Box 3, Folder 45 – General Speeches

 

November 17, 1984 – Enterprise Forum Luncheon Talk, MIT, MA

 

11/17/84, Copy of typewritten speech

 

For the most part, this speech is very similar to that given by Hewlett on April 20, 1977 at GE. He describes HP’s formative years, the origin of their basic philosophies, as well as management and employee relations policies. Towards the end of this speech he discusses some pros and cons on venture financing.

 

[We do not repeat the first part of the story on HP’s developing years, and jump to Hewlett’s comments on venture financing.]

 

After telling the story of HP’s growth Hewlett says “he wants to use our own corporate history as a basis for discussing methods of financing corporate growth. The two main methods common today are, of course, through self-generated funds or to accelerate the process, venture capital financing.”

 

He says “venture capital has been incredibly effective in bringing new industry – particularly hi-tech, on line. I am not here to denigrate venture capital, but to point out that one pays a price for this form of financing. ‘There are no free lunches.’”

 

Hewlett says he recently read a very interesting article on venture capital written by Joel Kotkin who was primarily critical of this form of financing, mainly from the standpoint of the organizations providing such services. He goes on to say that “Kotkin’s book had a very interesting section on George Doriot, perhaps the father of venture capital, and his American Research and Development Corp. Doriot’s style was to provide lean financing. He is purported to have said ‘If you provide too much capital, the founders might start buying Cadillacs, 50 room mansions, etc.’ How correct he was. His style was to work closely with the young management to nurture them through the ups and downs, not just for the short term but for the long….One of his great success stories was that of working with Kenneth Olsen in the establishment of ‘DEC’….I know only too well how successful ‘DEC’ has been. There are many disciples of Doriot in the venture capital market today – but not all venture capital organizations follow his conservative role.”

 

Hewlett says he sees “…three main potential problems arising from many venture capital financing techniques. First, is the dilution of the original entrepreneurs interest. I am sure that the point may be made that even a highly diluted interest in a very rapidly growing company may be of greater value to the original entrepreneur than a slow, steady growth, assuming of course, that the founders can acquire sufficient management skills to do so. But these very rapid growths have their own problems. Instant millionaires have little incentive to continue their creative role. I believe Silicon Valley has one of the highest concentrations of Jaguars anywhere in the country. I recently saw a bumper sticker ‘God owes me a Porsche.’”

 

“A second problem of accelerated growth is that of management development. It is extremely difficult to train managers to staff a year after year growth of 100% per annum….The problem of management development, or the lack thereof, is highlighted if one looks at the rate of turnover in management of many of the most spectacular current crop of hi-tech venture capital supported companies. To understand the nature and extent of the problem, one must look at not just the spectacular successes, but the spectacular failures. Many of these failures should not be solely laid at the door of venture capital, but do suggest that the quality of venture capital support is not uniform and may fail because of inadequate management development.

 

“A third problem relates to the quality of the organizational structure. I spent some time in my discussion of HP’s rather slow and perhaps ponderous growth and the development of what we now, provincially perhaps, describe as ‘The HP Way.’ By this we mean the tradition and practices that had been built up over the years relating to how the company is to be run and how the employees see their stake and their role in the future of the company. Many of these precepts spring from the fact that at one time, Dave and I were ‘there.’ We knew what it was like to be struggling; what it was like for employees to be struggling; and what is more important, the employees, even the new ones, sensed this to be true., It is very hard to build tradition in a very rapidly growing concern where the top level of management is often brought in from the outside and has little understanding of what the company is like at the working level. One pays a price for forced growth.”

 

“Having said all this, it seems to me that the following question should be asked: ‘Is venture capital good?’ My answer is ‘yes.’ In many cases, with responsible investors, it performs an absolutely essential service.”

 

“Is it the only way for small companies to get started? My answer is ‘no.’ There are other ways.”

 

And to show examples of this Hewlett talks about two companies – Solectron and Computerland. He goes through the development of both. Solectron was started in 1977, and by 1978 was in serious financial trouble. Winston Chen, a recent Ph.D graduate from Harvard, joined it in 1978, when sales were $450.000.  And by 1984 sales had grown to $55 million. To achieve this growth $350,000 capital was raised from friends and family.

 

To solve the problem of management in a period of high growth Chen told Hewlett that he established an in-house school to help their managers become good entrepreneurial managers.

 

Hewlett says “We have found that in smaller business environments, management theories and training can help a company tremendously if the top management and management in general, is committed to the implementation of the training program.”

 

Going on to another example of non-venture capital financing, Hewlett says he was recently talking with Bill Millard, founder of Computerland. a retail store chain. Millard says he started with a disastrous association with a small computer company backed by venture capital. Coming out of that he decided there had to be a better way, and started to develop a system that was intended to be self-financing. His idea was to use franchise stores, and he started with $10,000 in capital. Starting in 1978 the company has had a growth rate of over 100% per year. Management has been home grown, and financing has primarily been at the retail store level.

 

“Private financing is not a panacea,” Hewlett says, “…but in many areas, alternatives are possible. This is particularly true with the rise of service industries whose capital requirements are often nominal. A good example is certainly the independent software firms, particularly if they operate with an aggressive policy of moving forward and not resting on their oars.

 

“I am sure that there are many other important fields as yet unrecognized that may have growth rates comparable to the electronic industry. In the financing of growth in these areas, all methods of financing should be carefully analyzed and the most appropriate one selected.

 

“There are alternatives to venture capital financing.”

Box 3, Folder 41 – General Speeches

 

April 6, 1983 – “Productivity,” HP Productivity seminar, Philadelphia, PA

This was seminar, organized much like a trade show. Some 2100 people showed up for HP’s series of presentations.

 

4/6/83, Outline of speech handwritten by Hewlett

 

Hewlett says it might be interesting to hear how they, at HP, got into a productivity network and computer use.

 

He explains that for many years HP was purely an  instrument company, but they found they were having increasing pressure to automate their instruments to control and then reduce data.

 

He says that in response to this need they “started a line of computers that were rugged – could take the same class B environment as instruments: temperature, line voltage, vibration, and shock. Such computers were not common at that time of ‘hot-house’ computers.” They quickly found that these computers had many uses beyond  instrument control.

 

“Shortly afterwards,” Hewlett says “they developed a scientific desk top calculator on the rationale that we could sell it to our scientific base customers – actually because we thought it would be fun to do. The pocket [calculator] followed on the same basis.

 

“After a period of time these products began to have important spin-offs.”

 

Began to use the mini-computer in many plant wide applications

1)    First, a simple air conditioner controller

2)    Then, machine tool loads

 

As proficiency with computers grew Hewlett says they began to recognize that they had many more applications other than that of a control room computer.

 

1) Major system based on dedicated computer:

a)  Computer to computer dial up data entry

b)    Parts inventories

c)     Order processing automation

 

Uses of desk top calculators in Europe

 

1)    Advanced units much easier to use for the uninitiated than the former computers with their rigid language structure.

2)    The fact that they were selling more calculators in Europe than in the U.S. caused them to realize the great advantage of the individual but powerful workstation

 

Hewlett says, “It began to dawn on us that we were smack in the middle of a productivity program and that we had the proven bits and pieces to put such a system together. Further, that most of the necessary basic R&D had already been carried out – not under the heading of a formal R&D account, but carried out and paid for by the various users in the company.

 

“It was then, and only then, that we began a formal program of documenting and exploiting the particular niche in which we found ourselves.

 

“What you see and hear at this conference is the result of this effort. These were developed as user-based systems and we very much consider them as such. We solicit your comment and help, for your problems are our problems, and vice versa.

 

“We clearly see a recognition of the fact that we are both an instrument and a computer company.  The automated lab is one example and the other is the internal use of the computer for our own manufacturing operations:

a)     The next bench syndrome repeated.

b)    The best salesmen we have are our own people, using computers in manufacturing and office management operations.

c)     This is a field we are comfortable in.

 

4/6/83, Copy of newspaper clipping about the seminar

 

 

Box 3, Folder 42 – General Speeches

 

May 19, 1983 – Ground breaking ceremony, Center for Integrated Circuits, Stanford University, CA

 

5/19/83, Copy of the typewritten text of Hewlett’s remarks

 

Hewlett says that the “venture we see taking shape here reminds me of my own good fortune as a first-hand witness to so many of the developments in the field of electronics.”

 

He tells how, forty years prior, radio tubes, and even simple light bulbs, were used in the design of electronic circuitry. “Then tubes begat transistors; transistors begat printed circuits; printed circuits begat integrated circuits, and so on.”

 

“Integrated Systems technology,” he says, “is a logical and natural extension of this genealogy. It represents the vertical integration of the semiconductor and systems technologies. Among the small number of universities pursuing this integrated technology, Stanford has shown itself to be outstanding. A notable example is the early application of integrated technology to new medical and rehabilitation devices, such as the optical-to-tactile reading aid for the blind. The Center for Integrated Systems is a commitment to -–and an affirmation of faith in – the belief that joint, coordinated research is the key to the computer of the future and its applications.”

 

He says CIS is a consortium of 19 major U.S. corporations that have joined Stanford University “to undertake basic and applied research across a broad spectrum of disciplines. These range from semiconductor materials to software for dataprocessing systems. Initially, each sponsoring company has pledged $750,000 toward the construction of the new CIS building. Annual contributions of $100,000 each in partial support of CIS research programs are expected. Further, each sponsor has been invited to send one full-time visiting researcher to the CIS to lend technical support.”

 

Hewlett describes the physical building, which will house CIS: 70,000 square feet of floor space, including 10,000 of clean rooms for research on large-scale integrated systems. He says the Center will be a “very clear and distinct answer to three of the major problems faced by the United States. First is the failure of our national programs of basic research to keep pace with the needs of our universities and our industries. The second is the need to strengthen our system of education. And the third is the challenge to U.S. trade and technology posed by a number of foreign countries.” He reviews each of these.

 

BASIC RESEARCH

Hewlett says for many years America had the reputation as being a “fountainhead of innovation.” And, during the 19^th and early 20^th centuries the private sector was the stream of innovation – with individuals and business organizations exploring the frontiers of science and utilizing the products of technology.

 

The role of government as a “massive and then dominant factor in research,” Hewlett says, “grew out of the experiences of World War II. To undertake the various jobs of defense and national security required huge outlays of money and manpower that only a national government could muster.”

 

The government naturally turned to universities as a source of talent, and ultimately the government became the chief provider of funds for academic research. Industry’s contribution, on the other hand, has been quite modest, according to the National Science Foundation. Hewlett  says industry has contributed “only from 4 to 6 percent of total academic research and development funding …during the years 1960 to 1981.”

