Lesson #1: Practice Management the HP Way

“It is important to remember that both Dave and I were products of the Great Depression,” said Hewlett. “We had observed its effects on all sides, and it could not help but influence our decisions on how a company should be run.”

If you were working at HP in its early days, you knew you were in for something different. From the very beginning, Hewlett and Packard had a very unique idea about what it meant to manage, and it was not something that everyone else understood.

In 1942, when Packard was just 29 years old, he attended a conference at Stanford on wartime production. Most of the other attendees were the heads of major corporations like Standard Oil. At the time, Packard was still just starting out.

“Somehow, we got into a discussion of the responsibility of management,” Packard later recalled. “[The moderator] made the point that management’s responsibility is to the shareholders - that’s the end of it. And I objected. I said, ‘I think you’re absolutely wrong. Management has a responsibility to its employees, it has a responsibility to its customers, it has a responsibility to the community at large.’ And they almost laughed me out of the room.”

Packard might have seemed like a fish out of water at the time, but today, most of the management practices he implemented are considered the standard throughout Silicon Valley. First, HP decided to give every worker bonuses based on their levels of productivity. Soon, that turned in a profit-sharing plan. The company was also one of the first to adopt flex-time schedules. And, HP even broke ground when it launched its company-wide catastrophic health insurance plan.

In the 1970s, when HP and most other companies were hit hard by the recession, Hewlett and Packard struggled to come up with a way to avoid layoffs. “We did not want to run a hire-and-fire operation, but rather a company built on a loyal and dedicated work force,” said Hewlett. “Further we felt that this work force should be able to share to some extent in the progress of the company.” To that end, they decided to enforce a ten percent pay cut and require employees to take every other Friday off.

As significant as those big gestures were, the HP Way became much more about the little things. Everyone – even the bosses – was to be addressed by their first name only. Managers were to maintain an open-door policy, in the rare case that there were doors, that is; HP wanted a wall-free office in order to encourage teamwork and the free flow of ideas.

The HP Way paid off for the company in the form of staff loyalty and stability, both of which helped it get through some of the tougher times of the 1980s and 1990s. Today, now that their ideas have become entrenched in almost every Silicon Valley company, it can surely be said that neither Packard nor Hewlett would ever have their ideas laughed out of a room again.

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