & Prevot, 2010).

HP Change Initiative through the Eyes of Leader and Follower

One of the top agendas for Fiorina was to alter HP’s operations and culture by increasing HP’s sense of urgency, revitalize competitive spirit, and focus on speed of the customer delivery. HP CEO Carly Fiorina sought to revive the innovative heritage of the firm, accelerate strategic change, and catalyze HP’s profitable growth (Bandler & Burke, 2012). Fiorina also saw the need to adopt a different style of leadership given that the previous leadership habits matched the autonomous, vertical business units. Consequently, the previous leadership styles were inadequate for propelling cross-boundary efficiency, innovation, and speedy change. According to Fiorina, HP Way dealt more with the change, creativity, innovation, and bold moves, which contrasted the conventional perception of gentle bureaucracy or consensus and entitlement (Bandler & Burke, 2012). 

The biggest opposition to Fiorina’s change efforts stemmed from massive restructuring of the company, which necessitated the firing of more than 15,000 employees. Some of the workers perceived the restructuring as an antithesis of HP Way in the sense that HP’s corporate valued employee retention. Other employees criticized Fiorina for negotiating an exorbitant compensation package and introducing a rigorous and less generous worker evaluation system. Fiorina also faced criticisms for launching a $200 million marketing campaign intended to shift the company’s brand identification, which altered the firm’s name in advertisements from Hewlett-Packard to HP (Bandler & Burke, 2012).

The Successes and Failures of Fiorina’s Change Initiative

Fiorina’s vision of HP was both sound and radial. Undoubtedly, Carly Fiorina was a face of innovation and change at HP during her tenure, and most of her change initiatives transformed HP into a globally competitive company. Fiorina was exceptional in creating and leading change, primarily based on an emphasis to have clear metrics in order to appraise progress. The outcomes of the change initiatives heralded successes in three core areas: organization/process, culture, and product. The “Dynamic Leadership” program generated savings and revenue close to 15 times of its cost (Prevot & Prevot, 2010).

Analysts trace HP’s corporate governance problems to the company’s merger with Compaq in 2001. Although the merger succeeded, Carly Fiorina faced strong objections from Walter Hewlett, an heir to the co-founder William Hewlett. Fiorina's tenure was primarily characterized by persistent board infighting, which culminated in her dismissal in 2005. Fiorina blamed the infighting to personality conflicts, which rendered the board dysfunctional. The infighting implies that Carly Fiorina did not completely get the approval of all the followers during the change initiatives that she directed. The failure of Fiorina’s change efforts results from the weak performance of HP’s stock in the aftermath of the merger.

Concepts and Theories Used to Foster the Change Process

Organizational change is an intricate activity, and any misstep in the change process could yield the failure. Itay Talgam, a symphonist, imagines conducting music as a model leadership and demonstrates the significance of a sense of collaboration and leadership (Eberts, 2009). Talgam stresses that effective leaders listen and react to the moment intuitively or subconsciously with the fellow players. The HP change story demonstrates the failure to recognize different interests when initiating organizational change, which can lead to poor outcomes.

Leaders should consider the quality requirements of a decision and the probability of subordinate acceptance prior to selecting a decision procedure (Palmer, Dunford, & Akin, 2009).  Under the circumstances of change management, the leaders are expected to harness the capabilities and skills of others in order to adapt to diverse situations in a collaborative way (Pathak, 2010). Consequently, success depends on several variables, including leadership style, circumstances, and qualities of the followers. Fiorina’s mistakes in the change initiatives demonstrate that leadership effectiveness is reliant on the situation and environmental influences and not merely the traits of a leader. Although Fiorina’s change efforts were fast and furious, she exhibited some deficiencies in the form of rigidity and failure to delegate the tasks.

Transformational leaders' change initiatives succeed irrespective of the cultural backgrounds. Therefore, leaders who succeed in appropriately dealing with the cultural issue at play qualifies as competent. Transformational leaders are those who possess the competencies to focus on change initiatives that would be fruitful for the business (Palmer, Dunford, & Akin, 2009). Carly Fiorina can be considered an authoritarian leader, rather than a transformational leader in the sense that she created divisions between herself and her followers. Indeed, the executive decisions were made independently with minimal input from the employees (Bandler & Burke, 2012). Consequently, decision-making was less creative, which fuelled the perception that Fiorina was bossy, dictatorial, and controlling. Notwithstanding, Fiorina can be praised for recognizing the need for change and not being satisfied with the status quo. Despite the proxy fights and rejection of the merger by David Packard and William Hewlett, Fiorina ensured that the merger was implemented successfully.

