Box 2, Folder 29 – General Speeches
April 24, 1957, Growth from Performance, IRE, San Diego
4/24/57 Printed copy of David Packard’s speech “Growth from Performance” .
Packard starts by reviewing the strong growth of the electronic industry since the Korean war. Firms “have found it necessary to run just as fast as possible simply to keep up with the industry.” And in the case of HP, he explains, “our company has grown twelve times in seven years.”
He says they have encountered many difficult problems handling this growth, but have been fairly successful in surmounting them because “we have guided our program with some rather specific objectives …”; and he says he will share these with the audience.
“First”, Packard says, “we have directed all of our efforts toward the field of electronic instrumentation.” And he explains the benefit of being able to focus their R&D effort, their production capabilities and the efforts of the sales organization.
The second objective, Packard says, “has been to do only those things in which we could make some contribution to the progress of the electronic industry.” He gives some examples and points particularly to their effort to make contributions in the area of manufacturing techniques. He says, “I think the measure of this contribution is best indicated by the fact that very few of or prices have increased during this period even though there have been substantial increases in the cost of our labor and material.”
“As a third objective”, Packard continues, “we have attempted to meet our responsibility in providing security and opportunity for our employees.” And he points out they have avoided large contracts involving the employment of a large workforce, and the likelihood of having to let them go at the end of the contract.
“As a fourth objective”, he says, “we have kept in mind that we have a responsibility to the community in which our business exists. We have encouraged our people to participate in community activities. We have given substantial financial support to educational and other institutions in our community.” And he goes on the give specific examples of HP employees who are or have been members of civic, industrial or educational organizations.
Since they are talking about growth tonight Packard says “…I want to include our objective as to growth. It has been and is our basic policy to grow as rapidly as possible in fulfilling the other objectives which I mentioned, but to keep this growth at a rate which can be financed from our own profits on a pay-as-you-go basis.” And this brings up the final objective.
In presenting this objective to HP people Packard says he always puts it first. “It is to attempt to make a profit of at least 10% on every sales dollar every month and every year.” Packard says this objective is very important for two reasons: “First, it makes it possible for us to achieve all of the other objectives which we have set for ourselves, and second, especially because it is the final and absolute measure as to whether we do or do not make a contribution to the industry.” “When we can no longer make a contribution to you we cannot expect you to make one to us.”
Packard reviews HP’s growth since 1950 from 2.3 million of sales to 28 million in 1957, and he says, “and we have accomplished this growth without any outside capital.” “The formula for growth from earnings is very simple. It is as follows: The percentage increase in sales which you can finance each year is equal to your percentage of profit after taxes times your capital turnover. Capital turnover is defined as the number of dollars in sales you can produce per year for each dollar of capital you have invested in your business.”
Packard proceeds to look at this formula in more detail. “The percentage of profit which you produce on your sales dollar is a pretty obvious thing and needs little explanation except to emphasize that your rate of growth is directly proportional to your percentage of profit, other things being equal.” …”For our business we think a figure in the neighborhood of 10% is about right. ”
“The second factor, capital turnover, is not always as well understood. Your capital includes working capital (that is the money you use to buy inventory, to finance your accounts receivable, to provide some working cask, etc.) and fixed capital would be the amount of money you have spent to buy facilities, tools and equipment. If most of your money is in working capital you can increase your turnover by keeping your inventory low, by keeping your receivables low, and by always keeping exactly the right amount of cash on hand to just barely be able to pay your bills the day before they are due.” You can almost always make your turnover better by having all your money in working capital and none of it is fixed capital. But, by having the proper tools, facilities and equipment you can usually produce a better product, keep your costs down and, therefore, you profit up. So, here again there is an inter-related balance involved in adding to your machinery and equipment at a rate which will not unduly reduce your capital turnover, yet which will give you the things necessary to do a good job.”
Packard points out that control of all these factors is not as easy as it may sound. ” “Your production people want lots of money tied up in inventory.” “Your sales people would like to extend unlimited credit to all your customers.” He proceeds to look at how these factors have applied to HP during the last seven years.
He says that during this time HP growth has averaged 42% per year, profit after taxes has averaged 10% per year, and capital turnover about 4 1/2 times per year. “Thus, using the formula, percentage of growth equals percentage of profit times capital turnover, we should have been able to finance a growth of 45% per year. . Since our growth was slightly less than this we have come through this period of growth with improved capital strength.”
