Organizational congruence in the HP and Palm merger

Nadler-Tushman congruence model suggests that the success of a corporation is determined by the fit between the organization's different inputs. The four categories of inputs -- environment, resources, organizational history and strategy -- combine to deliver outputs. The degree of congruence between the different inputs is a key determinant of organizational success (MindTools.com, 2011). As HP and Palm come together, the inputs of the two different companies will be combined. The executives of the firms, in executing the merger, believe that there is a high degree of congruence between the inputs of the two organizations. This congruence will allow the organizations to flourish together in ways superior to the degree to which they flourish individually. When the merger was announced, there was a significant degree of skepticism with respect to the degree of congruence these two firms had with one another. This paper will analyze the different inputs, using the Nadler-Tushman congruence model, in order to determine the degree of congruence that HP and Palm have together. This analysis should lead to a prediction of success for the combined entity.

Environment

According to Nadler and Tushman (1980), the environment encompasses "all factors, including institutions, groups, individuals, events…that are outside the organization being analyzed, but have potential impact on that organization." The external environment is difficult for both of these firms. Competition in the industry is intense. While HP has responded well historically to intense competition, Palm has not responded well and as a result has faced rapidly declining sales and a depleted customer base. Competition in smartphones is driven by technological innovation and aggressive marketing. Palm was once a technological leader, but in recent years has lost that position. The economy is slumping. While this has impacted HP somewhat, it should not have affected Palm. The smartphone industry is rapidly growing and has been for a couple of years. Economic growth has rebounded in Asia, providing the combined entity with opportunity for economic growth. Demographics also contribute to growth, as smartphone use has been driven by younger consumers, with older consumers coming to the industry later. Developing markets are beginning to see an uptick in smartphone sales as well, though the leaders remain the U.S. And Europe.

There is limited impact on the combined organization from the perspective of the legal/political environment. While such actors do have the potential to impact the organization, there is no reason to believe that the combined HP-Palm will face any serious issues from this aspect of the external environment. The shareholders and potential investors also form an important external stakeholder group. Palm shareholders will be seeking value from their shares, and HP shareholders will demand that HP reap reward for its investment in struggling Palm. Investors apply pressure when they sell stocks, driving down the stock price. HP Palm will face shareholder wrath if the merger does not deliver the benefits promised, and this wrath could impact the course of HP's Palm integration strategy.

The second major input category is resources. According to Nadler and Tushman (1980), resources refers to "the assets to which the organization has access, including human resources, technology, capital, information…" the combined company is a technology leader. Palm has lost its status as a technology innovator, but HP appears to have retained its status as such. That said, Palm's patents are one of the most important assets for HP in this takeover (Ray, 2010). The Palm name is also strong, as is the HP name. This brand awareness gives HP flexibility in branding whatever new products arise. What HP is most likely to do is leverage the patents and technology that Palm has, merged it with existing HP technology and derive a superior product from the combination of technological expertise.

Beyond technology and branding, Palm and HP combine for a massive customer base including both consumers and businesses. They have excellent distribution networks and tens of thousands of quality staff members in everything from development to marketing. The assets that the two companies hold are complementary as well. Each firm is focused on a different customer base and different technologies. It is through the combination of these resources that HP believes it can derive value from Palm, with some innovations already reaching the market (Paul, 2011).

According to Nadler and Tushman, the third major input is history. Palm has long taken the view of itself as an innovator. Even though it has not been successful in its home product market, the company's culture is still one that is focused on innovation and a commitment to developing the best smartphones. This is a significant asset for HP, a firm that can give the developers at Palm substantial amounts of new technology and ideas with which to work -- and vice versa. Palm's legacy of failure is a recent phenomenon and probably has no bearing on the company's long-term organizational culture, unless HP begins to dissect the firm.

For its part, Hewlett-Packard is a long-time industry leader. While not viewed as a dynamic organization, HP has nonetheless withstood the challenges posed by a number of competitors to remain one of the world's largest computing companies. The culture is geared towards transactional management, and stability. Both of these are assets in a highly volatile industry. HP is an innovative firm that nevertheless views itself as a long-term survivor in the computer industry. This culture, if imparted to Palm employees, could boost that company significantly. Again, the history of the two companies and the impacts that those histories have had on organizational culture, complement one another.

The fourth major input is strategy. Palm does not come into this merger with a winning strategy, as evidenced by rapidly declining market share and a general slide into irrelevance. HP's strategy is based around being a differentiated player, and focused on big business customers on service contracts. The HP strategy is not entirely incongruent with the smartphone industry -- the company once had a similar position in personal computers that Palm now has in smartphones, but remains a vibrant player as a result of shrewd strategy and the ability to leverage its considerable assets. HP is well-positioned to make something out of Palm.

In particular, Hewlett-Packard acquired Palm in order to make a move into mobile computing. Palm's numerous patents fill technology needs for HP. The company combined has three different brands from which to choose for a re-launch -- Palm, Compaq and Hewlett-Packard. With Palm, HP's strategy is to use Palm's name and technology to launch a number of mobile devices and proper HP into that industry as a differentiated player, mirroring the company's position in personal computing. Another core strategy is the WebOS operating system, a mobile platform developed by Palm that HP feels is strong enough to help it compete in the intense smartphone industry.

Conclusion

HP has acquired Palm, and on the surface there appears to be a relatively high level of congruence between the three main input categories of the two firms and the strategy that HP appears to have in mind for the merged entity. However, there are risk factors and how HP chooses to address these issues could undermine the congruence significantly. If HP does not value Palm as an independent entity with a proud history, there could be significant loss of talent at Palm, to the detriment of both companies. If HP is wrong about the value of Palm's patents, a similar situation could occur. Thus, it is important for HP, in order to maintain a high level of congruence between strategy and inputs, to promote a strong Palm unit within the HP corporate family.

Works Cited:

MindTools.com. (2011). Congruence model. MindTools.com. Retrieved February 14, 2011 from http://www.mindtools.com/pages/article/newSTR_95.htm

Nadler, D. & Tushman, M. (1980). A model for diagnosing organizational behavior. Organizational Dynamics, Autumn 1980. 35-51.

Paul, I. (2011). HP's 'think beyond' Palm event: What to expect. PC World. Retrieved February 14, 2011 from http://www.pcworld.com/article/219115/hps_think_beyond_palm_event_what_to_expect.html

Ray, B. (2010). What does HP want with Palm? The Register. Retrieved February 14, 2011 from http://www.theregister.co.uk/2010/04/30/hp_palm/