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HP's destructive cost-cutting
» Home : Blog : May 2010
An email arrived in my inbox at work yesterday:
Like many companies these days, HP uses a teleconferencing service so that people in disparate locations can have meetings on the phone. It's convenient and ubiquitous. I'm in Massachusetts, and regularly deal with people in San Diego, Vancouver, Utah, Brazil, and India. Being distributed like this is difficult, it requires real effort to stay coordinated. Having a central conferencing service that everyone can use is essential to making it work.
But now, in a cost-saving move, HP has decided to push us to use two different conferencing tools, depending on whether there are three people or four on the call. They estimate they can save $5 million per year by making this change.
There are so many things wrong with this:
Adding to the irony, this memo arrived within hours of an email from CEO Mark Hurd announcing our quarterly results, including net earnings of $2.2 billion for the quarter, up 28% from last year. That makes the supposed $5 million saved only .05% of the company's profits, pretty small change.
In fact, I suspect if I came up with a business plan for an idea that would earn the company $5 million per year, I would be told that's too small, not worth the effort of a large company like HP. And yet the telecomm group can impose an inconvenient policy change on the entire company to save only that amount, and is applauded for it.
This is a classic example of making a trade-off while only examining one of the potential costs. We can see where the phone money is being saved. But the change has a corresponding cost on the entire rest of the company. It's just not a cost you can easily estimate or measure.
It's easy to see that this will be a bad move for the company as a whole. It will add frustration for everyone to an already difficult job. Some number of calls, probably more than .05% of them, simply won't get made.
I probably sound like I'm making too big a deal out of this. After all, what's so difficult about dialing phone numbers? It bothers me because it's one more insult in a long stream of changes made to cut costs. Cutting costs is Mark Hurd's super-power, and he does it with zeal. From closing offices (and dictating that half the workers work from home) to penny-pinching IT infrastructure to 5% pay cuts to requiring that employees take vacation days during specified company shutdowns, HP employees are expected to cheerfully accept all manner of dictates designed to save money.
These policies do nothing to improve the mood among HP employees, and they do nothing to make HP products better. Every one of them is a trade off of the visible against the invisible, and the invisible that suffers is everything you want in a company: productivity, morale, loyalty, and innovation. It's hard enough to build great products, I don't need my employer, a giant profitable tech company, nickel-and-diming me to make it even harder.
I think there are three possible outcomes of this phone policy:
In the end, people will do what they have to do to get their jobs done, and the phone group won't see a savings. But there will be yet more ill-will among the employees as they live under tighter and tighter strictures.
I don't understand HP's obsession with costs. Tech companies, especially profitable ones, need to use their money to foster innovation that will allow them to compete. The focus should be, how can we make it easier to build great products, not how can we shave .05% of our profits from the phone budget. HP should be putting out press releases explaining how they spent "only $5 million per year" to improve collaboration among their workers.
HP today seems intent on running the company like people and products don't matter. It's destructive, and it's a shame.