Packard discusses stock issues and points out that …”you can sell electronic stocks often at 30 to 40 times earnings.”…. Often, however, people forget that this multiplying factor can properly be used only once and that sooner or later profits will have to be increased to the point where the stock is supported on the bases of 10 or 15 times earnings, and when that point is reached your growth will be determined fundamentally by how rapidly you can increase your profits year-by-year.” Packard says he may have spent a lot of time on the financial aspects of growth, “…but, I felt since the trend seems to be otherwise that many of you would be interested in knowing that relatively rapid growth is possible without public stock issues and without merger or acquisition techniques.”
Packard says that the conservative formula HP uses is “most effective when you obtain a high level of performance from all of your people. He adds that although HP uses most of most of the scientific management procedures “I think we get the best performance by giving our people as much freedom and as much incentive as possible to work together as a team toward the achievements of our objectives. We try to give them this freedom by maintaining flexible organizational methods. We try to give them incentive by a very specific device which we call our Group incentive Plan.” And he goes on to discuss the profit sharing plan in effect at the time.
Packard closes saying, “And so in selecting the title “Growth From Performance” I really had in mind that we have been able to achieve a fairly substantial rate of growth first by setting and adhering to some rather specific objectives, second by demanding a high level of performance from our management group, from our engineers and in fact from all of our employees. I see great opportunity for us ahead to grow with you people in the electronic industry as long as we can continue the high standards of performance which our people have achieved in the past seven years.”
4/24/57, Printed program of the 7th Region IRE Conference.
4/24/57, Printed pamphlet containing a short biography of each of the speakers at the conference and a summary of their comments.
4/24/57, Printed pamphlet listing exhibitors and events at the conference.
4/24/57, Copy of a speech at the IRE conference titled “Motivating Engineers in a Balanced Military-Commercial Industry”, given by Dr. Robert S. Bell, President, Packard Bell electronics Corporation, Los Angeles.
4/24/57, Typewritten copy of a speech titled “The Balanced Management Concept”, given at the conference by Charles B. Thornton, President and Chairman of the Board, Litton Industries, Beverly Hills.
11/16/56, Letter to David Packard from Donald G. Burgere, Chairman, Professional Management Session, Seventh Region IRE Convention Soliciting Mr. Packard’s participation as a speaker at the Convention.
11/27/56, Letter from R. T. Silberman, of Kay Lab, urging Packard to participate in the convention.
2/6/57, Letter from Ronald K. Jurgen, Editor of “Electronic Equipment” asking for an advance copy of Packard’s speech for review.
2/13/57, Copy of a typewritten letter form Packard to Ronald K. Jurgen say he does not plan to release an advance copy of his speech.
3/19/57, Letter to Packard from D. G. Burger, Chairman, Professional Management Session of IRE giving details of the forthcoming conference.
4/57, Copy of publication, “San Diego Bulletin” and IRE publication, including biographies of the speakers at the forthcoming conference.
4/16/57, Letter from B. F. Coggan, Vice President and Division Manager, Convair-A Division of General Dynamics Corporation, inviting Packard to attend a breakfast, sponsored by the San Diego Chamber of Commerce, on 4/25/57.
4/17/57, Copy of typewritten note to B, F. Coggan from Packard accepting his invitation for the breakfast.
4/24/57, Letter to Packard from T. T. Patterson, Chairman, Publication Committee IRE-PGEM, requesting a copy of Packard’s speech at the IRE conference.
4/27/57, Letter from Samuel Freedman, General Manager, Chemalloy Electronics, requesting a copy of Packard’s speech at the IRE conference.
4/29/57, Clip of article from the Electronic News, about the speech at the IRE conference.
4/29/57, Typewritten note to Packard from Lee Hackler, Fairchild Publications, enclosing the article from Electronic News on the conference.
4/30/57, Handwritten note from Packard to (presumably) his secretary, asking that she send copies of his speech at the IRE conference to Charles Blyth, Frank Walker and Al Schwabacher.
4/30/57, Copies of letters to the above gentlemen sending copies of the speech.
5/3/58, Letter to HP Company from R. H. Rupkey, Foreman Cycle, Test & Repair, requesting a copy of Packard_s speech at the IRE Conference.
5/7/57, Letter to Packard from Karl Freund, President, Photo Research Corp. requesting a copy of Packard’s speech at the IRE conference.
5/8/57, Copy of typewritten letter from Packard to R. H. Rupkey, sending a copy of Packard_s speech at the IRE conference.
5/8/57, Copy of typewritten letter to Samuel Freedman sending a copy of Packard_s speech at the IRE conference.
5/10/57, Form postcard to Packard from Stephen W, Miller of SRI, requesting a copy of Packard_s speech at the IRE conference.
