50 Lessons From HP’s Company Culture
I recently finished reading Bill and Dave, a biography about the founders of HP, Bill Hewlett and Dave Packard. I’d like to share some of the lessons learned from it that resonated with me. As Coinbase continues growing (we’re now 1,000+ people including full time and contractors, across 7 offices), I’ve been thinking about how to shape the culture. Communicating a set of cultural norms and values is an important way to do this.
Today, most people think of HP as a stodgy old company, but it was the Google of its day. It had an amazing run of repeatable innovation from 1939 through the 1980’s or so, growing to $100B+ revenue and 100k+ employees. It changed workplace culture around the world. In Silicon Valley, you have HP to thank for flexible work hours, casual dress codes, employee stock options, and the idea of “management by walking around”. Most companies hit on one big idea, and are never able to make innovation repeatable.
HP is a great case study in how to build a string of successful products and create repeatable innovation across multiple business units.
The founders retired in the late 1980’s. After that, a string of CEOs came in to lead the company. The company continued to grow but seemed to lose its ability to reliably create new innovative products. History is still being written, but it appears to have stagnated. Therefore, HP is also a cautionary tale of how a company can become so dependent on a founder that it doesn’t survive into the next generation.
You can think of the tiers of business outcomes (by order of difficulty) as:
- Create a successful product
- Create a series of successful products
- Create a company that produces successful products for multiple generations (after founders have retired or passed away)
Apple is going through it’s own journey today to see if it can accomplish #3.
It’s perhaps worth asking the question, why does it matter if a single company lasts multiple generations? If new companies come to take its place, then the world continues improving. This is true, and it doesn’t mean any one company needs to last forever. But if you believe (as I do) that technology is the most important force improving the world today, then we can rephrase the question as “how do we create a culture and organize people and resources toward continuously improving the world with technology?” HP offers some ideas to help make that happen.
Standard caveat: business culture has continued to evolve in many ways since HP’s heyday. The goal here is not to say HP was perfect, but to extract any historical lessons that could be valuable.
Here are some of the lessons in the book:
- The best possible company management is one that combines a sense of corporate greatness and destiny with empathy for and fidelity to the average employee
- Set out to build a company and make a contribution, not an empire and a fortune.
- Never be afraid of abandoning one idea, no matter how much time you’ve invested, if a better one comes along.
- Happiness and success comes not from wealth but in the freedom to be yourself.
- A CEO should look back only strategically, never with nostalgia. What matters is what’s next.
- Price to customer desire. If that doesn’t offer an adequate profit margin, then don’t offer the product. If it exceeds standard margins, use the difference to finance future innovation.
- Take care of your smallest clients, they may one day be your biggest.
- A company with multiple product lines enjoys a number of advantages, including greater brand recognition, greater strategic flexibility, customer loyalty, and less vulnerability to attacks from competitors.
- An industry can never reach its full potential until it settles upon standards.
- The job of a manager is to support his or her staff, not vice versa — and that begins by being among them.
- Open door policy: a true open door policy goes all the way to the top, but in return requires the employee to pass through every door in between.
- A great company entrusts all of it people from top to bottom, to do the work that they are assigned, to take responsibility for their actions, and to speak for and represent the company as if they are the owners, which they are, and the founders themselves.
- Don’t punish employees for having initiative, even if it doesn’t fit standard procedures.
- Don’t punish employees for having been put in a position beyond their abilities. Relocate them quietly and diplomatically.
- Investing in new product development and expanding the product catalog are the most difficult things to do in hard times, and also among the most important.
- The biggest competitive advantage is to do the right thing at the worst times.
- A great corporate culture is a fabric of rules, experiences, myths and legends, relationships, and rituals as complex as any real family, and just as difficult to describe to an outsider.
- Maintain your personal networks. Never lose track of anyone you may want to one day hire.
- Company picnics: smart companies reward the families of their employees for the sacrifices that they to make for the company. These are also occasions for senior management to humanize itself by serving their subordinates.
