#3: HP: A Firm with a Philosophy
Duo figured if business were
run properly, profits would follow
BY JAMES J. MITCHELL
Mercury News Staff Writer
When Bill Hewlett and Dave Packard formed
Hewlett-Packard Co. on Jan. 1, 1939, they did far more
than create what would become one of the world's premier
electronics companies. They forged an enterprise whose
unique corporate culture shaped and nurtured the
development of the electronics industry in Silicon Valley.
HP is by far the largest company in the valley now, with
revenues almost twice the size of Intel Corp. The company
and its recent spinoff, Agilent Technologies Inc., employ
125,000 people and boast annual sales of nearly $50
billion.
The company started out making relatively obscure
instruments that analyzed electronic signals. But it
diversified over time to products that ranged from medical
measuring devices to semiconductors to personal
computers and desktop printers.
Much of HP's rapid growth over the last 30 years has
come from its computing business. The company created
the first hand-held scientific calculator in 1972 after
Hewlett said he wanted one to fit in his shirt pocket. The
slide rule became obsolete. In 1984 the company
introduced the HP LaserJet printer -- a market it still
dominates.
HP's greatest contribution to Silicon Valley -- equally
important as its commercial success -- was its innovative
way of doing business. It set the tone for a local business
culture that thrived in an informal atmosphere, minimizing
corporate hierarchy and executive perquisites. It used technological innovation
to keep ahead of
competitors. It promoted from within and emphasized training.
HP paid its workers generously, providing such benefits as profit-sharing,
medical insurance and
flexible work hours long before most other companies. As a result, the
workers at HP -- and
subsequently at most other local electronics companies that followed its
example -- saw little need
to join unions.
Hewlett and Packard ``set the standard'' for the
valley on how a highly successful organization
might be run, says Jerry Porras, a professor at the
Stanford Graduate School of Business and co-writer
of the book ``Built to Last.'' The company defined
how a corporation should treat its employees and
contribute to the community in which it operates.
Proud of impact
``As I look back on my life's work,'' Hewlett said
in 1990, ``I'm probably most proud of having
helped to create a company that by virtue of its
values, practices and success has had a tremendous
impact on the way companies are managed around
the world.''
Hewlett and Packard, the Stanford classmates who
started HP in a garage on 367 Addison Ave. in Palo
Alto with $538 in capital, shared a philosophy of
corporate social responsibility quite different from
that of most executives at the time. They believed:
The goal of business should be to provide a needed
service or product, not make money -- though
profits would come from success.
Employees wanted to succeed and would work
hard if given the proper resources and guidance.
Employees should be
treated well and
trusted. Once, when
Hewlett found a
storeroom chain-locked on a weekend, he severed the chain and
left it on the manager's desk with a note saying that locked
storerooms didn't fit with HP's notion of respect for employees.
Companies and their executives should be involved in broad
areas of community life, such as education, charities and politics.
Both men had a strong sense of ethics and fair play. Many deals
with customers were sealed with a handshake, not written
contracts. When the company's business boomed during World
War II, Packard didn't give himself a raise because he didn't want
to make more than Hewlett, who was in the army.
Close Stanford link
The two men established a strong connection with Stanford
University that was ``the beginning of the really close linkage
between Stanford and a growing industry around Stanford,'' says Henry Lowood,
curator for
the history of science and technology collections at Stanford and a member
of the Mercury News'
panel of historians.
The founding of HP ``symbolically and actually began to end the brain drain
(to companies back
East) of people trained in electronics, electrical engineering and fields
like that,'' Lowood says.
HP grew at a speed that seems glacial in today's Internet age. At the end
of its first year, sales
totaled $5,369 and profits $1,563. By 1950 it had only 146 employees and
revenues of $2
million. The company didn't go public until 1957.
This pace gave Hewlett and Packard time to develop management principles
known as the HP
Way.
In the company's first decade, the founders knew every worker's family
and met members
regularly at picnics and barbecues. Hewlett and Packard never worked in
snazzy offices and
asked to be called Bill and Dave. When apricots were ripe in Packard's
orchard in Los Altos
Hills, he would invite employees to go up and help themselves.
This was not the way most executives operated in the 1940s and '50s. ``From
the very outset,
Hewlett and Packard had a very forward view of how one deals in the business
world with your
customers, with your suppliers, with your employees, and with your communities.
They took all
of those responsibilities seriously and raised them all to a new level,''
says valley veteran George
Scalise, president of the Semiconductor Industry Association.
From its earliest days, HP was a leading contributor to local schools and
charities. As individuals
Hewlett and Packard gave away hundreds of millions of dollars -- several
billion if money in
their foundations is included. Stanford alone has received more than $300
million.
Hewlett and Packard never let their success go to their heads. At a press
conference in 1995, a
reporter asked Packard if he had any personal or professional regrets.
"If I had studied more
instead of playing football" at Stanford, he said with a straight face,
"I probably would have gone
a little further."
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