5/14/57, Copy of letter from Packard to Stephen W. Miller of SRI sending a copy of Packard_s IRE speech.
5/14/57, Copy of typewritten letter from Packard to T. T. Patterson sending a copy of Packard_s speech at the IRE conference.
5/14/57, Copy of typewritten letter from Packard to Karl Freund sending a copy of Packard_s speech at the IRE conference.
5/27/57, Letter from James W. Shoemaker of Schwabacher & Co. saying he and Al Schwabacher appreciate having received a copy of Packard_s IRE speech.
6/4/57, Letter from R. T, Silberman of Kintel, Cohu Electronics forwarding three pictures of Packard and others at the IRE conference.
6/4/57, Copy of typewritten letter from Packard to all employees of HP sending them a copy of Packard_s speech at the IRE conference. He compliments them on their past performance and adds that “We are sure, too, that we can count on your continued enthusiastic support in the future – as we have had it in the past.”
6/28/57, Letter to Packard from Stephen W. Miller, SRI, saying the first copy of Packard_s speech at the IRE conference which he received disappeared and he requests another.
7/5/57, Copy of letter from Packard to Stephen Miller sending another copy of Packard_s speech to the IRE conference.
10/9/57, Typewritten postcard to Packard from Prof. Donald S. Gates. Albright College, requesting two copies of Packard_s speech at the IRE conference.
10/14/57, Copy of a letter from Mickie Ayers (Packard_s secretary), to Prof. Donald S. Gates sending two copies of Packard’s speech at the IRE conference.
11/12/57, Letter to Packard from Harold W. Pope, Vice President for Operations, Sanders Associates, requesting a copy of Packard_s speech to the IRE conference, and saying he intended to send a copy to all of their employees much as Packard had done.
11/27/57, Copy of a letter from Packard to Harold W. Pope sending a copy of the IRE speech and saying he had no objection to their reproducing it for distribution to others.
Box 1, Folder 9 – HP Management
January 11-13, 1957, Executive Conference, HP Managers, Sonoma Mission Inn
1/11/57 – Typewritten text of Packard’s remarks at the Friday night dinner starting the conference. He spoke of the Corporate Objectives. [See also speeches dated 1/31/58, 1/29/60, 1/12/68, and 3/17, 75]
Packard says that there are “…many reasons why a business is founded and why a business continues to exist….It is desirable to clarify the objectives of a business and to state them from time to time so that all of the people in the organization will have a better understanding of the business and direct their efforts toward the common goal.”
He says “some” objectives for the Hewlett-Packard Company have been stated “a number of times in the past….Others may not have been specifically stated, but become apparent from an examination of what the company has done and how it has gone about it. It seems to me that it is more important than ever to make an attempt at clarifying and restating the objectives of the company. I believe such a restatement will help you to have a better basis for making your decisions. I think a restatement of the objectives will help some of the younger people in the organization have a better understanding of what is going on. In attempting to restate the objectives of the Hewlett-Packard company I do so with the knowledge that I am interpreting them as they seem to me. My statement of our objectives may not be strictly accurate and furthermore there may be some reason why the objectives as they have existed in the past or as I am stating them now should be modified for the future benefit of the company. Furthermore, I want all of you to understand as nearly as you can the reasons why these are or should be our objectives so that you will be able to accept them as being the kind of objectives you would choose were the choice your own. For this reason I would like to have you study these carefully, think about them, and be in a position to discuss them critically both for evaluation and for better understanding.
“It is difficult to decide which is the most important objective of the company, and in placing the one I have chosen first I do so with the specific emphasis that I consider it to be the most important objective to guide your day-to-day thinking. It is the objective which makes all of the other objectives possible, but it alone is not a sufficient objective. It is as follows:
“I. TO OPERATE OUR BUSINESS SO THAT YEAR IN AND YEAR OUT WE OBTIN A PROFIT OF ABOUT 20% OF SALES BEFORE TAXES.”
Packard stresses that this objectives is the “keystone on which all of the other achievements of the Hewlett-Packard Company are based.” And he mentions such achievements as the “ability to offer good employment opportunities to our people, our ability to spend money on forward looking developments without assurance of return, our ability to obtain outstanding tools and equipment and facilities….”
“The more I have considered the matter, the more important I feel this objective to be, and I would venture to put it so strongly as to say that anyone who cannot accept this objective as one of the most important of all has no place either now or in the future on the management team of this company.”
