Change Analysis

Company Background – Hewlett-Packard (HP)

The story of Hewlett-Packard known as HP is a legacy story. This company was started in a garage in Palo Alto with only $538 in start-up funds. (Gustin, 2013). The founders, Bill Hewlett and Dave Packard started HP in 1938. HP is dominant in the technology world. A company ran by engineers who were always coming up with the latest and greatest to go out to the market with. Wire Magazine credits HP for coming out with the first personal computer in 1968. (Gustin, 2013). HP had technological breakthroughs including the invention of thermal ink-jet which allowed them to create personal printers that allowed consumers to print sheets of paper for just pennies. (Fleming, 2002). HP had a niche in the market of printing and started to take over the market early on.

Technology is always developing and changing in today’s world. For companies like HP to stay relevant in the market they need to be coming out with the latest and greatest the consumers want and businesses need. There has been a shift in technology over the last 10 years where companies want to move away from the low margin business of personal computers and printers and get into the higher margin business of software and services targeted to the businesses of today. (Guston, 2013). HP has a real strength in the low margin products that they have historically done well on. With the shift in technology, HP has to be innovating new technology into the market such in the cloud computing and Smartphone arenas that they haven’t been involved in too much as of yet. This focus has been hard for HP to grasp due to the revolving door of CEOs over the past 10 years. HP is currently on their fourth CEO in this timeframe which presents a wide range of challenges on top of the pressures from the share holders to perform well on Wall Street. (Vance, 2013).

Company Background – Home Depot

Home Depot is a well-known retailer that is considered your one stop shop for your home improvement needs. The company was started by Bernie Marcus and Arthur Blank in 1978 with the help of investment banker Ken Langone. (Our History, 2014). The first two stores had 25,000 SKUs and were opened in June of 1979 in Atlanta, Georgia. Associates go through an extensive training program on the products that they sell in order to serve the needs of the customers. The idea was brought to the life by the founders to have a retailer for your home improvement needs that customers could rely on for not on the products but also the knowledge to do these projects around their homes themselves. Home Depot has been considered the fastest growing retailer in US History. (Our History, 2014). In 1981, the company decided to go public and for the next 20 years or more was growing fast and furious.

Founders, Marcus and Blank, retired in 2000 where they appointed Robert Nardelli to CEO for the company. In six years Nardelli was able to make Home Depot twice as big as it once was. (Jones & Krantz, 2007). This was really quite a ride to be on as an executive but as Nardelli wanted to make changes, executives started to resign. These executives made out very well based on the stock options they had. (Jones & Krantz, 2007). Nardelli was being compared to Home Depot’s competitor, Lowes, in all areas which made it difficult for him to manage the pressures of trying to keep with a smaller company that is now on the rise and whose stock was up 230% on the S & P 500 where Home Depot’s was only up 7.7%. (Jones & Krantz, 2007). Nardelli and Home Depot experienced much pressure in 2006 and 2007 for the compensation packages they offered to their executives and backdating of stock options. (Jones & Krantz, 2007). The pressures from many different directions caused Nardelli to step down as CEO. He was then replaced by Frank Blake. As with all companies, changing CEO can possess some unique challenges.

Comparison of the two companies

Hewlett-Packard (HP):

· HPs success was based on their innovative technology products with their niche being in the printing market. Their success has come from low margin revenues in both personal computers and printers.

· HP share prices have struggled up and down over the last 10 years.

· Top level executives have been a roller coaster ride with having 4 different CEOs in the last 10 years.

Home Depot:

· Home Depot was the fast growing retailer in US history based on the one stop shop for consumers home improvement needs.

· Home Depot’s share prices soared for many years but have become stagnant for a period of time.

· Top level executive in the last 10 years has been only two CEOs but that has caused for some change within the organization from the top down.

Looking at these two very different companies you can still compare their approach when it comes to how they have handled the changes in top level executives. Home Depot has been more steady when it comes to their executive level personal then HP has been in the last 10 years. The last change Home Depot made was in 2007 where HP just had another change in 2011. HP’s CEO, Meg Whitman, has stated that it will take five years for HP to get back on track but she is making strides towards the goals set out for HP. (Vance, 2014). As for Home Depot, their current CEO, Frank Blake, has been in place since 2007 which allows for them to have a little bit more stability when it comes to top level management skills, values, etc that is being flowed through to all employees than HP does at the current moment in time. HP has lost 120 executives over the last couple of years which makes it hard on the organization where Home Depot was losing executives back during the Nardelli era based on the fact that they had become very wealthy due to the stock options they had. (Jones & Krantz, 2007).

Image Analysis

Hewlett-Packard (HP) Image Analysis

Home Depot Image Analysis

Even though HP and Home Depot are in two completely different markets from one another when looking at their change images and the pressures that have caused them to make changes to top level executives such as CEOs they have a lot of similarities. They may not have approached the change the same way but the pressures that they faced caused both of these companies to make a change. Both companies were facing hyper competition pressures as their competitors really started to make some good strides in the marketplace.

Another pressure both companies had was growth pressure. When looking at HP, they had many changes to top level executive CEO positions that the innovation that they had once been known for was lacking. In order for them to come back and meet their expected revenue in order to be competitive in the marketplace once again they have to look at Smartphone and cloud computing. The current CEO is now looking at what they can do in these areas but this is behind the ball because the CEO prior to her put a stop to all plans in this area.

Home Depot also had growth pressures but not necessarily from new inventions or getting into a different market but from looking at their competitor, Lowes, and seeing the growth path they were on and wanting to be able to continue to grow as well. Home Depot has experienced a lot of growth for a long period of time so the pressures for this to continue from shareholders, board, etc might be a little unrealistic as at some point there will be a slowing trend for rapidly growing companies as it is unlikely they can keep maintaining the same growth rates.

