Is There a New Way Ahead for Electronics Enterprise? Part 1

As we proceed through the 21st century, major changes in the social parameters of the world motivate some new HP-style what-if thinking about how to do electronics. The trend begun by HP and Tek can be extended by including the form of company organization.

By comparison, the dominant 20th century organization of electronics enterprise was that of the hierarchical model. This form of organization concentrates decision making and innovation at the top of the hierarchy. They are delegated to varying extents to lower levels, and in the purely hierarchical scheme of command and control, all decision making emanates from the top level. At successively lower levels, less innovation and decision making is required, as job functions become well defined. At low levels, assembly workers function as essentially human machines, performing highly defined and repetitive tasks: Put these parts in these holes of the circuit-board, solder, then repeat.

The HP and Tek way
The founders of HP and Tektronix — Bill Hewlett and David Packard of HP or Howard Vollum and Jack Murdock of Tek — had the foresight to see that the earlier business model was imperfect; it was too much a product of the machine-mindedness of the 19th century. It reduced workers to the status of a deterministic machine, and as such, they were interchangeable, replaceable, and had no creative value. Their potential to innovate and make decisions was consequently lost to the company.

The HP and Tek founders valued people and what they could contribute; thereby replacing the view of workers as machines with one that was more like what they themselves were: innovators. It need not be recounted in detail here how well this has worked out in practice over the years that the founders ran these respective companies.

The HP and Tektronix company traditions were essentially indistinguishable; all the major features of the HP way were also found in Tek culture, including policies such as profit-sharing and stock options for employees. Employees were thereby given reasons to view themselves as having a stake in the enterprise along with the founders. In addition, employees were treated as though they were family members by the founders, and this high regard for the worth of others as persons resulted in high morale.

In effect, a trend was begun in their relationship to workers by these company founders, in distributing some of their decision making to the entire workforce of the company. I remember a story from Tektronix of how a janitor in Building 50, the technical center of Tek, proposed to an engineer working after-hours an improvement in the front-panel organization of a Tek curve tracer that was setting in the hallway. There were no arbitrary limitations on who was allowed to do the innovating. As a consequence, both HP and Tek were hotbeds of creativity. Command and control became more distributed than in a pure hierarchy, and the performance of company functions did not rest so heavily on a few innovators at the top.

In the next part of this series, we will continue this look at the hierarchy. We'll see what worked and what didn't, and we'll see what work was eventually farmed out and why.

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12 comments on “Is There a New Way Ahead for Electronics Enterprise? Part 1

  1. Charles J Gervasi
    November 26, 2013

    It makes me thing about the very question of what is an enterprise.  If an enterprise only has replaceable units, maybe such a company should outsource their technology development, maybe to a spinoff or a startup funded primarily by the parent company.  That would give them an island of freedom to do what it takes to get the job done. 

    In theory a matrix organization is supposed to do this.  The project manager has a team of people who report to her for the project and to their functional managers for issues regarding their area of expertise. 

    No matter which organization style, it seems like the key is for the CEO to make sure the culture of doing what it takes to get the job done goes all the way down the hierarchy.  If it's not happening, I think I would create a spinoff startup.  The company can always shut off funding if it's not working, but the goal would be NOT to have the parent company dictating to the startup under fear of cutting off funding.  The goal would be to get people willing to take a risk and possibly and fail and give them some freedom to try something. 

  2. Netcrawl
    November 26, 2013

    I think acqusition or merger could be the perfect solutions, it give the company the fastest or shortets way to gain technology it need to neter into new market, acquisition could provide everything it need from technology to manpower even customer acquisition and potential business opportunities. Well it could be expensive but overall its make strategic sense.

  3. Charles J Gervasi
    November 27, 2013

    “I think acqusition or merger could be the perfect solutions,”

    I hadn't thought of that.  My comment was the large company could spin off or provide funding to a small company to have someone researching new technology for the parent company but without the limitations of a company based on the model of employees being replaceable units of production. 

  4. Victor Lorenzo
    November 27, 2013

    Unfortunately too many managers consider the design or reasearch and development engineers as just a couple of very expensive and replaceable pieces, and make too big mistales when 'replacing' them for 'more cost affordable' ones.

