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A 1970’s employee manual at HP.

The “HP Way” and the founding of Silicon Valley.

I’ve given my History of Silicon Valley talk a few times, but recently I realized that I’ve neglected to include how important The HP Way was to creating Silicon Valley culture.

Most people know that Hewlett-Packard is regarded as the founding Silicon Valley company. Bill Hewlett and Dave Packard finished their studies at Stanford, rented a garage in Palo Alto and founded a company that grew to 120,000 employees. The original garage is still there, at 367 Addison Avenue in Palo Alto.

But what is somewhat less well known is that Hewlett and Packard (or “Bill and Dave”, as they were known to all) established a company culture that was considered pretty radical at the time.

During the 1940’s and 50’s, as they grew HP, American workplace culture tended to be very structured and top-down. Most American corporations were East of the Mississippi and built on the principles of industrial mass production. The CEO gave orders to his managers, and those managers gave orders to the employees. Individuals who deviated from orders were fired. Managers wore white-collared shirts and sat in offices, while workers wore blue-collared shirts and worked on the factory floor. Informal discussions were discouraged. This was the structured American workplace culture that had grown the United States into the largest economy in the world.

But Dave Packard and Bill Hewlett were building a company in California, where the vibe was a bit different, and they came from an academic environment where unconventional thinking and collegial relationships were valued. And so they took a different approach to management at Hewlett-Packard, an approach that eventually became known internally as “The HP Way”.

The HP Way is “a core ideology … which includes a deep respect for the individual, a dedication to affordable quality and reliability, a commitment to community responsibility, and a view that the company exists to make technical contributions for the advancement and welfare of humanity.”
-Bill Hewlett

The key tenets of The HP Way were articulated to employees as:

  1. We have trust and respect for individuals.
  2. We focus on a high level of achievement and contribution.
  3. We conduct our business with uncompromising integrity.
  4. We achieve our common objectives through teamwork.
  5. We encourage flexibility and innovation.

This was pretty radical stuff, for a 1950’s corporation.

As the company continued to grow from a garage startup into a large dispersed organization, Bill and Dave faced the same dilemma that Silicon Valley founders still face today — how do we “let go” as founders and allow the company to grow and flourish without our continuing to micromanage everything?

Dave Packard would later say “Early in our history, while thinking about how the company should be managed, I kept getting back to one concept: If we simply got everyone to agree on what our objectives were, then we could just provide them with the right conditions and resources and turn them all loose and they would all move along in a common direction”.

This philosophy become known as Management by Objective, and in 1957 Bill and Dave published a set of written objectives for the company. The first objective on the list was “To achieve sufficient profit to finance our company growth” (very sensible), the second was “To provide products and services of the greatest possible value to our customers, gaining their respect and loyalty” (should be an objective for any good company).

But the last two were perhaps the most radical:

Objective 6: To foster initiative and creativity by allowing the individual great freedom of action in attaining well-defined objectives (fostering creativity and freedom of action wasn’t a normal thing for an American corporation to have in its employee manual).

Objective 7: To honor our obligations to society by being an economic, intellectual, and social asset to each nation and each community in which we operate.(This was 1957, and HP was outlining what today we would call Corporate Social Responsibility, long before the term was coined).

HP also began embracing a management approach known as “Management by Wandering Around” (MBWA), in which managers were expected not to just in their office writing memos, but instead to walk through the workplace in an unstructured manner, talking to team member, getting input, offering guidance. Using MBWA, they found, was much more likely to create positive morale and sense of organizational purpose than sitting in your office awaiting status reports from subordinates.

Using this management approach and this workplace culture, HP out-performed most other American companies. They reached the $1 billion/year milestone by 1976, an almost unprecedented growth pace that was made possible by the founders laying out objectives for the team and then getting out of the way.

Today, many of these management methodologies are common and well-accepted, especially in Silicon Valley. But at the time they were an innovative (and sometimes radical) departure from the way that American corporations had been managed.

An entire generation of technologists got their first job at HP, and many eventually founded companies of their own, or went to work for new startups in the area. Steve Jobs got a summer job at HP, met Steve Wozniak, and founded a new company called Apple (just as one small example).

Silicon Valley is now a $300 billion economy, larger than many entire nations. And a key factor in the growth and success of Silicon Valley is the unique company culture that permeates the region.

That culture all started with Bill and Dave, and The HP Way.

Written by

I’m a Silicon Valley guy. I teach entrepreneurship at Stanford, coach startup CEO’s at Miller Center, and run the 4thly Startup Accelerator. Also, I love tacos.

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