5 ms·

HP's new business model for the last 2 years : * cut costs (mostly by disabling essential business functions) * buy back stock using proceeds The result: ht

by iofj 11y ago

HP's new business model for the last 2 years : * cut costs (mostly by disabling essential business functions) * buy back stock using proceeds The result: https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=1&chfdeh=0&chdet=1442377918603&chddm=78200&chddi=86400&chls=CandleStick&q=NYSE:HPQ&ntsp=0&ei=sPD4VcvfAoiI0AT2xIkY https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&... The person in Charge : Meg Whitman. In 2008, she was cited by The New York Times as among the women most likely to become the first female President of the United States. Because what "worked" for HP, we should apply to all of the US. Also see: http://www.zerohedge.com/news/2015-02-24/why-hewlett-packard-firing-58000 http://www.zerohedge.com/news/2015-02-24/why-hewlett-packard...

wpietri 11y ago
Doing the math on this, they apparently believe that each one of those people is costing the company $108k per year, net. Given that HP's revenue per employee is ~$350k, I find those numbers simply unbelievable. And let's suppose for a second that HP is somehow right. How did they just notice that 10% of their employees are doing something totally worthless? On top of the 55,000 employees that they laid off in 2012? I don't understand how this isn't an admission of total management incompetence. There's also the classic MBA mistake of seeing employees as expenses rather than assets. HP has been investing in these people for years. What a waste to just fire them all. And this is surely damaging another valuable asset, organizational morale. That they couldn't figure out a single valuable thing to do with those assets is just sad.
- dasil003 11y ago
  The uncomfortable truth at this scale is that some employees are absolutely essential and some are just phoning it in collecting a paycheck. Ideally management would have visibility into where the performers were, but with this many layers of management it's very very difficult to see the forest for the trees. It's one thing to repurpose people when the trend lines are positive or at least flat, but in HP's case there is a real question mark about what growing sectors they can successfully move into. Certainly they still have the talent to do amazing things, but have the leadership with the deep visibility into the organization's inner workings and talent pool and the outward facing vision to actually pull off a reorg like that seems almost impossible.
  - wpietri 11y ago
    If some employees are phoning it in, I think it's worth asking why. It's been a long time since I felt that way at a job, but for me it came out of shitty, disempowering, unrewarding environments. But even running with your argument, that the people laid off are slacking, I think it's an enormous failure that they let 30,000 of those people accumulate such that they were wasting $3 billion per year. Especially given their massive layoff a few years back. And if they've built an organization where it's difficult to tell where they're wasting $3 billion per year, I don't see how that's anything but an enormous indictment of the managers.
    - mahyarm 11y ago
      You work remotely, life is pretty low stress. Live in a cheap cost of living place, take care of the kids while the spouse is out working on their other job. Never get a raise in 6 years. That is why they phone it in.
      - FilterSweep 11y ago
        I find it hard to believe a matured company, rife with middle management, wouldn't have held those people "mailing it in," so to speak, accountable years ago. Whether they work onsite or remotely, some work is turned in. A handful may fall through the cracks, but it's just that, a handful. Not 30,000, even in a company much bigger.
        rqebmm 11y ago
        what if the middle managers are phoning it in?
        raincom 11y ago
        Many at Cisco do:) But they are managing people, mananging some cost centers, etc. They are contributing in a way, but not for the next $X Billion innovation.
        11y ago
- IndianAstronaut 11y ago
  > There's also the classic MBA mistake of seeing employees as expenses rather than assets. Not to mention that more critical people will leave once they sniff layoffs coming.
  - VLM 11y ago
    This is not exactly HPs first layoff. Its been a dying company for quite some time. There is no hope of a turnaround and has not been for some time. Everyone in the Venn diagram of willing to jump ship and able to jump ship, has already jumped. All you've got left is people unwilling to jump, unable to jump, or both. Those unwilling will continue to be unwilling for whatever reasons, if the last layoff round didn't snap them out, then this will also fail. Those unable to jump will continue to be unable.
