The Great ‘HP Way’ Is Packard’s Legacy to American Business
If the leaders as well as the critics of American business study the legacy of David Packard, who died of pneumonia Tuesday at age 83, we’ll all have less anxiety about corporate downsizing and whether our society can hack it in the new age of information.
From the very beginning in 1939, the company Packard founded with William Hewlett epitomized uncommon virtues. It was open, egalitarian, adaptable and innovative.
There were no offices at Hewlett-Packard headquarters in Palo Alto--not for supervisors nor for staff engineers. Instead there were workplaces separated by low-rise partitions in an enormous light and airy room with walls mostly of glass.
The design was intended to encourage sharing of ideas and esprit de corps. It fostered a modest, hard-working culture that became the model for Silicon Valley, and beyond it the model for a new kind of business organization associated with the Western United States.
The office buildings, carpeted executive suites and limousines common to traditional corporations in the East were out of place in the Northern California atmosphere favored by Packard, a Colorado-born, Stanford-educated electrical engineer.
Packard and Hewlett, who started out making electronic test and measurement equipment, kept company divisions small--no more than 1,500 people each. Packard “never wanted the organizations to get so large that the people in them would lose pride in the work their division was doing,” said a longtime associate.
Packard’s credo was, “Get the best people, stress the importance of teamwork and fire them up with the will to win.” For many people, such words are mere rhetoric. For Packard, they were a business plan.
Packard didn’t vary even as the company grew to its current $31.5 billion in sales and 96,000 employees--20,000 more than it had 10 years ago. He continued to press for decentralized operations, individual initiative and a no-frills atmosphere.
Successful business creates wealth, for many. Packard himself has a fortune estimated at $3.7 billion by Forbes magazine. HP’s stock has grown ninetyfold in the last 25 years alone and today has market value of $49 billion.
Packard’s most successful lesson for business was the “HP Way,” a set of policies regarding products, pricing, customer relations and employee responsibilities that all staffers had to know and live by at all the firm’s far-flung locations.
The HP Way was not a form of corporate group-think but a system of standards designed to allow collaborative initiative. One of the most famous instances of its working was the development of HP’s computer printer business.
In 1981, Richard Hackborn, a Boise, Idaho-based HP manager in electronic instruments, saw that HP could bring out a small, inexpensive desktop printer if it adapted a computer engine from Canon of Japan.
To do so, Hackborn had to go outside HP’s own sales force and agree to pay royalties to Canon. But with little fuss he got a go-ahead from headquarters and made an enormous success of desktop printers. HP leads the world in printers and earns more than a third of its profit from them.
Packard understood bureaucracy. He served as deputy secretary of defense from 1969 to ’71 and introduced many reforms to defense contracting.
But asked when leaving government what he thought were his most significant accomplishments, Packard replied: “We’ll have to wait five years to see if there are any accomplishments. Once new ideas get down into the bureaucracy, they get smothered.”
That insight had echoes decades later when at the age of 77, Packard and Hewlett went back into their company to shake it up because they feared it was succumbing--even if inadvertently--to bureaucracy.
Competitive business is no picnic. HP in 1990 was making a major and risky move--committing 10% of sales to a single research program--to try to stay current in the computer business. Because of the risks, more decisions were being cleared with headquarters.
But Packard and Hewlett, who together owned 21% of the stock, didn’t second-guess from outside. They met with groups of employees and decided in spite of the risks to decentralize the company once again by moving some operations away from headquarters.
Note, they didn’t institute massive layoffs, replace management or cause a furor in the public markets. Instead, they calmly decided that individual initiative was more important than the seeming efficiency of centralized decision making.
And so it turned out to be. HP, with a product range from scientific workstations to personal computers, is regarded by many as the world’s most successful computer company. “If we didn’t fix things,” Packard said in 1993, “we’d be in the same shape as IBM.”
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The ‘HP Way’
David Packard, the Hewlett-Packard Co. co-founder who died Tuesday, will be remembered for a management style that emphasized teamwork and an entrepreneurial spirit. Here are key elements of Packard’s philosophy:
* Decentralization: He eschewed bureaucratic management practices and believed in dispersing power throughout the company, allowing his employees to work in teams without management intervention. He often split up divisions after they reached 1,500 employees.
* Openness: He encouraged employees to leave their work out on their desks so others could tinker with it and offer suggestions to improve a design or product. He also did away with executive offices, turning instead to cubicles without doors.
* Management by Walking Around: Using a technique taught in most business schools, he stayed close to his employees by meeting with them individually and asking what they thought of the company’s policies and how they would change them.
* Management by Objective: To sway his executives away from micromanaging, he and his managers set practical goals and then let employees decide how to reach them.
Sources: Times and wire reports
Researched by JENNIFER OLDHAM / Los Angeles Times