- Institutionalized times when employees can step away from their normal work personas, relax, and free their imaginations.
- No matter how appealing a new idea, if it is not within your core competencies do not pursue it.
- Introducing products that do not yet exist (vaporware) is a betrayal both of customers and the company’s own values.
- Never take on an entrenched market or competitor unless you can make a decisive contribution.
- From the HP Corporate Objectives: Recognize that profit is the best single measure of a company’s contributions to society and the ultimate source of corporate strength. We should attempt to achieve the maximum possible profit consistent with our other objectives.
- In high tech especially, it is vital to be revolutionary, but dangerous to be utopian.
- A company is not just a business, but a philosophy, a set of values, a series of traditions and customs. It is the deeply held beliefs that guide a company in meeting its objectives.
- Always try to fund growth on profits. Long-term debt is a dangerous game. Taking on long-term debt mean serving two masters, customers and lenders, whose interest may not be compatible.
- Over the long-term the interconnection between company products can be as valuable as the products themselves.
- Senior management hesitation should never be the reason for the delay of an important new product or strategy that already has the support of the rest of the company.
- No matter how thrilling, popular, or complete a new product development project, if it isn’t going to succeed, or doesn’t fit the business model, kill it, even if it is at the cost of respect, key talent, and employee morale.
- If it doesn’t impact daily operations of the company, be prepared to turn a blind eye to side projects and skunkworks. If they work, profess ignorance and give credit to the mavericks.
- Great companies look for the opportunities that might lead them to success, not weaknesses that might preclude them from success.
- Eccentric, but talented, people may require atypical, but demanding, employee arrangements.
- One revolution at a time. If you expect customer to accept a radically new technology, don’t demand that they change their behavior as well.
- As long as it is for a good cause, and legal, a certain amount of employees subterfuge is acceptable and should be ignored.
- At the moment of your greatest victory, you should be preparing for the next battle.
- A company that honors entrepreneurs, even if it means losing talent, is more likely to keep such people, or see them return some day, or turn them into allies, than one that threatens and punishes those in its ranks.
- Entrusting employees to set their own schedule has a minimal impact on operation, but an immense impact upon employee morale, loyalty, and productivity.
- The highest level of corporate leadership moves to symbolic management. That is, it consciously chooses acts for their theatrical impact, and as models of behavior for others, even future generations, to emulate.
- Nostalgia for past success can lead you to preserve current failure.
- The lunch table: Institutionalize regular contact between senior management and regular employees, without the presence of intermediate supervisors and managers.
- Regularly survey employees to make sure that understanding, not just information, is being conveyed up and down through the organization.
- Enthusiastically cultivate new ideas as they surface throughout the company. Only later, rigorously challenge their value. This will foster an enduring climate of innovation in the company, yet protect it from pursuing too many dead ends.
- Creativity is an an area in which some people have a tremendous advantage, since they have an endearing habit of always questioning the past wisdom and authority. They say to themselves that there must be a better way. Ninety-nine times out of a hundred, they discover that the existing traditional way is best. But it is that 1% that counts. That is how progress is made.
- Take advantage of slow periods to give back to employees time that wouldn’t be used anyway, and let them use their imagination to fill it productively.
- When the company makes a mistake, admit it immediately and make full restitution. It may be the only way to retain loyal employees.
- A company is not what it makes, but what it is. The only enduring factor is its core philosophy. Almost everything else is expendable.
- Innovation must never be allowed to take on a life of its own. Rather, innovation must always be disciplined by the marketplace. This is especially true in a company dedicated to innovation.
- A true open door policy extends beyond the CEO to the directors and the chairman. An employee who has exhausted all other outlets should feel empowered to call directly on the board and receive a fair hearing.
- Talented, loyal senior executives who have given years of good service to the company should not be stigmatized for failure, but allowed to transfer or retire with dignity. In many cases, they will have considerable contributions to make to both the company and to society.