HP – Compaq Merger - Ningapi.ning.com/.../HpCompaqmerger.docx · Web view · 2017-05-24The case revolves around the HP=-Compaq merger and the herculean task it was to merge the

PRAXIS BUSINESS SCHOOL

HP – Compaq Merger

Change Management

Ankita Ghosh, Bhavna Raut, Vijay Leon

1/30/2009


Synopsis

The case revolves around the HP=-Compaq merger and the herculean task it was to merge the two companies. Carly Fiorina, the then CEO of HP was initially opposed by both the Hewlett and Packard families and later to the directors and the employees, but she finally managed to pull it off. The official merger got through on 4th September 2001. This merger involved a huge number of employees, almost 145,000 employees in 160 countries, 15,000 layoffs and untangling 163 overlapping product lines. This merger is known to be one of the biggest mergers till date.

The main reason for the merger was to bring about a synergy an since HP was taking over Compaq, the degree of change at Compaq was very high but employees at HP were also affected. The two companies were completely different when it came to structure and culture.

Hp structurally is a very decentralized and flat organization and has very strict rules and regulations (it is still known as the government of Hp). Due to this rigid structure, the culture also became quiet rigid culture which led to a conservative thinking and outlook. On the flip side Compaq was just the opposite of HP with a tall hierarchy but a laxed culture and an aggressive sales team.

During and before the merger took place, there was a lot of resistance from within and outside the company. The companies tried to reduce the intensity of resistance and so they took up steps to overcome it. This was mainly done through simple communication and a clear focus on goals.

Initially, the merged company took time to gain momentum after which it ran well with a rise in profits. But due to Carly Fiorina’s short sightedness, the company’s profits went on a decline. Finally, Carly Fiorina was ousted by the board and her place was taken by mark Hurd who immediately effected certain changes within the company and turned the company back into profits. Thus, proving that if Carly Fiorina had effected the same changes, the merger would have been a complete success. In many ways the merger was a success, but not under the one who implemented it.

Praxis Business SchoolPage 2


ContentsWhy Change................................................................................................................................................4

Hewlett-Packard..........................................................................................................................................5

The HP Way.............................................................................................................................................5

The Compaq Way........................................................................................................................................7

Post merger.................................................................................................................................................8

Lewin's Planned Change Model.................................................................................................................10

Five Stages of Change Management..........................................................................................................11

Resistance..................................................................................................................................................13

The First Wave.......................................................................................................................................13

HP Culture.................................................................................................................................................16

Compaq Culture.........................................................................................................................................16

Resistance to Change................................................................................................................................16

Overcoming Resistance.............................................................................................................................17

Drivers :.....................................................................................................................................................17

Time frame:...............................................................................................................................................17

Model:.......................................................................................................................................................18

Suggestions................................................................................................................................................20



As Carleton S. (Carly) Fiorina, the then chairman and CEO of Hewlett-Packard Co. (HP) left the headquarters in Silicon Valley late on November 6, 2001, to head home after an especially hectic day at the office, she pondered her company’s merger plans.

At 10 o’clock that morning, Walter Hewlett, son of HP co-founder William Hewlett, had called her to inform her that his family would publicly oppose the planned merger between Hewlett-Packard and Compaq. In addition, Hewlett told Fiorina that he would be issuing a news release within the hour to announce their decision. Then, just hours later, David Packard Jr., the oldest son of the other Hewlett-Packard co-founder, issued a statement announcing that he would also vote against the merger.

Suddenly, the future of HP—the company that created Silicon Valley—seemed to rest in the hands of heirs who had never wanted an active role in their fathers’ company.

The idea for the merger with Compaq—a Houston-based PC maker founded in 1982—had grown out of a phone conversation between Fiorina and Compaq chairman and CEO Michael Capellas in late June of 2001. The original purpose of the phone conversation between the two CEOs, who had met at a policy meeting in Washington 18 months earlier, was to discuss a possible licensing agreement. However, their conversation led to a discussion of competitive strategy and the idea of a merger between the two companies was broached. By July the basics of the deal had already been hammered out, and by the first week of September, the merger had been approved by the boards at both companies.

The merger was announced by Carly Fiorina on September 3, 2001 which had a transaction value of $25 billion.

