That's when HP boss Carly Fiorina announced a $25 billion acquisition of rival Compaq Computer, a blockbuster announcement that has sparked controversy and excitement from the opening bell. Fiorina believes the deal will take HP to the next level. But critics, including Walter Hewlett and David W. Packard, sons of the company's co-founders, say a merger with Compaq would be a disaster.
To a large extent, the success or failure of a merged HP-Compaq is bound up in the integration planning being carried out under McKinney's supervision. Working with Compaq CFO Jeff Clark, McKinney's charge is formidable: Make tough choices about personnel and policies, and foster a happy blending of two unique corporate cultures--all the while keeping customers happy and out of the clutches of rivals eager to pounce during the lead-up to the February board vote.
With the clock ticking, representatives from HP and Compaq on the integration team participate in a grueling ritual of meetings on top of meetings each week. CNET News.com caught up with McKinney during one of his few breaks to get a progress report.
Q: How is the integration committee figuring out what the combined company should look like?
A: Early on, we wanted to make sure the planning effort would be guided by the future line managers of the company. We didn't want a bunch of people planning and then, way later, have leaders being named and then told, "Good luck; go create your business."
So one of the first things we did was define the principles by which to operate. We also needed to name the future leaders of the company fairly quickly, and the top management of the future post-merged company has already been announced. Then we asked each those managers to name a lead to represent their businesses.
So it's a relatively small central team. How does the overall timeline get managed?
We've established a process that is very regimented and centrally controlled, where each of the integration teams has milestones and goals they are managing to. It's all about planning, since the merger has not happened yet.
Assuming the merger is approved, will you be ready to roll the day the two companies officially combine?
We've defined "deliverables" that will be ready for Day 1, but obviously the full integration will take several quarters.
What does your workweek look like now?
All the integration team leads come together and meet every Monday and Tuesday. Then, on Wednesday, Jeff and I host a meeting with all the managers where we look at the bigger issues that couldn't get resolved. On Thursday, Jeff and I meet with (HP CEO) Carly (Fiorina) and (Compaq CEO) Michael (Capellas) and a couple of members from their staffs, where we report on (work) status, or if there are any issues we need guidance on. And then we do it again the next week.
So Friday's your day of rest, so to speak?
Free days are pretty hard to find. It's pretty intense. But it's similar from a management point of view to any large project that cuts across many organizations in a company.
How do decisions get made? By majority vote, or more through a top-down, hierarchical basis?
A combination of the two. All the top management (for the combined company) has been formed, and we have had balanced representation between HP and Compaq, so the goals have been pretty clear. We've also tried to give strong guidance in terms of basic principles: Start with the customer and figure out the best strategy to serve them. Then, we can talk about structure and get to who reports to whom.
Rivals such as Dell and Sun have been pointing to the merger as evidence that there are problems at the company. They're also saying the transition will only distract you from concentrating on the business, and thus, they will be able to pick up your customers. An exaggeration on their part?
Yes, this is overblown. The facts don't support it. Our (fourth-quarter) earnings showed that we're not distracted, that we're not losing ground to our competitors, and that this is a company that stays focused on serving customers.
The merger vote is slated for February. When will the committee get done with its work?
Our goal is to have all the planning done at the top level by the time the merger closes. For our top customers, we have our account teams named...because we have to be ready for just about anything that can happen after the deal closes.
One of your colleagues was recently quoted as saying the companies want to create one strong culture. How do you decide which values or approaches are the ones that should predominate?
We're taking this cultural work quite seriously. The experts will tell you the cultural aspects of the merger are among the most critical to get right. We're already identifying the cultural differences and plan on making sure the cultural work gets done as part of the integration work.
The first thing is a benchmarking process where we get a variety of Compaq people to describe their culture--its strengths and weaknesses. With HP, we're doing the same thing. Out of that will come a work plan to turn it into something very specific for a future, merged company.
Besides the fact they both work for tech companies, aren't the employees who work for HP and those who work for Compaq quite different in terms of temperament and background?
There are layers and layers of culture. The word culture means different things to different people. At the top level it's about values, and we both have very comparable values. This doesn't mean there's not work remaining, but if you don't have comparable values, then it's more difficult.
Where are the differences that you've noticed?
Compaq people are more comfortable with conflict in the open. HP has a culture that's more respectful of people's (privacy), but one thing that has resulted is that maybe we don't bring up issues in public that we should. Compaq's people are good at what I call getting the "moose out on the table."
Assuming the deal goes through to completion, is the old "HP Way" going to be history?
What people call the HP Way is a term that's interpreted in many different ways. In the early days, the company used to have doughnuts brought in every day. In one of the economic downturns, a decision was made to eliminate the doughnuts--and some people said that decision conflicts with the HP Way. But that has nothing to do with our values.
The values of the HP Way are here for the long haul, and Compaq's value set is very consistent. The behaviors underneath a value set are always going to change. The specific ways we do things have to change because the world changes. People get confused between values and procedures.
The rap against the old HP Way was that while it was collegial, it also allowed for deadwood to accumulate. How do you plan to change all that?
We will build on the best of HP. If there are some qualities that the Compaq culture has that will be solid enhancements, then clearly those will have to get added.
Carly Fiorina is taking the company in new directions. But is she following the HP Way, or is she blazing her own trail?
I think what Carly's doing is very consistent with what Bill (Hewlett) and Dave (Packard) did when they ran the company. Certainly, she's driving change, but look at the way the industry is transforming itself. You have to be quick and successful. The direction that Carly's taken has been very consistent.
How do you think HP is different under her leadership?
Clearly there are different styles. Carly has been much more explicitly driving strategy at the corporate level. HP has always had a decentralized culture.
She's also made significant organizational changes to put more significance on customers. There's a much stronger focus on "go to market" and a stronger focus on customers.
Compaq took awhile to digest the Digital Equipment acquisition, which had its share of challenges. Anything learned about what and what not to do as a result of that process that is being applied here?
One of the first things Carly and I did was to go down to Houston to spend a day with Jeff (Clark) and Michael (Capellas), and for a whole day, we heard about the lessons Compaq learned. Also, in our spinoff of Agilent, we spent a lot time learning from that. A lot of principles came from both HP's and Compaq's experiences. One is that planning should not get ahead of line management, so that (managers) can guide some of this integration planning through their appointed leads. In retrospect, Compaq felt they had waited too long to do that.
Another thing is the way we structured our central planning effort to make sure it doesn't get fragmented. And third is to make decisions quickly--and tough decisions quickly. You don't make everyone happy in these situations.
Where do you think the integration process is going be most severely challenged?
I think the most important thing is to stay focused on the customer through this process. We have to maintain our current customer relationships as we merge our teams so as not to disrupt that.
Have you seen Booz-Allen's recent report titled "Merger Integration: Delivering on the Promise"?
How has that report affected the way in which you present your merger integration information--that is, are you using it like a playbook?
It makes some interesting points, but we're not using (the Booz-Allen report) as a playbook. There's been a lot written about mergers. I've been spending my spare moments talking to people who have done this before, and we're using consultants.