Interview with Bill and Dave

On March 6, 1989, in the 50th anniversary year of Hewlett-Packard, Bill Hewlett and Dave Packard met with HP communicators during an annual HP Communicators workshop. The one-hour internal press conference provided a rare opportunity to hear the company's founders express their views on a wide range of topics — from the early days of the partnership to the outlook for the decade ahead. Following are excerpts from the interview.

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Q: You've had a lot of success over the last 50 years — Hewlett-Packard is now a $10 billion company — what do you do for an encore?

Bill: Have good management to succeed us.

Dave: Well, I think you've got to realize that, as in many things, our rate of progress is in proportion to our level of effort. That's what generates financial growth. We've been fortunate to have lived with that kind of situation for the last 50 years. Obviously at some time it's going to have to come to an end. But from what I've seen, I really think the opportunities for the next 50 years are just as great, if not greater, than they were when Bill and I began back in 1939. I don't know whether you agree or not, Bill, but we've got a long way to go, so we shouldn't rest on our laurels. We've got to keep running.

The personal story

Q: One of the most fascinating parts of the Hewlett-Packard story is about the two men who started the company in 1939 — the personal story. So I wonder if you could tell us, what is your style of working together? What were the ingredients that made your partnership successful? And finally, did you ever have any major disagreements and how did you overcome them?

Dave: You want to start, Bill?

Bill: Go ahead, you start.

Dave: You see that's the way it worked. (Laughter, applause.) Well, I think that the essence of this whole thing is Bill and I got to be very good friends when we started at Stanford back in 1930. We were both taking some of the same courses in engineering, and we found we both had an interest in fishing and outdoor sports. So we had developed a good friendship in the early years at Stanford.

In our senior year, we were concerned about whether we'd be able to find jobs when we graduated. And we decided that if we didn't find jobs, we'd try to make ones for ourselves. We actually spent quite a little time talking about that. We decided that was what we were going to do. Well, I was fortunate enough to have a job offer from General Electric and that was a little bit too good to turn down, so I decided to accept that job. I went back to Schenectady, New York, for three and a half years. It turned out to be a good move because I learned a great deal about how a business should be run and made some very good friends back there. Then Bill and I got together again in 1939. I had a fellowship to come back and work with Bill, actually to do some graduate work, but our primary goal was to see if we could start the company.

So, we had a good close relationship from the very beginning, and I don't think we've ever had any major disagreements. We tended to come up with about the same answers to most issues. I'm sure there were times when somebody didn't like an answer they got from me, and they'd go to Bill. He'd give them the same answer, or vice versa. So that usually took care of things very well. Oh, there were some things on which we didn't completely agree, but I think we certainly have respect for each other's ability and we were just very fortunate to have the good friendship that has prevailed over 50 years.

Bill: We also had a common set of objectives. When we started the company, we were still in the Depression. And we saw the problems of people being let go, of people not having enough money. So we came up with some of our basic principles in those early days. We didn't want to run a hire-and-fire operation. Certain outfits did that, but we didn't want to. That decision alone made a lot of difference to our business. We also wanted to grow from our own earnings, which is very contrary to modern-day venture capitalists who want to get things going much more rapidly. We also were both technical people. We felt that we should use our technical skills to get where we wanted to be. So right there were the ideas of how we wanted to treat people, how we wanted to finance the company, and what products we wanted to get into.

The first products weren't very romantic, I'll tell you. There was a shocking machine to enable you to lose weight; a clock drive for a telescope and a magic eye to turn on a urinal at Stanford.

Dave: And to turn it off to save water.

Bill: Yes. Finally, we decided we had this oscillator. So we wrote a couple letters, and to our surprise we got some orders back. We didn't have the clairvoyance to say that the great opportunities would be in instrumentation. We got there by trial and error. We sent these flyers out, and people said, "We want them." Then a few more orders came in, and a few more. Then we decided, since we had an oscillator, we had to have a voltmeter. So it's a very logical progression — basically building on areas where we had strengths. It really worked out.

Now, as to conflicts, I can only remember one and I was mad as hell at Packard, I can tell you that (laughter). It was the only time I really got angry, and then I discovered that he and I were saying exactly the same thing. We just misunderstood each other. That's the only time I really remember, Dave.