 

Hewlett  points to a National Science Foundation report that shows a trend of significant increases in R&D spending in Japan, West Germany, France and the United Kingdom. Considering the interrelationships of technology and productivity, “some of these countries may surpass the U.S. in productivity if present trends continue,” he says.

 

 

FOREIGN COMPETITION

Hewlett points to the “distressing problem” of the rule in the U.S. that companies must play on a “level field” – a one-on-one match between competing firms. On he other hand, some foreign countries, as a mater of national policy, become partners with industry. Powerful alliances are formed, cartels encouraged, R&D subsidized, exports subsidized.

 

“This makes quite a different ball game,” Hewlett says, and he gives some examples: The Boeing Aircraft Company in the U.S. is facing competition from the European Airbus. “Airbus Industries,” he says, “formed by the governments of six European nations, has been highly successful in establishing a major market position. The infusion of large sums of money over an extended period is its chief source of strength. Airbus promotion has included reported economic inducements beyond favorable financing. Examples are landing rights, trade concessions, subsidy to cover airline operating loss, and military equipment. This meant government-to-government negotiations to secure directed procurement of the national airlines to buy Airbus.”

 

“The government of France has nationalized many of the key industries of that country. The question arises: What will be the terms and conditions for a private-sector company that attempts to compete against these nationalized firms? And what kinds of subsidies will be available to the nationalized firms when competing abroad?”

 

Another example he gives is in Japan. “Japan,” he says, “represents a clear example of a national commitment to specific industrial goals. One by one, it has targeted major sectors of the international market for sale of its auto, steel, consumer electronics and now computer products. Never before has the world seen such a concerted marshaling of national resources in the name of international trade. To date they have been outstandingly successful with this strategy.”

 

“It is clear, however,” Hewlett says, “that a response in kind to these and other examples would be contrary to the U.S. tradition of free enterprise and our laws governing competition. I am convinced that our anti-trust laws on the whole have been beneficial to U.S. industry. However, these laws need to be reviewed from time to time in light of changing conditions. In fact, the government has recognized this problem, and the department of commerce has just recently issued new guidelines that exempt shared research projects from anti-trust prosecution, providing they meet certain guidelines.”

 

Hewlett says CIS is “just such a venture, and one that meets the guidelines of the Commerce Department. More than that it is an imaginative response to the three problems I mentioned: the inadequacy of U.S. spending on basic research, the need to strengthen the educational system, and the deterioration of our competitive position in international trade.”

 

EDUCATIONAL NEEDS

Beyond the benefits of cooperative ventures like CIS, Hewlett says “industry must also take a more direct and active role in solving problems of educational resources. Foremost among these problems is the declining capacity of U.S. colleges and universities to develop the professional skills that will be needed in many technical fields in the years ahead.

 

“Two years ago, for example, an American Electronics Association survey of members indicted  major shortfall of graduates in future years. The surveyed firms projected a need of from 10,000 to 25,000 more graduates than our colleges and universities expect to produce.

 

“Part of the problem is in the shortage of funds to provide adequate faculty salaries. Most recent estimates place the engineering faculty shortage as one in ten, with even larger gaps for some of the more specialized technologies.”

 

Hewlett sees ways that industry can help. “One is to provide incentives that will make such faculty positions more attractive and competitive. As an example, Hewlett-Packard Company has committed $6 million to develop new electrical engineering and computer science faculty at 22 selected universities between 1982 and 1987.

 

“The program, developed jointly with the American Electronics Association, is designed to redirect the career interest of some superior students toward academia instead of industry. Its specific objective is to develop university faculty members, not Ph.D. graduates who will then be recruited by industry.”

 

“Finally, our pre-college education system is clearly in deep trouble with regard to the teaching of sciences and mathematics. A 1982 survey disclosed shortages of high school teachers of math, chemistry and physics in most of our states. Other studies tell us that the graduates of our secondary schools have fallen behind their counterparts of a number of other countries in quantitative skills and in understanding of science.”

 

“Let me conclude by offering my heartiest congratulations to the Board of Trustees of Stanford University, the sponsoring companies, and especially the co-directors –Professor John Linville and Professor James (Jim) Meindl – for your faith and support in bringing CIS so close to reality. Thank you.”

 

 

 

Box 3, Folder 43 – General Speeches

 

September 14, 1983 – “The Full Circle: Science Education and the Liberal Arts,” Oakland, CA

 

9/14/83, Copy of typewritten text of speech. Hewlett, a former trustee of Mills College, received the honorary Doctor of Laws degree and gave the following speech:

 

Hewlett says he wants to provide some historical background on the difficulty of  establishing education in the sciences in the early 19^th century, and how, once established, it recognized the essential nature of liberal education. “Now,” he says, “the circle is closed, and liberal arts needs to recognize the generality of science.”

 

Hewlett says he was stimulated  to study the growth of science education by a book he came across some years earlier called ‘Technology and the Academics,’ by Eric Ashby, wherein Ashby described the difficulties in introducing science education into the universities of England. Hewlett says he will base much of his introduction to the subject on the problems in England since “many of the techniques used to solve these problems found their way into this country.”

 

Based on Ashby’s book, Hewlett says the English universities in the 19^th century had little interest in science – somewhat better in Scottish schools. The situation was better on the continent – scientific inquiry flourished in France. Students from abroad came to Germany to study the new emphasis on science.

 

By the mid to late 1800s Hewlett says the “British began to realize that a knowledge of science was in the national interest if England was to continue its dominant position in the field of manufacturing. Darwin’s Origin of the Species, published in 1859, generated a tremendous interest in England…an interest that sparked the final effort for an introduction of science into higher education.”

 

Hewlett says “Education in the United States in some ways tracked what was happening in England. Of the three oldest colleges in the U.S., Harvard and Yale were founded primarily for the training of ministers…. The general level of education was low.”

 

In the 19^th century, pressure rose for some technical education in the U.S. Hewlett describes how, “in response to this need, the Massachusetts Institute of Technology was founded in 1859, and was modeled after the English technical institutes. Thirty-five years earlier, Rensselaer Polytechnic Institute had been founded in upper New York state and was modeled after the Ecole Polytechnique in Paris. In 1847, Lawrence Science School was founded and 25 years later, was incorporated into Harvard as the Graduate school of Applied Science.”

 

“U.S. education was strongly influenced by parallel developments in England and on the continent, modified to fit its own needs.” Science had been established as an essential component of higher education.

 

“By the end of the first World War it became apparent that some element of liberal education should be required in the purely technical schools. In the mid-thirties, John Buchard set up a department of Humanities at MIT….A second step had been taken and science now firmly established, began to move back towards liberal education.

 

“ The final step is now upon us – the recognition that science education is an essential part of any liberal education.” To expand on this thought Hewlett talks about the computer. “I chose this subject,” he says, “because of its high visibility, but one must remember that a computer is only a product of science. In discussing computers and education, I am not talking about computer aided education, but the actual use [of  computers] by students themselves.

 

“The uses in undergraduate education are diverse and hard to define,” he says. “The library is one of the first possible applications where a terminal can easily replace the old card file, but its uses are far more general. I inquired at Stanford about undergraduate usage, and to my surprise found that 20% of undergraduate computer time was used by students in the Humanities and Social Sciences. I was also informed that there is an increasing demand for computers as word processors, obviously for reports and term papers. For one of the new dormitories, serious consideration is being given to providing a terminal for each student.

 

“Graduate usage of computers is more obvious, particularly as a research tool. Most areas of research can make effective use of computers for such purposes as the study of ancient and modern languages to statistical studies in social sciences, for management of research libraries to printing texts prepared in such fonts as Greek and Cyrilic. [sic]

 

Hewlett says “The role of science in a liberal arts college should not be to turn out professional chemists or physicists. The role of science teaching should be to provide students with sufficient knowledge of science to allow them to make their own judgments and not to depend solely on others.“

 

“If science is essential, how do we go about introducing it into liberal arts education,” Hewlett asks. He sees two parts to this problem one related to primary and secondary schools, and the other related to the college and university structure. “Our secondary school structure has been deteriorating for 20 years,” he says. “It is indeed a disaster. We are not going to correct it overnight. I will not dwell further on this subject, but I am reminded that all my children went to Palo Alto High School, which had a fine science department. When the old science teacher retired, the football coach replaced him.

 

“At the college level, I am convinced that some form of basic science must be required of all students. This may not be greeted with uniform enthusiasm. I did not enjoy taking western civilization, but nonetheless, I think these basic courses must be introduced. In general, science teaching should be designed to stress the basic laws that govern the way the physical world operates. To achieve this, certain tools are necessary. Mathematics is one of them. If a Freshman is deficient in math, perhaps there should be a course in ‘dumb-bell’ math, but please don’t call it that. A second would be a working knowledge of statistics, for example, one should know why using the average of averages can lead to serious errors.

 

“And finally, why am I discussing science in a liberal arts college to such a diverse group – freshmen to seniors, graduate students and faculty and guests in general? For the entering classes, the purpose is obvious. For the upper classes, a warning of future needs should be evident. For the guests, a reminder that in this day and age, there is no end to learning. Once it was thought that after having received a degree from a college or university, studies were over. We can no longer rest on this concept. Education must be viewed as a current and never ending process.”

 

9/14/83, Copy of the Convocation Program

 

 

Box 3, Folder 44 – General Speeches

 

November 21, 1983 – AEA 40^th Anniversary Remarks, Location not given

 

11/21/83, Copy of typewritten text of talk with handwritten notes by Hewlett

 

Looking back forty years Hewlett recalls the early days of the organization that was to become AEA [American Electronics Association]. “That group had a membership of 25 companies,” he says. “The Hewlett-Packard Company had 45 employees, the transistor, the integrated circuit, and the microprocessor had yet to be invented. Computing was in its infancy, and Dave Packard and I were a whole lot younger.

 

“Today, the American Electronics Association is celebrating its fortieth anniversary with 2400 member companies representing one-and-a-quarter million people.

 

“And the Hewlett-Packard Company has 72,000 employees worldwide.

 

“The transistor, the integrated circuit, the microprocessor and a host of other advances in electronics technology have revolutionized the way the world works, plays, and communicates. Computers and computational devices have entered every aspect of modern life.

 

“And Dave and I are a bit older.”