Why ChangeWhen Carly Fiorina came to power in 1999, she saw that although HP was a model company in many ways, it had become somewhat inbred and sluggish over the years. Thus, she immediately went to work revitalizing the company and kick-starting growth. She had set out on a process to preserve what was best about HP and reinvent the rest.

Fiorina traveled more than 250,000 miles during her first year, visiting HP facilities worldwide and urging employees to step up the pace. She went to work overhauling the company’s structure, consolidating operating units, and shearing away layers of bureaucracy. She pushed for more focus in the lucrative area of services. She also engineered a new marketing campaign featuring a simplified “hp” logo that dropped the founders’ names. Overall, Fiorina worked hard to modernize HP’s culture and to achieve her vision of the company’s future.

With the merger she would be able to eliminate one player in an oversupplied PC marketplace while also improving HP’s market share across the hardware line and double the size of HP’s service unit — both essential steps in being able to compete with industry giant IBM. In addition to this the merger would create a full-service technology firm capable of doing everything from selling PCs and printers to



setting up complex networks and would eliminate redundant product groups and costs in marketing, advertising, and shipping, while at the same time preserving much of the two companies’ revenues.

Overall, the chief driver for the HP-Compaq merger was competitive positioning. As for chances that the merger would succeed, the distinguishing characteristic of successful mergers is the focus on consolidation, not diversification — exactly what HP had planned to do after its merger with Compaq.

Hewlett-PackardIn 1938, two Stanford graduates in electrical engineering, William Hewlett and David Packard, started their own business in a garage behind Packard’s Palo Alto home. One year later, Hewlett and Packard formalized their business into a partnership called Hewlett-Packard. HP was incorporated in 1947 and began offering stock for public trading 10 years later. Annual net revenue for the company grew from $5.5 million in 1951 to $3 billion in 1980. By 1997, annual net revenue exceeded $42 billion and HP had become the world’s second largest computer supplier.

The company, which originally produced audio oscillators, introduced its first computer in 1966. In 1972, the company pioneered the era of personal computing by introducing the first scientific, hand-held calculator. Hewlett-Packard introduced its first personal computer in 1980. Five years later, HP introduced the LaserJet printer, which would become the company’s most successful product ever.

The HP WayIn 1956, Bill Hewlett, Dave Packard, and a handful of other HP executives gathered at the Mission Inn in Sonoma, California, to create a set of values and principles to guide their company. The six objectives that this small group subsequently created not only helped shape a new kind of company, but ultimately became the foundation for what came to be known as “The HP Way.”

These six objectives, which later became seven, are:

1. Recognize that profit is the best measure of a company’s contribution to society and the ultimate source of corporate strength;

2. Continually improve the value of the products and services offered to customers;



3. Seek new opportunities for growth but focus efforts on fields in which the company can make a contribution;

4. Provide employment opportunities that include the chance to share in the company’s success;5. Maintain an organizational environment that fosters individual motivation, initiative and

creativity;6. Demonstrate good citizenship by making contributions to the community;7. Emphasize growth as a requirement for survival.8. Leadership at HP.



The Compaq WayCompaq Computer Corporation was formed by Rod Canion, Jim Harris and Bill Murto — former Texas Instruments senior managers. The name "COMPAQ" was derived from "Compatibility and Quality", as at its formation Compaq produced some of the first IBM PC compatible computers. In February 1982 by Rod Canion, Jim Harris and Bill Murto, three senior managers from semiconductor manufacturer Texas Instruments. Each invested $1,000 to form the company. Their first venture capital came from Ben Rosen and Sevin Rosen Funds. Like many small startups with unique beginnings, the original Compaq PC was first sketched out on a placemat by the founders while dining in a local Houston restaurant, House of Pies.

Two key marketing executives in Compaq's early years, Jim D'Arezzo and Sparky Sparks, had come from IBM's PC Group. Other key executives responsible for the company's meteoric growth in the late 80s and early 90s were Ross A. Cooley, another former IBMer, who served for many years as SVP and GM North America; Michael Swavely, who was the company's chief marketing officer in the early years, and eventually ran the North America organization, later passing along that responsibility to Mr. Cooley, when Swavely retired. In the United States, Brendan A. "Mac" McLoughlin (another long time IBM executive) lead the company's field sales organization after starting up the Western U.S. Area of Operations. These gifted executives, along with other key contributors, including Kevin Ellington, Douglas Johns, Steven Flannigan, and Gary Stimac, helped the company surpass the IBM Corporation in all personal computer sales categories, after many predicted that none could compete with the behemoth.