Dave: We also decided that we didn't want to copy other people's instruments — that we wanted to try and do something unique ourselves. This was possible because this oscillator that Bill had developed was a very important contribution — not in any big sense like a billion-dollar deal today — and we concluded that there were opportunities for us to make contributions.

There's another thing, which we didn't appreciate at the time, but turned out to be an important factor. Our professor, Fred Terman, had been developing this book called Radio Engineering. He ran regular courses on the subject. This was before the word "electronics" was commonly used. That was probably the best course in the country, or the world, for radio engineering. So, Bill and I were kind of fortunate. A lot of the graduates of Fred Terman's courses have gone on to responsible positions at General Electric, RCA and so forth. So, although we were very young, we probably had as good an education in that particular field as anyone in the country at that time. And that, in a sense, was a matter of luck. That had a lot to do with the fact that we got started early and had a good reputation in the technical world. The idea of trying to make a contribution and not do what everyone else was doing really came from that early period. And I still think that's an important element in our overall corporate objectives.

HP's challenges in the 1990s

Q: What do you see as the most important challenge facing HP in the '90s, and what is the most important internal change HP must make to stay competitive?

Dave: You want to start with that one, Bill?

Bill: Yes. I think we've got to recognize that we were able to succeed because we could pay our own way, and that meant generating an adequate profit. We have to remember that. It's just as true today as it was the day we started. You've really got to keep an eye on that bottom line and that's everybody's responsibility. Now, as to external challenges: When we started out in the instrument business, we really were numero uno for a long time. And we could do things just about the way we wanted to. We called the shots. As we moved into the competition of the computer field, we certainly were not the biggest by a fairly large degree. We had to figure out how to use our skills to build the same kind of niche that we did in the instrument business. This is not easy because there's a lot of competition and we don't have quite the free field as we did in the instrument business.

Dave: I think you can go back to what I said earlier about the level of effort. When we were first starting, the level of effort in this radio engineering field was fairly low and it was possible for a couple of people to have a significant impact on it. Now the level of effort, not only in the computer business but in every other technical business, is tremendous. Instead of just a few people competing, you have thousands, hundreds of thousands of people, competing with you all over the world. That, in a sense, makes it a more difficult job. It also means that it's extremely important to pick carefully the areas where you have some strength and to build on your strengths. I think there are short-term pressures on all businesses today. They largely come from all the security analysts worrying about what's going to happen next quarter instead of what's going to happen two or three years down the line.

So there are two external challenges that are both very important. One of them is that the competition is much broader and very capable today. That means that in order to compete, we're going to have to concentrate on our strengths. It's not possible for any company, no matter how big, to be competitive in all fields. Secondly, somewhere along the line, we have to find ways to think in the longer term rather than the shorter term. There's tremendous pressure on business leaders all across the country to look at short-term problems and not consider long-term ones. That's one of the places where the Japanese have a little advantage over us, and I hope we can improve.

Q: Our corporate objectives, with the exception of minor word smithing, have not changed over the many years. Why did you decide to put them in writing and how did you go about developing them?

Bill: Dave, your turn.

Dave: We began to grow very rapidly in the early 1950s. We had fewer than 200 employees during the first 10 years. Fortunately, during that time we were in a good position because we had developed a line of general-purpose instruments. The Korean War put a great emphasis on advancements in the electronic industry. During the early 1950s, sometimes our business doubled every year.

That really brought us around to paying more attention to how we were going to manage a larger business — larger than a few hundred people. I remember at times we thought that 500 people was the most that anybody could manage effectively. Then we decided when we got to that level, well maybe it should be 1,000. We actually spent a lot of time thinking about our corporate structure and thinking about management principles. We decided to write down those things, which seemed to work for us on the simple theory that if they'd worked for us in the past, they would probably continue to work in the future.

We had established meetings where top management people would get away for the weekend or a few days and talk about how to manage the current and future business of the company. It was along about '56 or '57, we simply sat down and wrote out what the corporate objectives were. I remember that there was only one issue we had some discussion about, that was whether the first item should be making a contribution or making a profit. Finally, we defined profit as the best measure of whether or not we were making a contribution. In a sense, the contribution you make is the value you add to material to make your products worth more to people than it cost you to make them. I think the other objectives were all included in that first draft. I haven't gone back and gotten that first draft. I don't think anybody has. Have you, Bill?

