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MARCELA PEREZ DE ALONSO
"What OD delivers to the bottom line"
OD Network Conference
San Francisco, California
October 24, 2006
© Copyright 2006 Hewlett-Packard Development Company, L.P
All rights reserved. Do not use without written permission from HP
Thank you. Good afternoon everybody. The world is changing, countries are changing, individuals are changing, organizations are changing. We live in a world where change is inevitable. Just think where you were 10 years ago, five years ago, a year ago. The events and things that happen to you every day all contribute to change.
I am Marcela Perez de Alonso, and I am Chilean. I was born in the southern city of Punta Arena. When I think about the time when I was born and where I was born, and the things I’ve done since I was born, many years ago, by the way, I realize have changed a lot. I have been changed as an individual, I have reinvented myself.
I am a psychologist by background and I did my thesis in organizational development (OD). So organizational development has been an important part of my personal experience of transformation.
I’ve worked for a number of multinational companies in different jobs. At one time in my life I owned a business, at another time, like many of you here, I was a consultant. I’ve lived in different countries – in Mexico, in Puerto Rico and for the last 16 years here in the United States where I’ve lived in New York, Miami and now in California.
Every time I move, I change and transform myself. I embrace change and I try to make the best of the situation I find myself in. Change is a theme of this conference. As individuals, we must change and transform ourselves. Likewise, the organizations we work in must also change and transform themselves every day.
The company where I work has reinvented itself many times. Hewlett-Packard is a company that was invented 65 years ago. It is a company that has gone through significant change many times and transformed itself. It is always growing and becoming better and more innovative and producing more products and services around the world.
So let me start by reviewing the environment that companies are facing while they are inventing and transforming themselves. I want to talk a little bit about the corporate landscape. You hear a lot in the news about this environment. The environment where we do business today has changed dramatically and it’s changing day by day.
One of the things that you hear a lot about is globalization. It’s not only about companies in the United States moving overseas. Interestingly enough, I was in India a couple of months ago where I had meetings with a lot of HR professionals in India. Their challenge was to become global companies and expand out of India into other markets.
So globalization is about putting a footprint outside of the original place where these companies are founded. And it’s easy to think about globalization these days where you have access to information and communication. It’s different from when we started moving internationally.
Today globalization is about connectivity, so countries and businesses are all connected into a small village. It’s about globalization. It’s about change and intense global competition. It’s not only about countries competing, but also about global conglomerates competing among themselves.
It’s about rapid technological advance. It’s about the use of devices. Most of you probably have devices that you cannot disconnect from. How many of you have Blackberries or iPAQs? Raise your hands. Well, that means that you are connected every single minute of your lives and are part of a vast network of communications.
That’s the environment we’re doing business in today. It’s rapid, it’s energetic, and we have to thank technology companies for giving us these possibilities.
We also have a new regulatory framework. Sarbanes-Oxley has changed the way regulators are looking at companies. And that has implications for the way we conduct businesses. In Europe for example, environmental regulations are changing the way we conduct business. And several other companies and regions have created new regulations and we, like all companies, have to be aware of them and conduct business within these local, global or regional regulations.
Changes in the workforce have a big impact on the way we do business. Many generations are working at the same time, each with different needs and different interests. It’s no more about one size fits all in terms of benefits or programs for employees, because we have, simultaneously, many generations working together. There are people who are thinking about retirement. There are people who want to come back from retirement to do different types of work. There are people who are coming into the workforce who don’t plan to stay too long in one company, in one job forever.
And you have to manage all those interests at the same time. And there’s a war for talent. Every company is trying to recruit the best and retain the best. So this is the landscape of business today and it’s an exciting environment, at the same time that it’s very competitive and very challenging.
So let me talk to you a little bit about HP and then we’ll talk about the challenges we face at HP. We are a Fortune 11 company in revenue.
Our objective is to become the number one technology company in the world. We have technology solutions and products for people around the world. We have more than a billion customers using HP products today. A hundred and fifty thousand employees in 173 countries speaking more than 40 languages. We have 145,000 sales partners and service partners that do business with us. So when you think about the network of people who really work for HP it’s not only the employees.
The company is around $86 billion in revenue [FY2005] and we grew the last quarter 6 percent year-over-year in local currency. So we are growing at the same time we are transforming ourselves.
