The Organic Management: Hewlett-Packard

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Dave Packard and Bill Hewlett built their dream – the Hewlett-Packard Company in 1939. Their greatest contribution was not the product that is the core of any business. Rather it was their management style that revolutionized the entry of HP into the American business scene. Their strategy placed their people at the core of their business. They did not believe in the conventional hire-fire policy of the Americans. Even in the 1980s, when the businesses were reeling under the economic burden, HP chose to retain its people by implementing the 4 work days in a week policy which was one of its kind in the history of business. The employees were given the opportunity to innovate and grow within the organisation. They adopted a slow growth policy unlike the other American companies. The growth of the company was phenomenal. On observing the HP way closely, we can understand that the theory underlying here is theory Z. Though it was formulated decades after HP articulated its way, the characteristics of HP way can be matched accurately with the theory. Theory Z was the latest addition to the humanistic traditions in management at the time it was propagated. It was built on the foundation laid by Douglas McGregor’s theory X and theory Y. Hence, theory Z is nothing but derived of the best of both X and Y. Theory X is typically an ancient approach to management. It can be considered as the basis of each of the enterprises that came into being since the primitive ages. People are inherently reluctant to work and that the only stimulating factor is punishment. This could be thought as the basis of all sorts of labour and in the extremes- slavery as well. When men are required to work for the builders, all they were doing is prevent punishment. Infliction of pain the dread arising from that thought was the sole driving force to finish the tasks. Pain can be considered in a broader sense here. It could be either the physical pain inflicted on inability to meet the requirements or the pain induced after losing the means of livelihood. This is one extreme of the theory. To give another case that we can relate to, theory X is in play wherever there is a threat of losing their jobs in case of underperformance. Daily wage earners, contract workers and many others working in the unorganised sectors fall in this range. It is an undisputable fact that this produced results. In most of the cases the results were most desirable- from the most talked about monuments to the insignificant routine jobs in an obscure factory. It is in thin context that a few revolutionary thinkers like Elton Mayo came up with their humanistic ideas. To test the same, they conceptualised and implemented the Hawthorne experiments at the Western Electric Company. The most interesting fact about the experiments was that the results were positive irrespective of the kind of stimulus given. For instance in the illumination experiment, merely being chosen amongst a test group itself was sufficient enough to drive the productivity of an individual to the peak. So we can effectively conclude that recognition is what each person strives for. In the present industrial scene, there is indeed a different measurement of the desirable end result. The world has redefined the term desirable for all. Now, there is a drastic shift to the human side of labour from the material gains to business. The mental and physical well-being of the employee is the prime consideration in most companies. This shift in attitude can be attributed not just to the changing industrial climate, but also to the social, political and economic changes in the world. Employee has now found himself at the heart of the process. In this backdrop, one can analyse the counter theory to X, which is called theory Y. This was the soft approach to management. Here, we believe that the employee wants to work for the love of work itself. This theory puts primary focus on self-direction and initiative rather than a company-driven perspective to work. This focusses more on the reward system in order to boost the morale of the employee and there by better productivity. McGregor mentions a few ways in which theory Y was applied in the industries. For instance, IBM had successfully carried out their decentralisation and deregulation process during this era. Another concept that came into being during this time was Management by Objectives formulated by Peter Drucker. Hence an alignment of the individual aspirations with that of the company became important. The employees would start identifying themselves as part of the organisation. Drawing parallels from the American and the Japanese systems of management one can easily fit certain characteristics of theory X and Y in the big picture. The American system had mostly the characteristics of theory X. They treated their employees solely from a mechanised perspective. Ouchi used the term theory A to describe the American way of management. It was more mechanistic in nature. The major characteristics were short-term employment, clearly defined career progression, rapid evaluation system, rigid control, and individual decision making. The Japanese management system, which was termed theory J by Ouchi, believed in collective processes. There was a “moral cohesion” amongst the team members. The defining characteristics of theory J were the collective decision making process, wholistic view, slow growth and advancement, and life-time employment. The stark contrasts in the characteristics of theories A and J roots in the varied socio-political environments in the respective countries. In a study during the 1970s it was found that the American companies fared better in automated production processes than the rest of the world. But in semi-automated industries Japan topped the world. Japan had a more peaceful industrial relations climate as well. The industries started focussing on implementation of the best of Japanese management to the American scene to create a more employee friendly industrial climate. The result of this was theory Z. Theory Z incorporates the best of both the practices. It emphasizes on long term employment, contrast to theory A and slightly different from the life-time employment concept of theory J. It includes individual decision making as opposed to that of Japanese management. Ouchi defines “trust, subtlety and intimacy” as the core values in the culture Z. In essence the meanings are derived extensively from the theories, but one cannot equate Z and the others. Ouchi calls his theory the organic way of managing and this was popularised during the Asian economic boom in 1980s. The implementation of this theory aims at maximising employee involvement, satisfaction, loyalty and productivity. Speaking of theory Z and its impact on the Indian context, we can see that the manufacturing segment operates with more of theory Y where as other newer industries like IT and other services focusses on Theory Z. One can observe this dichotomy in cases of Multinational engineering companies operating in the country. During my stint with ABB Ltd., I was put in a manufacturing facility in the outskirts of Bangalore. But I worked in a global IT team located there. So each day, the shop-floor visit and my workstation gave me experiences that were worlds apart. The manufacturing line had operators who had completed, 10-25 years of experience supervising the contract workers, where as I worked with a team of age group 22-35 years. The manufacturing segment in India being dominated by Trade Unions take collective decisions and there is hardly any attrition except among contract workers. Whereas the IT professionals have to make individual decisions and are strictly monitored and evaluated by their deliverables as a team and also as an individual. There has been a shift to theory Z in the recent years, where appraisals and rewards are incorporated right from the bottom to top of the hierarchy. It is quite palpable in the industrial scene in India. The MNCs have shifted their focus to a more employee engaging and friendly approach. But are the desirable results made? It is obvious that in the present market scenario, the competition is intense and loyalty has taken a backseat. Ultimately the theories aim at alignment of the long term goals of both the company and the individual. The concept of ‘long term’ is long gone from the world. The goals are short term and so are the forecasts. This could be observed in the case of the HP way as well. Currently the company is plagued by unstable management, who is troubled with the style of functioning of the organisation. Though the latter CEOs tried to remove the employee centred ‘HP way’ from HP, it is often seen that they were forced to revise their decisions. Organisations are made of organic building blocks i.e. its people. Hence the organic way of managing, irrespective of the number of names attached to theories, will continue until organisations cease to exist. References
  1. Ezaki, Koechi. 1983. ‘The Implications of Theory Z for the Sociology of Organizations’. Mid-American Review of Sociology. Vol.8, No.2, pp 81-91.
  2. McGregor, Douglas. 1960. The Human Side of Enterprise. New York : McGraw-Hill.
  3. Mayo, Elton. 1930. ‘The Human Effect of Mechanisation’. The American Economic Review. Vol.20, No.1, pp 156-176.
  4. Ouchi, W. G. 1981. Theory Z: How American Business can meet the Japanese Challenge. Massachussets : Addison- Wesley.
  5. Packard, David. 1985. The HP Way. New York: HarperCollins Publishers.
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The Organic Management: Hewlett-Packard. (2017, Jun 26). Retrieved September 25, 2023 , from

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