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6/2/2010
06:49 AM
Bob Evans
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Global CIO: In Praise of Mark Hurd's 9,000 Layoffs At Hewlett-Packard

HP and all of its employees face an ugly future unless its CEO continues to transform the company to meet the needs and demands of tomorrow.

In the movie "Master and Commander," a British Navy ship is caught in a horrendous storm and the howling winds have cracked off the top half of the main mast and swept it overboard, turning the jumble of mast and sails and ropes into an anchor that will surely sink the ship.

Easy choice, right? Just cut the lines and try to ride out the storm.

The problem is, one of the crew has also been swept overboard into the 30-foot waves and his only chance of survival is to swim to the tangle of sail and rope and pull himself back to the ship. The commander realizes the odds of saving the sailor are tiny but the odds of losing the ship's crew of 200 are very great.

As the agonized crew watches, the commander grabs an axe and cuts the lines, and they all hear their doomed shipmate's cries as he disappears.

But the ship and crew are saved.

I thought of that scene repeatedly while reading about HP CEO Mark Hurd's decision to cut 9,000 workers over a three-year period, with all the attendant human misery intermingled with corporate strategy and business vision.

And I am convinced that in spite of the pain those 9,000 employees and their families are feeling or will feel, Hurd made the right decision—no question about it. Because, as we've discussed before during these very challenging economic times, it is not the CEO's job to maximize employment—it is the CEO's job to maximize customer value, find and exploit opportunities, and ensure the company's future growth and prosperity.

In that context, Hurd's actions need to be evaluated beyond the blaring headlines of "HP AXES 9,000 JOBS" for their longer-term strategic impact and value: will HP and its customers and its remaining 295,000 employees be better equipped to grow and prosper in the future without the 9,000 jobs that will become unnecessary because of automation?

(For more analysis and insight on HP's strategy and Mark Hurd's vision, be sure to check out our "Recommended Reading" list at the end of this column.)

Here's why I believe the answer is unequivocally yes. And here's why I believe that before the politicians, labor "activists" and assorted other busy-bodies try to pillory Mark Hurd for making the kind of tough decision that CEOs are supposed to make, the full story needs to be analyzed in more detail and context. So here are six of those vital details, followed by an analysis of each.

1) Those 9,000 job cuts will be counterbalanced by the addition of 6,000 new jobs primarily in sales.

2) That net loss of 3,000 jobs amounts to 1% of HP's global workforce—in today's economy, is 1% churn abnormal?

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3) Those 9,000 job cuts will be phased in across three years.

4) Most of those 9,000 jobs will become obsolete because HP is upgrading data centers that will power its future business—and, the cuts give HP the resources to fund that investment.

5) HP has a strong track record in data-center transformations and is going into this huge project with knowledge, experience, and confidence.

6) Hewlett-Packard remains a company in transition for which this type of talent exchange is both inevitable and laudable.

And here's a deeper analysis of each of those six points:

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