Box 1, Folder 35C – HP Management
January 23-24, 1994 – General Manager’s Meeting, Reception for Dave Packard
1/23/94, Text of Packard’s remarks handwritten on yellow lined paper
Packard asks the question “How was HP different?
“Bill and I started at the beginning of the Great Depression of the 1930s.
“To be able to do this while we were doubling our business every year in the early days of the war we had to achieve nearly 100% increase in our return in equity, and keep our inventory and receivables at a low percent. Of our assets.
“Bill and I started this basic policy before he was drafted full time because he had a reserve officers commission in the Signal Corps.
“One day a year or so after Bill left the members of the local registration board appeared at our office. They were local businessmen and generally sympathetic with what we were doing but one of the guide lines they had to follow was the return on equity that was allowed was 12%.
“It was obvious to me that I could not accept that and I refused to do it. I pointed out to them that they could not get better instruments at a lower cost from anyone else. I went back to Washington to try to get an exemption from the 12% limit. I pointed out that I was getting a lower salary than most of the Chief Executives from companies of similar size. We were also spending more money on R & D or products from the Naval Laboratory.
“I put together some data to support this position and they finally agreed to accept what I recommended.
“We dealt with the Registration Board in every year after that following this problem.
“The Navy recognized our little company with the only E Flag given to anyone in our industry during the war.
“By the middle of 1950s we had reached a substantial level of sales and we looked at other companies who were leveraging their profits with long term debt. At one time I thought we should do the same. [But] Bill and I agreed not to do this and in the end we came out better than companies which had long term debt.
“Bill and I were very close to our employees and their families .Before we officially started the company in 1939 we were aware of what other companies were doing to provide motivation for their employees.
“The Lincoln Electric Company which made welding equipment had a profit sharing plan for their employees. Their equipment could be sold at a lower price and had better quality as well.
“The General Radio Company had a profit sharing plan for their engineers.
“We had noted tat the Aerospace Companies in Southern California did not have any way to keep the best engineer force. All of the good engineers in that business went to the company which had the business. If another company got the business all of the engineers went there.
“We had small group of employees in 1940 and we knew all of them and their families When we put together a profit sharing system for our employees we decided to include all of them not just our engineers.
“What this plan did was to give our employees the benefit of any improvement in products we achieved. This was done by taking the total cost of labor as a percentage of sales and keeping it at a level by increasing their bonus to keep the cost of total labor as a percentage of sales fixed. “This did two things, the take home pay increased substantially to about 180% of the starting point.”
“It had another long term effect on our employee award systems. They applied to all of our employees not just to specific groups of employees. These egalitarian aspects of our employee benefits plans encouraged team work as an important factor.
“U was active in athletics during my high school years. One of the teachers who helped in athletics helped to establish this principle.
“When a group is in the champion level there is a small difference in capabilities of the players. The winning team does so by having better team work and by having a stronger will to win.
“You can see the importance of teamwork in the champion basketball games when one player has a chance to make a basket he will pass to one of his team mates who has a better shot at the goal.
“The importance of the will to win was the key factor in enabling the 49ers to make such a decisive win mover the New York Giants. The same team was badly beaten just a couple of weeks before.”
1/23/94, Copy of the list of attendees at the General Managers Meeting
Box 5, Folder 41A, General Speeches
April 15-17, 1994 – Remarks Before the National academy of Practice, Denver, CO
4/15/94 – Copy of typewritten text of speech.
“The current interest in health care has brought forth a large number of activities which can influence the quality and the cost of health care. This makes it very difficult to chart the course to follow in a specific way. To make any real progress, long-standing attitudes and practices will have to be changed, and for many of the changes that might be desirable it will take considerable time to have them accepted.
“There is not even agreement on what the goal should be, except in general terms. The total cost should be lower, everyone should be covered and the quality should be improved. In my opinion, there should be one very important goal. Both the ultimate goal and the steps to get there should be done without arbitrary direction by either the state or federal governments – but both will be involved because legislation will be necessary and the National Institute of Health must continue to be a prominent anchor. The financial guideline should be to reduce the total cost so it will be less than the present 12% of GNP.
“Putting the patients record on a computer seems to be one step. I have made a good many visits to my doctor and to the hospital during the last several ;years. My health records are in a file of papers several inches thick. A substantial part of the time of my visits to my doctor are spent with his looking through the file to determine what happened in the past that might have some connection with my current problem. I would judge that this has taken over half the time I have spent with my doctor. In the process of being admitted to the hospital, several people spend a corresponding amount of time going through the file. My health record could easily be put on a computer, the trend of critical items plotted and a substantial amount of time now spent by my doctor and other people in the hospital could be saved. This appeared to me to be a simple problem but now I realize it involves some difficult questions that I will discuss later.