Compaq Portable

In November 1982 Compaq announced their first product, the Compaq Portable, a portable IBM PC compatible personal computer. It was released in March 1983 at $2995, considerably more affordable than the Canadian Hyperion. The Compaq Portable was one of the progenitors of today's laptop; some called it a "suitcase computer" for its size and the look of its case.

1980s

In its early years Compaq was in many respects what IBM's PC Group should have been, and indeed, two of Compaq's key marketing executives, Jim D'Arezzo and Sparky Sparks, had moved from there.

1990s

At the same time as they began to dominate the server market, in the early 1990s Compaq entered the retail computer market with the Presario, and was one of the first manufacturers in the mid-1990s to market a sub-$1000 PC. In order to maintain the prices it wanted, Compaq became the first first-tier


http://en.wikipedia.org/wiki/IBM_PC

http://en.wikipedia.org/wiki/Sevin_Rosen_Funds

http://en.wikipedia.org/wiki/Texas_Instruments


http://en.wikipedia.org/wiki/Bill_Murto

http://en.wikipedia.org/wiki/Jim_Harris_(Compaq)

http://en.wikipedia.org/wiki/Rod_Canion

http://en.wikipedia.org/wiki/IBM_PC_compatible



http://en.wikipedia.org/wiki/Bill_Murto

http://en.wikipedia.org/wiki/Jim_Harris_(Compaq)

http://en.wikipedia.org/wiki/Rod_Canion


computer manufacturer to utilize CPUs from AMD and Cyrix. The price war resulting from Compaq's actions ultimately drove numerous competitors, most notably IBM and Packard Bell, from this market.

In 1997, Compaq bought Tandem Computers, known for their nonstop server line. This acquisition instantly gave Compaq a presence in the higher end business computing market. In 1998, Compaq acquired Digital Equipment Corporation, the leading company in the previous generation of computing during the 1970s and early 1980s. This acquisition made Compaq, at the time, the world's second largest computer maker in the world in terms of revenue. Unfortunately for the company, CEO Eckhard Pfeiffer, who engineered both mergers, had little vision for what the combined companies should do, or indeed how the three dramatically different cultures could work as a single entity, and Compaq struggled as a result. Pfeiffer was forced out as CEO in 1999 in a coup led by board chairman Ben Rosen and was eventually replaced by Michael Capellas, formerly CIO of the company. Capellas was able to restore some of the luster lost in the latter part of the Pfeiffer era, but the company still struggled against lower-cost competitors such as Dell.

2000s

In 2001, Compaq engaged in a merger with Hewlett-Packard. Numerous large HP shareholders, including Walter Hewlett, publicly opposed the deal, which resulted in a nasty proxy battle between those for and against the deal. The merger was approved only after the narrowest of margins, and allegations of vote buying (primarily involving an alleged last-second back-room deal with Bank of America) haunted the new company.

Post mergerCapellas left the company after serving less than a year as President of HP to become CEO of MCI Worldcom, leading it to be purchased by Verizon. Carly Fiorina, the Chairman and CEO of HP, added Capellas' responsibilities to her own.

Fiorina helmed HP for nearly three years after Capellas left. HP lay off thousands of former Compaq, DEC, HP, and Tandem employees, its stock price generally declined and profits did not perk up. Though the merger initially made it the number one PC maker, it soon lost the lead and further market share to Dell. In addition, the merging of stagnant Compaq with HP's lucrative printing and imaging division was criticized as that overshadowed the latter's profitability. In February 2005, the Board of Directors ousted Fiorina. Former Compaq CEO Capellas was mentioned by some as a potential successor, but several months afterwards, Mark Hurd was hired as CEO.

In late 2005, HPQ seemed to find its feet under the new leadership of Mark Hurd. At this same time Dell seemed to be faltering and HPQ took back the #1 sales position. Hurd separated the PC division from


http://en.wikipedia.org/wiki/Mark_Hurd

http://en.wikipedia.org/wiki/Dell_Inc.

http://en.wikipedia.org/wiki/Carly_Fiorina

http://en.wikipedia.org/wiki/Verizon

http://en.wikipedia.org/wiki/MCI_Communications

http://en.wikipedia.org/wiki/MCI_Communications


the imaging and printing division. HP's PC segment has since been reinvigorated and now generates more revenue than the traditionally more profitable printers.

