Hewlett-Packard needs to remain competitive in a fast-moving industry so applies flexibility within its global total reward strategy, says Debbie Lovewell
Hewlett-Packard (HP) and Shrek may not seem like the most likely pairing, yet, it is the former’s technology that enabled the third installment of the movie series to be brought to the big screen this summer.
For while HP is perhaps most well known for its personal computer business, this is just one string to its bow. The company is also responsible for providing the technology used in everyday activities that many of us don’t give a second thought to. Approximately 95% of the world’s credit card transactions, more than 75% of stock exchanges worldwide and a significant proportion of the world’s mobile phone telephony are all made possible by technology supplied by HP.
The organisation is now one of the world’s leading technology companies. Last year, it overtook Dell to become the world’s biggest seller of personal computers and it has also overtaken IBM as the world’s largest technology outfit by sales.
Similar growth can be seen in its revenue over the past few years. For the four fiscal quarters ending 30 April 2007, HP’s revenue totalled $97.1bn, placing it on course to potentially achieve its aim of breaking $100bn in revenue this year.
Yet business has not always been so good. When Mark Hurd was appointed chief executive officer in 2005, he embarked on a drive to turn the then ailing company around. This included plans to lose up to 10% of its workforce worldwide.
More recently, HP hit the headlines when criminal charges were brought against the former chairwoman, Patricia Dunn, and then subsequently dropped, over the conduct of an investigation into leaks of confidential corporate information to the media in the US.
So, to reach its current market position has been something of a rapid turnaround for the business. However, Euan Hutchinson, Europe, Middle East and Africa (EMEA) rewards director, explains that it cannot afford to become complacent with its position. “We know that [some] of our [rivals] are struggling so we’re taking advantage of that. We know that they’re tough competitors and they’ll come back [so] we’ll have to be really sharp if we want to stay ahead.”
Change is seen as a key component of HP’s strategy to help it retain its current position. Hutchinson explains that the fast pace at which the company embarks on change processes applies as much to the company’s reward strategy as it does to its approach to business. “Just when I think nothing else can change, it will. I suspect there will be more change to come. That’s the nature of the technology industry. The best analogy I can think of is that you’re standing on the platform of a train station and a high-speed train comes through but it’s your train. You just have to literally run alongside, grab on and hold on. Change is very much part and parcel of what we deal with,” he says.
Over the past year, base pay, sales compensation, variable pay and benefits programmes are just some of the areas that have been modified to some degree.
At the core of HP’s reward strategy is a global total reward framework, which covers base and variable pay, reward and recognition, equity in terms of share options and share ownership plans, and benefits. “We try to work very much within that framework, but allow as much innovation and flexibility to meet business needs as makes sense. [What we try to do] is to find a way that our reward strategy is flexible enough to support every business where they are and at what [stage] they are at in their development,” Hutchinson explains.
One of the key challenges for HP’s reward strategy is to remain market competitive. “From a benefits point of view, there’s always the challenge of what it means to be market competitive. We recognise that when you’ve got a workforce as diverse as ours, then people will engage with a company in different ways. When people come to work for you as a company, you need to be able to put in front of them a wide enough proposition that will allow them to engage with you in a way that’s going to meet their needs and aspirations,” Hutchinson adds.
This is not the only challenge that Hutchinson and his team face when delivering total reward across the EMEA region. “In the benefits area, there are other complexities like [legislation] and tax. If you take pensions, for example, it’s one of the areas that governments are most concerned about in terms of how do they deal with the pensions time bomb that is ticking across the globe? If you look at some [places] like the eastern European countries where they’re coming out of the post-communist era, you don’t even have the regulatory framework to support these types of things. So what you have is some places where benefits are really significant in terms of what we offer, and others where cash is king.”
Hutchinson is responsible for a team of 45 people who manage the reward strategy across EMEA. This group is divided between those who operate centrally from an EMEA perspective, and others who are clustered around a country or group of countries on which they focus, for example, the UK and Ireland, some of the Nordic countries, and central and eastern Europe.
Whatever their approach, Hutchinson explains they all adhere to the same philosophy. “We try to focus on three simple things. We talk about competitiveness, programme management, and employee understanding and appreciation. For me, that’s what delivers value in terms of benefits.”
Providing good levels of service around reward is also seen as a key way of adding value for staff. “You only have to get that wrong a little bit in order for people to develop an impression you would [not necessarily] want and all of a sudden you could be spending hundreds of thousands of millions of dollars on actually not going anywhere. We try to keep it very simple and try to do the right things in the right place,” says Hutchinson.
Contrary to what may be expected, when looking at benefits across the EMEA region, Hutchinson does not focus on how reward structures and perks differ between countries. Instead, he prefers to focus on finding the common threads that bind nations together.
As the region covers such a wide variety of cultures at different stages of development, however, these may not always be immediately obvious. In the Middle East, for example, benefits are primarily cash-based in the form of allowances to cover costs such as housing, schooling and cars. In Germany and France, a number of perks are still under state control. Eastern European countries, such as Poland, are starting to become a little more sophisticated in what they offer and Hutchinson explains that perks such as pensions and cars are now starting to be offered in this geographical area, while basic healthcare benefits are also valued by staff.
