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A Road to Renewal : HP Unit Looks Beyond Cuts to Embrace Change

August 06, 1995|MARTHA GROVES | TIMES STAFF WRITER

SANTA ROSA, Calif. — Talk about testing a manager's mettle. Three years ago, Hewlett-Packard Co.'s legendary, if obscure, Test & Measurement Organization lumped together some aging products for measuring radio and microwave frequencies and handed them to Duane Hartley without expecting much.

Like many other businesses in the recessionary early '90s, the company was deep into a campaign to shrink its payroll to cut costs and stay competitive. But it dawned on Hartley, a 33-year HP veteran who had started on the assembly line, that it wasn't much fun managing a downwardly mobile outfit with ho-hum prospects.

"So we decided we were going to grow the organization," he said. "We wanted to make it vibrant and robust."

Hartley, whose division is now prospering, can credit an epiphany that American business is finding it can ignore only at its peril: Cost cutting is not enough. Long-term success must come from revitalizing and reinvigorating operations.

A decade of slimming down, restructuring and re-engineering has left companies leaner but not necessarily richer, said Dwight Gertz, a Boston-based vice president with Mercer Management Consulting.

Corporations that extensively retrench have paid a steep price in anxious workers who are reluctant to take risks. Indeed, evidence is mounting that zealously pared-down companies generally continue to perform worse than their industry peers. Just look at CBS, Westinghouse, Unisys, A&P and Kmart--to name a few laggards.

As Gertz wrote in a recent book, "Grow to Be Great," "Corporate anorexia is not a sensible way to get healthy."

Having shed the fat, many companies now must seek ways to gear up and get growing again--or risk having to settle for a future of dwindling expectations and diminishing returns. Key to that, management experts say, will be identifying new markets and building the foundations necessary to take advantage of them. A crucial step is getting workers--discouraged by years of hunkering down--to embrace dramatically different ways of doing business and to acknowledge that change will be a constant.

Halfway through a five-year transformation effort, the Test & Measurement Organization, or TMO, as it is known within HP, is showing renewed verve. In HP's second quarter, the unit recorded the highest profitability within the company and tied with the more glamorous computer systems operation in growth of orders.

To effect their rebound, TMO managers immersed themselves in management books and held emotional meetings to talk about how their business had gone awry and what they could do to set it straight again. They booted obsolete products and brainstormed to devise new ones. A few brave managers became "early adopters," dabbling in cutting-edge techniques for managing change.

As managers' commitment to teamwork grew, they began adhering to a notion made popular by Dwight D. Eisenhower: "Plans are nothing; planning is everything."

Predictably, TMO's gain has not come without pain--notably among employees discomfited by rapid change. But other managers seeking clues about how to get their companies back on a growth track could learn a thing or two from TMO's process--developed for the most part without high-priced consultants.

*

The Test & Measurement Organization is where it all began for HP. Although by far the smallest of the four sectors that make up the $25-billion Silicon Valley giant, it nonetheless had 1994 sales of $2.7 billion--enough to qualify for inclusion on this year's Fortune 500 if it were a stand-alone company.

Years before Hewlett-Packard became a powerhouse in calculators, workstations and printers, its first product was an audio oscillator--invented by Bill Hewlett in the late 1930s and perfected in the now famous garage behind Dave Packard's Palo Alto house. The instrument represented the first practical, low-cost method of testing sound equipment. Walt Disney ordered eight of the machines for production of his animated film "Fantasia."

From there, TMO went on to develop a variety of products with banal-sounding but important roles--to test radio and microwave frequencies, to conduct spectrum analyses and to measure voltage. Companies used them to assess the accuracy of all sorts of electronic gear, radar, aircraft and satellites. And with defense and aerospace companies as their biggest customers, these mundane product lines flourished for nearly 50 years.

Then, in the late 1980s, the defense industry began to founder, and TMO's profits headed into a slide.

The toppling of the Berlin Wall and the end of the Cold War didn't, of course, go unnoticed by TMO managers. But those developments, momentous as they were, failed to hasten the sort of change that the onset of global peace--however shaky--should have dictated.

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