Most Compaq products have been re-branded with the HP nameplate, such as the company's market leading ProLiant server line, while the Compaq brand remains on only some consumer-orientated products, notably Compaq Presario PC's. HP's business computers line was discontinued in favor of the Compaq Evo line, which was rebranded HP Compaq. HP's Jornada PDAs were replaced by Compaq iPAQ PDAs, which were renamed HP iPAQ.

In May 2007, HP in a press release announced a new logo for their Compaq Division to be placed on the new model Compaq Presario’s.



Lewin's Planned Change ModelLewin’s model is a three stage model of planned change which explains how to initiate, manage, and stabilize the change process. The three stages are unfreezing, changing, and refreezing. Looking at how the change process went on after the merger, we feel that this model applies to the merger. Let us now look at the stages in detail:

Unfreezing The focus of this stage is to create the motivation to change. In so doing, individuals are encouraged to replace old behaviors and attitudes with those desired by management. Managers can begin the unfreezing process by disconfirming the usefulness or appropriateness of employees' present behaviors or attitudes.

At HP this motivation to change was brought about simply by communication and making the employees and shareholders see the bigger picture even though it was a risk that they were taking. They followed a trickle down process wherein the information was passed on down the hierarchy. When people started realizing that they can have huge benefits from this merger, they started supporting the change. While at Compaq this process was not a large success as there was lack of information that should have been transmitted.

ChangingBecause change involves learning, this stage entails providing employees with new information, new behavioral models, or new ways of looking at things. The purpose is to help employees learn new concepts or points of view. Role models, mentors, experts, benchmarking the company against world class organizations, and training are useful mechanisms to facilitate change.

Once the merger had gotten through, the employees again went through a phase of uncertainty as they still did not know if they would retain their status or if at all they would remain with the company. Apart from this, the employees realized that they would have to go through a huge structural and cultural change. Both at HP and Compaq, this was handled by starting the process of evaluation which would eventually lead to their selection or dismissal. Apart from this there were personal mails from Carly Fiorina assuring that they need not worry.

RefreezingChange is stabilized during refreezing by helping employees integrate the changed behavior or attitude into their normal way of doing things. This is accomplished by first giving employees the chance to exhibit the new behaviors or attitudes. Once exhibited, positive reinforcement is used to reinforce the desired. Additional coaching and modeling also are used at this point to reinforce the stability of the change.



The process of change lasted for about two years. Once this was finished, they had developed a new culture. This was something that had developed out of the merger. There is no way one can change this culture now as this new culture is what people are comfortable working in. Therefore, the time now is to freeze the process and return to normal working.

Five Stages of Change ManagementHP followed the following model while going through the change process:

Awareness: The awareness stage is the stage where the problem is identified and defined. This is where the whole change process starts. Once the problem has been identified one can think of the necessary steps required to affect the change. Finally, steps to achieve this goal are developed. In this case, this stage refers to the part where Carly Fiorina identifies the need for change and discusses it with Michael Capellas and goes on to draw up a plan for change.

Coping: Coping is the stage where the initiator of change is faced with resistance – internal and external. In the case of HP this refers to the resistance from shareholders, employees, dealers, government and customers. Therefore, the need came to overcome this resistance. This was done with the help of communication of the plan and end goals. Apart from this came the employee portal where the employees could give in their ideas and the new HP foundation termed as the Clean Room which was a group of selected employees who were to be absorbed post-merger.

Internalize and Align: This is where everyone or the majority connected with the organization start believing in the change. Thus, the process of change takes up momentum and since there is support, the change process can start by implementing the tools and processes that is to support this change. As the process takes shape, it is now possible to make changes to the change process to try and make it a fit for all.

Execute: Execution refers to the implementation of the long term goals. In the case of HP this is seen as a move towards a High Performance Culture, which is basically an incentive driven culture. Today, organizations are making a move towards this sort of a culture as it is believed to be very efficient.





Reinforce and Arrive: This is the final stage where the people driving the change realize the fact that they are driving a major change and begin to acknowledge the effects of the change. This involves analyzing where the organization stands and how it is performing with respect to the change. Based on this one can decide whether the change process is running successfully and when the process is come to an end and the organization has gained enough momentum to run on its own.