Bill: Yes, I did some time ago. It's amazing to go out and read them. They basically say the same thing. There was one thing going on about the time we wrote the objectives. Dave was talking about how many people we thought we could manage. I think we had about 4,000 people working for us then. We felt we needed some kind of divisional structure. To do this, you really had to give managers an objective. In other words, it was the beginning of management by objective. If you have objectives you expect people to manage by, you better have them written down.

Dave: Management by objectives was one of the common management theories that was being discussed around the country. At the American Management Association meetings we'd talk about management by objectives, but it didn't always mean the same thing to everybody. We concluded that if you're going to try to manage by objective, it's very important that everybody understands and enthusiastically supports those objectives because it won't work otherwise. We've been very fortunate that our objectives were the kind many people agreed with, even if they weren't involved in their original formulation. The fact that the HP Way has prevailed as long as it has is probably the best indication that those objectives were basically pretty good ones. I think they're still as good today as they were when we began.

Mergers and takeovers

Q: I've read a lot lately saying that the computer industry is ripe for takeovers and mergers. I'd like to know whether you feel HP would ever initiate a large-scale merger or even a hostile takeover of another company?

Bill: If there was a large company that really had the same basic philosophies that we do, then obviously the combination of these two would be stronger than the individual parts. In that case, I would have no objection to a merger or acquisition. I certainly don't want to get involved in any hostile takeovers; I think they're for the birds.

Dave: I agree completely with that. I think there could be a circumstance under which we might want to initiate some joint venture with an organization of comparable size, but I'm certain that I would never want us to initiate a hostile takeover. In every aspect I wouldn't want any part of it. As a practical matter, we have discussed our exposure to hostile takeovers from someone else. I think, right now, we're in fairly good shape. Between Bill and me and family we still control over 20 percent of the stock, and it's not very attractive for someone to take over a company unless they can get more than 80 percent of the outstanding stock.

Childhood years

Q: I'd like to ask each of you about your formative years. What were your childhoods like? Dave: I gave a commencement address at Colorado College in 1964, and I reminisced about my early life in Pueblo. My mother and father had come from very poor families. My grandmother had brought my mother out from Ohio and supported her. My parents went to Colorado College, met there and received a good education and then settled in Pueblo where my father was an attorney. Neither of them had traveled outside the state of Colorado except for the initial trip that brought them there, and they had very little relationship with anything outside of that community. Yet, as a result of their college education, they had a great interest in cultural things, literature, history and foreign affairs. I told the graduating class of 1964 that I thought my parents would consider their education at Colorado College to be the most valuable possession they had in life.

My vision of the world was very narrow and very small when I was in Pueblo. Things certainly have changed. I was fortunate enough to come out to Stanford in 1930 where I met Bill. And there, of course, I met all these sophisticated people who had been to other places, and many of them had traveled around the world. It was quite a change for me compared to my background. But I did develop an interest in engineering very early. I decided when I was still in grade school I wanted to be an engineer. I built a radio when I was in eighth grade and in high school. I became a radio amateur in the 1920s, so I started in this business long before I came to Stanford and met Bill.

Bill: My background is a little bit different. My father was a college professor who taught at Stanford in the medical school, but he died when I was 12 years old. So I really did not have that much contact with him. He was very hard working, very serious and he loved the outdoors. That's really where I got my love for the outdoors, and that's something Dave and I have shared always.

There's kind of an interesting story about my father. I went to Lowell High School in San Francisco, a very good high school. When I got ready to go to college, I indicated I wanted to go to Stanford. The principal called my mother in and said, "Mrs. Hewlett, your son has indicated he wants to go to Stanford, and there is nothing in his record to suggest why I should recommend him." (laughter) She said, "His father taught there." He said, "Was his father Albion Walter Hewlett?" "Yes." "He was the finest student I ever had!" And that's how I got in. I was not a scholarly type for sure. I was curious about how things worked. I'd always take things apart. Sometimes I even got them back together again. But I had a curiosity, as Dave did, for scientific things, and I just got into engineering by osmosis.

Dave: Well, Bill, you might not have been scholarly in your early years, but you've become pretty scholarly in the last few.

