Walmart and HP: Founded on People Power

How were the top companies of the 1980s so successful? For HP and Walmart, they focused on their employees. We continue our Leadership Hall of Fame series, a year-long look at the top business books and authors, with an excerpt from In Search of Excellence (1982) by Tom Peters and Robert H. Waterman, Jr.

In Search of ExcellenceAlthough most top managements assert that their companies care for their people, the excellent companies are distinguished by the intensity and pervasiveness of this concern. The only way to describe it adequately is through example.

HP

In one study, eighteen out of twenty HP executives interviewed spontaneously claimed that the success of their company depends on the company's people oriented philosophy. It's called "the HP Way." Here's how founder Bill Hewlett describes it:

I feel that in general terms it is the policies and actions that flow from the belief that men and women want to do a good job, a creative job, and that if they are provided with the proper environment they will do so. It is the tradition of treating every individual with consideration and respect and recognizing personal achievements. This sounds almost trite, but Dave (co-founder Packard) and I honestly believe in this philosophy…. Many years ago we did away with time clocks, and more recently we introduced the flexible work hours program. Again, this is meant to be an expression of trust and confidence in people as well as providing them with an opportunity to adjust their work schedules to their personal lives…. Many new HP people as well as visitors often note and comment to us about another HP way—that is our informality, and our being on a first name basis. I could cite other examples, but the problem is that none by themselves really catches the essence of what the HP Way is all about. You can't describe it in numbers and statistics.

The people orientation at HP started early. In the 1940s Hewlett and Packard decided "not to be a hire and fire company." That was a courageous decision in those times, when the electronics business was almost entirely government-supported. Later, HP's collective mettle was to be tested when business was severely down during the 1970 recession. Rather than lay people off, Hewlett, Packard, and everyone else in the organization took a 10 percent cut in pay. Everyone worked 10 percent fewer hours. And HP successfully weathered the recession without having to sacrifice full employment.

The people philosophy at HP not only began early on but is also self-renewing. The corporate objectives were just rewritten and republished for all the employees, including a restatement of corporate philosophy. The very first sentence reads: "The achievements of an organization are the result of the combined efforts of each individual…" And a few sentences later HP reinforces its commitment to innovative people, a philosophy that has been a driving force in the organization's success. "First, there should be highly capable, innovative people throughout the organization…Second, the organization should have objectives and leadership which generate enthusiasm at all levels. People in important management positions should no only be enthusiastic themselves, they should be selected for their ability to engender enthusiasm among the associates." The introduction to the revised corporate objective statement concludes: "Hewlett-Packard [should not] have a tight, military-type organization, but rather…give people the freedom to work toward [overall objectives] in ways they determine best for their own areas of responsibility."

The faith that HP has in its people is conspicuously in evidence in the corporate "open lab stock" policy that a few of our students encountered in the Santa Rosa division. The lab stock area is where the electrical and mechanical components are kept. The open lab stock policy means that not only do the engineers have free access to this equipment, but they are actually encouraged to take it home for their personal use! The ideas is that whether or not what the engineers are doing with the equipment is directly related to the project they are working on, by fooling around with the equipment at work or at home, they will learn—and so reinforce the company's commitment to innovation. Legend has it that Bill Hewlett visited a plant on a Saturday and found the lab stock area locked. He immediately went down to maintenance, grabbed a bolt cutter, and proceeded to cut the padlock off the lab stock door. He left a note that was found on Monday morning: "Don't ever lock this door again. Thanks, Bill."

The same language pervaded a conversation with a twenty-four-year-old engineer, on the scene for a barely more than a year. Commenting on some problems with a new personnel procedure, he said: "I'm not sure Bill and Dave would have done it that way." It's truly remarkable to find the value set stamped in so quickly, and with such clarity. The young man went on to describe HP's dedication to "getting on with it," the need to be involved with successful new-product introductions in order to get ahead, the litany of succeeding by a record of hard accomplishments rather than paper-pushing skills, the ability to talk to anyone, anywhere. He talks of his division's general manager and senior officers as though they were close friends and he were their only employee. He rambles on about MBWA. The discussion drifts to such publicly touted communication devices as the "coffee klatch," where informal problem solving (all hands attending) takes place weekly. The PR hype turns out to be justified.

