Organizational Analysis Essay

Question

Organizational Analysis Essay Guidelines

A. Pick an organization or an organizational situation to analyze (for example: National Football League safety, hazing, or frequent criminal off-the-field behavior; Major League ramped drug use crisis; or HP from 1998 under Carli Fiorina to her departure, etc.).

B. Essay Contents and Structure

1. Analyze the organization from two different perspectives:
(a) Leadership
(b) Culture
2. Discuss changes in the organization from the writer’s point of view as a consultant to the organization, present your analysis and prescription for change.

C. The analysis should be as thorough and systematic as possible (On par with a upper level undergraduate student). The final product must demonstrate a good grasp of theory and concepts and go beyond just personal opinion. The reader will look at how deeply the essayist understands managerial and organizational dynamics and can use his knowledge to improve organizational functioning. When making an assertion about the organization, (e.g., its goals were unclear), be sure to support your assertions with evidence (e.g., when members were asked what the organization’s goals were, no one knew). Make sure to document all sources of data.

Answer

Abstract

Leadership and culture are two critical factors that influence the way an organization operates. It is sometimes necessary for a company to change its organization culture in order to adapt to the prevailing business environment. Such changes also create the right atmosphere for innovation and organizational reorientation. This study investigates efforts by Carly Fiorina to transform HP into a highly competitive firm with a new, highly aggressive culture. Carly Fiorina was CEO of HP between 1998 and 2005. Her tenure turned out to be highly controversial because of her autocratic leadership style. This paper found out that although she understood the strategic direction that HP needed to take, she did not succeed in steering the company towards this direction. Her aggressive approach triggered a lot of resistance at HP. Fiorina was unable to handle this resistance largely because of her autocratic leadership style.

 

Contents

Abstract 2

Introduction. 3

HP culture under Carly Fiorina. 3

HP leadership under Carly Fiorina. 8

Prescription for change. 10

Conclusion. 11

References. 13

 

Introduction

In every business organizations, managerial dynamics tend to influence performance. The leadership of the organization tends to be picked out for blame whenever the goals set are not attained. Similarly, culture also plays a critical role in determining the way a business organization operates and how it adapts to change. Companies whose organizational cultures do not permit change are likely to start experiencing problems in terms of innovation, productivity, and ultimately financial performance. It is the responsibility of organizational leaders to ensure that the prevailing culture is compatible with the new business environment.

The aim of this paper is to carry out an analysis of Hewlett-Packard from 1998 when Carly Fiorina was appointed President and Chief Executive Officer to the time of her departure from the company in 2005. The analysis is done from two perspectives: leadership and culture. On the basis of this analysis, the paper prescribes the changes that need to be made to the organization.

HP culture under Carly Fiorina

Carly Fiorina joined HP at a time when the company was still clinging onto the “HP Way” culture (Schein, 2006). The HP Way is a culture that was introduced by the founders of the company, David Packard and William Hewlett. Packard remained active in the HP business 1994 while Hewlett remained until 1987. While still in business, these founders were keen to ensure that the company did not break away from its past as far as culture is concerned. Even after retiring, the founders continued to ensure that those who were appointed to the leadership positions upheld its distinct culture that emphasizes on elimination of hierarchies, innovation, and profit-sharing.

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The HP Way culture is based on the idea that smart people will always make the right choices if they are given access to the right tools and authority. This culture also puts a lot of emphasis on profits at the expense of revenue growth. For decades, the HP Way has become more or less like a religion. Since its formulation in 1957, this culture provides unwavering support for the principles of open door management, teamwork, egalitarian pay practices, flexible working hours, and full employment (Burrows, 2003). The culture also encouraged leaders to embrace the concept of management by objectives. Under the founders’ watch, HP had also become famous for putting the concept of “management by walking around” into practice. In other words, the HP Way focuses on people and profits (Henri, 2006).

