This quote comes from "Bill and & Dave's Memos: A Collection of Bill Hewlett and Dave Packard's Writings", a book that was edited by Albert Yuen and assembled with help from Karen Lewis, HP's longtime archivist. It is credited to Bill Hewlett (who is standing next to Dave Packard in the picture).
The book doesn't exactly have an organized plot and some of the memos aren't exactly exciting -- Hewlett and Packard weren't known for their charisma, just their competence. And if you want to more complete story about HP, I recommend Michael Malone's recent book "Bill & Dave," but as we saw in Dave Packard's 11 Simple Rules, reading the original writing and speeches from these two guys provides a fascinating and unfiltered view of how HP used different such practices than most companies did then and do now.
The most striking thing to me is that Bill and Dave often articulate such a different set of assumptions about what motivates human behavior, the purpose of a business, and how people ought to be treated. The statement by Bil Hewlett about the "low man" starts of the section on "Managing in Tough Times," and was used in his speech about why -- during a downtown in 1970 -- HP elected to give most employees a Friday off every two weeks (and thus pay them for only 9 instead of 10 days) instead of doing a 10% layoff. Hewlett emphasized that because everyone from him to the janitor got the same percentage in the profit-sharing plan at time, that the same principle of equality should be applied during hard times as well. And he talked about how everyone would need to work to stop overtime expenses and expenses generated by temporary workers. He did discuss some exceptions, notably a plant that has massive back orders, where it made no sense to give people every tenth day off. Although HP certainly paid different amounts to different people in those days, this essay is striking because it seems to me that most companies go after the "low man" (or "low woman") first when times get tough.
Moreover, although Hewlett's perspective is rarely articulated and acted by executives (and indeed, in this era of worshiping star employees, many companies articulate and act on the opposite values), recent evidence supports the idea that laying off employees during a downturn is a bad idea, especially in a high tech firm, It turns out that the costs of getting rid of excess employees, waiting for an upturn, and then hiring a new batch of employees often exceeds the cost of avoiding layoffs and waiting for an economic recovery.
Check out the Bain & Company study on “Debunking Layoff Myths” that I've talked about before. They examined S&P 500 firms during 2000 and 2001. Bain found that it usually takes companies 12 to 18 months before the financial benefits of layoffs kick-in, because of severance costs and less obvious costs like the negative effects of layoffs on “survivor” productivity. By the time the savings can be enjoyed, the economy often begins to rebound, so companies then spend money hiring a new batch of employees. And those new people often have skills much like those who were sent packing. According to Bain, such “binge and purge” employment practices are often misguided ways to control labor costs, especially when companies do knowledge intensive work.
The upshot is that HP's approach may not only have been humane, it is consistent with some modern evidence. Of course, some hard times stretch out too long to avoid layoffs and some companies have too many employees even for the good time. So the old HP approach will only work if you already have the kind of people that you need, but you just have too many of them for now.
HP had alternate Fridays off at least one more time, around 1990. It lasted for about six months. I was at HP from 1985 to 1996. That plan was referred to as the "nine day fortnight".
Posted by: Walter Underwood | October 08, 2007 at 05:41 PM
I worked for two companies that did complex industrial systems.
At company "A" there were twenty four engineers reporting to a manager who reported to the Vice President of Engineering. The group was pretty much self organizing so that expertise in one area might put you in charge of a team one day and the next assignment might be as a lowly team member somewhere else. Your head swelled only in proportion to what was in it.
At company "B" there were pre determined group leaders as opposed to the self organizing done at "A". In addition to the group leaders, management included supervisors, department managers, and other layers before you got to the Vice President of Engineering.
Company "A" had a ratio of engineers to management of 12:1.
Company "B" had a ratio of engineers to management of 1:1.
How does that happen? In good times "B" hired managers and engineers. In bad times "B" laid off engineers.
Posted by: Fredex | October 08, 2007 at 04:43 PM