Making a contribution to the field has been stated as another objective Packard says. “…but, in considering the matter it seemed to me that it needed a more specific definition. We need to think about what kind of a contribution we mean and what field we mean….In an attempt to clarify this objective a little better, I choose to state it in this way:
“II. TO DESIGN AND DEVELOP ELECTRONIC MEASURING INSTRUMENTS AND TECHNIQUES THAT WILL CONTRIBUTE TO THE ADVANCEMENT OF THE SCIENCE AND PRACTICAL APPLICATION OF ELECTRONICS AND ELECTRICAL ENGINEERING.”
“This points up the fact that we have had our success in the field of instruments. It should be our objective to stay in that field almost to the exclusion of anything else. I say ‘almost to the exclusion’ because I think all of our objectives should be somewhat flexible and in case there came to our attention the opportunity to do something important outside the field of measuring instruments and techniques we should not automatically forego that opportunity, but rather we should concentrate our main efforts as we have in the past and consider outside activities only when and if they offer unusual potential.”
“One of the characteristics of HP instruments through the years has been their simplicity of design and relative low cost. We can certainly meet Objective II…in a number of ways. We can build instruments which are very expensive, very carefully done and yet meet the objectives of the above statement in every respect. Early in the business we felt it was possible to design and manufacture good instruments at a lower cost than those which were available. Historically we have done this. We have kept out the frills and held to the important aspects of the job. In the past I have described this as ‘inexpensive quality’ and for want of a better expression I will use this term in stating Objective III
“III TO MAKE AVAILABLE TO INDUSTRY INSTRUMENTS WHICH HAVE INEXPENSIVE QUALITY.”
“The inexpensive quality can come from engineering design, from clever and advanced production techniques and methods, or from better methods of sales and distribution. Realistically we should attempt to provide the inexpensive quality for our customers by our work in all three of these major areas.”
“We have been generally proud of our employment policy, or rather the result of that policy, in terms of the kind of people we have in our organization and their attitude toward their job and toward the company. In the field of personnel it is my opinion that the general policies and the attitude of management people toward the employee are more important than specific details of the personnel program. Personnel relations will be good if the people have faith in the motives and integrity of the company. Personnel relations will be poor of they do not, regardless of all of the frills that we have. I think a statement of our personnel policy belongs in the list of the objectives of the business, and it is as follows:
“IV. TO PROVIDE EMPLOYMENT OFFORTUNITIES FOR HP PEOPLE THAT INCLUDE THE OPPORTUNITY TO SHARE IN THE COMPANY’S SUCCESS WHICH THEY HELP MAKE POSSIBLE; TO PROVIDE FOR THEM JOB SECURITY BASED ON THEIR PERFORMANCE; AND TO PROVIDE THE OPPORTUNITY FOR PERSONAL SATISFACTION THAT .COMES FROM A SENSE OF ACCOMPLISHMENT IN THEIR WORK.”
Packard says “…we have not felt committed to accept anything like an absolute tenure status nor do we feel that this policy implies that we must recognize seniority except in cases where other factors are reasonably favorable.”
“Although I have stated the profit motive as our number one objective, it has been increasingly apparent in the past few years that business institutions have a responsibility to the society in which they exist to do something more than simply make a profit. We have freedom of action which is the direct result of the American type of government. Many of the things which we are now using in our day to day work have come about because the frontiers of knowledge have been pushed forward by our universities. A large part of the training which our people are using in their everyday work has come from universities. Our churches and schools play a large part in the intellectual and moral training which we rely on every day without giving the matter a second thought. This points up the fact that the Hewlett-Packard company as a business should be included as one of its objectives a recognition of these facts.
“V. TO MEET THE OBLIGATIONS OF GOOD CITIZENSHIP BY MAKING CONTRIBUTIONS TO THE COMMUNITY AND TO THE INSTITUTIONS IN OUR SOCIETY WHICH GENERATE THE ENVIRONMENT IN WHICH WE OPERATE.”
“This objective includes an obligation to make some contribution to the defense effort in times of peace as well as in times of war.”
Packard says they have speculated on what is the optimum size for a company…..There is a saying that ‘A business must grow or die,’ but I am inclined to think this is more of a cliché than a fact. However, over the period of years we have developed a fairly well defined objective as far as growth for the Hewlett-Packard company is concerned, and it is as follows:
“VI. TO LET OUR COMPANY GROWTH BE DETERMINED PRIMARILY BY THE PERFFORMANCE, LIMITED ON THE ONE HAND BY THE RATE OF GROWTH WHICH WE CAN FINANCE FROM OUR CURRENT PROFITS AND ON THE OTHER HAND BY THE RATE AT WHICH WE CAN BUILD UP OUR PRODUCT LINE AND OUR MARKET THROUGH CUSTOMER ACCEPTANCE IN ACCORDANCE WITH OUR OTHER OBJECTIVES.”