“Research and development in areas related to health promise stunning breakthroughs. It now appears almost certain that being able to mark human genes will make it possible to identify diseases before the symptoms appear, and genetic engineering will provide the treatment. Support for research in this area is not adequate even though the pay out would transcend everything else we could do. Research has been criticized because of the example of the two drugs that were developed to control heart attacks. One cost two thousand and the a few hundred dollars. A great deal of money was spent to justify the higher priced product by extensive testing, and although the testing showed that the difference was very marginal, the higher priced product still holds over half of the market.
“Human growth hormone and a new Genentech product to control cystic fibrosis are good examples of what can be done with genetic engineering. Recently an enzyme had produced a cure for a type of skin cancer. A tremendous amount of work has been done in this field since 1960 and a larger effort is clearly justified. There is a countervailing problem – diseases that were under control are reappearing and there is a new one, HIV, which has appeared. These are caused by microscopic virus-like particles, according to the latest theories, that inhabit our bodies and mutate rapidly to destroy the effectiveness of antibiotics, cause diseases the we thought were eliminated, to reappear, and to create new diseases like HIV.
“The outcome of research is always uncertain but at least offers the possibility of control. The lack of research insures that these complex problems will not be controlled, and that is a risk we should not take.
There are literally hundreds of ideas that can have some impact on the cost or effectiveness of health care. I think they are nearly all Band-Aid solutions to a patchwork of hearth care. There are a number of these in the book Aging In Good Health, by Florence Lieberman and Morris F. Collen. This book covers a range of things that should be covered in good geriatric care. It makes a strong case for more involvement of the nursing profession but does not put much emphasis on the importance of giving more attention to children in their early years.
“It is in the context of giving more responsibility to the nursing profession that the problems of computerizing medical records appears. How much of the computer records of the doctor should be given to the nurses to see independently of the doctor’s supervision of the nurses. I am not competent to answer this question, but I suggest it will be an important question and will have to be answered.
“HealthPACT for Business and Industry, developed by Judith B. Igoe, is used by the Hewlett-Packard Company and it serves to make appointments with doctors more effective. It is a useful program but does not contribute very much to the solution of the over-all problem.
“The over-all opinion surveys seem to indicate the country is not yet able to coalesce on a final plan. Daniel Yankelovich, one of America’s leading public opinion samplers, has pointed out hat mounting criticism of the current U.S. health care system hoes not mean that Americans are really ready for a major change. according to Yankelovich, the process of public decision making proceeds in a series of well-defined stages beginning with a dawning of awareness about an issue and gradually evolving toward fully integrated, thoughtful public judgment. According to this timeline, Americans are still in the early stages of development on health care reform, and enactment of major reforms may, despite the current heightened level of interest, be a long way off. Support for Yankelovich’s reading of where the public stands on health care reform can be found in a recent analysis which demonstrated a significant gap between export and public views on the nature of the problem with hearth care, its causes, and how it should be solved. Addressing this gap ;may prove particularly difficult given the likely attempts to game the reform process by the large assortment of vested interests who will be trying to protect their turf in the nation’s largest industry.
“There is good reason to believe that the U.S. public is currently working through the health care reform issue. It sees likely that this process of exploring choices, dealing with wishful thinking, and weighing the pros and cons of alternatives would be facilitated b the same kinds of objective information provided to the congressional staff last year.
“This reinforces my opinion that it is going to take a long time to decide where we ought to go and how to get there. The information from the opinion survey done by Daniel Yankelovich appears in the summer/fall issue of The Future of Children, a publication of the Center for the Future of Children, the David and Lucile Packard Foundation.
“The statement of purpose of the Future of Children is as follows:
‘The primary purpose of the Future of children is to disseminate timely information on major issues related to children’s well-being, with special emphasis on providing objective analysis and evaluation, translating existing knowledge into effective programs and policies, and promoting constructive institutional change. In attempting to achieve these objectives, we are targeting a multidisciplinary audience of national leaders, including policymakers, practitioners, legislators, executives, and professionals in the public and private sectors. This publication is intended to complement, not duplicate, the kind of technical analysis found in academic journals and the general coverage of children’s issues by the popular press and special interest groups.’”
