Mutual understanding and respect is the core of our successful business relationship lasting more than half a century. 

“Managing by walking around” means that to do the job right, personal communication is necessary to back up written instructions.  

Norman emphasized the importance of our offering more than one product because a single product rarely made a successful company. 

HP has a profit-sharing program that encourages teamwork and maintains that important link between employee effort and corporate success.  

It paid everyone a bonus, as a percentage of their base pay, should production exceeds certain levels. 

Grow from profit. Reinvest profit and not resort to long term borrowing. 

Control your cost to the extent that your clients could not get better service for anyone else at a better price. 

Offer more than one product because a single product rarely made a successful company. Concentrate on building a group of complementary products rather than become involved in a lot of unrelated things. 

I have enjoyed many pleasures as the result of my experiences as a rancher; I've also learned a thing or two.

Every season we would round up the cattle from the range and drive them to the corral. Along the way, we'd come to a gate; the trick was to get them through the gate and not stampede them. I found, after much trial and error, that applying steady gentle pressure from the rear worked best. Eventually, one would decide to pass through the gate; the rest would soon follow. Press them too hard, and they'd panic, scattering in all directions . Slack off entirely, and they'd just head back their old grazing spots. This insight was useful throughout my management career.

Our success depends in large part on giving the responsibility to the level where it can be exercised effectively, usually on the lowest possible level of the organization, the level nearest the customer.

We did not want to be a “me too” company merely copying products already in the market. A constant flow of good new products is the lifeblood of HP and essential to our growth. For a product to be useful must not only fill a need, it must be an economical and efficient solution to that need. The profit we expect to derive over the lifetime of a product should be at least 6 times greater than the cost of developing the product. 

Any organization, any group of people who have worked together for some time, develops a philosophy, a set of values, a series of traditions and customs. These, in total, are unique to the organization. So it is with Hewlett-Packard. 

We have a set of values— deeply held beliefs that guide us in meeting our objectives, in working with one another, and in dealing with customers, shareholders, and others. Our corporate objectives are built upon these values. The objectives serve as a day-to-day guide for decision making. 

To help us meet our objectives, we employ various plans and practices. It is the combination of these elements-our values, corporate objectives, plans and practices— that forms the HP Way and that is the subject of the chapters that follow.

THE FUNDAMENTAL BASIS for success in the operation of Hewlett-Packard is the job we do in satisfying the needs of our customers. We encourage every person in our organization to think continually about how his or her activities relate to the central purpose of serving our customers.

At HP, the customer satisfaction concept begins with the generation of new ideas and new technology from which we can develop useful, significant products.

These new ideas then form the basis for development of products that will meet latent needs of future importance to our customers. To be useful in an era of worldwide competition and rapid change, new products must be developed quickly and produced efficiently with manufacturing processes and techniques that assure quality and economy.

Providing innovative, reliable products is a key element in satisfying customer needs, but there are other important elements as well. At HP we offer many different products to many different customers, and it's imperative that the products recommended to a specific customer are those that will best fulfill the customer's overall, long-term needs. This requires that our field salespeople— operating individually, in teams, or with other companies that add value to HP products and ser-vices—work closely with customers to determine the most appropriate, effective solutions to their problems.

When a customer buys a product from HP, the customer should expect not only that the product performs well the day it's received but that it be backed with the best possible service so that the customer can obtain long, trouble-free operation.

For many years HP's marketing and sales activities were headed by Noel Eldred, vice president of marketing. Noel, a key member of our top-management team, was a strong advocate for helping the customer, so much so that he wanted our sales engineers to take the customer's side in any disputes with the company. "We don't want you blindly agreeing with us," he'd tell them. "We want you to stick up for the customer. After all, we're not selling hardware; we're selling solutions to customer problems."

The essence of customer satisfaction at HP is our commitment to quality. Meticulous attention to detail and every step in the manufacturing process must be done as carefully as possible, not as quickly as possible. 

IF AN ORGANIZATION IS to maximize its efficiency and success, a number of requirements must be met.

One is that the most capable people available should be selected for each assignment within the organization.

Especially in a technical business where the rate of progress is rapid, a continuing program of education must be undertaken and maintained. Techniques that are relevant today will be outdated in the future, and every person in the organization must be continually looking for new and better ways to do his or her work.

Another requirement is that a high degree of enthusiasm should be encouraged at all levels; in particular, the people in high management positions must not only be enthusiastic themselves, they must be able to engender enthusiasm among their associates. There can be no place for halfhearted interest or halfhearted effort.

From the beginning, Bill Hewlett and I have had a strong belief in people. We believe that people want to do a good job and that it is important for them to enjoy their work at Hewlett-Packard. We try to make it sible for our people to feel a real sense of accomp ment in their work.

Closely coupled with this is our strong belief individuals be treated with consideration and res and that their achievements be recognized.

