Organizational change: drivers, strategies, and implementation

Hewlett-Packards' restructuring announced by the company on July 19, 2005 (Hewlett-Packard 2005) was in the opinion of many financial and industry analysts, overdue. HP as one of the leading technology companies in the world, had lost touch with tis customers and often created barriers for their customers to work with them across product divisions. With a highly static, rigid, and regimented organizational structure, it was common for a large company, such as Amazon.com for example, to have to work with up to ten different departments if they wanted to purchase computer servers to run their website running multiple types of operating systems. Further, Amazon.com would need to work with separate divisions to purchase laptops, a separate division for printers, and even a separate division for supplies. The Amazon.com example was often discussed by financial and industry analysts as a case in point and highly symptomatic of just how fragmented and balkanized HP had become.

The steps HP took to restructure itself to be a more agile, customer-focused organization began by bringing sales and marketing efforts directly into the business units themselves, instead of having centralized functions. Moving sales and marketing directly into each business unit not only assured a higher level of responsiveness to customers due to much fewer layers of inter-divisional communication to go through, but also made each sales and marketing department much more accountable to customers. Additional aspects of the restructuring, HP chose to dissolve the Customer Solutions Group (CSG) and re-assigning sales and marketing staff into the Technology Solutions Group (TSG), Imaging and Printing Group (IPG) and Personal Systems Group (PSG). The intent of this change, in addition to the ones shown in Figure 1, was aimed at driving greater levels of accountability and agility in serving customers. In addition, HP realized that through the analysis of how to become more customer-focused, there was significant duplication of effort in the number of associates they had on staff. While HP did not disclose the number of associates they discovered were consider a duplication of effort, they did disclose that they needed to drastically trim expenses, and also announced plans, over the 2005-2006 timeframe, to let 14,000 employees go. Clearly Mark Herd, CEO of HP, saw the need for a more streamlined company to better serve customers, and the need for drastic cost reductions at the same time. Figure 1 illustrates graphically the extent of changes completed.

Figure 1: Restructuring at the Senior Management Level

Source: Moors & Cabot (2005)

Impact of Restructuring on Employees

With a significant change in the organizational structure, including a major change in accountability and also responsibilities, employees initially were fearful that their jobs were in jeopardy if things did not improve. There was also the dread of realizing that with so many associates leaving voluntarily or being let go all the work that was going to now need to be done by the remaining employees.

What HP concentrated on was the redefining of processes within each business unit to be more customer-centered. Employees were specifically asked for their inputs and opinions of how to make processes within the jobs more aligned to the customer, and less focused on just completing for meeting internally-focused and often irrelevant metrics of performance as far as the customer was concerned. The skills needed by workers first centered on re-defining and then taking ownership of their new jobs. HP chose to rely heavily on the Business Process Management (BPM) concepts of Dr. Michael Hammer in redefining their business units to be more customer-centered.

Dr. Michael Hammer in his many books on this topic including the Agenda (2003) illustrate through examples and intensive analysis of how companies can improve their performance through examining their many processes and re-defining them for greater competitive performance. HP chose to first re-define customer-facing processes first, looking for greater effectiveness in reaching prospects, channel partners and customers and working with them. Davenport (1992) prescribes a five-step approach to the Business Process Reengineering model. HP relied heavily on this model in pursuing their change management strategy within their company. The five steps are shown below:

Develop the customer-driven vision and process objectives first: The BPR method is driven by a vision which implies specific selling and service objectives including the development of an entire series of new online selling and service skills, online ordering tools that traverse all product divisions, and the use of the Internet as collaboration medium.