“The issues of The Future of Children are as follows:
Volume 1, Number 1 – Spring 1991
Drug Exposed Infants
Volume 2, Number 1 – Spring 1992
School Linked Services
Volume 2, Number 2 – Winter 1992
U.S. Health Care for Children
Volume 3, Number 1 – Spring 1993
Volume 3, Number 2 – Summer/Fall 1993
Health Care Reform
Volume 3, Number 3 – Winter 1993
Box 5, Folder 42 – General Speeches
September 23, 1994, Remarks to employees of HPSA, Geneva, Switzerland
9/23/94, Copy of printed page from Geneva Site News, containing the transcript of Packard’s speech
Packard explains that Bill Hewlett wanted very much to make this visit too, but he recently underwent an operation on his knees and is still convalescing, and in good spirits.
“Commenting on the people he has seen during his visit Packard says “In every place I visited I’ve been greatly impressed with the tremendous spirit, ability and enthusiasm that I’ve seen in the people who are responsible, doing these jobs. There are quite a few who are old friends here, but it’s also great to see a good many very young people and they’re all really working to do the job that has to be done.
“We have a very complex operation and it wouldn’t work if we had a routine system of somebody at headquarters who had to tell everybody what to do. It just wouldn’t work at all in this kind of a business.
“And so the reason for our success is the fact that all of you people here have an understanding of where we want to go and have the ability to make the decisions that are important to achieve what we’d like to achieve. And I tell you it’s a very, very impressive presentation.
“Now I want to say a word or two about some of the long-term prospects of things. Some of you know this already but it’s so important that I think it’s very desirable to repeat it and keep it mind. If we look at the technology which has been put in place in the 20th century we find that almost all the science on which that technology is based was in place in the middle of the 19th century.
“In the years of about 1850, the electrical quantities had been named: Amps, volts, and so forth. Maxwell’s equations had been defined and Maxwell’s equations, as you know, defined very precisely how electrical energy is transmitted through space.
“And, in 1895, a scientist called Nikola Tesla published a paper in which he described every conceivable kind of power phase generator and motor run transmission system that we’ve got in this century.
“That science on which this progress is made, was based on the concept that an atom is the smallest particle in the world, and had two particles – neutrons and protons – and rings of electrons.
“And from that image, we constructed the Periodic Table and actually could demonstrate some of Einstein’s theories.
“That science prevailed until the end of World War II. At that time, both we and the Soviet Union undertook an extensive program of high energy physics. Wouldn’t you know that some of it was done right here in this vicinity! High-energy physics taught us that an atom was much more complicated than we had thought. It consists of ten particles and weak and strong forces – Newtonian, I guess. I don’t understand these. I can’t explain them all to you, but I can tell you what the difference is.
“With the science we had up until the end of the war, we could reproduce things that occurred in nature. With the science that has come from this new knowledge of the nature of the atom, we could reproduce things that did not occur in nature. You can make materials that are harder than diamonds. You can make glass flexible. This advance is the basis of engineering programs to do all these wonderful things.
“Now a good deal of work is done and genetic engineering is helping to solve some of the medical problems in the world. Well, I think we’re going to find that genetic engineering is going to be much more important for us in other ways.
“Almost all the technology we’ve used with transistors and integrated circuits has been co-planar (that allows you to connect several planes together). But with some of the things that are done in genetic engineering it may be possible to add a third dimension to these devices which will have some tremendous possibilities. You can imagine some of the things. We don’t know what they will be for sure, but it’s something that we really must follow.
“When Bill and I started, the overall effort that generated the growth in the 20th century was not very high. We had exponential growth. If one works at exponential growth, you sort of say that you can’t keep going up forever. It’s common sense that it’s got to stop somewhere. But this is one place where common sense does not apply. And the overall effort today is many, many times what it was when bill and I started. And the rate of change in the years ahead is going to be very much higher than anything we have seen in our life-time.
“Now you people have generated some rather expensive ideas about what you’re going to do in the next two to three years. I’m not suggesting you change it. It’s a good way to be. But the rate of growth in the 21st century is going to be many, many times greater than it has been in the 20th century.
“So you young people have wonderful futures to look forward to and it’s going to be an exciting world for you. There are going to be some problems…I think for that reason it’s probably a good idea to be on the conservative side. As one of my friends said a long time ago, more businesses die of indigestion than of starvation and that’s a good thing to keep in mind.
“As we move into the next century, it’s going to be, as I said, an exciting time. And I can tell you that I’m going to go home and tell Bill that things are just as good as I hoped they would be and just as good as I expected they would be. And I expect you to keep up that performance. You have wonderful opportunities ahead. God bless you all.”