When Carly Fiorina joined HP during the late 1990s, the challenge of the onset of the internet age had already set in (Zahra, 2004). The internet revolution had already brought about several business dynamics in the industry. One of the challenges was that consumers and corporate buyers were more interested in technology solutions than with off-the-shelf items. Another challenge was that companies in the industry need to leverage the internet as a way of attaining competitive advantage. By failing to shift its business operations towards technology, HP lost many customers to IBM. On the other hand, HP also lost customers to Dell, which did a better job of attaining competitive advantage by leveraging the internet.

It seems HP failed to rise to the internet challenge because it was too preoccupied with efforts to preserve the HP Way. The company faced the need to maintain a balance between central control and decentralization (Cameron, 2011). One of the ways of doing this was by delegating strategic decision-making to heads of different business units. The biggest problem came when the business heads failed to agree on the right course of action. These disagreements posed a major threat to HP’s strategic direction. The company was still grappling with this problem when Carly Fiorina was appointed as president and CEO.

In 1998, HP was compelled to hire a consultant to enable it assess its strategic options. The consultant suggested that the company should do away with all businesses that were unrelated to the printers and computers. Consequently, HP sold of its test and measurement unit. Soon afterwards, HP hired another consultant in efforts to review the company’s culture. This time round, the consultant suggested that the company needed to leverage on its high level of employee loyalty and corporate integrity. At the same time, the company needed to revive its confidence and aggressiveness. HP was found to lack the sense of urgency in the implementation of its core business strategy compared to its competitors. The consultants observed that although everyone seemed to appreciate the need to respect the HP Way, every individual tended to pursue his own agenda. Over time, HP Way had turned into a bureaucracy. The organizational culture that had led to the growth of the company had started to be counterproductive.

Therefore, when Lewis Platt declared his intention to retire, HP embarked on the search for a new leader. The company was searching for a new leader who could bring in a new vision, bring a sense of urgency in all operations, and conceptualize strategies. For the first time, HP broke its own culture of promoting insiders when it hired Fiorina as president and CEO. Fiorina was appointed because of her charisma and her meteoric rise in the corporate world at AT&T and Lucent Technologies. In October 1998, Fortune Magazine had singled out Fiorina as the most powerful female executive in America.

However, her tenure at HP turned was marked with a lot of controversy. While accepting the appointment, Fiorina pointed out that she would have to work hard to achieve a balance between reinforcing HP’s culture and reinventing its business. Her ouster in 2005 indicates that she was not successful in this undertaking. While commenting on the decision to fire her, HP’s board members pointed out that they agreed with Fiorina regarding the actions that HP needed to undertake to reinvent itself but disagreed with her regarding how to attain this goal.

Fiorina arrived at a time when the internet revolution was shaking up the market, thereby compelling computer companies to change their cultures and corporate styles. However, the problem with its culture continued to hinder progress. Bureaucracy was at its peak in the 83 units within which HP was operating. Jeffrey Cooke, the company’s vice –president, had already acknowledged the existence of this problem when he pointed out that synergy among these units was lacking. In another situation, a former executive at the company pointed out that he had chosen to leave the company because he was managing bureaucracy 80 percent of the time. Evidence of a bureaucratic culture at HP was gathered from an incident in which four Best Buy managers requested for some computer products. Fifty HP employees arrived at the company’s offices to push their respective unit’s wares. Moreover, two other companies, Beoing and Ford Motor Comopany, had complained that numerous sales teams from HP were putting too much pressure on them to purchase specific products instead of addressing all their needs in a holistic manner.

HP’s culture was in need of transformation in order to fit into the highly competitive era in which major competitors such as Dell were waging very destructive price wars. Without revamping the traditional culture of the company, this goal would not be achieved. Among the things that Fiorina wanted to do include justifying the need for HP to continue with its core line of business, coming up with a new advertising strategy, and outlining a new plan to revamp the company’s traditional culture. The CEO’s flamboyance enabled her to confront the executive council of the company with demands on information on any strategy that would suffice as an alternative to the drastic restructuring program that she was about to introduce.

Fiorina took over HP at a time when the company was operating as 83 separate divisions. One of her first objectives was to create a single front through which the company could undertake its operations. To achieve this goal, she had to alter the existing bureaucracy by using her office to consolidate power. Two major groups emerged: the product-facing group and the customer-facing group. This strategy worked out well because once again, customers started perceiving HP as a single company with a unified strategy.

