In 1998, she announced her plans to reinvent HP, but still wanted to maintain the cultural values that Dave Packard held when he formed the company. Ever since its founding in a Palo Alto garage in 1939, HP has represented entrepreurialism. Packard created a culture that valued engineering and teamwork and rewarded ideas and innovation. Fiorina recognized that HP needed to build capabilities of speed, agility, and collaboration to survive in this industry. Fiorina saw the industry in which HP competed as being in a state of transformation. The digital age is bringing about democratization of information because it removes the traditional barriers of time, distance, and wealth. HP started working with Jeffrey Katzenberg at DreamWorks to help them create cuttingedge entertainment. She thought that the ability of HP to give audiences a new visual experience in movies, such as Shark Tale, Shrek 2, or Polar Express, was her vision for HP as it moved Into the digital age. She also believed that HP needed to work with Orca and other companies to deliver and distribute digital content to consumers in new, compelling, and mobile ways.

On February 9, 2005, the board of directors dismissed her. Many believe that under her leadership, HP was simply trying to do too much. It lacked the resources and management competencies to compete with the best in each industry. According to some, her problems started with the acquisition of Compaq in 2001 for more than $24 billion. By emphasizing size over technology, the board of directors said that she doomed HP to periods of declining margins and lackluster growth. That is, she created a giant company but did not come up with a strategy to fend off Dell in the low end of computing or match IBM's sophistication. She immediately began to exercise leadership over HP's 80 relatively autonomous divisions, instilling a more centralized structure, which resulted in downsizing the firm and eventually laying off thousands of workers. Robert Knowling, a member of HP's board of directors, said that the "merger hasn't met the board's expectations or management's." Recently the stock price was listed as 13 percent below what it was just prior to the Compaq merger. While recent profits have risen, one HP e-mail sent after her firing read "Ding-dong, the witch is dead."

The history of high-tech companies indicates that companies that dominate their segments of the market such as Intel, Microsoft, and Dell are big moneymakers. Unfortunately, HP does not dominate anything. In personal computers, HP's market share is small compared to Dell's, its profits are less than I percent, and HP is often second best to IBM for global corporate computing. In its PC business, HP has two different distribution channels, each with its own goals. The directsales, build-to-order model competes with Dell, which carries no inventory. The other is HP's traditional, high-inventory distribution model for units that it ships through its sales partners. If HP tries to match Dell 's direct system, it might not have the efficiency and volume to make money. This approach would also risk angering thousands of HP's traditional sellers (e.g., Costco) whom HP needs to sell its printers and ink. The $24-billion-doIIar Imaging and Printing Division is the only division making a profit. This division generates more than 75 percent of HP profit. HP's chief competitors in this business, Lexmark and Dell, have also seen their profits steadily increase.

HP had operational challenges under Fiorina's leadership. HP has developed customized websites for customers where they can place and manage orders. Unfortunately, these B2B (business-tobusiness) sites have frequently crashed erasing accounts, losing orders, and shipping wrong products causing customers (such as Procter & Gamble) to lose faith in HP's ability to deliver. This requires HP sales representatives to spend most of their time working with customers to fix problems as opposed to selling new products. In putting together, a package involving servers, printers, and software for a customer, a sales representative must coordinate the efforts of different divisions. As a product designed organization, each division has its own goals. For example, if one division is concerned with its financial picture and is unwilling to cut its price, the whole deal falls apart The company appears to lack an effective process to resolve conflicts.

HP intended to push its digital technology in the crowded electronic field. The results ofHP's push into this field have met with mixed success. To tap into the music industry, HP began selling Apple's iPods. Some thought that HP was straying too far from its reputation as an innovative company and getting into a business that it knows nothing about. Because HP sold less than 320 000 iPods of the more than 4.6 million sold, these critics have a point. HP has also been aggressively buying small software companies in an attempt to enter this market. HP has also entered into the managed services industries, in which companies outsources their IT departments to another organization. Unfortunately, this market has heavy start-up costs and IMB and EDS already hold a large share of this market.

QUESTION 1 (25 MARKS)

1.1 From the case study, what change approach did Carly Fiorina use at HP and why it was not successful? (10)

1.2 Which of the change approaches should have been used by Carly Fiorina and why do you think this approach would be successful (10)

13 "Most theories of organizational change originated from the landmark work of social psychologist Kurt Lewin. Lewin developed a three-stage model of planned change which explained how to initiate, manage and stabilize the change process" In view of the latter statement, List (do not discuss) the 5 assumptions underlying this model (5)

QUESTION 2

Read the following case and answer the questions that follow:

Laura is the associate director of a nonprofit agency that provides assistance to children and families. She is the head of a department that focuses on evaluating the skill-building programs the agency provides to families. She reports directly to the agency leadership. As a whole, the agency has been cautious in hiring this year because of increased competition for federal grant funding. However, they have also suffered high staff turnover. Two directors, three key research staff, and one staff person from the finance department have left. Laura has a demanding schedule that requires frequent travel; however, she supervises two managers who in turn are responsible for five staff members each. Both managers have been appointed within the last six months.

Manager 1: Kelly has a specific background in research. She manages staff who provide research support to another department that delivers behavioral health services to youth. Kelly supports her staff and is very organized; however, she often takes a very black and white view of issues. Upper level leadership values Kelly's latest research on the therapeutic division's services. Kelly is very motivated and driven and expects the same from her staff.

Manager 2: Linda has a strong background in social science research and evaluation. She manages staff that work on different projects within the agency. She is known as a problem solver and is supportive of her staff. She is very organized and has a wealth of experience in evaluation of family services. Linda is very capable and can sometimes take on too much.

The managers are sensing that staff are becoming overworked as everyone takes on increased responsibilities due to high staff turnover. Staff have also mentioned that Laura's "glass halfempty" conversation style leaves them feeling dejected. In addition, Laura has not shared budgets with her managers, so they are having difficulty appropriately allocating work to staff. Laura said she has not received sufficient information from the finance department to complete the budgets. The finance department said they have sent her all the information they have available.

As staff become distressed, the managers are becoming frustrated. They feel like they are unable to advocate for their staff or solve problems without key information like the departmental budget.

2.1 How can Laura most effectively use both management and leadership skills in her role as associate director? (5)

2.2 What steps could be taken to build staff confidence? (5)

23 What advice would you give Laura on improving her leadership skills and to the managers on improving their management skills? (5)

2.4 Which leadership style do you think a leader would need to be effective in this situation?

(10)