We feel our objectives can best be achieved by people who understand and support them and who are allowed flexibility in working toward common goals in ways that they help determine are best for their operation and their organization.

When we were small and insignificant and had to hire the best people we could find, we had to train them and then hope they would work out. We wanted our people to share our goals of making a profit and a con-tribution. We in turn felt a responsibility to provide them with opportunity and job security to the best of our ability. 

Thus, we made an early and important decision: We did not want to be a "hire and fire" —a company that would seek large, short-term contracts, employ a great many people for the duration of the contract, and at its completion let those people go. This type of operation is often the quickest and most efficient way to get a big job accomplished. But Bill and I didn't want to operate that way. We wanted to be in business for the long haul, to have a company built around a stable and dedicated workforce.

We were very close to our employees. We understood their jobs and shared much of their lives with them. We also were learning which of our people had management potential, although sometimes we learned the hard way.

Once we promoted a man, a good worker, to be the manager of our machine shop. A few days later he came to see me. He said he was having a tough time managing and wanted me to come out to the shop and tell his people that he was their boss. "If I have to do that," I said, "you don't deserve to be their boss." 

The underlying principle of HP's personnel policies became the concept of sharing-sharing the responsibilities for defining and meeting goals, sharing in company ownership through stock purchase plans, sharing in profits, sharing the opportunities for personal and professional development, and even sharing the burdens created by occasional downturns in business.

Our employee benefit programs reflect this concept of sharing. The programs take various forms around the world, each country having its own set of benefits tailored to its own laws and traditions. 

To some, education means unnecessary sacrifice; to others it means the prospect of opportunity for increased contribution and greater personal satisfaction. Fortunately, the latter view has prevailed at Hewlett-Packard. 

The vast majority of our people have recognized the value of education and self-develop-ment, not only in enhancing their careers but also in making meaningful contributions to the company's progress.

So going all the way back to the beginning of the company, Bill and I have placed great faith and trust in HP people. We expect them to be open and honest in their dealings with others, and we trust they will readily accept responsibility.

I learned, early in my career, of some of the problems that can be caused by a company's lack of trust in its people.

Perhaps the most widely publicized example of trust at

HP is the company's program of flexible work hours. It was initiated at our plant in Böblingen, Germany, in 1967, and we were the first company in the United States to use it. It is now in wide use throughout HP and throughout industry. Under the HP program, an individual may come to work very early in the morning or perhaps as late as 9:00 A.M., then leave after working a standard number of hours. It is not appropriate for all jobs, but certainly for most.

To my mind, flextime is the essence of respect for and trust in people. It says that we both appreciate that our people have busy personal lives and that we trust them to devise, with their supervisor and work group, a schedule that is personally convenient yet fair to others.

Tolerance for the differing needs of individuals is another element of the HP Way. On occasion, situations arise in which people have personal problems that temporarily affect their performance and attitude, and it is important that people in these circumstances be treated with sensitivity and understanding while the problems are being resolved.

Many companies have a policy stating that once employees leave the company, they are not eligible for reemployment. Over the years we have had a number of people leave because opportunities seemed greater else-where. We've always taken the view that as long as they have not worked for a direct competitor, and if they have a good work record, they are welcomed back. They know the company, need no retraining, and usually are happier and better motivated for having had the additional experience. Several years ago one of our senior executives left HP for what he considered a greater opportunity. He later returned, and although he had been gone for some years, he quickly resumed his career with us and earned increasing management responsibility until his retirement.

Some people have left HP and have successfully started their own companies. There are at least a dozen of these entrepreneurs and their companies now employ more than forty thousand people. Are we upset that they left us? On the contrary, Bill and I understand and respect their entrepreneurial spirit, and we are pleased and proud that they once worked with us and have done so well. We're also flattered that in building their com-panies, they have adopted many of the management principles and practices embodied in the HP Way.

AN ORGANIZATIONAL STRUCTURE, once created, should be flexible and responsive to the developing needs of the organization and changes in the market-place.

As the company continued its steady growth and began to diver-sify, Bill and I realized we would have to consider some sort of decentralized strategy in order to retain our emphasis on individual responsibility and achievement.

As the company became more decentralized, our objectives and policies did not change in any significant way. At that time we were still largely in the business of general-purpose electronic instrumentation, and our growth was derived almost entirely from new products.

We continued to focus our efforts on those technical areas where we thought we could make a good contribution, and we were not taking on any new projects just for the sake of growing.

We consider ourselves one single company, with the flexibility of a small company and the strengths of a large one— the ability to draw on corporate resources and services; shared standards, val-ues, and culture; common goals and objectives; and a single worldwide identity.

NO OPERATING POLICY has contributed more to Hewlett-Packard's success than the policy of "management by objective." Although the term is relatively new to the lexicon of business, management by objective has been a fundamental part of HP's operating philosophy since the very early days of the company.

