HP's Bold Management Plan Isn't Working

In late 2000, CEO Fiorina created a radical front-back structure. Some insiders say it's now being undone

Critics of Hewlett-Packard Co. Chairman and CEO Carleton S. Fiorina say she has made lots of changes since arriving in mid-1999, but has had too few successes. Now, BusinessWeek has learned the critics can add another failure to their list: the radical "front-back" structure that was the centerpiece of her restructuring efforts.

HP executives insist that it's finally working well, and one says it's currently being adapted to make it simpler and more effective. But other insiders say the structure is being dismantled. "The front-back thing has been a complete, unmitigated failure," says one exec.

When Fiorina introduced the new structure in late 2000, it was a huge shock to HP's system. The highly decentralized company then had 83 units, each responsible for its own product development and sales -- and for hitting profit goals. The approach gave HP pinpoint financial control and a rich crop of managers. But it also meant customers had to deal with many different HP salespeople. And ultimately, it left the company so focused on small niches that it missed big opportunities like the Internet.


  Fiorina's front-back approach, outlined in BusinessWeek's Feb. 19, 2001, cover story, aimed to fix all that. In place of the many units, she reconfigured HP into two "back-end" organizations -- one for computers and another for printers -- that would develop the products. They would feed those products to two front-end organizations targeted to selling a full suite of stuff to consumers and companies. To ensure that the front and back end of each unit worked well together, they shared responsibility for meeting financial targets.

On paper, it seemed promising. But in practice, it created major confusion. Many employees complain that Fiorina didn't drive the needed changes down through the organization. And managers, unhappy with the loss of financial responsibility, often resisted.

Now insiders say the responsibility for meeting financial goals will return to the back-end units. But still each will have a front-end sales unit that can sell all of HP's products. That should help achieve the "one face to the customer" approach that Fiorina sought.

By Peter Burrows in San Mateo, Calif.