© 2004 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice Energising through change – An opportunity for HR Mike Taylor Director, UK and Ireland Human Resources

2 Agenda Change management strategy The HP/Compaq Merger – a change story HP’s People Strategy Stabilize: Building the new HP foundation Mobilize: Creating a high performance workplace Energize: Creating the Best Place to Work Discussion

3 “By any objective measure, the amount of significant, often traumatic, change in organizations has grown tremendously in the last 2 decades. Although some people predict that most of the reengineering, restrategising, mergers, downsizing, quality efforts and cultural renewal projects will soon disappear, I think that is highly unlikely." John Kotter – Leading Change

4 Reasons why change initiatives fail 1. “Allowing too much complacency” – Not creating a burning platform for change 2. “Failing to create a sufficiently powerful guiding coalition – not driving the change from the top” 3. “Underestimating the power of vision” 4. “Failing to create short term wins” 5. “Under communicating the vision” 6. “Neglecting to anchor changes firmly in the corporate culture” 7. “Permitting obstacles to block the new vision” 8. “Declaring victory too soon”

5 Group discussion What in the merger story needs clarification? What evidence is there of the change initiative avoiding Kotter’s pitfalls – or falling into them? What lessons can you learn for your own change initiatives?

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7 Merger proposed September 2001 Merger approved May 2002 Merger Finalised in the UK&I Feb 2003

8 Change is an opportunity that you can influence and if then managed correctly, it will energize an organization.

9 Planning for change A “clean room” was established in September 2001 to plan for the merger This consisted of a team of dedicated employees from both pre merger companies Legal training to comply with competition law Over 500 people producing over 1 million hours of work to prepare for the merger

10 the new hp On day one of the new company 30,000 employees of the new HP were trained and ready to serve customers The new hp.com website was available in 21 languages in 72 countries Over 2 million hits in the first two weeks Clear product roadmaps and transition plans were delivered

11 IT infrastructure 150,000 employees could log on to their respective networks and accounts from either pre-merger Compaq/HP sites and send to all pre-merger employees All employees could traverse pre-merger cross-company networks to view each company’s pre-merger employee portal The hp portal became our primary means of communicating merger related information receiving over 2 million hits on day one

12 Organization culture Research was done in the clean room to establish current organizational culture in the pre-merger companies A cultural framework for the new company was created Mechanisms to communicate the new framework included: oThe HP portal oPoster campaigns oE - learning oFace to face briefings oFast start workshops

13 It began in a garage and a pie shop We have a long standing culture that makes HP a great place to work. We aim to be the most trusted partner in the industry. HP values We act with speed and agility We are passionate about customers We deliver meaningful innovation We have trust and respect for individuals We achieve our results through teamwork We conduct our business with uncompromising integrity We perform at a high level of achievement and contribution

14 Fast start workshops Fast start sessions were one to two day business meetings for newly appointed intact teams. They took place within 30 days of the team’s appointment They were a communication vehicle for transmitting, interpreting, and incorporating information about the New HP strategy, organization model, brand, culture, and transition plan. Fast start sessions are intended to accelerate leadership readiness.

15 The need for a change management strategy Managing the cultural change after the merger between HP and Compaq was essential for the success of the merger The challenge for HR was to develop a strategy to maintain and surpass the pre-merger standards of both companies and to manage this cultural change process HP’s People Strategy enabled us: To speed up and smooth the process of change To move through the initial change period To set a culture of high performance right from the start

16 The HP People Strategy is aligned to our corporate objectives and values, aiming to maintain employee commitment, especially in this time of change.

17 HP’s People Strategy Best Place to Work Energize High Performance Workplace Mobilize New HP Foundation Stabilize

18 Building the new HP foundation Build New HP Foundation Stabilize

19 Building the New HP Foundation organization implementation & effectiveness org design & selection MRU Fast Start culture cornerstones workforce reduction total rewards & benefits design – job titles – job levels – pay/bonus mix – structures benefits – retirement – time-off – health

20 Developing a High Performance Workplace High Performance Workplace Mobilize New HP Foundation Stabilize

21 Developing a High Performance Workplace The high performance culture accelerates future growth by: Maximizing organizational/individual productivity and capability Aligning individual performance with company and business objectives Using rewards as the motivator Develop people through effective coaching, performance feedback and development planning

22 Accelerating a High-Performance Workplace: Integrating the “WHAT” and “HOW” balanced scorecard, HP values and supporting behaviors

23 Creating the Best Place to Work Best Place to Work Energize High Performance Workplace Mobilize New HP Foundation Stabilize

24 Creating the Best Place to Work HP’s new culture is guided by a core set of ethics that: Drives progressive work-life programs Listens to its employees and acts on what we hear Provides all employees with tools, resources and a supportive environment that values diversity and inclusion

25 Creating the Best Place to Work Work/life balance at HP HP’s flexible work arrangements provide employees with alternatives to: Working the traditional five day a week work schedule (Monday-Friday) and/or Working solely from an HP facility or office location

26 Creating the Best Place to Work HP listens to its employees and act on what we hear: The annual “Voice of the Workforce” survey evaluates employee commitment, identifies areas for improvement and issues that employees consider important. Based on the results of this survey, managers will develop action plans to address areas of improvement. HP’s Open Door Policy is based on the value of trust and respect for the individual

27 Progress report: Revenue and EPS

28 Group discussion What in the merger story needs clarification? What evidence is there of the change initiative avoiding Kotter’s pitfalls – or falling into them? What lessons can you learn for your own change initiatives?

29 Lessons learned Prepare for the change as well as you possibly can Communicate concisely and frequently Listen to your employees Implement as quickly as you can Don’t over complicate Focus on your customers Accept that it won’t be perfect