Merger man

Most of us associate 1939 with the start of the Second World War. If you’re a film buff, you’ll also recognise it as the year that the movie epic Gone with the Wind was released, while radio hams are more likely to note it as heralding the invention of FM radio. In a garage in Palo Alto, California, meanwhile, a toss of the coin was deciding the name of what was to become one of the biggest and most innovative technology companies in the world.

Bill Hewlett and Dave Packard formalised their partnership on 1 January 1939. In its first year, Hewlett Packard, a two-employee company, had a revenue of $5,369, which wasn’t bad since it was founded on only $538 of working capital. More than 60 years later in 2002, and by then commonly known as just HP, it became the subject of the biggest merger in technology industry history with rival Compaq.

Merging two workforces, cultures and product lines, spanning printers and storage devices to notebook, handheld and desktop PCs, is never easy, but the global scale of the HP/Compaq merger made it a mammoth task. HP had 88,000 employees and Compaq 65,000, all spread across the globe. Mike Taylor, then working in a European training and development position for Compaq was one of the members of the Clean Room (named after the dust-free, clean areas where new micro-processors are developed), a virtual team which was assembled from both companies to plan for the merger.

“All organisations know that the success of a merger is down to the people – you have to get your people focused in the right way,” says Taylor, who after the merger became HR director for HP UK & Ireland, the largest subsidiary of HP outside the US. “So a lot of work we did in the Clean Room was to make sure we were as well-prepared as we could be for the sort of company it would be post-merger.”

Although recent quarterly earnings were below forecasts (largely attributed to poorer-than-expected sales of computer servers and storage equipment) there’s plenty of evidence to suggest that the work carried out in the Clean Room paid off.

HP serves more than a billion customers worldwide across 162 countries and had a revenue of $76.8bn for the year ended April 2004 (increasing from $45.2bn pre-merger in 2001) and is ranked 14 in the Fortune 500 (2003).

So how do you mastermind such a merger from an HR standpoint and how central was the function to the whole operation? Taylor’s role was to look at the HR model that was required and he is now implementing much of what was planned. HR’s role, he says, was and remains pivotal. “It was absolutely at the forefront of the success of the merger. Very little could happen within that first 12 months without the intervention of HR.”

For starters, 1,500 people lost their jobs in the UK due to duplication. “It was necessary for the organisation’s survival,” says Taylor. There was also a huge amount of core HR work, which included harmonising terms and conditions and implementing new job architecture and a new performance-management system right across the organisation. “We had an HR strategy and an HR plan that tackled these issues one by one,” explains Taylor. “So we were gradually building from one level to the next.”

It was also an HR facility which became one of the most powerful tools throughout the merger. The need to focus employees meant it was vital to have the necessary communication and information channels in place. Traditional media such as posters and leaflets played their part, as did regular briefings from senior executives, but by far the most effective delivery mechanism was its intranet employee portal, @HP.

The self-service HR portal, which was originally rolled out in 2000 and has around 141,000 users, received two million hits on day one of the merger. It enabled HP to disseminate a mass of information during the run-up to the merger which included the rationale behind the move and the role employees could play within the new organisation. It also included training materials.

“[The training materials] enabled sales people, for instance, to go out and represent the company to customers in an appropriate way,” says Taylor. “So from an external perspective it all looked like it had been in place for some time.”

The portal was a 24/7 tool which helped prepare for the merger, but the company also put a raft of other initiatives in place. The most significant of these from a people perspective was its Fast Start seminars. At the planning phase, the Clean Room team constructed training modules that managers could use to get their newly appointed team up to speed on the company. “It took them through the culture and strategy of the new organisation but they were also intended to drive out some of the underlying thoughts and feelings in people’s minds and help them understand what the expectations of the team and the manager were,” explains Taylor.

Such underlying concerns stemmed from issues such as how teams would operate at a local level and how they would be expected to function. Employees also wanted to know what the decision-making process would be and what the product lines comprised, as well as how they would be supported. “The seminars worked at a strategic level but were also tactical to get people thinking about how they were going to operate,” says Taylor.

One of the major challenges when two high-profile and high-performing companies merge is ensuring the best of both side’s processes and practices are adopted. With speed and agility among the new company’s core values, HP used what it calls an “Adopt and Go” approach when it came to deciding on processes. “If we had two processes within the organisation we would spend some time examining which one was the most effective and adopt that one,” says Taylor.

