Discuss the three most serious problems you have identified in the case. Defend why you think they are the most serious.
One of the Hewlett-Packard’s most serious problems is its lack of management. CEO Carly Fiorina didn’t provide enough direction. The strategic vision she was using to guide the company was unclear, and nobody in the company has any idea if it was being carried-out or not. Without a well-defined strategic vision for the company, employees had no motivation and no sense of organizational purpose. As a result it can lead to a number of symptoms such as poor image, slow growth and a decline in sales, which is a direct connection to lack of leadership and imprecise strategic vision.
The second of the H-P’s most serious problems was its confusing matrix structure, which blurred accountability lines and slowed decision-making. A matrix structure focuses on integrated teams and involves reporting to multiple managers. It can be highly effective, but it can be confusing to work within and it can also create conflict between project bosses in different parts of the matrix. According to Williams (2011), some of the common problems are disagreements or misunderstandings about schedules, budgets, available resources, and the availability of employees with particular functional expertise. A matrix structure requires a high level of coordination to manage complexity involved with running large, ongoing projects at various levels of completion and it also requires much more management skill than the other forms of organizational structure.
The third of the most serious problem was the H-P’s reward system because it was so complicated and no one understood how performance affected his or her bonuses. A reward system does not have to be complex; it should be clear and simple in order to get the best results. Leonard (1994) refers to Jerry McAdams notations, which state as follows: “an employer needs to keep performance measures simple and select only “what’s important.” A complicated and convoluted measurement system will lead to a complicated and convoluted reward system
Describe how the company should attempt to correct each of the three most serious problems.
In order to correct the under management problem, Hewlett-Packard has already taken the first step, which was to replace the current CEO, Carly Fiorina, with Mark Hurd. In order to succeed, the company needed a leader like Mike Hurd with a different leadership style, someone who focuses on a clear strategic vision, mission, goals, and objectives. A leader who could be able to turn H-P’s vague strategic vision it into something more precise and also make sure the company’s strategy is being properly executed.
With respect to the confusing matrix structure, I agree with the tactic CEO Mark Hurd implemented to correct this type of operational issue, which had H-P’s single sales division reporting to four or five division heads at once. Hurd divided up the sales division, so that each of the major H-P product divisions had its own dedicated sales division. It seems that the matrix structure was not working for Hewlett-Packard; therefore it needed an immediate corrective action in order to appoint clear accountability lines and speed up decision-making.
Hewlett-Packard should attempt to correct its complex reward system problem by implementing simplifications to it. Because of this complex bonus system, talented executives were leaving and the company was having trouble attracting new ones. A reward system should be intended to attract and retain suitable employees, to maintain and improve performance, and to maintain commitment to the organization. It should be a method of motivating employees to change work habits and key behaviors and it should be simple and easy to understand by them. Mark Hurd solved this issue by linking the bonuses directly to divisional and company performance, which I think was the best way of solving this issue.
Recommend a leadership style or combination of initiating structure and consideration the CEO should adopt to address the problems of distrust and declining morale. Explain your answer.
In order to address the problems of distrust and declining morale, CEO Mark Hurd should adopt a combination of leadership styles such as the relationship-oriented leadership style and the supportive leadership style. According to Fiedler theory, leaders under the relationship-oriented leadership style must be people-oriented. In other words, they need to focus more on the needs of the people and the organization they are guiding and focus less on their own needs. Fiedler points out that the effectiveness of a leader depends on a range of situational factors such as leader-member relations, task structure, and position power. Leader-member relations are the most important situational factor. “It refers to how well followers respect, trust, and like their leaders. When leader-member relations are good, followers will trust the leader and there is a friendly work atmosphere.” (Williams, 2011). Murray (2009) suggests that leadership should be adapted to the particular demands of the situation, the particular requirements of the people involved and the particular challenges facing the organization.
One way of addressing the problems of distrust and declining morale should be adopting the supportive leadership style, suggested by the path-goal theory. The path-goal theory states that a leader’s behavior is contingent to the satisfaction, motivation and performance of his/her followers. Leaders who show the way and help followers along a path are effectively ‘leading’. Leaders need to provide coaching, guidance, support, rewards necessary for effective work performance, and they must complement and not duplicate the characteristics of followers’ work environments. (Williams,2011).
The CEO should also adopt the supportive leadership by considering the needs of the follower, showing concern for their welfare and creating a friendly working environment. This includes increasing the follower’s self-esteem and making the job more interesting. This approach is best when the work is stressful, boring or hazardous. (House & Mitchell, 1974). The results of adopting this leadership style would be performance improvement and job stress reduction. It would also improve relations and trust between employees and leaders. By implementing or adopting these leadership styles, employees at Hewlett-Packard will no longer feel that they are working for the leader, but with the leader.
After having examined all of the issues facing HP, recommend whether the CEO should focus on the approach to the current strategy or on implementation and execution. Defend your decision.
I would definitely recommend that the CEO should focus on implementation and execution. Execution Management is essentially defined as translating your strategy into reality. It is not just accomplishing a task or a goal, but also to achieve the underlying business objectives. It has to enable a constant review and fine-tuning of your strategy. A good execution management will focus on WHAT as well as HOW of an achievement.
The main reason the board hired the new CEO was because of his focus on execution (management). By focusing on implementation and execution, the CEO was able to successfully transform the company from a struggling, dysfunctional corporation into a well-structured and profitable corporation. Under his work style, Mark Hurd was able to work with the lower divisional levels to make sure operations were running smoothly. He was able to recast the CEO Fiorina’s strategy vision into something more concrete, offering specific visionary purposes. He tackled the confusing matrix structure by dividing up the sales division, so that each of the major H-P product divisions had its own dedicated sales division. He simplified the complex reward system by linking bonuses directly to divisional and company performance. He proved to match more closely to the traditional “H-P Way”, which was friendly, approachable, and supportive of its employees. Finally, within two years of Hurd taking the CEO position, sales increased by $10 billion, and the stock price rose 80 percent.