In short, the most extraordinary trait at HP is uniformity of commitment, the consistency of approach and attitude. Wherever you go in the HP empire, you find people talking product quality, feeling proud of their division's achievements in that area. HP people at all levels show boundless energy and enthusiasm, so much so that many of our colleagues, after a chance encounter with an HP executive, engineer, or line work, ask: "Is this guy for real?" And then they meet more, and invariably their skepticism, no matter how hard they try to keep it, begins to fade. We ourselves tried to remain sober, not to become fans. But it proved impossible.

Wal-Mart

Wal-Mart, with over 26,000 employees, is now the number four retailer in the United States. During the 1902, growth took the company from $45 million in sales to $1.6 billion, from 18 stores to 330. Sam Walton, or "Mr. Sam," as he is called in the company, is the driving force behind this success, and Walton, quite simply, cares about his employees. In fact, almost all his managers, at his insistence, wear buttons that say, "We Care About Our People."

Walton learned the peopled business at J. C. Penney. Like Penney's, his people are referred to as "associates," not employees. And he listens to them. "The key is to get out into the store and listen to what the associates have to say," he says. "It's terribly important for everyone to get involved. Our best ideas come from clerks and stockboys." Walton stories have become legends. According to The Wall Street Journal: "Mr. Walton couldn't sleep a few weeks back. He got up and bought four dozen donuts at an all night bakery. At 2:30 a.m., he took them to a distribution center and chatted for a while with workers from the shipping docks. As a result he discovered that two more shower stalls were needed at that location." Again, the astonishing point is not the story per se: any small business person could relate a host of similar tales. The surprising news is that top executive still exhibits such a bone-deep form of concern for his people in a $2 billion enterprise.

The message that down-the-line people count is mirrored in every activity. The executive offices are virtually empty. Headquarters resemble a warehouse. The reason is that Walton's managers spend most of their time out in the field in Wal-Mart's eleven state service areas. And what are they doing? "Leading local cheerleading squads at new store openings, scouting out competing K mart stores, and conducting soul-searching sessions with the employees." Walton himself visits every store every year (330 now, remember) as he has done since 1962.

Everyone at Wal-Mart feels like a winner. The regular management meetings start at 7:30 a.m. on Saturday. The buyer of the month receives a plaque. There are "honor roll" stores, every week. And every the "SWAT" team that swoops down to remodel stores testifies to jobs well done. Mr. Sam stands up and yells, "Who's number one?" And everyone, of course, yells back "Wal-Mart!"

So, it's intense rah-rah, and yes, it's hokum, and—like so many other situations we see—it's fun. As The Wall Street Journal reports: "Mr. Walton seems to have the most fun. Not long ago he flew his aircraft to Mt. Pleasant, Texas, and parked the pane with instructions to the cop=pilot to meet him 100 or so miles down the road. He then flagged a Wal-Mart truck, and rode the rest of the way to 'Chat with the driver—it seemed like so much fun.'"

The theme of fun in business runs through a great deal of the excellent companies research. The leaders and managers like what they do and they get enthusiastic about it. Or, as Howard Head said in a recent speech, "It seems to me you have to be personally associated with what you do. I just love design. If it weren't fun, I wouldn't do it."

Common Themes

As we step back from the analysis of people and productivity, we find a number of strikingly similar themes running through the excellent companies data. First is language. The language in people-oriented institutions has a common flavor. We have seen it happen with some of our clients. Once they start talking the philosophy, they may start living it, even if, initially, the words have no meaning. For example, we doubt that "the HP Way" meant very much to anyone in Hewlett-Packard when the language was first introduced. As time went by, we suspect that the phrase took on deeper and richer meanings in ways that no one would have suspected—not even Hewlett or Packard.

Another of the more striking characteristics of the excellent companies is the apparent absence of a rigidly followed chain of command. Of course, the chain of command does exist for big decisions, but it is not used much for day-to-day communication. For information exchange, top management is in regular contact with employees at the lowest levels (and with customers), everyone is typically on a first-name basis.

We see important evidences of informality in many other traits. For example, at the excellent companies the physical configuration of facilities is different. Informality is usually delineated by Spartan settings, open doors, fewer walls, and fewer offices. It is hard to imagine a free-flowing exchange of information taking place in the palatial, formal, expensively decorated suites that mark so many corporate offices.

Reprinted by permission from In Search of Excellence: Lessons From America's Best Run Companies by Tom Peters and Robert H. Waterman, Jr. (HarperCollins).

Read more about In Search of Excellence or our Leadership Hall of Fame.

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