“Finally, I want to state an objective which I think is important to all of you, and although it may not appear to be so, it is also very important to Bill and me. That objective is to build sufficient strength into our organization so that the future of the Hewlett-Packard Company is not dependent upon any one or any two or three people, including Bill and myself. Many of you, in fact I hope all of you, have staked your future in Hewlett-Packard Company. Many of you will have in the future spent the greater portion of your productive lives with us. It should be of the utmost importance to you that the company be in a position to carry on regardless of what happens to any of us. This is also important to Bill and me.”
“I want to assure you all that I feel we have made some real progress toward this final objective and certainly at such time as we might look toward a diversification of stock holdings for whatever reason, we would hope to include HP people in the plan. Should that happen you would have even more reason to put emphasis on this last and final objective.
“In conclusion, I want to emphasize that we expect all of you to guide the execution of your individual assignments toward the common goal in accordance with these objectives. It serves no useful purpose to build strength in one area at the expense of another. Furthermore, we have no place in the company for half-hearted effort. I am sure the reports on our past progress which we will discuss during this meeting will emphasize the progress that comes from enthusiastic work toward a common goal. I hope every one of you will leave this meeting with added enthusiasm for and added understanding of the opportunity we have ahead.”
1/11/57,List of attendees, schedule of topics, charts of operating data
Conference agenda with attached charts and financial spreadsheets.
Photocopy of handwritten note by Packard listing points he wanted to make:
1. We want you to succeed, to help you do a good job and advance in your career. Success of Co. needs good men
2. Make good impression
3. Continue to study
4. No 8 hour job
5. Take [illegible]
6. Keep on details
Conference agenda:
Statement of Corporate Objectives – Packard
Responsibility of Sales Department
Responsibilities of General Administrative Department
Responsibilities of Production Department
Responsibilities of Research and Development Department
Public Relations
The decision seems to be in favor of a conservatively controlled publicity program to disseminate real news in a non-blatant manner as contrasted with ordinary business publicity”
Reasons for publicity program:
1. Employee satisfaction and pride of achievement
2. Get correct information to public before various news agencies disseminate a lot of misinformation
Dynac, Inc.
Dynac should start hiring their own engineers and production employees.
Dynac should become independent as soon as possible
Dynac should start acquiring their own machinery and equipment, engraving machine etc.
Clarification of Responsibilities of Cavier as CFO, mission, purpose, charter
Hewlett-Packard Company Sales Department
Several page discussion with organization charts
Box 1, Folder 10 –HP Management
January 21-22, 1957, Management Conference, HP Managers and Sales Reps
1/21/57 Agenda for this two day conference on sales topics.
Subjects to be covered included: forecasting, Sales Department organization, selling methods, hiring methods, doing business in foreign states, commissions
Box 1, Folder 11 – HP Management
June 14, 1957, Management Conference, HP Managers, Palo Alto
1/14/57 Spiral bound notebook containing papers for this conference with Dave Packard’s name on the front cover. Items on the agenda include:
Theme and Corporate Review – Packard
Financial Department Report – Frank Cavier
Sales Department Report – Noel Eldred
Current Development Projects – Barney Oliver
Production Organization – Ed Porter
Future Personnel Functions – Ray Wilbur
Discussion Period – Bill Hewlett
Corporate Importance of New Product Development
Speaker – Dr. C.W. Randle, Director of Research, Booz, Allen & Hamilton
Application Seminar – Panel
Summary – Packard
The booklet also contains:
charts and graphs
Description of responsibilities of each department
Draft of Corporate Objectives
Common Responsibilities of Management Positions
1. Develop and Maintain a Sound Plan of Organization
2. Select and Train Subordinates for a Fully Qualified Staff
3. Help Develop fully-qualified Persons for Key Positions and Train a Suitable Successor for Yourself
4. Work Effectively Through Others
5. Be a Good Representative of the Company within it and to the Community
Booklet titled Management of New Products from Booz, Allen & Hamilton
2/23/57 Spiral bound booklet from HP titled Production Management Seminar
Box 1, Folder 12 – HP Management
July 15, 1957, Summer Sales Seminar, HP Managers and Sales Reps, Palo Alto
7/15/57 Agenda and exercises to be accomplished
Box 1, Folder 13 – HP Management
November 16, 1957, New Product Conference, HP Managers
11/16/57 Typewritten pages of describing action to be taken on many instruments