I’m going to give you a little bit of understanding about the biggest challenges that we have faced as a company.
The first one is the scale. This is a company that has transformed itself several times.
HP had the biggest merger in the history of the IT industry a few years ago. I’m going to talk to you a little bit about the merger later. You’ll see how we applied OD in a transformation of that size.
We also had a recent restructuring. When Mark Hurd joined the company a year and a half ago we restructured and defined a new operating model for the company. So we have transformed ourselves several times in a short-term period.
Some people think big companies can’t change or that they can’t change that often. I have to tell you that we can, that we have proven to be successful at change. We have done a lot of this work through OD techniques. Let me tell you a little bit about the origin of the OD techniques at HP.
We believe that organizational development drives the human dimension of the business. It’s not an isolated dimension that comes from a consulting group. It’s a process that’s a core part of the way we manage our business and the human resources of the business day by day. We have a business strategy and from the business strategy we align the organizational design with OD techniques. We start from the strategy and we align our organization to that strategy.
We define processes and the culture of the company has to support those processes in order to achieve our results. In all of these stages, we are using organizational development and organizational effectiveness techniques and processes. And this all translates into better results.
So let me share with you a little bit about the history of HP and how, from the origins of HP, we applied these techniques.
Can we play the video, please?
[Origins video plays. Ch. 7: Managing by Walking Around]
Now let me tell you a little bit about the biggest change we had in 2002, the merger of two companies that we put together: HP and Compaq, the biggest merger in the IT industry.
It was about mixing and putting together two big organizations that have different cultures, different behaviors, different products. The market was very skeptical. There was a heated proxy battle. We were in the news at that time although perhaps not with the same intensity that we have been lately.
The analysts were very skeptical, saying, “Can these people deliver to the expectations?”
2002 was a year, if you remember, when the economy, partly as a by-product of 9/11, was very tough. But that was not an excuse for us not to deliver. Now, years later, we have proven that it was possible. And we’ve put in place a strong operating model that allows us to balance multiple streams of revenue.
Before the merger, HP was centered on the printing and imaging business. With the acquisition of Compaq and the merger, it was possible to bring in different product lines and services. We became a company that grew more than the sum of both independently. Our growth was the sum of both plus the growth that came after the merger that allowed us to reach $86 billion in revenue.
We’ve introduced a lot of new products into the market. The share price has exceeded the levels that we expected with the merger. We can now say that the merger has been a success. We have proven the skeptics wrong.
Let me tell you a little bit about the things we did at the time of the merger using OD techniques that have allowed us to be where we are today.
One of the keys to success was created even before the merger when we started working on clean rooms. Now, the term clean rooms probably doesn’t tell you anything. Let me explain. At that time we put together groups of people from both companies in teams who tried to understand the best process and what was the best way to make the decision about were we going to adopt: the HP way or the Compaq way of doing things?
There are very few companies that take the time and the discipline to go through this analysis. Normally a company that acquires another just wants to impose their processes and move on. In this particular case, we did a deep analysis in a clean room. People from both companies came together to understand the best processes, the best products or the best ways of doing things. And that’s the way we became the new company.
So it was not one or the other style. There were not winners or losers. We tried to adopt and go with the best of both.
At the same time, we did a lot of fast starts. New teams were coming together and we introduced the fast start method. We did cultural due diligence, which is another thing that many companies that merge don’t take the time to do.
So let me go one by one through the lessons of the merger. I think they are good examples of how OD professionals can help. This is how we operate. First, the clean rooms.
Clean rooms were where teams came together. OD professionals helped with these teams, not only managing the dynamics of the meetings. It was about doing the right analysis.
We are talking about organizational design, processes, people and the implications of those decisions. There were OD professionals in all these groups. And these techniques were not developed by consultants. Rather, we put people from HP who were OD experts in these teams.
Having the skills and the OD capability inside the company is critical because it allows you to transform yourself when needed. If you have to bring people in from the outside every time you operate in this environment, then you can’t understand the processes and the culture.
The good news is that we now use this every time we transform ourselves. The clean room concept is used today at HP every time we go through a major restructuring or a change in organization. So for us, clean rooms mean using OD processes to improve an organization, or a product, or anything that we need to change.