In terms of culture, Fiorina was opposed to her predecessor’s strategy of “management by wandering around” (Johnson, 2008). She argued that this culture encouraged all people to say no. She sought a more aggressive policy of dismissing sales representatives who performed poorly. This policy was the exact opposite of the traditional culture at HP, where those who performed poorly always got a chance to improve over a period of one year. HP’s employees were used to a traditional culture in which employees got a share of the company’s profits every year. Fiorina scrapped this culture and replaced with a new one whereby employees were given bonuses on the basis of HP’s performance in comparison to that of its competitors. Although HP reported a profit in 2001, its employees were not given a bonus. This was the first in 39 years that employees were being denied access to a bonus. Since the bonus used to be paid out on a yearly basis, sales personnel had formed a culture of procrastinating till the last quarter. Fiorina solved this problem by changing the period of the bonus to six months.

HP leadership under Carly Fiorina

When Carly Fiorina joined HP, she was expected to use her charismatic leadership skills to transform the organization. HP needed a radical transformation to survive in the digital era. One of the radical measures that Fiorina undertook was the acquisition of Compaq Computer Corporation for $19 billion. This acquisition was as highly publicized as it was controversial. This development triggered a fierce proxy fight in which family-led shareholders attempted to block the takeover of the giant computer company. Fiorina was confronted with the responsibility of providing a precise strategic direction at a time when her critics were doubtful about the wisdom of the acquisition.

Fiorina’s was never afraid of firing high-ranking company executives. She was also more than willing to ensure that those who failed to tow her line eventually bowed to pressure by resigning. In essence, her leadership strengths started turning into a weakness because she brought in too much tension at HP. People were not used to this tension, and therefore an environment of resistance started emerging. In the first months of 2004, HP failed to meet its projections in terms of financial performance. The company’s board of directors started exerting pressure on Fiorina to turn things round at the company. Eventually, the board ousted the CEO in February 2005.

In terms of leadership, many things went wrong at HP during the five and a half years that Fiorina was at the helm. One may argue that it was paradoxical for HP to hire a charismatic leader to bring about organizational change in a company that was famous for its traditional culture. An assessment of the reasons why Fiorina failed as a leader should be undertaken in order to gain a better understanding on the best way of transforming a company. Alternatively, one may argue that Fiorina would have succeeded in the transformation work if she had executed the company’s strategy in the right way. It seems that she went too far in her efforts to change the existing organization structure, thereby triggering a wave of rebellion.

In the face of subtle resistance from employees, Fiorina exuded too much confidence. She did not realize that the company’s loyalists were deeply concerned about the way she was killing the company’s legacy. Although conflicts were inevitable, the way they were managed would greatly determine the extent to which the new CEO attained her goal of revitalizing the company. Fiorina did not foresee a situation in which the battles would become bitter, public, and protracted.

Most people at HP were opposed to her autocratic style of leadership. She overlooked many simple gestures of affection that had been an integral part of the company’s cultural heritage for decades. For example, she refused to join employees in staff canteens for meals. Hewlett and Packard, the company’s founders, were famous for practicing this tradition. In other words, she acted in ways that made employees develop a perception of high-handedness.

It is unacceptable for a leader to pass the blame to lieutenants all the time. Yet this is precisely what Fiorina used to do at HP. She compelled many senior managers to take the blame for poor performance, in many cases by resigning. This attitude made her extremely unpopular at HP. In situations where senior managers were always being singled out for blame, a wave of rebellion was likely to emerge (Ravasi, 2006). This is precisely what happened at HP when Fiorina was president and CEO. Her desire for publicity made her to appear to be creating her own brand instead of building on the brand of HP.

 

Prescription for change

HP needs to reorient its culture for it to become competitive in the current environment. Efforts should be made to ensure that new CEOs do not do away with the HP Way. This organizational philosophy is useful because it has brought the company to the point where it is today. Efforts should be on building strategic partnerships. One of Fiorina’s greatest failures was to let her celebrity status get in the way of his role as a leader at HP. In her status as a celebrity, she made the merger with Compaq look like it was all about the wishes of one person rather than the strategic direction of a Fortune 500 company.