 

Surmising that many people may be wondering what lies ahead, reflecting the uncertainty of the times, Hewlett says newspaper headlines can give the impression of  “a bubble bursting. Some companies are quitting the home computer business, and others are filing for bankruptcy. Some companies are reporting slower growth and disappointing earnings, and others are announcing staggering losses. And that sensitive barometer, the stock market, has reflected the uncertainty by a volatile treatment of electronic stock prices.”

 

Seeing that people are worried about competition from abroad, particularly from the Japanese, Hewlett says “I don’t think it would be amiss to say that perhaps, as we celebrate forty years together, we might be asking ourselves whether we can face the next decades with any kind of confidence. I think we can.”

 

In considering the future, Hewlett, reviews the past. He says the electronics industry has a “solid record of innovation, of making it easier, faster, and less costly to perform a task using electronics technology.”

 

He cites the electronic calculator as an example. He says that when they first introduced the HP-35 pocket calculator, they would have been pleased to sell ten thousand of them in the first year. Actually they sold over a hundred thousand that first year. “And within five years,” he says, “a product that had never been dreamed of before had completely supplanted one of the one of the basic tools of the engineer – the slide rule.

 

“Our industry’s history is filled with stories like this. It has been an ongoing process of using innovation to make our products more powerful, less costly, and easier to use. The result of our efforts has been tremendous growth and the movement of electronic technology into all areas of our lives – into our factories, our offices, our hospitals, our schools, and into many of the products we use in our homes.”

 

Hewlett feels the Japanese challenge is overrated. “They’re tough competitors, to be sure,” he says. “But we do drive the technology. Even where they have been successful, we were the initiators of the technology – VLSI, robotics, statistical quality control. They benefited from our oversight, not from any basic weakness on our part. The Japanese presence in our markets should be welcomed for forcing us to focus on creating real value, not speculative value. We are fully capable of matching their record for quality and I believe we are entering a new dawn of productive labor-management relations.”

 

He urges everyone to get “a firm grasp on our strengths. As a country, we’re financially strong. We understand marketing in a way few nations do. We are the world leaders in technology, and we can maintain that strong technical position if we keep our eyes on the ball.”

 

He lists some action items: “Use the R&D tax credits for increased investment in research. Let’s scrutinize our own research carefully and not let other nations benefit from our oversights. Let’s continue our support of collaborative research vehicles like Stanford’s Center for Integrated Systems. And let’s continue our support for engineering education and the maintenance of a strong basic research capability at our nation’s universities.”

 

Returning to the AEA, and the value the umbrella it has provided to all members, Hewlett says “Whether the subject is increased R&D tax credits or engineering education, the AEA has spoken out both effectively and in a timely manner. We have all benefited from its credibility and its hard efforts on our behalf. We’re not just celebrating forty years this evening. We’re celebrating forty years of solid accomplishment and the knowledge that the best years are yet to come.

 

“Thank you”

 

11/10/83, Memo from public relations person Katie Nutter, to Hewlett, transmitting a draft of this speech.

Box 3, Folder 39 – General Speeches

 

March 25, 1982 – “The Human Side of Management,” University of Notre Dame, IN

 

3/25/82, Copy of typewritten text of speech    (See also speech May, 1992, Random thoughts on The HP Way)

 

In talking about this subject Hewlett says he would like to draw upon “almost 43 years of direct shared-management responsibility in a company that Dave Packard and I founded in 1939 – a period that saw the company grow from just two people to one that now employs about 65,000 people. I particularly want to talk about the importance we placed on the individual from the very beginning. In no way do I want to suggest that we have ‘all the answers’, or that this is the only way to do it. But sometimes it helps to go from the abstract to the concrete, and so with this in mind let me tell you a little bit about the development of Hewlett-Packard Company.”

 

He reminds his audience that both he and Packard were products of the great depression, which influenced their decisions on how a company should be run. They did not want to run a ‘hire and fire’ operation, sought achieve a loyal and dedicated work force.  And they thought this work force should, to some extent, share in the progress of the company. “Secondly,” Hewlett says, “we wished to operate, as much as possible, on a pay-as-you-go basis, that our growth be financed by our earnings and not by debt.”

 

When they first started out Hewlett and Packard did almost every job in the place from sweeping the floors to keeping the books, to inventing the products. They were so small they had to hire whomever they could and train them, hoping they would work out. Implementing their belief that employees should share in the progress of the company they initiated a production bonus plan. The idea was to pay 30 percent of sales to employees through pay and bonus. The same percentage was paid to everyone from janitor to top manager.

 

Hewlett tells of the production manager they had who was not working out in spite of all their efforts to improve his management skills. They had to release him, but Hewlett says the decision “is still with us, and in subsequent years has led us to make every effort to find an appropriate niche for a loyal employee.”

 

In another early situation in the 1940s Hewlett tells of the employee who came down with Tuberculosis and had to take a two year leave of absence. They were able to provide some financial help for the employee and his family, but they concluded this was a problem they had to solve on a permanent basis. They established a plan for catastrophic medical insurance to protect employees in situations like this.

 

In the early years they had to work with the people on hand. They had to sort out employees according to their abilities, their education or training background. Hewlett says many of those employees are still with the company, a number in key management positions despite the fact they never went to college. On the other hand some were “forced to recognize that there were limits to their future progress in the company. Hewlett says they “…worked hard to deal with this problem and, almost without exception, were able to find appropriate jobs for them within the organization.” In this way they were able to preserve their workforce.

 

Hewlett says for a considerable time they did not have a Personnel Department. “We had strong convictions that one of a manager’s most important jobs was to deal directly with his employees. We did not want to impose any artificial barriers to hinder direct communication.”

 

Hewlett describes another technique they employed. “The informal structure of the company led to what was eventually known as the ‘open door’ policy. In a sense this said that any employee could come in and talk with Dave or me or any other senior executive about his problems. Although such a technique could easily be abused, it never was, and it served as an excellent safety valve for the frustrations that occur in any organization.”

 

Hewlett says 1957 was a turning point for the company. “Up to that time,” he says, “HP was directed by the owner-founders operating in a single plant in Palo Alto, California. Most of the basic policies that directed the company were firmly in place, and we had a good team of people running the operation.

 

“But there were signs of strain appearing. I think the principal concern Dave and I had was that, as it increased in size, the company might lose the intimacy we felt was so important to the organization. Therefore, in January 1957, Dave and I took the top ten or twelve people of the company on a weekend retreat to discuss the future of the company, and to decide what action might be taken to insure its continued success.”

 

As a result of the conclusions reached by this group they decided to divisionalize the company along product lines. “We felt,” Hewlett says, “that by reducing the size of the operating units and decreasing the span of control, we would provide an opportunity to recapture the personal touch that everyone felt was so important. The managers of these divisions would assume direct responsibility for the health and welfare of their charge, but they would need some guidance. Second it seemed that this guidance could best be achieved with a simple set of policy statements. In fact, these statements consisted of no more than a codification of past company policies.”

 

Hewlett summarizes these statements. The first relates to profit and sets a specific target, and says that “all the other things we wish to achieve rested on the success of this first objective.”

 

The second deals with and defines our product line; “…we should concentrate on the things we know and do best.

 

The third objective relates to customers and stressed “inexpensive quality.”

 

The fourth objective in part reads, “To provide employment opportunities for HP people that include the opportunity to share in the company’s success which they make possible, further, to provide for their job security based on their performance,  and to provide the opportunity for personal satisfaction that comes from a sense of accomplishment in their work.”

 

On the matter of job security Hewlett says “The objective of job security is shown in a number of ways. Hewlett-Packard has attempted to avoid large ups and downs in its production program because these large ups and downs would require that we hire people for a short period of time and lay them off when we do not need them. It is evidenced by the fact that we have attempted to be lenient with some of our older employees who, as we have grown, have not measured up to the standards we might have reason to expect. But in the interest of those employees who are carrying their full load and who are growing with the company, 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.”

 

“The fifth objective dealt with meeting the obligations of good citizenship, while the sixth spelled out our policy on growth.

 

“These objectives are somewhat similar to the U.S. Constitution – a document expressing basic ideals subject to current interpretation and to amendment. If you look at our objectives, as they exist today, you would see how little they have changed despite a hundred-fold increase in sales and a 50-fold growth in employment. And instead of a single plant operation, [we are] a company operating with over 50 management units in about 32 countries around the world.”

 

The recommendations of the 1957 meeting were quickly implemented by divisionalization and by wide distribution of the objectives. “But,” Hewlett says,   “these were not the only changes that took place at Hewlett-Packard that year. For one, the company changed from a privately held corporation to one that was publicly traded. With our stock now on the market, we were able to reward many of our employees with stock bonuses. These bonuses went to a wide variety of officers and employees who had played important roles in the company’s past performance.

 

“We concluded that the time had come to have a corporate personnel department with a clearly stated role: to support the management team. In no way was it to supplant the direct manager/employee relationship which we considered so important.

 

“In the next three years, basic changes continued to occur. 1958 saw expansion into the European market with sales headquarters in Geneva, Switzerland. To expand our product line we made the first of several acquisitions. A stock option plan was instituted not just for the top few managers, but with the thought that a broad distribution of relatively small options (100 shares) could have real value as a formal indication of a job well done.”

 

Going on describing changes, Hewlett says a second manufacturing plant was established in 1959, not in the U.S. but in Germany. A second acquisition was made in 1959 and an employee stock purchase plan was implemented. An employee stock purchase plan with a 25% subsidy plan was established for employees.

 

1960 saw the establishment of a manufacturing plant in Loveland, Colorado, and a cash profit sharing plan was established to replace the former production bonus plan. A key question was whether the bonus be based on individual plant performance, or should the benefits be spread uniformly through the corporation? The decision was that it be determined on the basis of corporate performance, so as  not to sow the seeds of discord among divisions.

 

Looking at HP four years after the establishment of divisions and the concept of management by objectives, Hewlett sees considerable progress. “From an operation in a single plant and a unified management structure with sales of about 20 million dollars, and about 1200 employees, it had grown to a complex organization, with 10 divisions operating in four locations inside the U.S.- and with employees and sales each increased by approximately 2 1/2 to 1.”

 

Hewlett says he feels the new management structure had been tested and it worked. “The recipe was simple: 1) have objectives; 2) explain and teach them; 3) gain agreement with modification if necessary; 4) have everyone share in the success of achievement; and 5) be egalitarian to assure that communications are open.”

 

He notes that the system worked even in a place like Germany, a place with very different traditions and background. He says they had greater problems with some of the U.S. acquisitions, particularly where they had operated under a more autocratic rule.

