HP's Organizational Culture and the HP Way Explained

Introduction to Organizational Culture

Historically, many definitions of organizational culture have been offered across different bodies of literature. The most widely cited informal definition is simply "the way a company does things." More formally, organizational culture refers to the attributes of an organization — specifically, the shared ways in which its members understand problems and respond to them. At its core, organizational culture encompasses the values and beliefs that people within an organization hold in common. It can be understood as a system of shared values (what is considered important) and shared beliefs (how things work) that interact with a firm's people, organizational structures, and control mechanisms to produce consistent patterns of behavior (Sun, 2008).

Although many definitions exist, organizational culture comprises a set of values, beliefs, and understandings that members share. Culture also provides appropriate ways of thinking, feeling, and reacting that can assist managers in decision-making and in organizing operations within a company (Robert, Phillip, and Marshall, 1999). A successful organization should therefore possess a strong culture capable of attracting, retaining, and rewarding employees for achieving its objectives. Dedication and cooperation characterize such strong cultures, which are oriented around common values.

Most importantly, four primary themes underlie organizational culture: culture is a learned entity; culture is a belief system; culture is a strategy; and culture is mental programming. Organizational culture creates a sense of identity among employees and generates a competitive advantage by helping employees understand what behaviors are acceptable. It also plays a vital role in influencing employee behavior through managerial tools such as strategic direction, communication, and goal-setting. Organizational culture can further serve as a tool of management control (Sun, 2008), allowing managers to use selected rites, stories, symbols, and values to shape employee behavior — an approach that is particularly effective because of its capacity to build commitment to the firm and its objectives.

Hewlett-Packard Company Overview

Bill Hewlett and Dave Packard, Stanford University classmates, founded the Hewlett-Packard Company in 1939. The company's innovative approach led to the development of its first product — the audio oscillator, an electronic instrument used by engineers to test and improve sound systems. Beyond developing innovative technology hardware, HP demonstrated a consistent interest in acquiring horizontal and vertical technology businesses internationally. While many computer firms struggled in the early 1990s, Hewlett-Packard was enjoying notable success (Robert, Phillip, and Marshall, 1999).

In addition to the oscillator, the company manufactures computers, calculators, medical electronic equipment, chemical analysis tools, and other technological devices. In 1993, HP posted a 100% increase in revenues while cutting prices by 40%, and profits rose at an average rate of 23% annually between 1984 and 1994. Most significantly, HP was the only major computer company to remain consistently profitable throughout the global recession of that period. By early 2001, HP employed 85,000 people and operated 104 divisions across 120 countries.

The HP Way Culture

HP has frequently appeared in Fortune magazine's "most admired companies" surveys over the past several decades and holds a long-standing reputation as one of the most philanthropic corporations in the world. During the waves of downsizing and job insecurity that characterized the early 1980s and 1990s, HP stood apart by providing employment with a high degree of job security. As a result, the firm became a preferred employer for top science and engineering graduates from leading universities in Europe and North America.

Hewlett-Packard grew and endured over the decades through a carefully defined organizational philosophy known as the "HP Way." This approach is considered exceptional because it has demonstrably worked for the company over many generations of leadership. The two founders established the company in a garage in Palo Alto, California, and during those early years they developed managerial concepts and principles that evolved into a comprehensive set of corporate objectives and business practices — the HP Way. Central to this approach was a participative organizational style that supported individual freedom while emphasizing the importance of teamwork (Robert, Phillip, and Marshall, 1999).

As the company expanded, management made deliberate efforts to preserve the sense of purpose, closeness, and familiarity that had characterized its early days. The HP Way instilled trust in employees to make decisions independently, learn from mistakes, and contribute meaningfully to the company's growth. Functioning as a kind of cultural control mechanism, the HP Way provided a framework of values that encouraged self-directed employees to pursue personal autonomy, goal-setting, self-learning, and self-discipline. This approach allowed for substantial employee flexibility and adaptability (Robert, Phillip, and Marshall, 1999).

Conclusion

In the event of a significant decline in product demand, HP would benefit from supplementing its foundational culture with elements of a market culture. Unlike the HP Way, which centers on employee well-being and customer satisfaction, market culture is oriented toward competition and the achievement of measurable organizational objectives (Ashkanasy, Wilderom, and Peterson, 2000). This culture focuses on the external environment — consumers, competitors, and profits — and requires leaders to prioritize productivity as a driver of financial performance. In a market culture, employees are aligned around delivering quality work quickly and responding rapidly to market shifts. Executives are held accountable for meeting specific sales targets to prevent further decline. This cultural adaptation could equip HP to compete effectively in a volatile, fast-moving market while navigating reduced demand for its existing products.

Organizational culture is central to how an organization operates. It benefits workers by providing a sense of identity and creates a competitive advantage by establishing shared standards of behavior. Organizational culture is also an effective managerial tool that companies can use to build long-term commitment. The HP Way is a prime example of an organizational culture driven by core values that has enabled the company to survive serious financial challenges over many decades. As this paper demonstrates, strong organizational cultures are not one-size-fits-all; different forms of culture suit different companies and circumstances. The market culture, for instance, offers a viable strategic framework for organizations facing declining product demand, providing the competitive orientation needed to sustain performance under pressure.