HP Cuts Back on Telecommuting: Strategically Sound?

Recently, Hewlett Packard (HP) announced that it will no longer allow its information technology (IT) employees to telecommute. Thousands of HP IT employees, scattered across numerous sites (reportedly 100) around the world, will be required to relocate.  HP will offer relocation packages to IT employees who live 50 miles or more from work, but those who are not willing to work out of one of HP's 25 designated offices during most of the week will be out of a job and won't be offered severance pay. The move seems to be a shift in the company's culture and has been called part of HP's drive to "free itself from cumbersome costs and an outdated corporate culture" [1]. The move is one of the biggest changes that CIO Randy Mott has made since he joined the company.  Mott has been called the "Wall Street mastermind of operational efficiency based on his days as chief information officer at Wal-Mart and Dell" [1].

At first, HP's decision was viewed negatively by several industry writers. The move doesn't seem to follow current trends.  There is an increasing number of teleworkers [3], an increase in the use of collaboration tools and knowledge management systems [4], and a jump number of companies allowing workers to telecommute [5]. The move is also very costly for HP and may decrease employee retention (at least over the short term). Additionally, the decision has been frowned upon and could reduce employee morale, since it's perceived as a move to force many in HP's IT group into an early retirement [2].

Although much of the criticism is valid, there are some management principles that could support Mott's plans, based on some hypotheses I make as an observer of his strategy.

Hypothesis 1: Mott's experience and earlier successes came at companies that had geographically centralized IT departments; part of his success could be attributed to the employees' location. Removing this piece of the equation could lead to failure.

Mott was successful at Wal-Mart and Dell. The IT departments at both companies are known for their efficiency, cost consciousness, and return-on- investment (ROI)-focused decisions. Many management case studies and papers have been written about Wal-Mart and Dell's IT processes and strategy under his watch. When HP hired Mott, the company strongly signaled to the market that it too was pursuing a more efficiently and cost-conscious IT strategy [6]. It was a move necessary for HP to remain competitive and vie for the title of the largest software, hardware and services company.

As Mott perfected his IT management capabilities from leading some of the software industry's largest and prominent IT departments, he may have attributed a part of his success to a geographically centralized organization [7]. When asked by HP to improve its IT department, he probably designed his strategy based on his prior experience. Pursuing a previously successful strategy with adaptations to a new company is a lot less risky than trying to innovate when the pressure is on. Consequently, Mott likely made the best decision based on his management style. He could have risked a new approach by leaving his IT group decentralized, but he would not have been playing from his strengths and core competencies.

Hypothesis 2:  To accelerate the transfer of knowledge from older, experienced employees to younger ones by having these two groups work more closely.  This enables a transfer of "tacit knowledge" (knowledge acquired from experience and practice).   Tacit knowledge is hard to codify, and transferring it is easier when people work together in person over extended periods of time. 

About 600 employees in HP's IT group have over 15 years of experience [2]. These veterans are not only experts in the field of information systems, many of them also helped contribute to the strategies that have made HP successful. Being able to transfer an expert's tacit knowledge to younger and less experienced colleagues needs to be a critical component of the transformation effort Mott's leading at HP.

Many organizations have struggled with this transfer of tacit knowledge and have tried to implement knowledge management technologies and programs to improve knowledge transfer; but so far, the best strategy for transferring knowledge is to assign an expert and novice to work together in person on a project that forces the expert to demonstrate his/her skills to the novice. This kind of face-to-face experience can be costly and often requires travel. By eliminating the number of people who need to travel, HP could save time, money, and support more in-person knowledge transfer. Additionally, having a geographically centralized team allows Mott to transfer his tacit knowledge more easily to staff.  It allows him to spread his vision, strategy, and experience throughout the organization more quickly.

Making a financial commitment to centralize personnel can signal that HP is committed to increasing knowledge transfer and improving their employee's capabilities. Hopefully the investment will pay off, and HP's younger generation will become wiser and a better asset to the company.

Hypothesis 3: This sacrifice will weed out employees who are not truly committed to undertake the journey that will lead to a more efficient, cost conscious, and ROI-focused IT department.

In order for HP to succeed, it needs to change, and change often requires a sacrifice in comfort and routine for growth and improvement.  Changing a company's culture is not easy.

 To succeed in a marketplace that is becoming more competitive, less profitable, increasingly efficient and more innovative, a company needs employees who can pull through and execute upon the company's vision and strategy. Having employees who are not willing to give 100% of their effort or are complacent, comfortable, not willing to change, or who lack a sense of urgency, can lead to poor performance and eventually lead to a company's downfall. The change that Mott expects from his IT group requires committed employees; their sacrifice to move could be a sign of their re-commitment to the company's future. Those who have helped HP succeed and are not willing to sacrifice a second time, may not find the journey a worthy one to take. If HP were not in a challenged position and seeking growth, the rules of the game could be more lenient; unfortunately, this is not the case today. Alignment behind a strategy and complete dedication to execution may be one of the most critical components Mott needs to help execute this strategy.

Although HP is centralizing its IT staff, it is not ending its telecommuting program for IT employees entirely.  Nor has the company announced plans to enact this policy in other business divisions [1]. IT employees will still have some ability to work from home; it's just that their homes will now be closer to work. Collaboration and knowledge management tools and consulting will still be required.  It's just that HP's IT staff will be more centralized going forward.

Citations

[1] N.C. Wong; "HP Cuts Back on Telecommuting"; Mercury News, June 3, 2006.

[2] B. Goldback; "How to Squeeze Out Employees". June 5, 2006.

[3] C. Jones; "Teleworking: The Quiet Revolution" (2005 Update); Gartner, September 14, 2005.

[4] B. Burton, M.W. Cain, J. Mann, D.M. Smith, and M. Drakos; C"IO Update: Collaboration Is Becoming a Higher Priority for CIOs"; Gartner, November 2, 2005.

[5] The Telework Coalition Facts.

[6] SearchCIO.com Editorial Staff; "CIO Water Cooler: Reaction To HP's Mott Move"; SearchCIO.com, July 13, 2005.

[7] T.S. Ellis, R.L. Webster; "Information Systems Manager's Perceptions of the Advantages and Disadvantages of Telecommuting"; ACM SIGCPR Computer Personnel; Vol 18. Iss 4, October 1997.