Resistance

The First WaveThe first wave of resistance came even before the merger to take place. There was a good chance here that the merger could be scrapped. Both HP and Compaq had its own set of problems but they were different from each other. HP was having problems competing in the PC market while Compaq had financial problems – they had not handled their finances properly leading to a host of problems. Plus both HP and Compaq were loosing due to the price wars in the computer industry. Thus, the merger seemed to be the best option at that point — at least to Fiorina and Capellas — the perfect way for the new company to differentiate itself and to become more competitive.

Internal

The very first resistance as usual had come from internal sources, namely the shareholders and employees of the two companies, causing stock prices of HP and Compaq to fall significantly in the months following the deal’s announcement. The shareholders believed that rather than accelerating growth, merging the two companies would simply create a bigger company with bigger problems. As one analyst explained, “This is not a case of 1 + 1 = 2. It’s more like 1 + 1 = 1.5.” Others believed that competitors would try to swoop in and get solution providers and customers to switch allegiances and product lines. Some wondered how HP would hold onto loyal Compaq customers if the Compaq logo were to completely disappear. Still others worried about the difficulty of blending the two large organizations and their workers.

In any merger, the problem is that employees from both sides loose jobs. Apart from this, many loose their position of power. It also requires the employees to adjust to a new culture which means getting out of their comfort zone. And keeping in mind that two diverse cultures are coming together, it would definitely be a challenge for both.

External

Going outside the company, firstly the dealers are in the dark as to what would happen to them and their dealings with Compaq. This fear is not only restricted to Compaq dealers but also to HP dealers. Compaq dealers would not only have the fear of loosing their dealership status with Compaq but would also now have to adjust to the HP way. As for HP dealers, they would now have to store additional products of Compaq, which would mean larger investments and in certain cases may come under a Compaq employee who would again take time to adjust and form a relation with the dealer. Dealers are in a way a part of the company, thus, they would also feel the brunt of this change.

Customers on the other hand felt that they may not be able to avail of Compaq products. For a loyal Compaq customer, he or she maybe comfortable with Compaq products and may not want to change. Speaking about B2B customers of Compaq, they would already have existing deals with Compaq. Thus, for them any change in their deals would be unwelcome.



The US government actually did not bring about resistance. Both companies were put under the scanner in lieu of the Anti-Trust Regulation (The Sherman and Clayton Laws). The Anti-Trust Regulation stopped one single company from growing beyond a particular size keeping in mind that it would be unfair on the competition. In certain cases the government has been known to implement this regulation wherein a company is asked to break itself up. In this case the government felt that HP and Compaq combined would be big enough to bring to implement the regulation upon them. But after a thorough review, the merger was allowed.

Overcoming the First Wave

Overcoming this first wave was very important as the whole merger could have been stopped dead in its tracks. At HP Carly Fiorina had no other way to solve this problem but to communicate her intentions clearly and be completely transparent with everything. Also she had made it clear that her goals were clear and she was completely focused towards it. Her goal was to, “Create a great new company that is a leader in our chosen fields and is positioned to be the leading overall IT solutions provider.”

She agreed that getting into the merger was a risk but if it worked, the returns would be huge. She also reminded them that the HP way was to take risks and that shareholders were resisting only to safeguard their investment.

What Carly Fiorina did was make people realize that they could have high benefits and in the current situation, this was the best thing to do. People realized this and automatically were for the merger.

Michael Capellas followed the same strategy at Compaq.

Resistance – The Second Wave

The second wave of resistance came post merger when the organizations were being merged internally. This was a huge and difficult task as not only structures but cultures were also being merged.

Uncertainty regarding change: “The Comfort Zone” and Fear of the UnknownIn the case of HP the employees were not only informed but also assessed and trained for the post merger phase. Whereas in the case of Compaq, the employees were completely in the dark. On the day of the merger, their email ids were changed from @compaq.com to @Hewlitt-Packard.com. Apart from this the only information that was passed down was that everything would be ok. In reality the heads of the company themselves had no idea what was going on. Even though the HP employees were trained and informed they had no idea if they would remain with the organization as a post would go to either to a Compaq or a HP employee, whoever was the better of the two.