MBO, as it is frequently called, is the antithesis of management by control. The latter refers to a tightly controlled system of management of the military type, where people are assigned-and expected to do— specific jobs, precisely as they are told and without the need to know much about the overall objectives of the organization. Management by objective, on the other hand, refers to a system in which overall objectives are clearly stated and agreed upon, and which gives people the flexibility to work toward those goals in ways they determine best for their own areas of responsibility. 

The concept of people working together under common objectives and in an atmosphere of individual freedom is nothing new. An organization offering opportunity for individual initiative performs better than organizations operating with corporate directives and tight controls.

Managers at all levels must be sure that their people clearly understand the overall objectives and goals of the company, as well as the specific goals of their particular division or department. Thus, managers have a strong obligation to foster good communication and mutual understand-ing. Conversely, their people must take sufficient interest in their work to want to plan it, to propose new solutions to old problems, and to jump in when they have something to contribute.

Drucker says managers "will have to learn to manage in situations where you don't have command authority, where you are neither controlled nor control-ling." He later points out that "in the traditional orga-nization-the organization of the last 100 years-the skeleton, or internal structure, was a combination of rank and power. In the emerging organization, it has to be mutual understanding and responsibility." Mutual understanding and responsibility have been, for many years, key characteristics of the HP style of management.

I do argue strongly that the best job can be done when the manager has a genuine and thorough understanding of the work. I don't see how managers can even understand what standards to observe, what performance to require, and how to measure results unless they understand in some detail the specific nature of the work they are trying to supervise.

We have a technique at HP for helping managers and supervisors know their people and understand the work their people are doing, while at the same time making themselves more visible and accessible to their people.

It's called MBWA-"management by walking around.

The term, a good one, was coined many years ago by one of our managers, though the technique itself goes back to my days at General Electric.

Linked with MBWA is another important management practice at HP. It is called the open door policy and it is aimed at building mutual trust and understanding, creating an environment in which people feel free to express their ideas, opinions, problems, and concerns.  

The open door encourages employees, should they have problems of either a personal or job-related nature, to discuss these with an appropriate manager. In the vast majority of cases, this will be the employee's immediate supervisor. But, should the employee be uncomfortable talking with the supervisor, he or she can go up the line to discuss misunderstandings or any other problems with a higher-level manager. It must be clearly understood by supervisors and managers that people using the open door are not to be subjected to reprisals or to any other adverse consequences.

Like all large companies, HP has organization charts as providing a general guideline to the structure of an HP organization, whether it be a division, a group, or the corporation itself. In no way do charts dictate the channels of communication used by HP people. We want our people to communicate with one another in a simple and direct way, guided by common sense rather than by lines and boxes on a chart.

It's important that individuals have their performance evaluated on a regular basis. HP managers make good use of coffee talks and other informal employee gatherings. Nothing beats personal, two-way communication for fostering cooperation and teamwork and for building an attitude of trust and understanding among employees. 

An important responsibility of managers is the selection and training of their potential successors. Management succession is especially critical at the upper levels of an organization, where a manager may be responsible for a wide scope of complex activities involving the expenditure of many millions of dollars and the efforts of many thousands of people.

During the early years of Hewlett-Packard, as with any small company, we didn't give much thought to management succession. But as the company grew, the selection of the best-qualified person to fill a specific position became much more challenging. The growing size and diversity of HP's operations led to a similar growth in management positions and made it important that we develop an effective management selection process.

The process has several elements, but its roots are in process.

The process has several elements, but its roots are in our long-established policy of management by objective. Under the MBO principle, managers at all levels are given an opportunity to show their abilities-to develop plans, to make and evaluate decisions, and to provide leadership for their people. Managers often have many responsibilities, and perhaps this is no better illustrated than in the job of managing an HP division or business unit. These managers, under MBO and our decentralized structure, are given full product line responsability and P&L accountability. 

On a regular basis the CEO, now Lew Platt, gathers his top managers for a lengthy review of group management perfor-mance. They discuss each group's profit generation, asset utilization, revenue growth, product quality, customer satisfaction, personnel issues, and other matters for which the group manager is responsible.

I have always felt that the most successful companies have a practice of promoting from within.

Best practices. 

Get our managers together at least once a year to discuss policies and problems, to exchange views and to make plans for the future. 

Despite growth try to maintain a small-company atmosphere and to have our key managers throughly familiar with our management style an corporate objectives. 

We stress to our people that each of these communities must be better for our presence. This means being sensitive to the needs and interests of the community; it means applying the highest standards of honesty and integrity to all our relationships with individuals and groups; it means enhancing and protecting the physical environment and building attractive plants and offices of which the community can be proud; it means contributing talent, energy, time, and financial support to community projects.

It also is important that the prospective communit want the company rather than simply putting up with its presence. The community must be convinced that its new neighbor, in addition to providing jobs, will be a good corporate citizen and a catalyst for community betterment.