    We have experienced this ourself with the company we worked for before founding our own consultancy firm. Curiously, they have now less production costs, yes, but also less-to-none know-how and a heavily reduced capacity to continue supporting the products we developed for them (almost all, in fact).

    Now we provide some services for them, which I should say is good for both companies.

  5. Vishal Prajapati
    November 27, 2013

    I think the HP and Tek model is better than spin off. The reason I would like to share is the people at the bottom of the pyramid will never be able to show their creativity and expertise of innovation. The spin off start up will employ like minded and well qualified people to make innovation. But as Dennis has said in this blog how a janitor had helped an engineer. Which I think will not be possible or very less likely to be possible in the start up.

  6. Davidled
    December 1, 2013

    Mangers need to get the vision for road map for his or her department so that all engineers get the same vision for each project. The relationship between CEO (Owner of company) and manger should communicate for the future project and budget including the manpower based on profit or loss of company.

  7. samicksha
    December 5, 2013

    @Daej, Your point seems effective but little tough, CEO and manager relation is not very common specially in enterprise environment, C level mainly focus on revenue and keeps interaction within C level only. Please correct me if i am wrong…

  8. eafpres
    December 6, 2013

    @Netcrawl–M&A is a very viable way for companies to bring in innovation.  In fact, very large cmpanies like Cisco have “spin ins” where they fund companies, and if they do well, they buy them and integrate them.  The most recent high profile example is their deal with Insieme.

    Unfortunately, the very thing we are talking about here, culture, is the downfall of many acquisitions.  Managers love to think they can acquire a company, integrate it with no issues, take out redundancies, and end up with an even better bottom line than before.  In reality it so often happens that the culture of the buying company does not match the oen they are acquiring, and things go wrong very quickly.  Now in some strategy circles there is a lot of talk about “fit” and “culture” with regard to growth by acquisition.

  9. eafpres
    December 6, 2013

    @Dennis–it is remarkable to me that companies still operate from the viewpoint that most or all employees are replaceable units with no marginal cost.  In 1959, Edith Penrose published her landmark book “The Theory of the Growth of the Firm”, and in it she described that firms, as they gain specialized experience, naturally generate an excess capacity of specialized skills and knowledge, which they then use to create programs of growth.  Her point was that this creation of capital was in the people–she had correctly identified human capital as crucial to the very survival of firms long before it was vogue in HR circles.

    In the last decade or two some thinking has arisen that more and more of the market capitalization of public firms stems from intangibles, of which specialized knowledge and human capital is a major component.  Yet it is still difficult for managers to understand the value in their employees and the costs of turnover.

  10. D Feucht
    December 6, 2013

    eafpres – What is too infrequently understood by nontechnical management people is how fragile advanced technology is in that highly skilled engineers took years to achieve their abilities and many are almost irreplaceable. These kinds of people are not commodities and cannot easily be replaced as assembly-line workers.

    As a consequence, it appears to me that the integrity of engineering as a collective group is weakening in some ways over time. The typical engineer when I was young (in the '60s) seemed more rigorous than today, with deeper theoretical and experimental skills. Today, there are many more EEs on the planet than in the '60s, and the technology is maintained, though by a smaller fraction of the EE population – or so it seems to me.

  11. eafpres
    December 6, 2013

    @Dennis–I think the situation started in the 80s or so; from the time of the first dot com boom.  The idea of “career” went out the window and engineers more typically moved from company to company ever 2 years or less.  I can't recall seeing a resume in the last 10 years where someone had over 5 years at a given company.  As employers did away with retirement plans and other incentives, and 401k plans took over, and were portable, only a few other benefits gave any incentive to stay somewhere for a long time.

    The result is there is minimal mentoring in many situations now.  The premium on “fast” is overcoming the premium on “right” or at least “quality”.  Sometimes it does make one wonder how fragile all this is, as an ecosystem starting with engineering innovation and ending in products.

  12. RedDerek
    December 30, 2013

    Your comment that HP valued employees was clearly a foundation. However around 2003 I noticed that HP started to de-value the employee as they started to outsource the design work. Personally, when the control of the design is farmed out, the company starts to loose control of the quality. Look at the HP cameras and printers. They tended to be good up until they started the outsourcing.

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