 

Hewlett says he will not “burden” his audience with a year by year description of developments over the following years. “Suffice it to say we greatly reduced our expansion via the acquisition route and turned more to internally generated concepts. By far, the most important of our expansions was in the computational area, first in the scientific and technical area, more recently in general applications.

 

During the following years Hewlett says they continued to give the development and welfare of their people a high priority. “We have not been afraid to experiment with new ideas,” he says. An example would be doing away with the concept of time clocks and implementing flex-time. Under this plan there is a window for starting work of about two hours, say 6:30 to 8:30 AM. Employees put in their eight hours and then may leave.

 

An idea involving a four-day week of ten hours each did not work out well and they dropped it. But another plan combining vacation and sick leave into a single package “greatly simplified the complex problem of sick leave accrual and should do much to solve this difficult problem.”

 

“One of the most dramatic examples of working with our employees,” Hewlett says, “occurred during a recession in early 1970. It became evident that we had about 10% more employees than we needed for the production schedule. Rather than lay off or furlough 10% of the work force, we simply decided that everyone in the company would take every other Friday off without pay. It worked very well. Employee after employee commented how much they appreciated the opportunity for continued employment, albeit at a reduced pay rate, when on all sides they saw people who were out of a job.”  After about six months of this they were able to return to their regular schedule.

 

Hewlett says there are many ways they try to take their employees’ wishes into consideration. “One is to pay heed to the area of the country in which an employee would like to work. This cannot always be achieved but, by and large, much can be done.

 

“Many companies have a policy saying that once an employee leaves you, he will not be eligible for re-employment. We have had a number of people leave us because opportunities seemed greater elsewhere. We take the view that as long as they have not worked for a direct competitor, and if they have a good record they are welcome back. They know the company, need no retraining, and usually are much happier for having had an additional work experience.”

 

Hewlett sees HP’s policy of providing an “open door” for employees who feel they have not been treated fairly the right to talk to higher levels of management about the problem as a way management can get direct feedback on how employees feel. Hewlett says they also want more general feedback from employees. “One way we have tried, and which has been fairly successful, is a technique we call ‘communication luncheons.’ A senior executive will visit a division and ask to have lunch with a group of employees, 15 or so at the most; no supervisors are invited.”

 

“The format is very simple. After light conversation to break down the barriers, usually an employee will ask a question about something in the company that he does not understand or with which he is unhappy. This provides an opportunity to discuss company policy or company problems. Sometimes these items are trivial, sometimes the ‘word’ has not gotten down; sometimes the problems are strictly personal and must be treated with great care so as not to interfere with the supervisory process.”

 

Hewlett describes another approach which they tried to obtain “feed back on how our U.S. people felt about the company.” They employed the services of a company to survey employees with several objectives in mind:

 

1. “Give employees a chance to express their opinions about the work place

2.  Provide an opportunity for the company to listen to employees’ concern and to

3.  Compare HP with other large companies with regard to the attitudes of employees, and

4.  Set a standard, or benchmark, for future surveys, possibly in other parts of the HP world.”

 

Hewlett says “the responses to this survey were very positive. It was clear that the people liked the survey itself as a way of communicating their views. But it was not a one-way program: the survey results were made known to the employees and, where there appeared to be deficiencies, positive remedial actions were taken, and these were reported. The recommendations for flexible time off came from this source.”

 

In summing up the matter of employee feedback, Hewlett says “What I have been endeavoring to demonstrate is that there are many creative ways by which an organization can learn the needs of employees and thereby work with them to help them develop a better life style – a happier work place, a more meaningful existence – all at practically no added cost to the organization.”

 

“The United States is rapidly discovering that it must be competitive in world markets, and that both cost and quality are factors. Productivity is the name of the game, and gains in productivity will come only when better understanding and better relationships exist between management and the work force.

 

“We must find better solutions to the adversary relationships that have so long dominated the American labor scene. Management is in a position to take the lead in such a new relationship. Managers have traditionally developed the skills in finance, planning, marketing and production techniques. Too often the relations with their people have been assigned a secondary role. This is too important a subject not to receive first-line attention. In this regard we could learn much from the Japanese. We must reinvest in the human side of management.”

 

 

Box 3, Folder 40 – General Speeches

 

May 17, 1982 – Dedication of HP Plant at Evry, France

 

Text of speech handwritten by Hewlett

 

“I am very sorry,” Hewlett says, “that I cannot address you in French. It is my loss.

 

“Yesterday I was taken to Claude Monte’s garden in Givereny and enjoyed it greatly. I couldn’t help but think of what the wonderful impressionist artists such as Monte, Renoir, Monet gave to the world through their art. I also remember the great contributions to science by such people as Pasteur, in the biological sciences, and the Curies in the physical science.”

 

“”It was no coincidence that just about 7 years ago we completed our first plant in Grenoble and how successful the organization has been. Indeed we have just completed a second plant on the same  site, roughly doubling our present space.”

 

“We are finding a great synergy between such technologies developed in our own laboratories in the U.S. and the highly trained and educated work force in France. It is exciting to see such technologies transplanted to French soil and now flower.

 

“We see now an efficient force in Europe with our French operation. France is the 4^th largest exporter in the world and we are doing our share with 80% of the product made in France being exported. There are at the present time no Americans in management positions in France.

 

“It is no accident that we have taken an option on a parcel of land of about 60 hectares near Lyon to provide space for further expansion.”

Box 3, Folder 38 – General Speeches

 

February 26, 1981 – “Human Values in a Competitive Environment –A Personal Reflection,” Stanford Business School

 

2/26/81, Outline of talk handwritten by Hewlett

 

This is a brief recap of the start of HP. Hewlett says it is not easy to describe this history without sounding self-righteous. But he starts out  “to take you through some of the early formative years, when things were simpler and clearer.” He admits that they did indeed start in a garage – “one car at that time.”

 

He recalls two important factors that need to be kept in mind:

 

1)    Both he and Dave Packard were products of the depression

2)    Because they both did all of the work around the place, they had great empathy for their people.

 

Several factors marked their early period:

 

1)    They wanted no ‘hire and fire’ policy

2)    Because they were a small, informal, company they had close personal relationships with their people

3)    Had the novel idea of sharing their profits

4)    Followed an ‘open door’ policy

5)    Wrote a statement of corporate objectives in 1957

 

In a later period they:

 

1)    Acquired companies

2)    Expanded outside the U.S. and outside California

3)    Certain problems became acute – early employees had peaked – always had worked to “re-pot” before – now had to let go

4)    Willingness to experiment with ideas that would accommodate employee life-style wishes in company  – flexible hours, 4-day work week

5)    9 day fortnight during recession

6)    Communications lunches

 

Conclusions

 

“I know that [our practices] were the product of very strong beliefs that Dave and have always shared re the dignity of fellow man. They are a product of our home background, our religious teaching and our ability to observe.”

Box 3, Folder 36 – General Speeches

 

May 5, 1980 – Personnel Managers Conference, Silverado, CA

(See also speeches dated 3/23/76 and 4/20/77, and 3/25/82)

5/5/80, Notes for speech handwritten by Hewlett on the back of an old typewritten speech

 

This speech is essentially the same as that of April 20, 1977 and is not repeated here.

 

 

Box 3, Folder 37 – General Speeches

 

November 11, 1980 – Fellowship Forum, Redwood City, CA

 

11/11/80,  Notes for talk handwritten by Hewlett in pencil on notebook paper. There is no indication in the folder of who the audience was. The short talk is a review of the history of HP, and it is not covered here.

Box 3, Folder 35 – General Speeches

 

November 5, 1979 – GTE Management Meeting, Engineering Session, Hilton Head SC

 

11/5/79, Speech, handwritten by Hewlett

Hewlett apparently was invited to attend this three day seminar of GTE managers, and this is a speech he gave to engineering people on day three.

 

He tells the group that he is not going to try and tell them how to run their R& D   program, saying “I have seen no sign that you need any help.” But he does say that he can share his experiences in managing the engineering program at HP.

 

Hewlett provides some background on HP and current financial figures. He says it is roughly ½ the size of GTE.

 

He describes the organizational structure of HP, divisions and groups, and says the product divisions:

a)     Must make a profit

b)    Must finance their own growth

c)     Must be making a product contribution

 

Speaking of control of the divisions, Hewlett describes the Primary methods:

1)    Groups, and their “small staff”

2)    Corporate visit once a year – 2 years for some

3)    Strong internal accounting system, designed to emphasize elements of corporate policy

4)    Responsible for preparation of a rolling 3 year intermediate range plan

5)    Responsible for the preparation and execution of a detailed annual plan

6)    Key element is allocation of R&D funds

 

In discussing the R&D function in the instrument field Hewlett lists some relevant factors, such as:

 

1)    Leans much more toward a “free field style” than a more rigid fixed style

2)    On funding package solutions for a customer – can spend a great deal to solve a specific problem if there is a broad enough user need.

3)    Control R&D cost and of overhead. He says he once estimated that for each dollar spent on R&D, 5 dollars of pretax income was returned to the company.

4)    Wide open field with great opportunity for innovation – primarily a question of matching need and technical solution

5)    Importance of “freedom of design”

6)    Importance of “next bench syndrome”

7)    Excellent training ground for young engineers – can give the engineer a real feeling of accomplishment and job satisfaction.

 

Hewlett adds that “To support these R&D activities we budget 9 to 10% of sales – about 1% to central labs, 8 or 9% to division support.”

 

On the role of the central labs Hewlett list some points:

 

1)    Divisions too busy doing their own thing

2)    Place to spawn new ideas and new processes

3)    High risk, low cost philosophy

 

On the computer field Hewlett says:

 

a)     Need to have a total strategy

b)    Projects can be very long and detailed. HP is a small company but spent 60 engineers for 3 1/2 years on an operating system. Well over 200 man years to wind out.

c)     Had great difficulty  in learning how to operate in the field – low morale – black arm bands

d)    Have our act together now, have the basic strategic plan, have learned how to take the best out of HP background and apply to new highly competitive field

e)     Work can be made interesting and rewarding if one works at it.

 

Conclusions

 

“I have not told you anything that you did not already know, but I hope that I have reinforced that knowledge with examples and numbers.

 

“If there were only one way to run an R&D program it would have been discovered long ago and would be in universal use throughout industry – until someone found a better way.

 

“One point is evident that some level of planning and control is essential  – the need varies from product line to product line, but we must have it.

 

“But this very planning and control tends to curb innovation in the professional staff, particularly if laid on with a heavy hand – it should be used in moderation.

