Hewlett-Packard Reaches A Cultural CrossroadsHewlett-Packard Reaches A Cultural Crossroads

Are the "HP Way" and Carly Fiorina's way headed in the same direction? The answer will be critical to Hewlett-Packard's ability to execute on its strategy and pull out of its slump.

The corporate culture created by co-founders William Hewlett and David Packard set the standard for the modern work environment long before dot-coms made casual-but-intense the way to succeed in Silicon Valley. Back in the 1940s, HP established an office environment in which most employees worked in open cubicles and managers kept their doors open as a way of encouraging communication and idea-sharing. Packard made famous a practice he called "management by walking around"--impromptu get-togethers with employees that kept him in close touch with the everyday business.

That influence is still felt. A typical HP office building has a vast open area, in some cases the size of a football field, with dozens of worker cubicles. Even the offices of Hewlett and Packard in HP's first headquarters still exist very much as they did back in 1958 when the building was constructed. The original décor remains, with family photos and personal mementos on their desks and walls. Packard died in 1996, Hewlett in January of this year.

Fiorina says HP's culture is both the company's greatest strength and weakness. "It's a strength because it binds many of our customers and our partners to this company," she says. "It is a weakness when it causes people to get frozen looking into the rearview mirror instead of forward at the oncoming cars."

One CIO who visited HP last year was impressed with the personal influence Fiorina had on the people he met. "She clearly had a major impact on what they were doing and why they were doing it," says the CIO, who requested anonymity because he's now doing business with HP. Yet recent layoffs and Fiorina's push to hold the company's engineering-driven culture more accountable appears to be taking a toll on morale. "Something has happened from an employee perspective that's less attractive," he says.

The HP culture has been heavily influenced by the company's engineering heritage. "Invent" is the company slogan. The challenge is keeping the edge in engineering and innovation while making HP employees more adaptable and responsive.

To do that, Fiorina has begun to tie compensation to improvements in customer-approval ratings. To better develop leadership skills, the company has instituted the concept of 360-degree feedback into its review process. Beginning in the fall, pay for the company's top managers will reflect input from internal employee surveys.

Fiorina will be the first to admit that such fundamental changes don't come easy. But don't expect her to ease up. "We're making good progress," she says, but "I think we have a lot of work left to do."