Silicon Insider: Putting HP Back Together

March 3, 2005 -- -- The cheering is over: the reports of dancing in the aisles at the Corvallis plant, the Ding Dongs (as in, "the Witch is Dead") handed out in Boise, the laid-off but still loyal ex-employees from Grenoble to Palo Alto who momentarily saw their stock jump in value.

It takes a special arrogance to destroy the World's Greatest Company, and one can only hope that Carly Fiorina carries that entry on her résumé forever.

But, thankfully, that is now the ugly past; Hewlett-Packard's Wilderness Years. Now the question becomes: What does HP do now?

This is not a theoretical question. Hewlett-Packard plays a vital role in the ecology not only of Silicon Valley, but the electronics industry -- arguably even in the world's economy. For more than a half-century, HP served not only as one of the great technical innovators, but also the greatest corporate cultural innovator. Think employee stock options, flex-time, management by objective, profit sharing … all were either invented or validated by the company.

For Silicon Valley, HP was not only the founding firm, but the embodiment of enlightened management, endless innovation and unimpeachable quality. Hewlett-Packard taught the Valley's entrepreneurial startups how to become real companies, and taught the founders of those firms how to become industry leaders and statesmen. During the Valley's hard times, HP also served as sanctuary from the vagaries of the business cycle and the hard-heartedness of less-enlightened bosses. And, as a company of den mothers and little league coaches, HP was a perpetual reminder to the wildcatters of the Valley (and in time, to the world) that you didn't have to surrender your life to succeed in the digital age.

At the heart of this corporate exceptionalism was the so-called "HP Way," a philosophy of doing business that was self-evident to HPers, but infuriatingly imprecise to outsiders -- so much so, that many dismissed it as mere mumbo-jumbo. The tragedy of Hewlett-Packard during the Carly years was that she thought so, too. Fiorina, whatever her inadequacies, was no fool: she rightly saw the HP Way as the greatest threat to her plan to remake the company in her own image, and did her level best to destroy it.

Unfortunately, it was the one job she did well. By the time she was tossed out, HP was not only no longer the best tech company in America, but one of the worst. It had become a place where employees lived in a perpetual fear of layoffs, their bosses reduced to functionaries delivering the latest bad news from executive row, where the stock sat paralyzed, and the chief executive officer embarked on crusades and acquisitions that nobody in the ranks believed would work. As demolished as Fiorina's reputation is today, she is, in fact, lucky to have been fired before the next boom led to HP hemorrhaging disgruntled employees from every doorway.

Now there is this horrible mess to clean up. HP today finds itself mired in commoditized businesses, such as personal computers and printers, where it doesn't belong. It is saddled with a giant anchor, Compaq, which it doesn't need. It will take years of divestiture, reorganization and reorientation to put the company back on the right track.

Worse, this heavy lifting will have to be done by an organization that has driven off or fired much of the intellectual capital and institutional memory. Silicon Valley and the other HP enclaves around the world are littered with loyal 20-year Hewlett-Packard veterans who were unceremoniously dumped during the many Fiorina purges -- and now, when it needs them most, HP is too poor to hire them back.

The task is so daunting that around Silicon Valley you can already hear comments that HP should simply be broken up, its various pieces spun off or sold to the highest bidder. I don't think the solution is that draconian. Companies as diverse as IBM, Xerox and Apple have shown it is possible to re-emerge from the ruins -- but only if you first rediscover who you are

In other words, if HP is to survive, its first step must be to restore the HP Way. To do that, it must strip away both the myth and the calumny that now encrust the HP Way and see it as it really was. Hewlett-Packard at its best was neither a sweet corporate kumbaya (as some old HPers remember it), nor some "paternalistic" peaceable kingdom ruled by two kindly old monarchs named Bill and Dave. It was rather a tough, competitive, highly innovative corporation with an unmatched reputation for quality, integrity and fairness. And the HP Way, rather than being an anachronistic leftover from a slower, quieter age, is in fact the most avant garde management model ever devised for a large company -- and one better suited for today than ever before.

The HP Way is not a technique, but an ethos of restraint, responsibility and, most of all, trust. It begins with the simplest possible precepts -- profit, customers, fields of interest, growth, our people, management and citizenship -- that are increasingly elaborated as they move down through the organization. Decision-making follows the same path, with the key decisions made by the employees closest to the problem.

It sounds easy, but the HP Way is nearly impossible to execute because it demands forbearance by the very people most likely to aggrandize power, and almost infinite trust from the people least likely to give it.

When it works, as it did at Hewlett-Packard for decades, the HP Way creates a decentralized, cohesive and intensely competent organization of stunning resilience -- and a genius for innovating itself out of hard times. The HP Way resists empire building and eschews flash -- which is why it is hated by CEO superstars and dismissed by the press. Yet, in the age of global organizations, independent work teams, and lightning decision cycles, the HP Way is better suited for modern organizations than any other. For the company that invented this model to die now would be a singularly cruel irony.

So, this is the ultimate test of Hewlett's and Packard's vision. The battered employees of HP have been betrayed by a CEO who was more interested in résumé building than company building, a board of directors that acquiesced to this hijacking and a media that went into the tank over the whole idea. Now, in fighting back, HP's employees can only trust themselves. But if Bill and Dave were right, that is all they need. They alone can restore the World's Greatest Company.

It's the HP Way.

Michael S. Malone, once called “the Boswell of Silicon Valley,” most recently was editor-at-large of Forbes ASAP magazine. He has covered the Silicon Valley and high-tech for more than 20 years, beginning with the San Jose Mercury-News as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, The Economist and Fortune, and for two years he was a columnist for The New York Times. He has hosted two national PBS shows: "Malone," a half-hour interview program that ran for nine years, and in 2001, a 16-part interview series called "Betting It All: The Entrepreneurs." Malone is best known as the author of a dozen books. His latest book, a collection of his best newspaper and magazine writings, is called "The Valley of Heart's Delight."

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.