Disruption of routineThe whole process of merging the two companies led to confusion and the process itself caused a disruption of routine. Employees from both sides suffered as they would have to go through constant evaluation processes and once they were set or given a particular role, they would have to go through a



number of training sessions. For some the uncertainty factor added to the disruption as the will to work would not be there.

Loss of benefits and threat to security and position powerOne particular position would go to either a Compaq or a HP employee. The one who gets the position, gains as he or she now has gained job security and for many they moved up a few rungs of the hierarchical ladder. As for the one who looses out, he or she would have to report to the one who has been selected. For this person it is a step down and keeping in mind a human being’s ego, it would not allow that person to remain in the company. Therefore there is always the question in the person’s mind as to what would happen and even if something happens, do I gain or loose.



HP CultureThe Blue Company as it is known among its employees had a reputation of being a task master and such was reflected in the culture of the organization. It was the like the Government of HP as was called by the employees with its rigid rules and policies. The company was a very technical sound company but a very conservative company in its thinking and outlook. Even with their sound systems and processes the sales force were not aggressive in their approach .The system was so rigid that during a negotiation phase the sales person wasn’t even in the position to quote a price as the price would be determined by the top notch sitting in their respective chambers.

The structure was a flat structure and not very strong in administration. It was basically decentralized organization and it was a company which focused more on individual than on the team. It was not very team friendly and encouraged individual work more. The culture was such that it wasn’t a very people or customer friendly as you could never reach a HP person after 6 pm. All means of communication with that person would have faltered and you would have to wait for the next day to talk to that person.

Compaq Culture The Red company on the hand had a reputation of being a very laxed company in terms of policy and other rules which govern the company and in-turn determine the culture of the company. It had a culture of giving its employees all the freedom and power it had in terms of business decisions. The sales force was a aggressive lot and were given the freedom to quote any price in the negotiation table the consequences of which would be seen later on. They were more performance driven in this way and focused on getting the deal no matter what.

The structure couldn’t be called as too tall but it wasn’t flat. Decisions were not given centrally and there was no autonomy as such in the organization which portrayed a very positive culture. It also encouraged a spirit of team in the company. A particular project or any other celebration was always a team affaire. The people of Compaq were more people and customer friendly and were available round the clock.

Resistance to ChangeThere was a lot of resistance in the company and the impact was felt by both the companies in some way or the other. The people in Compaq were totally dictated by the HP behavior and their terms and conditions hence there was a lot of resistance from them. Discussions, debates and coffee breaks storming sessions became a regular feature in the company.

To add to it there was nothing which was done to ensure that the people are aware of the change and the effect of the change on the people of Compaq. Even though HP was having regular training and other sessions with its own employees, sales force their was no communication for the Compaq people. Also in the Indian offices even though the systems, values were that of HP the heads of the various department were Compaq Employees which led to a lot of resistance from the HP employees. Since now



in many instances there were two people who had the same post, interviews were held between the person from HP and the person from Compaq which was taken by the head in HO. Result of which a lot of top people who didn’t get through the interview process left the organization rather than taking up the other post that was given to them. The only incentive that they got for leaving was a high retirement package and benefits.

Overcoming Resistance As such no major steps were taken to overcome the resistance which was faced by them. Some seminars and talks were held to make the clients aware of the new basket of goods provided by the merged company. Communication in the form of e – mail was used by Carly to communicate to all the effect of the merger and at what stage the merger was in. Details which would be useful for the employees regarding the merger were shared by her through email. In the offices even the Compaq bosses weren’t happy with the development since most had lost their original power. The only communication which was given by them was to “assure the people that everything is going to be all right”. No form of face to face communication was used as such besides this.

Drivers:The key drivers involved form one person from both the companies. The people involved in this merger were Carly Fiorina the CEO of HP and Michael Capellas CEO of Compaq. The whole transition process also involved HP’s veteran Webb Mckinney and Compaq’s CFO Jeff Clarke. Both of them were deeply involved in the process initially.

Time frame:The initial time frame of the actual process was for 3 months but the restructuring was on for almost 2 years after the merger was undertaken.



Model:Kotters 8 – step change model:

Step-1: Create Urgency

▫ Help spark the initial motivation

This is the initial step of the change process and starts with communicating the change that needs to be done to the employees. Here the positives of the implied change, its effect on the employees are all clearly stated to everyone. This is where Carly went ahead and announced the merger to the board and the employees and the initial phase of resistance started.