“This meant that instead of saying ‘those processes could be improved let’s design a new one’ – which, to be quite honest, would have taken too long – we took the best from whichever world and went with it. If you look at the company now, whether it’s from a people or processes perspective, you have a complete mix of pre-merger HP and pre-merger Compaq built in and integrated across the new organisation.

Similarly, the mix is helping to build the company’s new culture. It used to be said that HP employees could sniff out their fellow HP-ers at an event even if they’d never previously met. Taylor believes the new company is successfully creating its own new culture. “It doesn’t happen overnight, it’s something unique that builds,” he comments.

“But I believe if you looked around the company now you couldn’t identify a pre-merger HP or pre-merger Compaq heritage – you would just see the new organisation,  the new HP. But that isn’t to say, complacently, that everything is fine, there is still work to be done.”

Taylor explains how the Fast Start sessions are now being followed up with a Fast Forward programme, designed to iron out any issues that still remain about how the new organisation operates. “It builds on what the teams have already done together in Fast Start and helps to move us through those final phases and continues to build our culture.”

Like Fast Start, it is, Taylor proudly reports, an HR initiative – Fast Start being a global initiative and Fast Forward being a European one.  “But that isn’t to say that it won’t be adopted elsewhere,” he says. “They are programmes that have been developed within HR to help the organisation meet its business objectives. The way in which HR is moving means we can take advantage of the technology out there to move up the value chain and we’re developing our HR people as genuine business partners.

“We have a terrific heritage in how we deal with people and must continue to build on this as well as move forward. We’re in a world where change is continuing to accelerate and we’ve got to help people deal with that change.”

HP structure within HP UK & Ireland

HR within HP divides itself into two core groups: business partners, who work alongside managers to help them derive the right people strategies to meet their business goals; and a team of shared service HR staff working right across the business. The latter is subdivided into areas such as reward, comp & bens, staffing, training and development, employee relations and HR operations. This HR model is replicated at all of its global operations.

Mike Taylor, who before taking up this role was European director of training and talent development for Compaq, is responsible for the delivery of HR to over 8,000 employees across the UK and Ireland.

HP major landmarks

1939: Bill Hewlett and Dave Packard form Hewlett Packard in a garage in Palo Alto, California. Its first product is a sound oscillator.

Employees: 2

Revenue: $5,369

1959: HP becomes a global company.

Employees: 2,378

Revenue: $48m

1961: HP is listed on the New York Stock Exchange “big board” for the first time.

Employees: 5,040

Revenue: $87.9m

1966:  HP’s original computer, the HP2116A is launched.

Employees: 11,309

Revenue: $203m

1972: HP launches the world’s first scientific hand-held calculator, the HP-35.

Employees: 20,941

Revenue: $479m

1980: HP introduces its first personal computer, the HP-85.

Employees: 57,196

Revenue: $3bn

1994: HP becomes one of the first companies to encourage the spread of telecommuting around the world as telecommuting policies are formalised.

Employees: 98,400

Revenue: $25bn

1995: Dave Packard publishes the The HP Way, which provides an insight into the company’s management practices and culture.

Employees: 105,200

Revenue: $31.5bn

1998: Compaq acquires Digital Equipment Corporation, making it the largest acquisition in computer industry history at the time.

Employees: 124,600

Revenue: $47.1bn

2000: Carly Fiorina is named chairman of the board of directors.

Employees: 85,500

Revenue: $48.8bn

2001: HP Services is created, offering consulting, outsourcing, support, education and solutions.

Employees: 88,000

Revenue: $45.2bn

2002: HP and Compaq officially merge on 3 May. In November, HP opens the next chapter of mobile computing with the Compaq Tablet PC TC1000.

Employees: 41,000

Revenue: $72.3bn

2004: HP celebrates 65 years.

Employees: 142,000

Revenue: $76.8bn

Mega mergers


America Online/Time Warner: $165bn

Vodafone/Mannesman: $196bn


Exxon/Mobil: $81.5bn

Daimler-Benz/Chrysler: £55bn

GlaxoWellcome/SmithKline Beecham: $75.7bn

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