Review the case study illustrated below and answer the questions based on the Hewitt-Packard Company Case study.
Question 1. Recommend a leadership style or combination of initiating structure and consideration the CEO should adopt to address the problems of distrust and declining morale. Explain your answer.
Question 2. After having examined all of the issues facing HP, recommend whether the CEO should focus on the approach to the current strategy or on implementation and execution. Explain your decision.
Hewlett-Packard Case Study
After Hewlett-Packard fired CEO Carly Fiorina, new CEO Mark Hurd found himself in charge of a struggling, dysfunctional corporation. The strategic vision Fiorina had been using to guide the company, "digital, virtual, mobile, personal", was vague, and no one knew if it was being executed or not. A confusing matrix structure blurred accountability lines and slowed decision making, and the company reward system was so complex that no one knew how performance affected their bonuses. Talented executives were leaving, and H-P was having trouble attracting new ones.
If those troubles weren't enough, H-P was struggling financially. After acquiring Compaq Computers for $19 billion, it cost H-P another $10 billion to integrate the H-P and Compaq systems. The combined company was riddled with pervasive distrust. And when a board member leaked confidential information to the press, the subsequent scandal (involving spying and phone tapping) ended with Hurd having to testify before Congress regarding what he knew of the situation.
One of H-P's major problems was that it was under managed. Fiorina had been known as a broad visionary, who was highly visible in the press. Many inside H-P, however, felt she didn't provide enough direction. The board ultimately hired Hurd because of his focus on execution (management). Hurd began working with the lower divisional levels to make sure operations were running smoothly. Hurd said, "We need to temper the idea that this company needs to have some earthshaking event every 15 minutes...our job is to execute." After a review, Hurd asked divisional manager Nora Denzel how he could help improve her division. Denzel said, "I asked for three things. By the time I got back to my office, they were all done."
One of Hurd's first decisions was what to do with Fiorina's strategic vision. Hurd chose to keep the strategy but recast it into something more concrete, offering specific visionary purposes. Executing this strategy involves tackling operational issues, like the matrix structure, which had H-P's single sales division reporting to four or five division heads at once. Hurd divided up the sales division, so that each of the major H-P product divisions had its own dedicated sales division. Similar simplifications were implemented in the bonus system, which was so complex that no one understood how their performance affected their bonuses. The new plan links bonuses directly to divisional and company performance.
In the past, H-P management had been friendly, approachable, and supportive of its employees. Under Fiorina's more autocratic style, many employees felt that they were no longer working with her but for her. When Hurd arrived, his work style proved to match more closely to the traditional "H-P Way". Some decisions, however, had to be made to ensure productivity, and these ultimately led to the lay off of 14,500 employees to help keep H-P under budget.
Within two years of Hurd taking the CEO position. sales at H-P increase by $10 billion, and the stock price rose 80 percent. Though it's still early to tell, Hurd's leadership looks promising. H-P "is a company that is transforming," Hurd said. "We are not [yet] transformed.