The second lesson from the merger was the fast start sessions. I imagine that many of you have done new manager assimilations or have processes in place when you put new groups together. That is what this is about. We tried to accelerate the integration of the teams that were in one or the other company with a new manager. We needed to put teams together and understand what was different. How can we integrate them? What are their values? What are the behaviors? How are we going to work together as a team?
So we named it fast start at the time of the merger and we did more than 16,000 fast start sessions around the world. And we now use it in any transformation we do and also for new manager assimilation. We do it every time that we face an important transition.
Culture due diligence was the first step in bringing HP and Compaq staff together. It helped us understand the values and behaviors that were different or similar in both companies. And this is something where we used some external consultants to help us. We wanted to have an objective view, an objective pair of lenses looking at the culture of both companies.
So again, we had a lot of OD professionals helping us from the outside, helping us to understand. We had more than 120 focus groups helping people understand the interpretation of values around the world. These cultural differences were very important for us to capture at the time.
And this is what we found. When you look at the values of each of the companies, they were not that different. But there was some kind of tonality around the values that could be a little different. I’m not going to read them all to you, but if you think about the evolution of the values, it was a result of the due diligence and a conscious decision by senior management on the type of company that we wanted to create once we merged.
And there was a lot of analysis done about the values, the things that we could put together. If you think about Compaq a lot of their focus was on the customer. On the other side, there was a lot of good things about the heritage of HP that we wanted to add to the Compaq values and way of behavior. So we came up with the new HP values.
So what are the long-term lessons? Four years later clean rooms are part of the change management discipline at HP. We also created the Program Management Office. Every time we put together a big transformation, a big change, we create a PMO office, which basically has a leader in charge of the change and a representative of all the disciplines: HR, finance, operations, marketing, sales, etc., so that we can incorporate all the points of view in a big transformation.
The PMO’s objective is to introduce the change and go through all the phases. We do a diagnostic of the situation, asking what needs to change? What is the plan for change? What are the actions that we need to put in place? And what is the outcome of the change? And we measure progress every week. Reports go to the Executive Committee.
The magnitude of change in a company of this size requires a lot of discipline and a lot of structured work. The PMO is the way we now handle this change.
We also have a lot of management change practices. We have captured all these management change practices in a Web portal – change@HP – where any business leader, any HR leader, any employee at HP can access the Web and get the tools or processes to lead the change, from individual change to an organizational change. It’s not only about big company change, these tools are not necessarily only oriented to big companies, big organizations, they can also help individuals cope with change.
Let me now give you an overview of where we are today, of some of the practices that we have put together in our latest restructuring.
This is a new operating model for HP. When Mark Hurd came on board last year, we changed our operating model. So this is a very simple strategy oriented to targeted growth, efficiencies, and managing our financial and human capital differently. It’s all integrated to produce the leading information technology company in the world.
So what did we do? What were the challenges we faced and the results? We wanted to create a company that delivered better bottom-line results, a growth company – and reduce costs at the same time.
And again, we needed never-ending improvement, which is part of the heritage of this company. The improved results shown in our share price and financials came from defining a new strategy and changing the operating model.
We have changed the way we organize ourselves. And we did this change at the same time that we were changing the company. We didn’t stop and slow down. We did this at the same time we were producing significant performance improvements. So at the time we were transforming ourselves, we were producing significant improvements.
Today we have greater focus on structure and we’ve initiated an enormous transformation in global functions. One function was IT, the other is human resources. I’ll talk a little bit about that.
The changes in the organizational structure brought clear alignment, accountability and simplification. One of the things that we needed to address at HP was the complexity of our organizational structure. So one of first things we did, under Mark’s direction, was to change our organizational structure.
The old organization had silos. TSG, PSG and IPG are our major business units – the Technology Solutions Group, the Personal Systems Group and the Imaging and Printing Group. At the bottom, one global operations organization, and at the top, all the sales people in one group.
One thing that became clear was that people were not clear about accountability. What were they responsible for? It was very matrixed. So we changed it into a structure where it’s clear who’s responsible for what and what are the P&L responsibilities.
Each sales organization reports into their individual business. Also, operations, the supply chain and the distribution arm of HP, are now aligned to each of the businesses. We’ve created an alignment of all the global functions.
The global functions today are both horizontal and global. They are all together so we can leverage the infrastructure and achieve some savings. But at the same time, we can build global capabilities.
