How to Separate a Fortune 50 Company in 391 Days
November 11, 2015 • Blog Post
Discover the strategy and tactics Hewlett Packard Enterprise used to separate into two companies in just over a year
Few headlines of the past decade have caused as much tumult in the business world as the October 6, 2014 announcement that Hewlett-Packard would separate into two distinct companies: Hewlett Packard Enterprise (HPE) and HP Inc. Some called the move bold and prescient; others saw it as a sign that the venerable Silicon Valley powerhouse was responding, perhaps belatedly, to an utterly transformed tech landscape. Through it all, HPs chairman, president and CEO Meg Whitman promised that the separation would provide both new ventures with the focus and agility required to be market leaders.
In this interview, Chris Hsu, a West Point grad and now chief operating officer of the newly formed HPE, speaks about leading the colossally complex separation process, the logistical and managerial challenges of the split and how the companys culture of innovation made the thrilling (and exhausting) experience so memorable and, in the end, so rewarding.
No matter how capable a person might be, heading up the separation of a company as large and complex as HPE has to be a daunting prospect. What was the first significant step you took in the process?
The first step was saying "yes" to Meg when she asked me to lead the separation. My background, from West Point and beyond, is about stepping up to lead big opportunities. I thrive in those types of environments. But to be honest with you, when Meg said we were going to separate the company and that she wanted me take the lead, for the first time I thought to myself, Im not sure I can do this. The idea was so big and so complex. But Meg made it sound like it would be the most awesome experience imaginable. Of course, when asked to take on a project like this, people usually think about it. They go home and talk it over with their families; they negotiate. But I said yes right on the spot.
In hindsight, I probably should have thought about it a little more. But its been incredible to see what people are capable of when they work as a team.
At this scale and this complexity, with the number of interdependencies we were facing, there is no substitute for structure, process and governance.
After agreeing to tackle the separation, how did you proceed? What was job one?
I knew right off the bat that I had to figure out what the biggest, most critical workstreams were, and which ones would act as gating items. I needed the best people in the company to head them up; I needed those people full time and I needed them up and running right away. Everything else was secondary. We had to get structure, process, governance and people in place. So I spent the first month of this huge project working around the clock, trying to make all of that happen. At this scale and this complexity, with the number of interdependencies we were facing, there is no substitute for structure, process and governance. There just isnt.
Give us a sense of the complexity that you and your teams faced during this separation.
When we were fully staffed and up and running, the hardest part was developing the plan to move forward. Think about it, HPE was a $110 billion company operating in 120 countries with more than 700 legal entities. The way a separation on this scale works is that you essentially have to separate and realign all 700 legal entities, and every one of those entities includes assets, people, revenue and so on. You have to figure out what the phasing and timing of each will be in order to get the IT systems up and running and in order to get employees in place so you can turn those systems on so that everyone will have day-to-day needs met, everyone will get paid and everyone will be able to manage transactions. On top of all of that, not every country operates with the same legal structures. Frances labor laws, for example, are very different from those in the U.S. In the U.S., our challenges centered on the sheer size of the business here. We essentially had to solve for all of that and execute in about nine months, because in order for us to separate on November 1, we needed to have 95 percent of our assets fully operational and established in their new legal structures by August 1 of this year.
The complexity was truly mind-boggling. I served as a M1A1 tank officer in the Army, and very early in my career I became a strategic planner who wrote operations for the military. I helped write plans and execute the deployment to Bosnia in 1995. Since then, I had never seen anything more complex from a planning standpoint than that operation until this HPE separation came my way. This project literally reminded me of a major military deployment.
What was the most unexpected result of the separation process?
One thing that struck me, although in retrospect maybe its not so surprising, is how emotional the prospect of the separation was for so many people. At the very beginning, some of my colleagues were voicing feelings of loss in a way that I simply didnt anticipate because from the start, I saw this as a clear, value-creating transaction with a clear mission. But I definitely understand their emotional reactions now because for that first month and a half after the separation announcement, we were moving at a pace that had peoples heads spinning.
This project truly reminded me of a major military deployment.
But the other thing that struck me, and struck me forcefully, is that this company is capable of executing at a scale and a level of excellence that Id never imagined. Remember, its an engineering company with an innovation mindset, which can sometimes mean that people engineer solutions to perfection by employing perfect information. But during the separation we had to make big decisions quickly and often with imperfect information. We were taking risks and then locking down decisions in less time than we might have given ourselves in the past. But the funny thing was, once everyone knew the decisions were locked, they executed like it was nobodys business.
Let me paint the picture for you. In the first few weeks of August, we were working at an incredible pace. We had global command centers operating around the clock. We had disciplined, military-like processes in place for the handovers that had to happen. We had automated dashboards on every single one of the processes in order to identify glitches. We were so ready for this separation. We had done mocks, tests and dry runs. And as it turned out, we did encounter some issues, but the speed at which the team identified and resolved them was absolutely remarkable.
It truly was the most awesome experience to be a part of, and Im so proud of how everyone responded to this enormous challenge. And by the end, when we saw how well the entire transition happened, we knew we had accomplished something special. I think it shows what these two new companies are capable of.