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Case Study on ”The HP Way”


‘No operating policy has contributed more to Hewlett-Packard’s success ‘ – Bill Packard on MBO.

With the last article, we started a series about Management Styles. In that article we explained MBO (Management by Objectives). Today we will explain MBO and how it’s applied to the real world. We will do a Case Study on HP. 

Bill Packard, cofounder of HP, said of MBO: “the antithesis of management by control. The latter refers to a tightly controlled system of management of the military type [while] Management by objectives, on the other hand, refers to a system in which overall objectives are clearly stated and agreed upon, and which gives people the flexibility to work toward those goals in ways they determine best for their own areas of responsibility”.

The concept of MBO became more popular when “The HP Way” was affirmed to be a standard of the Hewlett-Packard management style. At every strata in Hewlett-Packard, the need to generate objectives and combine them with those of others became paramount for managers. This was provided by drawing up plans illustrating what needed to be achieved in order to reach objectives by all those involved. The objectives were then passed around and transmitted to everone in the company.

The two founders of HP, William Hewlett and David Packard, from the beginning developed a Management Style never used before on a large company. They renounced the “hire and fire” Management Style (to employ people only for a big project and then fire them). In the US economical crisis of 1974, they avoided layoffs by a four-day workweek. This made a Corporate Culture unique in the US.

Another measure, more recently adopted by Apple (Steve Wozniak, who worked at HP, later co-founded Apple) and Google, is that they treated the employees as family members. They called each other by the first name. Even the two founders were known as Bill and Dave.

Employers participated in the company with stock options to increase motivation and involvement in the companies objectives. Also they were paid additional premiums when the company was succesfull (profit sharing). The HP Way included also extensive social benefits, as for example scholarships for the employee’s children.

In the late 1950s, William Hewlett and David Packard writed down the company’s objectives. These were the guidelines for “all decision-making by HP people”. With slightly changes, they are still valid today. The objectives they established (to be achieved through teamwork) are: “Profit, Customers, Fields of Interest, Growth, Our People, Management, and Citizenship”.

This established a new Corporate Culture in Silicon Valley and many firms tried to imitate “The HP Way” adopting measures like stock options, innovative work rules, teamwork, and profit sharing.

Nowadays, “The HP way” is seen as model for Corporate Culture globally accepted.

Does your organization have a MBO Corporate Culture model?

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Author: angelberniz (All Rights Reserved by the author).
Source: Original Text (based upon first hand knowledge).
Image: © Maksim Šmeljov –
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