We also transformed HR. This is where the most significant changes were made in terms of building OD capabilities within HR.
One of the things we believe, and I personally believe, is that HR professionals need to be the leaders of a transformation. And you can’t have a separate OD organization from the HR organization. In my opinion, both things have to become part of one organization, and the way we have structured the operating model of HR is that the OD professionals now work together with HR in terms of building the transformation and managing the change, putting the people in the right jobs when we design the organization and the structure.
So OD professionals are HR professionals. HR professionals need to be proficient in OD capabilities. We created a Center of Expertise, a COE of OD capabilities. And these people are helping HR with training programs in working sessions in order to build OD capabilities into the HR functions.
So for us, HR is OD. OD is HR. It’s not divided or separated, it’s part of our DNA. And we are trying to build that capability day by day.
So we have a new definition for HR business managers. We want them to guide the change. We are not administrators any more. We want to be advisors, we want to be leaders of change, leaders of the transformation and for that, we want to create a lot of assessment skills and competencies that are not there in their original roles. We started this transformation a year ago. A year later, we can say that we are better than we were last year in terms of moving professionals from traditional HR roles into OD roles. And the same with OD professionals.
So we also redesigned our HR processes. We reduced a lot of the admin work. We put together a PMO, again, and we tried to do an analysis of what is the work that we can take out of HR, but not by transferring the work just to another operation. We were trying to take work out of the system. We did this with our OD capabilities. Again, the PMO organization was put together as a change organization that analyzed all the processes and came up with great ideas from all over the world. It has a global presence, a country presence and a regional presence so that we can understand all the processes.
We eliminated or changed around 40 processes globally with the help of this PMO. So this is an example, I think, where OD can produce bottom-line results. This is an activity that helps us streamline processes, reduce work, save money and produce important cost savings for the company.
At the same time we are developing OD capabilities for HR. We’re putting together a center of Organizational Effectiveness where we have best practices. The center can share practices so you don’t have to re-learn every time you have a new transformational need.
We have focused on HR, but we are producing the tools so that anybody at HP can leverage them. We have workshops where we have HR people with OD people working together on simplifying processes and getting things done. So we learn from our peers, we integrate the teams, and use our OD capabilities in the center of expertise that we create to leverage them around the company.
There’s another component of change that I want to touch on briefly. It’s about how we handle communications when we were involved in significant change and transformation.
Even if we have the best processes, we need to communicate the transformation. We need to reduce uncertainty by making each individual understand why we’re making the changes that we are making. The role of communication is a critical one in managing change. We have a lot of technology and resources at HP to help us communicate with people.
But the first line manger or supervisor is the best communications channel. As you saw in the video, managing by walking around and talking to people is the way you communicate. Even with the portals on the intranet and all the tools that we have that support change, our employees tell us every day that there’s nothing like the communication that comes from their supervisor who tells why we’re changing and what the expectation of the change can be.
We have a way of measuring how effective this process has been. It’s our Voice of the Workforce surveys. We tried to understand what the P&L implications of any change we do and communicate that. This annual survey is part of our systematic approach to change. We measure how we are doing around our values, and we had around 75 percent participation in this year’s survey.
People really like to give us their opinions. The surveys also have an open question at the end so that they can express these opinions. People are normally very vocal about what they think about the company. We collect this data as well as the statistics on each of the questions. This is a way for us to get the pulse of how we are doing with change and transformation every year.
We benchmark our results with other IT companies so that we know how we’re doing against our competitors and our peers.
One of the things that I want to leave with you is that OD needs to be embedded in business activities. This is how you align your human dimension to the business.
It’s the way that the business needs to operate. This is not a group of people isolated from the business or a group of people in HR isolated from what is going on in the company. You have to be proactive, you have to be involved in the transformation of the company. It’s embedded in all HR professionals. This is a competency that we want to have embedded in all our HR professionals.
It’s not part of one event, it’s part of the way you manage a company and it’s part of any transformation that you have in a company.
So with that, I would like to leave you with the thought that you need to get involved. Wherever you work, wherever you are a professional, wherever you exist as an OD professional, get involved. You are not a consultant. You are part of the DNA of the company. You are part of a business process, you are part of an HR organization. Sometimes it’s not within HR, sometimes it’s even in other organizations. Be part of it. Be part of the change. Embrace the change, lead the change. Thank you. |