Surprising changes

Q: I'd like to ask a question that looks a little bit to the past and a little bit to the future. Over the past 50 years, what changes in HP or the world have surprised you the most?

Bill: I suppose one of the things that surprised us was the rapid growth of the electronics industry. I don't think we were prepared for what happened. We certainly never could foresee how big a company we were going to be. We never have been able to see more than about three years ahead of time. That's why our long-range plan is our three-year plan. But the industry just grew like wild fire. It's interesting to note, that in about 1953, the whole electronics industry was about $5 billion. Last year we did $10 billion, just this company alone. The electronics industry has gone from a really obscure field — of primary interest to the communication and the entertainment people — to being a real workhorse for everything.

Dave: Well, there are several things that happened that were in a sense surprising. I agree with Bill. The rapid growth of the electronics industry was something. There was another thing we hadn't thought about in the early days that developed into an important part of our activities. That's our international business. Bill was kind of the leader in that. He saw that there would be opportunities first in Europe and then in other parts of the world. We began in the late '50s to really get started in the international business. We hadn't imagined we would become an international company. We didn't even think we were going to be a very important national company. I think that was an important change.

The other thing that surprised us — or at least we didn't take advantage of it properly — was the beginning of the whole computer business. We had been involved on the fringes of computers before 1960. We began to see in the early 1960s that, since we were in the measurement business, and since the digital computer would be involved in the collection, processing and formatting of data, there certainly was going to be an important correlation between measurement instruments and computers. I don't think we realized as soon as we should have what the potential of that field was. It took us a long time to really catch up. I think in the last 10 years we've been in a very strong position.

The other thing that I think a lot of people didn't appreciate much in the beginning was the importance of software. We didn't give that much attention in the early days, and obviously that was a mistake.

Bill: Coming back to your question about mergers and acquisitions, I think we had a chance to acquire DEC and turned it down (laughter).

Dave: As a matter of fact, I went around and visited a number of small computer companies in the early 1960s, including DEC. We decided that it would cost $25 million to acquire DEC, and that was more than we could afford at the time (laughter). I must say, as a result of that, I realized that their people have a very good background in digital computer technology because they started working on it early. Also, we looked at some of the personnel problems and decided that it would be difficult to merge our two groups of people. So there were several reasons why we didn't think it was a good idea, and I'm not sure it could have been done.

On the HP Way

Q: From time to time you hear people say that the HP Way has lost some of its luster over the years. Would you share with us how we can keep the HP Way alive? And, in particular, how we as communicators can help keep the flame going?

Bill: Well, I've often said that the real residue of the HP Way are HP employees themselves. It's amazing that the HP Way has been handed down as successfully as it has. You can have the best manager in the world, but if the employee doesn't believe it, it won't work. We depend very heavily upon the HP Way and older employees impressing upon newer ones that the thing really works, and proving it works.

Dave: You can talk about the HP Way including all of our objectives, but I think you mean primarily the relationship between individual people. I've always thought that the best way to explain that is simply the golden rule. The HP Way says do unto others as you would have them do unto you. That's really what it's all about. You people in the communications area I think have two important roles. One of them is to do the best you can to communicate from the top down. Bill and I get complaints from time to time from various people around the company who feel they haven't been treated fairly. Quite often it's simply a case of misunderstanding. Often the person just didn't really understand what was behind a policy. In some cases the policy may seem to be unfair at first glance, but as you know a little bit more about how it was developed and why it was developed, then it becomes much more understandable. So I think you have an important job to communicate from the top down and make sure that the people really understand the background and all the aspects of the various policies and actions that are undertaken.

I think communication should be a two-way street. I think you people have a responsibility to translate the concerns that you see from the people you're involved with up to the top-management level because sometimes the people at the top don't always understand the impact of their policies. It was much easier when we were smaller and Bill and I could get around and know what was going on, but that's no longer possible. So there needs to be a way, not only to explain the policies and principles that are established from the top, but when they're not working right, to get the message to the top from the people who are impacted at the lower levels. It's good management practice to recognize that people on the firing line, so to speak, often have some pretty good ideas — sometimes better ideas about what ought to be done about something than the guy sitting up in the front office. I think you people have a responsibility to get some of those ideas up so they're brought to the attention of management. I know John (Young) and Dean (Morton) and all the rest of the managers are trying to do the best they can, and you can give them some help.