Planned change is designed to render the organization more efficient and effective. The employee and board attitudes, beliefs, and intentions imply that Fiorina failed to create organizational readiness for change. Indeed, Fiorina failed to produce short-term wins to ensure that employees recognize the benefits of the change process. Resistance to change primarily stems from the uncertainties and potential outcomes of a change process. It can range from subtle acts such as sabotage, hostility, and outright defiance (Quast, 2012). The best approach to averting resistance to change is uncovering the resistance to change even prior to implementing it (Quast, 2012). Fiorina’s failure in the change initiative stems from her non-recognition resistance to change and strategize around its sources. In order to minimize resistance to change, Fiorina should have established: (a) the specific changes included; (b) the people these changes will influence; (c) how the changes will impact on the subjects; and, (d) how those affected by the changes might react. However, in reality, it is hard to guarantee that the organization remains aligned with the external influences given that every subtle change can present its reactions.

The Mixed Impact of the Change on HP as an Organization

Carly Fiorina accomplished what she had been hired to do; delivered a change and turn around the company. Fiorina’s change initiatives played a significant role in acting as a conceptual road map for HP and directing the future of the organization. The merger of Hewlett-Packard with Compaq Computer transformed the company into one of the world’s biggest PC maker. Nevertheless, Fiorina’s change failed to exploit the emerging market opportunities and deliver enhancement in HP’s profits and stock price. Although the merger generated some advantages, such as cutting costs, it did not provide the synergies promised.

Successful change demands shaping of a compelling vision of the future that aligns with the organizational culture. Kotter outlined eight steps to ensure the effective change, in which individuals’ see, feel, and change. Kotter’s eight-step change model recognizes the need to increase urgency, constitute the guiding team, and model a vision for change (Kotter, 2007). Kotter also highlights the need to communicate for purchase, empower action, generate short-term wins, encourage determination and persistence, and ensure that the change sticks (Kotter, 2007). Principally, Fiorina failed to shape a compelling vision of the future that aligned with HP’s organizational culture.

The Sustainability of the Change Effort at HP

Fiorina committed to making HP an industry leader by providing unbeatable customer experience. In order to consolidate the change, Fiorina, first, sought to ensure that the merger got formalized. Second, Fiorina embarked on “selling” the change to the staff, albeit with diverse degree of success. She engaged in a series of technological “coffee talks” and symposiums with HP engineers to convince those questioning the validity of HP’s riskiest move. After the merger of Hewlett-Packard with Compaq, HP promised the marketplace that the new entity would avail an alternative to IBM. During the years following her resignation, Fiorina’s cost reducing measures coupled with the acquisition of Compaq helped to increase revenues and the growth of HP’s PC business. To a large extent, Fiorina’s change efforts played a crucial role in building trust in the brand and fostering a culture of engineering innovation. During the reign of Mark Hurd, who replaced Fiorina, the company’s stock price doubled, earning per share quadrupled, and HP became number one among the companies producing PC, printers, and servers shipments.

For a long period, HP had been ranked one of the best companies to work for owing to high reputations of being a “people first” organization. However, by 2005, employees’ trust in HP had deteriorated fuelled by increased employee dissatisfaction caused by perceived executive’s disrespect and unfairness (Bandler & Burke, 2012). The dysfunction that characterized the vicious infighting over HP’s merger with Compaq in 2002 still plagues the company today in the sense that HP board remains dysfunctional. Indeed, HP has not recovered from the crisis yet out as demonstrated by ominous trajectory of decreasing margins and market share. Largely, HP has been dogged by lack of strategic direction, poor execution of change initiatives, and absence a long-term plan.

Conclusion

Fiorina’s change initiatives were valuable and necessary, especially in responding to economic and competitive pressures. Fiorina succeeded in restructuring HP and exploiting market opportunities by merging Hewlett-Packard with Compaq Computer. However, there is some level of incompetence that arose during her change initiatives, especially due to her failure to create short-term wins. Fiorina also failed to debunk the notion that she was killing HP’s corporate culture (HP Way). A vision for change is needed to give direction to the employees and ensure that all the staff share aspiration toward the imminent change. According to the opinion of Itay Talgam, Carly Fiorina would be a poor symphonist, and consequently, a weak leader for failing to collaborate and connect with the fellow players. Fiorina may not be considered transformational owing to the unprecedented chaos that characterized the proceedings and road map toward the Hewlett-Packard merger. Notwithstanding, Fiorina demonstrated great determination to shape the vision and changes that HP would implement to guarantee a healthy future. She showed a lot of competencies in her quest to economically transform HP into a dominant company capable of challenging IBM.