 

“Engineers and scientists as I know them derive great satisfaction from finding practical solutions to real problems and in seeing the fruits of their labor put to a good use. They must be given every opportunity to find their work exciting and fulfilling.”

 

Hewlett says he enjoyed sitting in on the sessions over the last two days, particularly the one on Human Resource activities. He says he was disturbed by some of the answers to a little survey taken in the session. To the question ‘Are you thinking of what your professional staff really wants?’, 26 people answered ‘yes’, but 20 said ‘maybe’ and 13 said ‘no’.

 

“People should not be babies or treated in a preferential way, but you are dealing with a creative and by and large dedicated group of people. To the degree to which you can match their aspirations to the needs of the corporation you will achieve a maximum of return to the company and create the strongest type of dedication and loyalty to the company. The care and feeding of a professional staff is a full time job.”

Box 3, Folder 32 – General Speeches

 

January 29-31, 1978 – Management Meeting, Silverado, CA

 

1/29/78, Copy of typewritten text of remarks, with first page lead in handwritten by Hewlett.

 

Hewlett talks about the forthcoming transition in management  in the same vein as he did when talking to the Toronto sales Office on October 19, 1977. [See speech folder of that date] Again he talks of he and Dave being difficult to replace, the two of them as “legends,” and the heritage of “cultural control,” or, as it has been known at HP,  “The HP Way.”

 

And he again describes the evolution in organizational changes over the years, says these changes will continue.

 

He ends saying he is very comfortable with the new management team.

 

1/29/78, Copy of the agenda for the meeting, and a list of attendees

 

 

Box 3, Folder 33 – General Speeches

 

February 23-24, 1978 – Talk about 1977 results, review of company history, and the forthcoming change in management

 

2/23-24/78, Outline of remarks, handwritten by Hewlett

 

Hewlett covers the essential financial statistics and ends with the statement that these excellent results are due to “the great strength of our management team, for it is basically this management that in the last year or so has been responsible for the improved performance of the company.”

 

He then says he wants to switch to another subject. “I will be retiring as CEO in just three months,” he says, […and I would like] “to make a few comments about the company over the years, – the key changes that have taken place and some of the problems and challenges that lie ahead for the new management team.”

 

[The company was] “founded in 1939 as a partnership. Changed to corporation in 1947 with assets of a little over $400,000 – all stock owned by DP and WRH.

 

“The next ten years was a period of consolidation with the years 1957-58 being key and critical.

 

“By 1958 [we were]:

 

A relatively small company committed to the development, manufacture and marketing of electronic test equipment

a)     Sales 30 million

b)    1750 employees

c)     Have completed the second major change in ownership by going public and taking on the first part time outside director

 

“In 1958, just 20 years ago, some profound significant changes were made that are now hallmarks of the company:

 

1)     Concern about the company size lead to a program of decentralization

2)     Management by Objectives

3)     Entry into international market

4)     A few years earlier had begun a program of college recruitment for engineers – in 1958 expanded [this program] to engineers who had had graduate business training. Interesting to note that John Young, who is the President of HP, was hired in that year.

5)     Introduced a major in–house training program at the foreman and supervisor level throughout the company

6)     To coordinate our expanded personnel and training function, employed our first professionally trained personnel officer, Ray Wilbur, who, by coincidence will be retiring this year.

7)     Almost subconsciously we were gearing up to be a major firm in our field of electronics. Today’s sales are almost 10 times those of 1958.

 

“We can now skip ahead another 10 years and we find that indeed we had been able to build on those structural changes

1)    From being just in electronic instruments we are in:

Desk calculators

Computers

Medical electronics

Analytical electronics

Components

All basic elements of the company today

 

2)    Our international business had blossomed, and whereas this was about 10% in 1958 [it is] now almost 26% of sales.

 

3)    Our decentralized program had progressed to the point that for reason of management span of control we had that year added a group structure. Again, it is interesting to note that John Young at that time was made a VP and placed in charge of one of the groups.

 

4)    That was the year we got rid of Packard and sent him off to Washington to straighten out the Defense Department

 

“That in a sense brings us another 10 years – to today.

 

1)    Shortly will take another major step, for in May when I retire from direct active management, we will see the company change from one managed by the founder-owners to one managed by professional managers

2)    It is worth therefore taking a look at the company at this point in time and view its strengths – its problems and its future.

3)    It is a major international company in the field of electronics with about 40 separate operating divisions throughout the world

 

a)     Can identify about 50 market segments in which we operate –

b)    About 50% of our business comes from abroad – geographic divergence

c)     Sales running at about 15 billion, with 36,000 employee world wide

d)    Our basic operating strategy is based  on

 

1)    New products supported by strong R&D program

2)    Pay-as-you-go financing

3)    The dignity of the individual in our dealing with both our employees and our customers

4)    A sense of responsibility to the community at large

 

“The future

“What are our problems – easiest to say a list of non-problems

 

1)    New product ideas – new areas of profit, with our broad range of product experience we are in an ideal position to take advantage of future growth in the electronic industry

2)    We have demonstrated that we know how to make a profit and that we can finance future growth from such profit.

3)    We have a very strong and experienced management team

 

 

“Problems are basically of manager growth

 

1)    Based on a historical trend line, the next 5 years should see our employees increase by 20,000 people, with 7 million square feet of new plant space.

2)    Have the problem to manage and stimulate a much larger organization – to preserve The HP Way

3)    We must maintain a tight coupling between our expanded marketing operation and the technology on which growth depends

4)    Our area of greatest growth, computation, is also our area of most sophisticated competition. It is also an area of excellence. We must therefore work out careful strategies to capitalize on our strengths and experience in order to successfully carve out an important position in this rapidly expanding field.

5)    All I can say is that I have confidence that our new management team can successfully meet these challenges.”

 

 

Box 3, Folder 34 – General Speeches

 

March 3-7, 1978 – On Retirement as CEO, Villars, Europe

 

3/3-7/78, Hewlett’s handwritten outline for his remarks

 

Hewlett’s remarks here are very similar to those he gave in the above speech, February 23-24, 1978. After the conclusion of this part, he turn to a section he calls “One Last Thought”

 

“Although Dave and I will be taking a less active role in the day-to-day management of the company, we are in no way walking away from it. It simply is not possible to have spent your life in an endeavor such as HP and not have it a very  [large] part of you. There is still much counsel and guidance, grown out of years of experience, that we can offer the company even though the direct responsibility for running the company is elsewhere.

 

“I will add one further personal note that a large percentage of my friends are or were company people. They will still be so. HP Europe holds a very very special position in my heart….I have seen it grow from a small seed to a major element of the corporation. I have developed warm and personal friendships that will continue, as will my interest in the health and continued growth of this magnificent organization.

 

“Thank you.”

Box 3, Folder 29 – General Speeches

 

April 20, 1977 – “Technology and Profitable Growth,” General Electric Spring Conference, Bellaire, FL

 

4/20/77, Copy of the typewritten text of Hewlett’s speech

[See also speech dated March 23, 1976, “The Four Musts of Hewlett-Packard” and one dated May 5, 1980, Personnel conference at Silverado]

 

Hewlett is addressing a group of General Electric people and he notes that while HP has just reached the one billion a year sales level, GE was at that level 38 years ago when HP was just starting, so he acknowledges that “we are still a little bit behind you.”

 

“In a sense then,” Hewlett says, “my talking with you tonight about technology and profitable growth might seem like carrying coals to Newcastle. However, I have spent my entire professional life dealing with these matters, and I firmly believe that regardless of a company’s size some element of its operations can stimulate interest and lead to valuable discussion.”

 

Hewlett says he will try to be “fairly practical “ in his remarks, as he knows that engineers are practical people.

 

He recalls that when they started HP they found that people they hired wanted to do the right thing, and would do the right thing if given the opportunity. “We found,” he says, “that by respecting the dignity and worth of these people, there was much they could contribute. I believe that a great deal of what we subsequently accomplished in the company is a direct result of this very basic approach to people.”

 

Engineering of Opportunity

Managing the engineering effort was a learning process Hewlett says. Since they could not afford to hire top engineers they had to make the best use of their resources as they could. He says they derived something he calls “engineering of opportunity.”  Instead of telling their small engineering staff that they wanted a specific device developed they preferred to say “What technology can we apply to meet these …needs?”  And he says they were able to invent a large number of useful products for their customers while staying within the bounds of their technical capabilities.

 

Hewlett describes another learning experience. He says that during the mid-fifties somebody in the company thought up the concept of a “vintage chart,” upon which they plotted the annual sales of each of their products over a period of four or five years. “We found,” he says, “that the average life of a product was surprisingly long, and that our entire growth was heavily dependent upon adding a layer of new products each year. This impressed upon us …that the route to growth was through new products – products that contributed real value content to our catalog.”

 

Other Early Lessons

They also learned the hard rule, “If you want to do something, you had better earn the dollars first….This philosophy of pay-as-you-go also had a long-term influence on how we approached management problems.”

 

Hewlett describes another key learning experience, –“…discovering the advantage of having a relatively small group of people working together closely – people who knew what they were doing and where they were going.” They wanted to preserve this characteristic and believed the method of achieving this was to decentralize their operation – even though their volume was only about 50 million at the time. They also recognized that in order to follow a decentralized organization they would have to develop an overall operating philosophy to guide the decentralized units.

 

To do this he says they chose a concept “that is now popularly known as ‘management by objective,’” — a term he says they had not heard of at the time. He describes the decentralized organization as one where the organization was divided into “several small operating divisions with well-defined product lines, to assign managers with complete responsibility for all their functional areas, to provide them with some broad, general guidelines, and then keep track of the division’s performance.”

 

Broad Objectives

Hewlett says he and Dave Packard “sat down and wrote six corporate objectives. The first of these dealt with the essence of everything we were trying to do – make a profit. The other objectives covered customers, fields of interest, growth, people, and citizenship.

 

“Although we have reviewed and modified these objectives from time to time, they really have not changed very much over the years.” They did add a seventh objective in the mid 1960s which had to do with management techniques – a reflection of their increased size. “These objectives have withstood the test of time, and our ability to follow them so steadfastly has been a major factor in the company’s achievements.”

 

Four “Musts”

Hewlett says he tried to boil down these objectives into a few catch phrases, and he coined four “musts: – You must make a profit, you must make that profit by technological contribution, you must work through people to achieve these objectives, you must put back more into the community than you take out.”

 

Hewlett goes on to discuss each of these themes, and he starts with technology. “To make a technological contribution,” he says, “you have to have good people, and you have to have a proper atmosphere.  It is obvious…that good people attract good people, thus producing an exciting place to work. This is a positive feedback type of operation, and if you can get into this mode, it is extremely beneficial.”