Step-2: Form a Powerful Coalition

▫ Convince that change is necessary

▫ Leadership

This is somewhere the most important aspect cause if you can’t convince them that the change will do well for them there will be a lot of resistance and to stop this resistance steps were taken by Carly. Change leaders in the form of Carly of Hp, Michael Capellas of Compaq and also the two leaders who were recognized from among the employees who would help in change process. They were 19 year Hp veteran, Webb McKinney and Compaq’s CFO, Jeff Clarke. They formed the strong leadership team who would initiate the change and make sure people are comfortable with it. They worked as team and any issue was worked out by them together. Also many small teams were formed which had managers from both the companies and they worked together to support their teams.

Step-3: Create a Vision for Change

▫ Develop an overall vision for people to grasp easily

A clear vision can any day help them recognize with the change and make them motivated to work towards it. A new vision statement was developed by Carly and it was made with the consent of the board members and the specific change leaders. It looked into the benefit of the employees from both the sides and it clearly communicated how is the new vision helps them succeed in the company.



Step-4: Communicate the Vision

▫ Communication is the key

Communication is the key to success and maybe the reason that the merger didn’t work was because Carly was using the wrong key. Communication was something which was lacking from the companies side. The employees of Compaq got to know about the merger and the change not from the leaders of the company but from various new reports. They weren’t even aware that the next day they come to office it won’t be the same for them. Their e- mail ids changed overnight and they were made to adjust too many changes and their was lot of mayhem about this as they just weren’t aware. The employee’s only form of communication from their leaders was the occasional mail that they received from Carly telling them about the recent developments in the merger but then this came on at a later stage of the merger.

Step-5: Remove Obstacles

▫ Removing obstacles to empower people needed to execute the vision

To remove any kind of obstacles that came their way meetings were held by the senior executives Conferences and seminars were held for the buyers so that they are aware of the new range of products and the situation that time so that they don’t become a obstacle for them.

Step-6: Create Short Term Wins

▫ Best motivators

As such there was no reward system which was followed by the companies. They motivated them not by extrinsic awards but followed more of a intrinsic approach. If the person worked he would be given a better post then their peers. This was one of the motivators which were given. The only extrinsic reward that they got was that incase they left he company they got a good remuneration package which really can’t be considered a reward.

Step-7: Build on the Change

▫ Change runs deep

▫ Announcing victory will lead to a failure

As Kotter clearly states that many changes fail because victory is declared too early. Though the start and the purpose of the change was good it procedure wasn’t handled well. And this is where Carly went wrong. And as a result she was made to resign from the post in 2005.



Step-8: Anchor the Changes in Corporate Culture

▫ To make the change stick

▫ Values of vision shows in day to day work

Once Carly resigned , Mark came in and he gave this change a whole new face. He made sure that the change is successful by working on it and making sure that that any mistakes are worked upon. The vision that was stated by Carly was worked upon and he made sure that all were aware of the change and the new vision and it showed in their day to day work. Once that was done the resistance went down a lot as then both parties involved were aware of the consequences.

Suggestions • Better planning: As a group we feel that the change could have been handled well if there was

better planning and coordination in the change team. Also better planning in terms of the planning process would have led to a better success story for the team.

• Working out cultural issues: There is a lot of cultural issue that needed to be looked into during the change process. Since there were teams being made from two different companies whose culture differed a lot there. Even now the culture of the company is considered as two different cultures rather than one. People are recognized either as a Red (Compaq) or a Blue (Hp). They are like two tribes in one common place working towards a common goal yet having differences on their way of reaching that goal.

• Creation of a sense of urgency: There was no sense of urgency which was created by the leaders. Communicating the importance of the change for all the employees would have helped them overcome all the resistance and the merger would have been a success from the start.

• Definite time frame: Since no time frame was defined and changed kept happening for almost 2 years after the initial 3 month change period there was a lot of apprehension among the employees and as a result many of the best people of the companies left the company. Hence a clear and definite time frame should be there.


Documents

HP – Compaq Merger - Ningapi.ning.com/.../HpCompaqmerger.docx · Web view · 2017-05-24The case revolves around the HP=-Compaq merger and the herculean task it was to merge the