Corporate restructuring at Hewlett-Packard

Hewlett-Packard Company, commonly known as HP is an American MNC (multi-national company)  and among the world’s leading manufacturer of computers. The company caters to both the business as well as final consumers with its wide range of laptops, personal computers, printers, monitors, electronics, and computer accessories. The company also offers software solutions and IT consulting services to its clients. Though HP has managed to secure the status of the trusted brand among its customers over the years, the future doesn’t seem so bright owing to serious issues internal to the company. These issues create the need for corporate restructuring at HP.

Why HP needs corporate restructuring?

In the recent history of HP, the problems primarily started in the year 2001 when HP acquired Compaq with a view to holding a larger market. But the deal not only proved wrong in terms of revenues but also gave birth to serious internal conflicts among the Board of directors. The company also recorded very high CEO turnover since 2005. Over the last 3 years from 2010 to 2012, the company had 3 new CEOs. The internal management of the company worsened because CEO attrition wasn’t a result of death or retirement, but the company fired its CEOs on account of non-performance and unethical behaviour. Since these were not planned departures, the company needed immediate replacements to fill the leadership gap. As a result, reshuffling in the top management took place in a hurry adding further to the company’s miseries. Every CEO brought his unique management philosophy into the company.  While a few concentrated upon increasing revenues, others focused on cost-cutting through employee layoffs. But this is not all; HP made another wrong strategic decision of acquiring Palm in 2010. Though the decision was initiated in lieu of expanding too rapidly growing smartphones market, soon it proved to be a miscalculation only. The tough competition from Blackberry soared all benefits. The impact of decisions made in the history is now visible from the company’s financial losses for the quarter ending September 2012.

What type of corporate restructuring is needed in HP?

The company needs a complete review of its strategies and HR practices. The history clearly reflects that traditionally the company focused on expansion through mergers and acquisitions (M&A). HP has probably failed to understand that innovation and development is the core of computer hardware and software industry. The shelf life of products is very less in this industry and therefore till the time such M&A deals mature, the purpose usually fades.  So, there is a need to improve research and development (R&D) budget and encourage innovation in the organization. The company should now focus on the development of new products and markets. Also, the top management of the company needs to realize the value of leadership stability. Instead of firing CEOs for failure to achieve short-term goals, the company should focus on minimizing long-term costs of frequent leadership changes. A better option of cost-cutting would be to restrict its lines of products to only the profitable ones and diversify into trendy products like smartphones. These are the only ways a company can survive and retain its position in the long-run.

References

Ankita Agarwal

Analyst at Project Guru
Ankita is working with the editorial board of Project Guru as a Research Analyst and Writer. With Masters in Commerce and Business Studies, Ankita learned much of what she knows about management through experience. She has previously worked in various financial institutions like Birla Global, HDFC Ltd. and Citi Financial. She is self-motivated and writes for the Knowledge Tank section of Project Guru. She has authored more than 80 articles so far in Human Resources Management, Strategic Management, Finance and Marketing. She likes to pen her thoughts about the latest issues gripping these areas across the world.

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