 

Concerning the need to maintain a creative atmosphere, Hewlett says R&D people “don’t want to be on the sidelines; they want to feel that they have a major role in defining what a company does.”

 

“At HP, product decisions are almost always made between the divisional manager and the R&D personnel – not, in contrast with many companies, between the divisional manager and the marketing operation. In our business, we feel that – important as they are – marketing people must play a secondary role in the question of product definition.”

 

Being on the Cutting Edge

Hewlett says this is a very important for engineers, who want to be on the cutting edge of what the company plans to do – not simply asked to carry out a pre-determined course of action. “This… is the basis of one of our objectives – that you must make a technical contribution, not take a ‘me too’ approach.”

 

Engineering Management

The high degree of engineering involvement in HP’s entire program requires people in divisional management who understand engineering. “It is not by accident,” he says, “that 35 of our 36 or so divisions are headed by people with engineers’ degrees. (He adds, parenthetically, that less than a quarter have an MBA.) “This means…that we are taking people who are not trained in management and putting them into key management slots. In turn, this approach requires a strong commitment by top management to provide these people with considerable back-up support.”

 

Deep Commitment to ICs

Hewlett describes HP’s philosophy on IC fabrication. “We have,” he says, “nine divisions with integrated circuit facilities, and a tenth just coming on-stream. People from the semiconductor industry tell us that no one can afford to spread such sizable capital resources out among nine or ten areas – but we don’t look at it that way. Our feeling is that while we won’t make money on integrated circuits, per se, we will profit from the sale of products built around these tailor-made integrated circuits. As an indication of this, I would guess that probably 90 to 95% of our products now have one or more of our proprietary integrated circuits in them.”

 

Profit…A State of Mind

Making the substantial commitment of dollars into technologies such as ICs requires a high level of financial security. Hewlett says “One measure of financial security is whether you’ve been able to finance your growth from earnings, or whether you’ve had to engage heavily in debt financing. It is for this reason that we have continually stressed the importance of profits to HP people at all levels of the organization.

 

“Profit, as far as I am concerned, is a state of mind. It is not just something the boss is harping on; instead it is something that each person in the organization must be convinced is in his own best interest. Once that attitude prevails, each individual will have a direct concern that this part of the organization is making a profit. I think that concern is even more important for technical people. Because in a more sophisticated sense, profit is the difference between what an item cost you, and what your customers perceive its value to be –that is, the technical contribution if you are in a technical field. I think that every one of our technical people now appreciates this fact fully. They recognize that if you are going to make a profit, it has to be on the basis of some kind of contribution.”

 

Technology and Profitable Growth

Talking about his third “must,” working with people to achieve objectives, Hewlett says he doesn’t need to elaborate on this area because, of all the companies he knows, GE is “the most conscious of this need and has done the best job.” He adds only one comment: management by objective is a extremely costly program, personnel-wise. It requires a large number of managers because you are spreading the workload among a great many people. Additionally, if you are drawing your management talent from the engineering staff, it is important to recognize that these people have not necessarily been trained in basic management principles. Therefore, it is essential that you provide training and development programs and facilities to be sure that when you put these people into management positions, they are indeed able to handle them.”

 

Hewlett says he does not want to take the time to discuss the fourth “must,” …responsibility to the community. “That is a very broad area with many ramifications. I just want to assure you that we supported the concepts of good citizenship long before it became the popular thing to do.”

 

No Perfect System

Realizing that there is no perfect system for running a company – Hewlett says he can draw some general conclusions.

 

“We really have not solved the problem of the dual ladder. I know that you people have given this a lot of thought too, and the solution still lies in the future.

 

“In terms of management by objectives, I think we have had reasonably good results at the upper levels. The approach has been quite successful as a motivation for our management team. But I have some doubts as to the degree to which it operates at the lower level in the corporation – and that, of course, is one of the places we would like to have it operate most effectively. We intend to work on this problem.

 

“I believe we have been reasonably successful in making profit a viable concept in practically everything we do, and that the profit center itself has been satisfactory despite some short comings. We have accomplished this partly by our management-by-objectives approach, and partly by creating a special management accounting system that tends to remind managers where their primary focus should be.

 

“Finally, at HP we have committed ourselves to the concept that achieving profit and growth via a constructive R&D program on a pay-as-you-go basis is the path we want to follow. I see no reason why it will not continue to work for us just as well in the future.”

 

 

Box 3, Folder 30 – General Speeches

 

October 19-20, 1977 – Visit to Toronto Sales Office, Canada

 

10/19/77, Copy of typewritten text of speech

 

Hewlett says a few words about FY 1977 which is about to close. He says he “thinks it is going to be pretty good year – about 107% of quota in U.S., international a little weaker.”

 

“I really think the company is in very good shape – in a very strong financial position….It is my view…that we are probably in as good a position as I can recall we’ve ever been.”

 

And that leads into what Hewlett says he really would like to talk about – “the transition that is going to take place in management during the next few months.” He mentions the previous announcement that John Young has been elected President and Chief Operating Officer of the Company. He says that implies that “unless he does something horrible before I retire as chief executive officer he will assume that title.”

 

“Now I want to be very frank with you on this matter because I think it’s important for all HP people to understand what is happening and what is going to happen. These are not easy remarks for me to make. So I’ll tell you quite frankly that Dave and I are not doing to be easy fellows to replace. To be absolutely frank, it will be impossible! I’d be dishonest if I said anything different. But I think it’s better for us to make a decision now, when we have a choice, than have to do it at some later date on an involuntary basis.”

 

Hewlett points out that the change is not just a change in management, “it is a change from an owner-founder management to a professional management. We took a half-way step some years ago when we changed the company from a privately held company to a publicly held corporation. At the present time, the Hewlett and Packard families still own about half of the stock. This will be reduced in time. Inheritance taxes in the U.S. are such as to be almost confiscatory, and as you probably know, my wife’s estate sold quite a bit of HP stock simply to pay death taxes on that estate. The remainder will go into a charitable foundation and the foundation must sell some stock eventually to provide needed liquidity. So time will take care of disbursing much of these holdings.”

 

Hewlett says he has come to realize that Dave and he are getting to be legends. “I honestly say that modestly, but so many people come up and ask to shake my hand before I leave – you begin to sense how legends grow.”

 

“And perhaps people want legends. Perhaps they want to feel that there’s something special about people who lead them. And if that’s what they want, let them have it – although I must say I sometimes swallow pretty hard.

 

“I think the fact stands that Dave and I have held a special position in this company, that will not duplicated. But in the long run we’ve got to be replaced and, as I said, it’s better to do this on our own time schedule than involuntarily.” He also admits that he feels himself “running out of gas to some extent” – further indication that this is the right time.”

 

Hewlett tells of the Stanford professor who studied what he called HP’s ‘management by cultural control’ – The HP Way. “So I assure you,” Hewlett says, “that even if the new management team had an inclination to change the character of this company, they would have a hard time doing it. Because each one of you – and there are now 35,000  people in the company – would be there to protest indirectly, and to say, ‘This isn’t the way it’s done at HP.’”

 

“What you must realize is that there are going to be changes. There must be changes. In fact as John [Young] talks to you shortly about the next five years, you should begin to see how the kind of growth we foresee will inevitably pose problems. We’ill probably have twice as many divisions, for instance, if we follow our present policy. How will we control that number of divisions? Will six groups be right? Or will we need more groups, or fewer? Is the concept of three executive vice presidents the proper way to run this company? What will we do about the collision course that calculators and computers are following? And what role should the labs play in the company as it grows larger? Those are some of the problems we face, and we are going to have to make some changes to resolve them. I don’t know what those changes are going to be, but certainly John and his people are going to have to come up with some suggestions.”

 

“Dave and I have a great deal of confidence in the new team. I don’t think we would have recommended them to the board if we didn’t. It might just interest you to know how a decision like that comes about. I really think it has roots in our management by objective because under that concept a person is given the opportunity at the very early stage to make independent decisions, and to follow his own management style with the bounds of the corporate guidelines…. Speaking further about John Young, Hewlett says “He was known to the board, he was well known to the company, and in view of all who knew him, he was exceedingly well qualified to lead the company in its next generation of management.

 

“Now I probably have more at stake in this company than anyone in this room, except Dave, and I want to tell you that I feel comfortable with the new management team that is going to be with you next year directing the future of the company.

 

“Thank you”.

 

 

Box 3, Folder 31 – General Speeches

 

November 2, 1977 – Herbert Hoover Medal for Distinguished Service, Stanford Alumni Association, Location not given

 

11/2/77, Copy of typewritten statement, with handwritten notations by Hewlett

 

Hewlett says he is very honored to be the 10^th recipient of this award, especially when he looks at the names of the previous recipients.

 

He recalls that Herbert Hoover, in approving the use of his name for this award, stipulated that the recipient should decide the time , place, and nature of the presentation ceremony. “It was not the date that was the problem” he says, “once a moment of thought allowed me to determine that it should informal and with friends. It was where and who. The real question at issue was a curious one. Who are my friends? In thinking about this subject, I realized that a very high percentage of people whom I put in this category have been associated with the management of Stanford during the past 10 or 15 years and in particular, during 11 years I served as a trustee. This was a period during which I cemented old friendships and established many new ones.

 

He says his experience was “exciting and stimulating, and that the people he associated with were “thoughtful and dedicated.” He realized that most of the people he thought of as his “friends” were those associated with his experience on the Stanford Board. So he concluded that he should “build the invitational list around these people and supplement it with family and a few old friends.”  He says the decision as to “where” was an easier one. “I wanted it to be informal and local. I am afraid that I imposed upon Dick and Jing when I asked that the award be made in their home.”

 

“Subject to one obvious absence, I can truthfully say that there is no group with whom I’d rather share this honor than those of you here tonight. You honor me by your attendance.”

Box 3, Folder 26 – General Speeches

 

February 24, 1976 – Shareholders Meeting, Palo Alto, CA

 

2/24/76,  Typed copy of Hewlett’s remarks

 

Hewlett says HP performance in 1975 can only be considered as fair, although quite good when compared to the electronics industry as a whole. Shipments up 11% to $981 million, pre-tax earnings up 3% to over $148 million. Earnings per share were $3.02, down from $3.08 in 1974.

 

H runs through a series of overhead slides:

 

Slide #1.

The first shows the sales growth pattern over the past ten years. He says the slide shows sales growth in the period 1966-1970 was 19%, and for the period 1971-1975 it was 29%. He notes Packard returned to HP in 1971.