The fact that Fiorina failed as CEO does not mean that HP no longer needs to take the strategic direction it had embarked on with her arrival. Rather, it means that the company should employ a leader who does not use an autocratic style of leadership. The new leader should leave some of the elements of culture intact to avoid triggering a strong wave of rebellion. The ability to manage expectations is a crucial skill for any leader. HP must look for a CEO who appreciates the importance of building consensus.

In situations where a new CEO undertakes an overhaul of the organizational culture, shortfalls in terms of performance may occur (Rivas, 2005). As the senior-most officer of the company, it is only prudent for the CEO to take the blame for the poor performance. Leaders who never accept responsibility for failure should not accept to be praised when the company performs well. More importantly, failure to take responsibility for poor financial performance may be perceived by employees as a weakness.

In terms of culture, the solution for HP lies in the ability by top leaders to create the right environment for change. Organizational change cannot be brought about overnight the way Fiorina wanted to do. Rather, it is a long-term process that should entail the participation of everyone at HP. Fiorina failed to win the trust of HP’s employees as well as management. She mistakenly believed that her credentials as a high-flying corporate titan gave her the legitimacy and ability to turn things round in a decades-old business organization overnight. To make matters worse, the new CEO adopted an overly aggressive approach to organization change at a time when the company was facing some of the greatest difficulties since it was founded. It is very risky for a company to put in place new structures, systems, and strategies when it is facing the fiercest competition from its biggest rivals. Such a move is a kin to starting a new company altogether.

Lastly, in terms of leadership, HP’s board of directors seems to have erred by introducing a CEO from outside for the first time in its history. The intention was to bring in a person with a new outlook of organizational strategy. Although the directors were aware that this was a risky move, they did not put in place the necessary contingency plans to ensure that the company’s future would not be threatened by an individual who disregarded or misinterpreted the values on which the company was founded. To avoid such problems in future, the company should reserve the position of CEO to a person who in-depth knowledge of and respect for the company’s culture. Such a leader would ideally be tolerant of employees’ shortcomings while at the same time initiating reforms.

Conclusion

In conclusion, every organization must adapt its culture to changes in business environment. HP is one of the giant corporations with a deeply entrenched culture that existed for more than half a century. During the late 1990s, time had come for the company to undertake sweeping changes to its culture in order to face with fierce competition from its rivals. It is against this backdrop that Carly Fiorina was appointed CEO. Unfortunately, Carly’s tenure turned out to be highly controversial. This is largely because of her high-flying demeanor and autocratic leadership style. The main lesson to be learnt from her fall from HP’s top position is that leaders should always accept blame for failure while at the same time seeking to win over their followers’ hearts and minds when undertaking sweeping changes in organizational culture. Such sensitivity cannot be achieved through an autocratic leadership style.

 

References

Burrows, P. (2003). Backfire: Carly Fiorina’s high-stakes battle for the soul of Hewlett-Packard

Cameron, K. (2011). Diagnosing and changing organizational culture: Based on the competing values framework. Boston: Harvard University Press.

Henri, J. (2006). Organizational culture and performance measurement systems. Accounting, Organizations and Society, 31(1), pp. 77–103.

Johnson, C. (2008). The Rise and Fall of Carly Fiorina: An Ethical Case Study. Journal of Leadership & Organizational Studies, 15(2), 188-196.

Ravasi, D. (2006). Responding to Organizational Identity Threats: Exploring the Role of Organizational Culture. Academy of Management Journal, 49(3), 433-458.

Rivas, R. (2005). Accelerating Innovation at Hewlett-Packard. Research-Technology Management, 48(1), 32-39.

Schein, E. (2006). Organizational culture and leadership. Princeton: Princeton University Press.

Zahra, S. (2004). Entrepreneurship in Family vs. Non-Family Firms: A Resource-Based Analysis of the Effect of Organizational Culture. Entrepreneurship Theory and Practice, 28(4), 363–381.

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