    - Redoubts 11y ago
      How does a company like this die anyways? Does headcount just dwindle until they're nothing but a holding company or what?
- yummyfajitas 11y ago
  And let's suppose for a second that HP is somehow right. How did they just notice that 10% of their employees are doing something totally worthless? The keyword to search for in the economic literature is "labor hoarding". In short, companies tend to (by default) keep employees until well after they are no longer useful. Then some sort of a shock causes the company to shed the deadwood all at once. This is management incompetence, but it's exceedingly common. If you ever see a company (e.g. Netflix) which sheds employees regularly, that's a very good sign.
  - mercer 11y ago
    Could you argue that in a broader sense this exact same thing happens not just on the company level, but on the level of entire economies? I recall reading a few articles on how recessions/depressions often have a way of shaking up industries to align (or rather, catch up) with new innovations/developments.
    - yummyfajitas 11y ago
      I imagine one could - certainly many companies which should die actually do die during a recession. Some structuralist theories are based on this. But this is just theory. The empirical grounding for labor hoarding is pretty solid.
    - kaffeemitsahne 11y ago
      It's like a spring/mass dragging across a rough surface: it stays behind until the tension gets too much, and then skips forward. You can find this effect in a lot of places.
  - drzaiusapelord 11y ago
    Not to mention politics. Its ugly to lose this many people and job creation and protection is often encouraged by the government via incentive programs. If HP opened an office in some state and got a shit-ton of tax incentive and federal job creation credits, well, those pay off for a while. After those expire then its safe to cut these people. Or use the threat of cuts to get more credits. If these negotiations fail, then a big cut happens. Big companies don't really operate by simple supply vs demand laws. They play a much more complex game and many large businesses have long figured that gaming the system is just as profitable as actually shipping product.
- devonkim 11y ago
  There's many reasons for layoffs besides the belief that employees are negative / insufficient value. For example, companies do lay-offs in smaller quantities simply because a high level business objective wasn't met and a division is going to be disbanded as a strategic decision. In HP's case, I'm pretty sure that HP management feels that these targeted employees work for divisions that management can't foresee sufficient profit to keep operating which has increasingly become based around service and support for the old Compaq lines of business. HP has tried desperately to break into higher margin enterprise software and services for at least two decades now with mixed results and after failing to increase their brand value on the hardware side to approach something like Apple (I looked at HP's on the book assets compared to their market cap a few years ago and they were worth less than if they liquidated according to their market cap). Buying VoodooPC a while ago is an example of trying to increase brand value by associating themselves with "high end" stuff with corresponding mark-ups. Organizational morale at HP has been pretty dire for at least a decade by now with few bright spots of news and a revolving door of leadership. I left HP in very early 2010 after a few years there when I was acquired in, but in hindsight I should have left probably the second I heard of the acquisition and cashed out what I could of my NQSOs / ISOs. I've been calling them the Walmart of tech years ago before these recent stories about Amazon showed up because unlike Amazon, the stories of poor pay, long hours, and consistently below-market compensation are very, very common at HP.
mc808 11y ago
> for the last 2 years Still solid gains over the last 2 years, but the chart forms a classic "head and shoulders" bearish pattern centered at the beginning of this year. I'd say there's a 50% chance that it will continue to fall.
rasz_pl 11y ago
>buy back stock using proceeds it worked for radioshack!
johnward 11y ago
That was basically the same plan Sam Palmisano put into place at IBM. I call it "cut your way to prosperity". Basically cutting cost and not growing revenue with a focus on manipulating earnings per share. It seems very short sighted to me but I'm no multi millionaire CEO shrugs. At least Rometty seems to have abandoned it.