 

Slide #2

Shows growth of profits for the same ten year period. Profits averaged a 9% annual growth for the first five years, and a 20% growth rate for the next five years.

 

Slide #3

Shows test and measurement business – about 45 of total sales. In the last five years the annual rate of growth was18% for sales and 20% per year for pre-tax earnings.

 

Slide #4

Data Products is the next largest category group. This is the most rapidly growing area averaging 45 percent growth in sales and 68% growth in pre-tax profit per year. He notes the 3 to 1 rise in profit between 1972 and 1974, showing the impact of the pocket calculators.

 

Slide #5

The Medical Group, represents about 10% of total sales. Long steady growth in sales, averaging about 31 percent over the last five years. Average annual earnings up 52% during the past five years.

 

Slide #6

Smallest group – Analytical

Average sales growth 34%, profits grew at 80%/year over past four years.

 

Slide #7

Shows how inventories grew rapidly between 1971 and 1973. Corrective steps taken that year improved this situation from a high of 30% of sales down to 21 % by 1975.

 

Slide #8

Accounts receivable. Percent of sales rose from 23% in 1971 to 28% in 1973. Since has dropped to 21%

 

Slide #9

Shows sharp increase in employment in 1972 and 1973. Static for last two years.

 

Slide #10

Better asset management. At the end of 1973 HP had a net cash deficit  (cash and cash equivalent less short-term borrowings) of $111 million. By the end of 1975  the net cash position showed a favorable balance of more than $33 million.

 

Slide #11

R&D expenditures. Averaged about 10.5% of sales prior to 1971. Due to rapid growth during the years 1972-1974 couldn’t keep up the same % to R&D. By 1974 R&D expense fell to 8% of sales, but back up a bit to 9.1 % in 1975.

 

 

Box 3, Folder 27 – General Speeches

 

March 23, 1976 – “The Four Musts of Hewlett-Packard,” Purdue University, West Lafayette, IN

[See also speeches dated April 20, 1977 and May 5, 1980 on this subject]

 

3/23/76, Typewritten draft of speech

 

Hewlett says, “There is always a certain advantage in choosing a provocative title – hence ‘The Four Musts of Hewlett-Packard.’ These musts are – you must make a profit, you must make a contribution, you must achieve your objectives through people, and you must give back to the community more than you take out.”

 

He says these “are an imperative re-statement of the corporate objectives cast into simpler categories. I want to make it clear that these imperatives pertain to Hewlett-Packard, and may or may not be applicable in all respects to other companies.”

 

Looking at the first imperative regarding profit, Hewlett says “In recent years somehow or other profit has almost become a dirty word. In some people’s mind it is synonymous with profiteering. There is a tremendous lack of understanding in the American public abut the size and role of profit. Let me quote you a few figures that you may or may not have heard before. These figures resulted from a survey by the Opinion research corporation  a few years ago. The following question was asked:

‘As a rough guess, what percent profit on each dollar of sales do you think the average manufacturer makes after taxes?’ The average answer came back a surprising 28% — with some groups ranging as high as 34%, and the lowest estimate around 21 percent. The actual fact is that the average American manufacturer makes only about 4% after taxes on each dollar of sales. Thus, public estimation of profit was seven times higher than reality. It is not surprising that with this point of view of profit, there has been an increasing tendency to ask business to accept greater operating costs without any offset from price increase.”

 

Hewlett moves to talk about the profits at Hewlett-Packard, and what they are used for. First, he says HP is not an average company – its profits are higher than the average –8 ½ % in 1975, and 9 ½ % in 1974.

 

Where do HP’s  profits go? He says, “Of  the approximate $900 million in profit earned by the company during its life time, about 22% went to employees in profit sharing and other benefits; 38% was paid in income taxes to the state, federal and foreign governments; less than 5% was paid in dividends to the shareholders; and the remainder of about 36% was re-invested in the company to finance its growth.

 

“The economy of this country is based on the free enterprise system. The life blood of free enterprise is profit, and without profit for any long period of time, the free enterprise system will disappear.”

 

“Profit is not something that should be put off until tomorrow, it must be made today, and each day thereafter. I know of many companies who were always gambling on the future, but somehow the future never came, and they either failed or had those blowing hopes of the future permanently stunted.”

 

“Profits should be the primary source of financing company growth.”

 

Hewlett tells of the problem a few years earlier when “through lack of attention to asset management, and failure to maintain an adequate profit level, we found ourselves on the threshold of reversing a long standing policy through funding our debt by means of long term obligations. By paying much greater attention to inventory levels and accounts receivables…we were able to reverse these trends, such that at the end of last year, we showed a favorable balance of about $46 million.”

 

Speaking of the next must, must make a contribution, Hewlett says they are not talking about giving money away. “We are talking,” he says, “about a technical break-through, a conceptual innovation, a better way of solving a problem, i.e., a contribution to the science of measurement computation….This implies we must spend more than the average on our R&D program, and indeed we do. Traditionally averaging around 10% of sales, this makes us a higher-than-ordinary cost company in our fields. It says we should not compete in areas where low and lower production costs are the sole measure of success. This may sound like a contradiction in view of the high competition now prevalent in the pocket calculator field, but we will have a few ideas on how to make our brand of calculator more valuable to the user.”

 

But when is a contribution a contribution? Hewlett says this is not an easy question to answer. “Much of our R&D effort goes into supporting existing additional product lines. Typically, in the instrumentation field a given design concept has a fairly long life expectancy, 5 to 8 years. Therefore we have ample time to plan a next generation and to incorporate into it the most advanced thinking. We have very little cosmetic face lifting….What is needed is a spark of an idea of how to do the job in a better way. I have often called this ‘engineering of opportunity’ – with this you get directly down to the problem of building a device without worrying too much about inventing a new technique as well.”

 

“Behind all this discussion of contribution is lurking the customer, who is the person we are trying to serve. If you are solving a real problem for him, and you are solving it at the right price, he will buy your product and will be willing  to allow you to make a profit on it. If you don’t achieve this, he will not buy it – it’s just as simple as that.

 

Hewlett talks about the period of time  before they were in the “big ticket items such as computers.” Back when their sales were some 250 million dollars a year, the average order was around $1000,  or about 200,000 orders per year.  “Because we had a limited customer base,” he says, “this meant that we went back to the same customer time and time again. It was essential therefore, that we solve his needs on an honest basis. It did us no good to sell him a bill of goods, for we would not be welcomed back….The customer must be happy with his product after he has purchased it. This requires that we maintain effective after-sales support; good parts availability; reasonably quick recalibration service if desired, and as we have grown, these items have continued to be a very basic part of our operations.

 

“If one now looks back to our corporate objectives, you can recognize specifically the objective on profit. The objective on growth is partially covered under the heading of profit, for this is the source of funds to pay for growth, and partially under contributions – for our product line will grow from these new innovative thoughts. Our field of interest is sufficiently defined under contributions, and obviously that objective, pertaining to our responsibility to customers, is also to be found there.”

 

 

Box 3, Folder 28 – General Speeches

 

May 27, 1976 – Chamber of Commerce, Corvallis, OR

 

5/27/76, Outline of thoughts  for talk, handwritten by Hewlett

 

After some introductory  remarks concerning HP’s products, and the corporate objectives, Hewlett says he wants to talk about a question he is sure is of great concern to this organization, as it is to him — “The subject of current trends in government and its affect on the economy of the private sector.”

 

“As many of you know, one of our corporate objectives is to be a good citizen in our communities, to solve more problems than we create. We feel that the betterment of our society is not a job for a few – it is a responsibility to be shared by all. This we intend to do.

 

“The excesses of the 19^th century did nothing to allay past suspicions, even though…these were no worse than what was happening in the political sector in the U.S. – remember Tammany Hall and Boss Tweed.

 

Out of these concerns came the Anti-Trust legislation…which I believe were beneficial in an overall sense.” But Hewlett goes on to say that over the last 15 years there has been a trend to solve social problems at the expense of the productive economy – and he feels this has gone too far.

 

“One of the results,” he says, “has been the rise in importance and number of independent and appointive boards and commissions. A second has been the rising voice of the ‘so called’ Consumerism.” He says he would like to discuss each of these separately along with the effect of each on the business community.

 

Hewlett defines the appointive form of government as one that has regulatory power independent of any legislative or executive body. He lists some recently created: Consumer Product Safety Commission, Environmental Protection Agency, Equal Employment Opportunity Commission, Office of Health and Safety.

 

He says the problems with the appointive form of government are that it is not responsive to the public at large, once started there is no way to get them out of business.

 

On “Consumerism” Hewlett says he is very much in favor of the consumer’s voice being heard, but at least two problems with this trend have arisen:

“The tendency for a small vociferous minority to exert undue influence, and

The susceptibility of regulatory agencies to react to such pressures.”

 

Hewlett gives seat belts as an example of the “tyranny of the minority over the majority who did not want all those gadgets.”

 

Another example he cites was the how an action by the  Consumer Product Safety Commission resulted in at least eight pregnant women undergoing abortions based on misleading information put out by the Commission.

 

Another problem with these Boards which Hewlett cites is “the pressure they exert to replace anyone on the Board who may have first hand knowledge of the subject, simply because they may be biased.”

 

Hewlett moves on to the subject of “Corporate morality.”  He says he “thinks many of the cases reported where there has been flagrant, inexcusable, disgraceful, [events], action should be taken to punish the individuals or corporation involved, [but]:

 

“Need a reference standard, and

There is the danger of exporting our own morality”

 

“While the government is looking into the matter of morality in the private sector, they should also be looking at themselves as well.

 

“I know of flagrant cases where in order to assure reelection an official has taken action that clearly was not in the public good.

 

“It is an axiom that a politician’s first responsibility is to get reelected. Similarly, it is business’ first responsibility to make a profit. But it is clearly understood that such responsibility must be tempered with some respect for the public good. This same tempering should be part and parcel of the responsibility of the politician vis-à-vis his reelection.

 

Hewlett says he has been only critical thus far and would like to discuss what might be done to start to change the less than satisfactory environment in which the private sector finds itself.

 

A)   “Reevaluate which of the multiple agencies – Commissions are really needed, are doing a truly useful and important job. Those that do not meet this test should be phased out

 

B)   “Those that continue should be classified as to who should be truly independent, such as the Federal Reserve Board. The rest should be assigned to a branch of the executive branch to assure responsibility to the electorate.

 

C)   “Where governing bodies do exist they should be selected from individuals who have first hand knowledge of the subject.