When looking at the change images for both you have the Director, Coach and Interpreter. I believe from all that I have found on these companies that the most relevant change manager was the Director. I believe that in the case of HP that had a hard time finding the right leader to make the type of changes that the board and shareholders wanted to see which made it difficult for the whole company in general. There was a lot of turnover in top executives which hurts the skills that the company has as well as employee morale was directly impacted. HP needed to have more of a focus on a Coach and Interpreter to so that the employees could understand the changes that were going to be made and that the company was helping to align their skills and values around those changes. Whereas, for Home Depot also had a Director, Coach and Interpreter their change plan didn’t cause as much confusion or angst. The new CEO, Frank Blake, took on a couple different roles when it comes to change management and was able to get the support of the employees. I think that Home Depot handled the change of CEOs much better than HP did. The fact that Home Depot’s current CEO was last appointed in 2007 and is still there is a testament to the fact that they made the right choice in leadership for the life cycle of the business.

Being aware of what your company needs and having the right plans in place to make those needs a reality is a challenge. When you are in the public eye and what the outcome of these changes are affects many people makes it even a bigger challenge. HP and Home Depot understand when changes need to be made to the leadership of the team and although the organization will have to understand those changes and be managed through the changes it will likely be what is best for the future of these companies.

References

Fleming, L. (2002, November 1). Finding the Organizational Sources of Technological Breakthroughs: The Story of Hewlett-Packard’s Thermal Ink-Jet. Industrial & Corporate Change. 11 (5), 1059-1084.

Gustin, S. (2013, October 15). Why Hewlett-Packard Suddenly Doesn’t Look So Bad. Time.com, 1.

Jones, D & Krantz, M. (2007, January 4). Home Depot Boots CEO Nardelli. USA Today. Retrieved on January 15, 2014 from website: http://usatoday30.usatoday.com/money/industries/retail/2007-01-03-hd-nardelli_x.htm

Our History. Retrieved on January 15, 2014 from the website: https://corporate.homedepot.com/ourcompany/history/pages/default.aspx

Vance, A. (2013, January 14). Mark Hurd, Leo Apotheker, Meg Whitman in Hewlett-Packard’s Vertigo. Bloomberg Businessweek, (4312), 44-50.

Change

Image

Basis of ImageHPPressures for ChangeDiffers from others how?

Unintended consequences from

Image

Director

Meeting the expectations specifically

those that the shareholders, Wall

Street, and board are keeping a close

eye on.

HP had several CEOs in a short

period of time that the Director role

was always changing.

One of the pressures HP had was

from the growth pressures. They

are trying to get into new

technology markets such as

smartphones.

Due to the change and number of CEOs

over the last several years it was hard

for HP to stay focused on developing

new technology as some of the CEOs

didn't agree with the plans of

development.

Losing market share, dropping of

share prices, lost revenues, as well as

disappointed investors and board.

Coach

Shaping the organization so that the

right skills and mindset are their to

reach the goals of the company.

By changing the CEOs they were

trying to find the right fit to get the

company where they wanted to be.

Hypercompetition Pressures could

have contributed to wanting these

changes as their niche of low

margin business such as personal

computers and printers was

slowing the company down.

Other companies that were not going

through so many top level organizational

changes would be able to handle these

type of changes much better than HP

could

120 executives left in the last two

years because HP could not help

coach them through these changes.

Interpreter

Helps employees to get on board with

the changes that are happening within

the company.

Due to the changes of the CEOs this

was hard on the employees and there

was really no one helping interpreter

these changes. The direction was

changed frequently and morale

dropped in several cases.

New Broom PressureIn some companies when there is a new

CEO there is a uptick in engergy with

the employees excited about the new

direction the company may be going.

Morale drop was a result of the

changes in CEOs overtime. Some of

this drop occurred more in some of

the changes than in others.

Change Image

Basis of ImageHome DepotPressures for ChangeDiffers from others how?

Unintended consequences from

Image

Director

Meeting the expectations set out by

the board, approved budget and

shareholders.

Home Depot's CEO, Nardelli was

unable to keep shareholders happy

due to the competitor, Lowes, having

increases much surpassed Home

Depot.

Hypercompetition pressure existed

while Lowe's was on a growth

trend. Growth pressures also exist

as Home Depot was on the fast

track for such a long time.

Home Depot was a rapidly growing

company which provided some

challenges and expectations to continue

that way.

The CEO had a lot of pressure due to

the fact that Home Depot's competitor

was on a growing trend during some

of his time there which caused his

numbers to look weak in comparision

Coach

Encouraging employees when they

continue to meet or beat the

expectations laid out for them.

Home Depot's new CEO, Frank

Blake, really takes the time to thank

his team for all of their efforts.

New Broom PressureSome new leaders just dictate what

needs to be done. It appears Frank

Blake really listens to his employees to

see what ideas they have.

Having a coach can help with any

changes that the company wants to

make as well as help employee

morale.

Interpreter

Helping employees with the changes

so that they are on board and

understand what the goals are.

The change in CEO in 2007 seemed

to be the best thing for Home Depot.

The focus prior to 2007 and the CEO

during that timeframe was on

compensation & stock options.

Power & Political Issues is what

really helped cause the change in

CEO in 2007.

Home Depot was being scrutinized over

the fact that they paid their top

executives quite the compensation

packages.

Home Depot was looked at by the

SEC to see if what they were

compensating employees and the

backdating of stock options was

within the law.