by iofj 11y ago

wpietri 11y ago

Doing the math on this, they apparently believe that each one of those people is costing the company $108k per year, net. Given that HP's revenue per employee is ~$350k, I find those numbers simply unbelievable. And let's suppose for a second that HP is somehow right. How did they just notice that 10% of their employees are doing something totally worthless? On top of the 55,000 employees that they laid off in 2012? I don't understand how this isn't an admission of total management incompetence. There's also the classic MBA mistake of seeing employees as expenses rather than assets. HP has been investing in these people for years. What a waste to just fire them all. And this is surely damaging another valuable asset, organizational morale. That they couldn't figure out a single valuable thing to do with those assets is just sad.

dasil003 11y ago
The uncomfortable truth at this scale is that some employees are absolutely essential and some are just phoning it in collecting a paycheck. Ideally management would have visibility into where the performers were, but with this many layers of management it's very very difficult to see the forest for the trees. It's one thing to repurpose people when the trend lines are positive or at least flat, but in HP's case there is a real question mark about what growing sectors they can successfully move into. Certainly they still have the talent to do amazing things, but have the leadership with the deep visibility into the organization's inner workings and talent pool and the outward facing vision to actually pull off a reorg like that seems almost impossible.
- wpietri 11y ago
  If some employees are phoning it in, I think it's worth asking why. It's been a long time since I felt that way at a job, but for me it came out of shitty, disempowering, unrewarding environments. But even running with your argument, that the people laid off are slacking, I think it's an enormous failure that they let 30,000 of those people accumulate such that they were wasting $3 billion per year. Especially given their massive layoff a few years back. And if they've built an organization where it's difficult to tell where they're wasting $3 billion per year, I don't see how that's anything but an enormous indictment of the managers.
  - mahyarm 11y ago
    You work remotely, life is pretty low stress. Live in a cheap cost of living place, take care of the kids while the spouse is out working on their other job. Never get a raise in 6 years. That is why they phone it in.
    - FilterSweep 11y ago
      I find it hard to believe a matured company, rife with middle management, wouldn't have held those people "mailing it in," so to speak, accountable years ago. Whether they work onsite or remotely, some work is turned in. A handful may fall through the cracks, but it's just that, a handful. Not 30,000, even in a company much bigger.
      - rqebmm 11y ago
        what if the middle managers are phoning it in?
        raincom 11y ago
        Many at Cisco do:) But they are managing people, mananging some cost centers, etc. They are contributing in a way, but not for the next $X Billion innovation.
      - 11y ago
IndianAstronaut 11y ago
> There's also the classic MBA mistake of seeing employees as expenses rather than assets. Not to mention that more critical people will leave once they sniff layoffs coming.
- VLM 11y ago
  This is not exactly HPs first layoff. Its been a dying company for quite some time. There is no hope of a turnaround and has not been for some time. Everyone in the Venn diagram of willing to jump ship and able to jump ship, has already jumped. All you've got left is people unwilling to jump, unable to jump, or both. Those unwilling will continue to be unwilling for whatever reasons, if the last layoff round didn't snap them out, then this will also fail. Those unable to jump will continue to be unable.
  - Redoubts 11y ago
    How does a company like this die anyways? Does headcount just dwindle until they're nothing but a holding company or what?
yummyfajitas 11y ago
And let's suppose for a second that HP is somehow right. How did they just notice that 10% of their employees are doing something totally worthless? The keyword to search for in the economic literature is "labor hoarding". In short, companies tend to (by default) keep employees until well after they are no longer useful. Then some sort of a shock causes the company to shed the deadwood all at once. This is management incompetence, but it's exceedingly common. If you ever see a company (e.g. Netflix) which sheds employees regularly, that's a very good sign.
- mercer 11y ago
  Could you argue that in a broader sense this exact same thing happens not just on the company level, but on the level of entire economies? I recall reading a few articles on how recessions/depressions often have a way of shaking up industries to align (or rather, catch up) with new innovations/developments.
  - yummyfajitas 11y ago
    I imagine one could - certainly many companies which should die actually do die during a recession. Some structuralist theories are based on this. But this is just theory. The empirical grounding for labor hoarding is pretty solid.
  - kaffeemitsahne 11y ago
    It's like a spring/mass dragging across a rough surface: it stays behind until the tension gets too much, and then skips forward. You can find this effect in a lot of places.
- drzaiusapelord 11y ago
  Not to mention politics. Its ugly to lose this many people and job creation and protection is often encouraged by the government via incentive programs. If HP opened an office in some state and got a shit-ton of tax incentive and federal job creation credits, well, those pay off for a while. After those expire then its safe to cut these people. Or use the threat of cuts to get more credits. If these negotiations fail, then a big cut happens. Big companies don't really operate by simple supply vs demand laws. They play a much more complex game and many large businesses have long figured that gaming the system is just as profitable as actually shipping product.
devonkim 11y ago
There's many reasons for layoffs besides the belief that employees are negative / insufficient value. For example, companies do lay-offs in smaller quantities simply because a high level business objective wasn't met and a division is going to be disbanded as a strategic decision. In HP's case, I'm pretty sure that HP management feels that these targeted employees work for divisions that management can't foresee sufficient profit to keep operating which has increasingly become based around service and support for the old Compaq lines of business. HP has tried desperately to break into higher margin enterprise software and services for at least two decades now with mixed results and after failing to increase their brand value on the hardware side to approach something like Apple (I looked at HP's on the book assets compared to their market cap a few years ago and they were worth less than if they liquidated according to their market cap). Buying VoodooPC a while ago is an example of trying to increase brand value by associating themselves with "high end" stuff with corresponding mark-ups. Organizational morale at HP has been pretty dire for at least a decade by now with few bright spots of news and a revolving door of leadership. I left HP in very early 2010 after a few years there when I was acquired in, but in hindsight I should have left probably the second I heard of the acquisition and cashed out what I could of my NQSOs / ISOs. I've been calling them the Walmart of tech years ago before these recent stories about Amazon showed up because unlike Amazon, the stories of poor pay, long hours, and consistently below-market compensation are very, very common at HP.

mc808 11y ago

> for the last 2 years Still solid gains over the last 2 years, but the chart forms a classic "head and shoulders" bearish pattern centered at the beginning of this year. I'd say there's a 50% chance that it will continue to fall.

rasz_pl 11y ago

>buy back stock using proceeds it worked for radioshack!

johnward 11y ago

That was basically the same plan Sam Palmisano put into place at IBM. I call it "cut your way to prosperity". Basically cutting cost and not growing revenue with a focus on manipulating earnings per share. It seems very short sighted to me but I'm no multi millionaire CEO shrugs. At least Rometty seems to have abandoned it.