 

D)   “Codes of ethics should be established for both the private and the public sectors and that should be enforced. None of this ‘legislators protection society’ business.

 

E)    “Leaks should be stopped, and this means starting at the top.

 

F)    “Most important of all there should be developed a better understanding between the public and private sectors.

1)    The private sector should understand and learn more about the important role of the politician and how very different it is from his world,

2)    The politician should understand better both the role of the private sector and what makes it tick. In fact I think that in general he has a better understanding of the problems of the private sector than the private sector has of his.

 

G)   “I feel that there is an encouraging trend in all of these directions but it is just not going to happen by itself, nor is it going to happen overnight.

 

“We all must become involved in a move toward representative government and mutual understanding and trust between the public and the private sector.

 

“I would also like to take this opportunity to publicly thank all of our friends here who first brought the advantages of Corvallis to our attention, and their tremendous labors to make our coming a reality.”

Box 3, Folder 21 – General Speeches

 

February 25, 1975 – Shareholders Meeting, Palo Alto, CA

 

2/25/75, Hewlett’s handwritten notes, in outline form, noting information he intends to cover at the meeting

 

Hewlett notes that it is a pleasant experience to give a favorable report, and he proceeds to cite data on 1974 performance, the management structure, capital expenditures and employment.

 

 

 

Box 3, Folder 22 – General Speeches

 

March 12, 1975 – Visit to HP Plant, Boise, ID

 

3/12/75, Outline of topics to discuss, handwritten by Hewlett

 

Under the subject of “How did we get from there to here?” Hewlett lists:

 

Early goals

Did you ever expect to be where you are?

Progress – slow and steady – conservative

Based on new products

Entry into new fields

Pay-as-you-go

Up to 1958-59 all HP in Palo Alto

Had made first start in divergence

First time set down corporate objectives

Through 1960s rapid diversification

Medical

Analytical

Computers, calculators, pocket calculators

Group structure

Current organization

 

What are we doing here?

Part of a plan to expand outside California

Boise chosen for many reasons:

2 hours from SF

Good place to live

Community wanted us

 

Early period

Good EE, not good ME

Don’t design up on curve

All knowledge not derived from school

 

The grass is always greener syndrome

Computers

 

Never try to take a fortified position unless essential

Tektronix [Refers to difficulties breaking into oscilloscopes]

 

Problems of communications

Pay checks [Refers of change in pay system that didn’t go over with employees]

GmbH, Loveland, Japan

 

Carrot in the wrong spot

Asset management

 

Balance

R&D, growth, marketing

 

Screw up of acquisitions

 

How are we doing?

Very pleased indeed, 138% of target in orders

211 employees

Policy of local hire

 

Look ahead

Boise will be headquarters for electro-mechanical products

Will break ground this month for new building on new site

May have to lease some additional space

 

The test

If I had to do it again I would chose Boise

 

 

Box 3, Folder 23 – General Speeches

 

April 22-23, 1975 – Talk at University of Oklahoma, Norman, OK

 

4/22/75, Copy of handwritten outline of Hewlett’s talk

 

This talk is entirely devoted to his description of HP – its organization, its products, its philosophies. He concludes by talking about where they are today and where they are going. He says they have the “hatches battened down for the current situation,” they are in “good financial shape,” have a “freeze on hiring,” no lay-offs, but taking extra days off at Thanksgiving. [See also speeches dated March 25, 1982, and May, 1992]

 

 

Box 3, Folder 24 – General Speeches

 

June 15-17, 1975 Management Meeting, Napa, CA

 

6/15/75, Copy of typewritten text of Hewlett’s remarks

 

This is a general talk about the role of management in the world of today. He titles it “Managing a profitable billion-$ decentralized corporation in a changing worldwide environment.”

 

Hewlett feels that all over the world we are moving towards an era of “greater concern for the individual both singularly and in groups.” He acknowledges that the interests of the individual are not always consistent with that of the group, nor with that of business. “As people have votes and businesses don’t – this obviously poses problems and it is inevitable that more rather than less restraint will be placed on businesses in the future.”

 

“Businessmen,” he says, “have never done a very good job of explaining business to the public – the internal selection process did not emphasize this ability. The lack of understanding of the average person on the street is appalling. In a survey conducted by a McGraw Hill subsidiary, the question was asked of a wide cross section of the public: “What do you think is the average profit [as a percentage of sales after taxes] of manufacturing corporations”? The answer came back – an average of 29%…and the actual figure is 4%. It is no wonder that the public thinks that business is an infinite reservoir from which all goodness flows.”

 

As a result of this general view, Hewlett sees a continuing drift towards socialism. He admits to being prejudiced, but says he doesn’t believe socialism can succeed.

 

The days of the Robber Barons in the U.S. were accompanied by strong aggressive men who would be considered ruthless by modern standards, Hewlett says. Much has been done, he says,  by Business Schools to perfect the science of management, but the rise of big corporations all too often brought an arrogance and disdain for people and government…..If the free enterprise system is to survive, we need a new criteria in selecting our managers. These managers and leaders must be people who have all the technical skills that their predecessors did, but they must also have the quality to understand their own people, and a quality to understand and participate in the key role that business must play in the prosperity of the country, as well as what its responsibilities are in this respect. “

 

Hewlett feels the new generation of manager “must be sure that his own employees understand what the company is doing, where it wants to go, and how it wants to get there. But the reverse is also true – management must listen to what its people want, to what their problems are, and to see how their goals and objectives can be met consistent with the framework of the corporation.” He says he is not talking about management by committee, simply communication and understanding.

 

“If each person within [the U.S.] workforce understood the system and truly felt that there was a partnership between business and its employees, we would have far fewer kooky laws passed by our government. The modern business leader also needs to take a more active role outside the company. This is something we have certainly preached for a long time under the heading of ‘Good Citizenship’. Just as a manager must know and work with his people, so must a manager know and work with his government. Most government people do want to do a good job, but too often they don’t really understand the effect of their actions in the other direction. Most people outside of government don’t really understand the problems that face governments and the people who administer it. There is much that business can learn about some of the facts of life that face governments, and understanding these problems, [might] be more sympathetic with some of the decisions reached. In other words the new facet of management that must be added to be successful in a changing world, in addition to all the other management attributes, must be the ability to communicate both up and down – to communicate and to understand – to understand and be willing to act.”

 

 

Box 3, Folder 25 – General Speeches

 

September 13, 1975 – Dedication of Grenoble Plant, France

 

9/13/75, Copy of typed remarks

 

Hewlett says that General Charles de Gaulle visited the United States in 1960. De Gaulle had heard of the Stanford Industrial Park in Palo Alto, California – where high technology companies and a major university existed in close proximity to the benefit of both –  and wanted to see and learn more about this unique development.

 

De Gaulle visited HP’s plant, its administrative offices, its research laboratories, and its manufacturing areas. Hewlett says he remembers that “on several occasions our employees broke out in spontaneous applause on seeing him pass by.”

 

Hewlett says he reports this anecdote, not only because it was a matter of pride to have the President of France visit their facility, but also because it provides “an important reference date from which to view the intervening progress of our company. I am sure that none of us at that time conceived that 15 years later we would be dedicating a plant in France. Nor would we have dreamed that our French plant would be fully a quarter the size of all the facilities operated by Hewlett-Packard at that time.”

 

Since that time Hewlett says HP’s total sales have grown 15 times, but “international sales have grown by a factor of 50.”

 

“At the time of General de Gaulle’s visit, our product line was limited to electronic test and measuring instruments….However, today we also produce all forms of computational equipment – computers, desktop electronic calculators, and pocket calculators -–as well as medical electronics equipment, instruments for chemical analysis, solid-state components, and some equipment for civil engineering.

 

“Thus, in these past 15 years we have grown from a company with a relatively small number of products sold almost entirely in the United States, to a much more broadly based company with over 50 percent of our business emanating from outside the U.S.”

 

Hewlett poses some questions: What brought HP to France – to Grenoble; what will they manufacture here; what are their long range plans; will they be a beneficial influence to Grenoble, and to France.?

 

In answering these questions Hewlett says France is not only a major market, but it “provides a highly skilled workforce, supported by one of the best educational systems in the world.” Add one of the most stable economies in Europe, and convenient location. “All justification enough to come to your country.”

 

Hewlett says they were drawn to Grenoble by its physical attractiveness, its ‘livability,’ which is an important factor in attracting and holding top professional and managerial employees. Grenoble is close to technical institutions as well as the University of Grenoble.

 

Hewlett says they plan to manufacture computers and their peripheral devices at the Grenoble plant, as well to assemble various components into large computer systems.

 

“At present,” Hewlett says, “about 90 percent of the orders we receive for products manufactured here in Grenoble come from outside France. At the current rate of production, we are contributing a favorable increment of about 40 million francs annually to France’s balance of payments.”

 

He says the Grenoble facility also has its own research and development staff,  “whose initial responsibility is to develop data entry input terminals for Hewlett-Packard’s entire line of computer products.”

 

Talking about HP’s management philosophy, Hewlett says “the company operates with a high degree of decentralization. Our basic viewpoint is that decisions can and should be made at the lowest possible operating levels. After all, the people at these levels know first hand what is actually going on, and are well qualified to make many routine operating decisions. But, they need some general guidelines in which to operate. We achieve this by means of broad corporate objectives that are well understood throughout the corporation. This philosophy of distributed management, which we call management by objectives, encourages a broad participation in operating decisions and serves as an excellent training ground for all levels of management.”

 

Hewlett mentions the staffing of the Grenoble plant. He says, “In keeping with our long-standing policy of managing and staffing local organizations with local people, the next manager in all probability will be selected from our present staff in Grenoble. You might be interested to know that of the 203 people employed here, 186 come from this region. There are only 17 non-French employed, two of whom are from the U.S.”

 

“I cannot close without saying a word about the tremendous amount of help and cooperation we have received during the startup phases of this operation. This help has come from many sources – the French government itself, from the region as a whole, and certainly from the city of Eybens. Let me express our appreciation for all that you have done to make this operation a success. I also want to pay particular credit to the exceedingly fine workforce we have been able to assemble. In a very short period of time, they have been able to master complicated procedures and are as efficient and dedicated as many of our more mature workforces – a clear vindication for our decision to come here.

 

“Somehow I feel that if General de Gaulle were with us today, he would heartily approve of our decision to come to France and build a plant in this wonderful and hospitable region. We are pleased and honored to become a corporate citizen of your community, and we look forward to a long and happy relationship.”