The HP-Compaq merger

Within a communal culture both friendship and performance are important. People have the feeling of being that the are part of a community, but there is also a focus on goal achievement. A communal culture needs a charismatic leader with a clear vision where the organization wants to be in the future. The disadvantage of a communal culture is that it will consume a lot of time for the employees. In 2001 two big IT manufacturers decided to merge, this was one of the biggest mergers in the history. The merger between HP and Compaq we can call a horizontal merger. A horizontal merger is a merger between competitors who operate within the same market.

Compaq was very strong in the customer PC market, and the business server market where HP’s main market was the selling of printers and printer accessories. Next to the selling of printers HP was also active on the business server and customer PC market, but this was not their main market. If we look at the markets and the core competencies of the companies, the merger between HP and Compaq was a very good tactical step and it was also necessary. It was necessary because due to the nature of the HP company they were not very innovative, and therefore they were getting behind on the competition in this very fast changing environment. On the other hand Compaq was very innovative, but they were to small to compete with the mighty IBM who had an advantage of being the biggest player in the market. Another problem that Compaq had was that they lacked judgement, meaning that sometimes they had to do things over and over because they hadn’t thought it through.

So looking at the business side of the merger it was a very good merger, but in this report we are looking at the business cultures of companies. So now we are going to look at the cultures of both companies before the merger so we can understand possible difficulties that arose during the merger. The Hewlett-Packard culture before the merger Hewlett Packard had always been in the news for their very special culture. Hewlett-Packard began with a very low budget in a Stanford garage, where co-founders Bill Hewlett and Dave Packard built a sound effects device for the Walt Disney Company. For years Hewlett-Packard avoided layoffs, and employees were given the opportunity to find other jobs within the company when positions were downsized or eliminated.

With a management philosophy emphasizing on integrity, respect for individuals, teamwork, innovation, and contribution to customers and the community they founded a very special organization culture. This culture had become known as “The HP Way”. This culture earned very much respect from their employees since the company was founded 65 years ago. To employees, customers, and partners of Hewlett-Packard, the “HP Way” is symbolized as a set of values that defined Hewlett-Packard’s culture. The “HP Way” communicates a culture of engineering excellence, respect for the individual, and rewards for exceptional effort. These abstract principals are easily communicated and therefore everybody understands them. Companies like Hewlett-Packard which have a well-known dominant culture, have many advantages over companies whose dominant culture is not as explicitly defined.

Due to the very explicit dominant culture it is very easy to identify candidates that fit with this culture. It enables the organization to operate with fewer formal rules and regulations. In any particular circumstance employees are likely to know what to do. In the end we can say that “The HP way” is a synonym for a very conservative culture in which there is not much change. This culture also reflects the product strategy where HP is always a slow moving company, meaning that they not very innovative.

The Compaq culture before the merger Compaq’s culture is different then HP’s culture. Compaq stresses innovation and creativity through the organizational practices that have established. They hire young, talented individuals that are creative and innovative. Their policies for team development are centered on communication, equal access to information, and excellence. Which means that Compaq is a more aggressive company, they are always innovating. Compaq has a history of rewarding employees with bonuses in response to achieving objectives that it has clearly defined for its employees and departments. Compaq also values innovation at the employee level. Methods used to determine employee performance include the employee’s ability to deal with problems that arise through creative and innovative ways that are in line with Compaq policy.

Managers are chosen based upon their ability to express leadership and motivate employees instead of growing through the company towards a management function. Even in the product development process we can clearly see the Compaq culture. Strategic goals include the development of innovative products which their consumers will enjoy. Throughout its organizational dynamics and philosophy, Compaq has always emphasized on innovation and creativity. In the organization Compaq stresses these values by establishing teams that specifically focus on making sure that practices are aligned with strategic goals such as excellence and innovation.

Having said this about the culture of Compaq we can conclude that they have a strong entrepreneurial culture. This culture means that Compaq is always an innovator looking at the products they deliver. The problems of the merger looking at the cultures So when we looked at the business side of the merger it was very good, because the companies could complement each others weaknesses to become a stronger company. The problem of the merger was with the merging of the two different business cultures that HP and Compaq had. HP on the one hand was like a family and everything was very friendly, and on the other hand Compaq had a more aggressive culture.

Due to the merger the productivity dropped to a very low level from especially the HP employees. The HP employees had a lot of troubles with the merger, they didn’t want to cooperate and they didn’t want to change. On the other hand the Compaq employees were a lot more flexible, they also resisted change which is human but the did cooperate and helped to think how they could improve the situation. What caused this culture clash, en more important what can HP and Compaq do about it to bring productivity up and create a new dominant culture.

The cause analysis of the culture clash Due to the merger 15.000 jobs had to disappear, and especially the HP employees couldn’t accept this. The The first thing we can do is compare the cultures of HP and Compaq by placing them in the four-culture typology model. If we look at the HP culture we can say that they have a high sociability, the people at HP really see each other as family. The HP way values thrust and community which encourages the employees loyalty to the company.

On the other dimension of the four culture typology, the solidarity HP also gets a high score. The also score high on solidarity because they encourage teamwork, and the employees work together to achieve their goals. So HP’s culture scores high on both sociability and on solidarity, which means that according to the four culture typology they have a communal culture. This communal culture that the HP way is means that the employees have always put their work above their personal life. The employees always had the idea that they were part of something more then just a company.

On the other hand when we look at Compaq and the four culture typology we see a different culture. The Compaq culture scores high on solidarity, because they are very goal focussed. The employees at Compaq always want to achieve their goals, and invent innovative new products. When we look at the sociability we can say that within Compaq this is low. The people at Compaq are very goal focussed and will do almost everything to get the outcome that they want to get. This very goal focussed environment isn’t good for the sociability because the culture becomes more hostile.

Looking at both cultures within the four-culture typology we can conclude that they differ at the sociability factor. And this also makes clear why the HP employees resisted the merger so much. Due to the merger and the bad economic situation 15.000 people had to be dismissed. Normally at HP almost nobody got fired, when a working spot disappeared there was always taken good care of the employee who had to leave it’s position. The employee was mostly replaced in another position inside the company or he of she was placed in another company by the HP management.

With the merger the new management had no choice but to just dismiss the 15.000 employees without taking care of their future. These employees were very disappointed because this was not thinkable of within “the HP way”. This situation also had it’s affect at the employees who stayed during and after the merger. The motivation dropped to a disappointing level, and along with the drop of motivation the productivity also took a beating.

Looking at the situation during this merger we can say that the biggest problem was the employees of HP. Because most of the employees worked there for a long time and they strongly believed in their culture, they wanted to hang on to the past situation. They were not used to changes and were very much connected to each other. The employees of Compaq on the other hand came from a dynamic culture in which they were more used to changes, and along with that the Compaq culture didn’t have a high sociability which means that the employees cared less for there colleagues that were dismissed.

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