Keeping employees engaged and focused during times of change

Robin Andrews & Desiree Sylvester June 28, 2005

2004 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice

HP overview

Founded in 1939 by Bill Hewlett and Dave Packard Headquartered in Palo Alto, California Leading technology solutions provider to consumers, businesses and institutions globally HP revenue totaled $83.3 billion for the four fiscal quarters ended April 30, 2005 150,000 employees in 170+ countries Ranked No. 11 in 2004 Fortune 500
HP Confidential 2

In the headlines
Merger Will Make HP a World Giant Fiorina Steps Down as Hewlett-Packard CEO

Hewlett-Packard's Profits Disappointing

HP Is Stuck In The Middle Of Competitive Market

HP Names NCR's Hurd as New CEO

HP Confidential 3

Change is constant

HP/Compaq merger: May 2002

Realignment involving more than HP employees: May 2004

Goal to improve customer focus, growth, simplification

3 CEOs in 35 business days

February 9: Carly Fiorina steps down

Change

Bob Wayman named Interim CEO March 29: Mark Hurd appointed new CEO
HP Confidential 4

Communication challenges
Communication

Balance focus on delivering day-to-day business vs. change Manage leaks in the media Everything said internally was expected to be shared externally very difficult to give employees additional or advance information

HP Confidential

Critical success factors

Develop detailed, ongoing communication strategy and plan:

Ensure leadership is committed to consistent communication throughout process Focus on face-to-face communication Continually survey employees to monitor pulse Provide employees with ability to ask any question, any time When surfaced, share issues up the line to the very top

HP Confidential

Communications during M&As

Communications are, without question, the first and most important organizational activity that should be carried out after public pronouncement of the transaction A communications program is one of the most important steps management can take toward expeditiously melding tow companies.
Winning at Mergers and Acquisitions
HP Confidential

What makes some mergers fail while others succeed? The research published on this subject over the past 30 years yields a checklist of points, (one of them being) do buyers and sellers have an effective communications program in place to help the integration process?
The Art of M&A: A Merger Acquisition Buyout Guide
7

People issues account for nearly half of merger failures

People and culture are at the heart of integration work
Percent of responses
Business issues or other 21% Poor communication 22%

19% 31% Poor management 7% Lack of employee support

Culture-related issues
8 HP Confidential

Corporate cultural clashes

Source: The Art of M&A Integration, industry literature, Roffey Park Management Institute, McKinsey

Merger communications plan

Realignment communications plan

Central PMO established to execute internal communications plan on a global basis Realignment website
296,000 homepage views 1,777,000 views during 6 months Plan

Pulse survey results showed understanding and support increased 11% from January March

HP Confidential

10

Interim CEO Communications Plan

Developed a clear messaging platform focusing on execution, serving customers and improving company performance

Expanded CEO and EC/senior leader outreach

Provided 2-way communication opportunities for employees

HP Confidential

11

Introducing a New CEO

Integrated program management office (PMO) for announcement CEOs first employee broadcast most watched web cast ever 30/60/90 day internal communications plan
Connecting CEO with employees No. 1 priority

Next up is communicating Marks vision for HPs future

HP Confidential

12

Deconstructing commitment
Commitment consists of two components, rational and emotional
Employee engagement framework
Engagement drivers

Discretionary effort
Commitment Intent to stay/ leave

Performance Retention

Rational commitment
The extent to which employees believe that managers, teams or organizations are in their selfinterest (financially, developmentally or professionally).

Emotional commitment
The extent to which employees value, enjoy, and believe in their jobs, managers, teams or organizations.

Source: Corporate Leadership Council, Driving Employee Performance and Retention Through Engagement, Washington, D.C.: Corporate Executive Board, 2004 HP Confidential 13

Employee engagement
Monthly photo contest

Redesigned Feb 2004 replace competitor cameras with HP More than 350 entries every month 35% increase In top 10 hpNOW stories each month average 27,000 views Created 2005 calendar based on employee feedback

HP Garage restoration

Launched Sept 2004 Internal awareness/pride campaign Includes history, photos, video In top10 hpNOW stories each month - average 60,000 views

YOU +hpNOW

Launched Aug 2004 Employee voice & community Addresses readership survey request: provide a space for employee contribution 47,500 views each month
14

HP Confidential

Engaging employees in the brand

Enhanced EPP discounts
Special promotions offered at up to 35% off including TVs, digital cameras, printers

Increase employee purchases more than 400% Create HP brand ambassadors

Fender +hp guitar contest

Photo contest using HP cameras Awarded special-edition Stratocaster guitars 1,200 entries, 156,000 views to photo gallery

Science of Printing

Partnered with Imaging & Printing Supplies group to equip employees with information on why HP ink, toner and media are better than the competition

More than 50,000 views 4,000+ entries to quiz/contest 94% committed to sharing the message with friends/family
15

HP Confidential

Ask HP
Employee clicks Ask HP link on portal

Results

Received over 1000 employee questions, suggestions and messages since Sept. 04 Average response time less than three business days User participation varies by region:
72% Americas 17% Europe and the Middle East 11% Asia-Pacific and Japan

Received over a hundred suggestions for new products, new features, and cost saving suggestions User satisfaction survey indicated that 80% found the system to be valuable, would use it again, and would recommend it to others HP Confidential 16

Transforming Internal Communications

Continuous communications

Employee and leadership engagement

Two-way communications Aligned communications

Basic communications

Recognized strategic importance of IC Established Internal Communications Program Management Office Coordinated messaging across HP Increased IC effectiveness

Engaged Senior Leaders as key communicators Launched centralized website, regular newsletter and tools enabling managers to communicate more effectively Expanded strategy coverage Employee feedback channels

Developed communications tools to empower employees to better meet customer needs Established horizontal and vertical communications Integrated strategy, brand, culture, and communications Initiated benchmarking to measure ROI

Direct, one-way communications Solid, basic tools Limited feedback from employees

Today: Accelerating growth

Synchronized with HR Integrated into leadership development Designed to strengthen employee engagement and build culture of excellence Evaluated against service metrics and TCE Accelerating growth through strategic communications

2001

2002
HP Confidential

2003

2004

2005
17

2005 awards to date

IABC Gold Quill Award IABC Silver Quill Award Dalton Pen Communications Award of Excellence Dalton Pen Communications Award of Merit Summit Creative Silver Medal

U.S. International Film and Video Festival Silver Screen Award

CINE Golden Eagle Award

Melcrum Strategic Communication Management Business Performance Award

18

HP Confidential

2004 awards

Dalton Pen Communications Award IABC Gold Quill Merit Award Ragans Top 10 Employee Publications Awards U.S. Intl Film and Video Festival

Chicago Film Festival

CINE ASPC

Magnum Opus

HP Confidential

19

Q&A