“You do have to learn that there are opportunities for leverage, but one-size-fits-all is never going to work.”
It is also necessary to adhere to cultural sensitivities. In Denmark, for example, HP employees receive free fruit throughout the day, which they have now come to expect. These type of perks would be difficult to remove “People have a huge emotional attachment to these things, so it could be the most uncompetitive thing that we do but it touches people in some way. From their point of view, the value is 10 times what they might give a pension,” says Hutchinson.
Whatever elements of reward are offered, however, the company has to keep a close eye on costs to ensure these don’t contribute to unnecessarily increasing product prices for customers. This is a particular issue for its fixed-cost benefits, which are provided for staff regardless of business performance. “You need to be very careful that you keep a close eye on what those fixed costs are because those are the ones you have to build into every deal and every product you sell to a customer. So we very much align ourselves with the business and what the business is trying to do.”
In keeping with the company’s liking for change, Hutchinson is now keen to embark on further reward development. “For a company like HP, we thrive on innovation. I have already had some discussion with some of my team that what I would like us to try to think about next year is about some benefits innovation in different countries. We support the business and sometimes that squeezes out the oxygen of perhaps being able to innovate a little bit and be creative. It is important for my team and for HR teams to feel as if they are doing important things. I think there is an opportunity for us in that space to be more creative.”
Hewlett-Packard at a glance
Hewlett-Packard Company was founded in America in 1939 by Bill Hewlett and Dave Packard. The roots of some of its existing benefits schemes can be traced back to these early days.
The $5 Christmas bonus and production bonus that were introduced in 1940 to enable staff to share in the company’s success, for example, formed the basis for the company’s profit-sharing scheme, which was introduced in 1962.
HP’s early product range featured items such as oscillators, used for testing sound equipment and microwaves.
In 1957, Hewlett-Packard became a publicly-traded company in the US.
Two years later, the firm established its first division outside of the US, setting up operations in Germany and Switzerland. This was just the start of its move to become a global business. Over the past 40 years, it has expanded significantly within the Americas, Europe, Middle East and Africa, and the Asia-Pacific regions. HP now operates in approximately 170 countries worldwide, and employs 160,000 staff.
The firm operates primarily within three business areas: imaging and printing, technology solutions and personal systems, the latter of which is the largest of the three. The business also includes HP Financial Solutions, which provides financial support to HP customers, and HP Labs, which is the company’s research and development arm.
For the four fiscal quarters ending 30 April 2007, HP’s revenue totalled $97.1bn. This places it on course to achieve its aim of exceeding $100bn in revenue this year, which it sees as a significant achievement.
Euan Hutchinson, Europe, Middle East and Africa (EMEA) rewards director at Hewlett Packard, didn’t enter reward via a traditional route. Instead, he began his career as a chartered accountant, working for firms like PricewaterhouseCoopers and Arthur Anderson.
During his 12 years in this field, he spent some of his time specialising in tax and undertaking reward-related consultancy work, for example, around employee share schemes. This was to give him his first taste of the HR world.
Upon leaving accountancy, Hutchinson joined Compaq as rewards manager for Scotland. When the company merged with HP in 2002, he then took on the role of EMEA benefits director for HP, which was the first time that this type of role had been created within the company. “One of the things my boss saw was the ability to see benefits across the region and manage benefits across [territories],” he explains.
Three years later, he was promoted to his current position of EMEA rewards director.
One of the achievements Hutchinson is particularly proud of is the team that he has built up at HP.
“I’m enormously proud of what the team is now in comparison to what it was two-and-a-half years ago. To me, that’s a legacy.
“People will forget all the programme stuff but actually the legacy is the people, the impact you have on them and what they become as future leaders.”
What are the UK’s benefits?
Closed defined benefit pension scheme. Open defined contribution pension scheme which offers employees a choice of contribution levels, with company contributions up to 8%.
Private medical insurance for all employees. Dependants can be added through flex.
Range of flexible working arrangements including flexible hours, part-time hours, home working, career breaks and job shares.
Eligible employees can choose between an employee car ownership scheme and a cash allowance.
Flexible benefits scheme
Includes options such as childcare, critical illness cover, dental perks, retail vouchers and spouse’s life assurance cover.
25 days as standard.
Hans Wendschlag is Hewlett-Packard’s Nordic environmental manager. He has worked for the company for seven years and is responsible for tasks such as handling environmental customer requests and ensuring that the organisation complies with environmental legislation.
Wendschlag particularly values HP’s policy around flexible working arrangements. He explains that the company enables him to work from wherever he wants, which provides him with a certain amount of freedom.
“HP has a very good flexible [working] arrangement. I like the advantage of feeling free about how I arrange my work and life. The most important thing is that you get your work done. It is my responsibility how and when I do it,” he explains.
Wendschlag adds that he is even permitted to work from his country holiday home in Sweden, which is in a relatively remote location.