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Sat 23 Dec 2000 04:00 AM

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Morale plummets at HP over frozen increases and botched communications

Employees at HP's headquarters in the United States speak out about the computer giant over its methods of saving money.

Employees at HP's headquarters in the United States speak out about the computer giant over its methods of saving money.

A double-blow of delayed employee raises and botched communications about the action by management is causing morale to plummet at Hewlett-Packard, according to sources inside the company.

Crn.com, the Web site for Computer Reseller News in the United States reported today that the move this week by HP to delay employee annual raises for three months is actually a reversal by the company.

Earlier this month, HP had acknowledged that some of its Bay Area and Silicon Valley employees were underpaid and would be receiving larger-than-expected salary increases, sources said.

"Morale here is a lot worse because of this," said one HP employee at the company's headquarters in Palo Alto. "There are a couple of people who are okay with it, but from what I've heard, most people are really angry, and I think that's because we had just been told we were going to get better increases than we'd expected."

Sources said the situation was exacerbated because of the way employees learned of the reversal. Many employees found out they wouldn't be receiving their expected raises by reading a notice posted on the company intranet, HPNow, on Monday, December 18, they said.

Later in the week, the company shut down an internal electronic bulletin board where employees were posting their negative reactions to the news, sources said.

One employee said the move demonstrated a clear lack of concern by the company. "I was very disappointed because they had finally admitted that they weren't paying me my market value, and now that they've admitted this, they still aren't going to," the employee said. "It feels like they don't care."

About two weeks ago, managers received the green light to tell some employees they would receive raises in the 8% to 15% range, up from the usual 4% to 6% range, sources said. One manager said it would be difficult to keep valued employees now, with the company vacillating on its policy toward employee compensation.

In an internal e-mail memo dated December 21, HP chief financial officer Bob Wayman admitted that the way employees were informed of the decision to delay raises "was not popular." He said the company "certainly could have done a better job in communicating this decision."

The pay raise policy reversal has prompted some employees to doubt whether HP can navigate its way through a turbulent technology market that saw the company's fourth-quarter earnings fall ten cents short of Wall Street expectations last month.

"The expense-control measures we have taken have caused some of you to question the fundamental health of HP," acknowledged Wayman in his December 21 e-mail. Yet he assured employees that HP's "financials are sound."

However, all employees were not convinced. One employee doubted the company's health because management is "concentrating on very small things in order to save money, like how much we spend on pencils. If they're worried about pencils, we must not be doing well."

The employee also speculated that there was a double standard about the cost-cutting measures. "A lot of us are wondering why Carly [Fiorina, HP's CEO] is worried about how much we spend on pencils when she says she can't do her job without two Lear jets," the employee said. "I can't do my job without a pencil. Maybe she can't do her job with a Lear jet, but why does she need two?"

HP hopes the deferred employee pay increases will save the company at least $140 million over the course of the year, Wayman wrote in his memo. "This $140 million could make a significant difference if we end up facing the economic environment we are planning for," the memo said.

Sources said signs had been posted throughout HP headquarters reminding employees they could help the company save up to $50,000 by turning off their computers when they left for this holiday weekend.

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