Keeping employees engaged and focused during times of change

1. Keeping employees engaged and focused during times of change Robin Andrews & Desiree Sylvester June 28, 2005

2. 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

3. HP Names NCR's Hurd as New CEO 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 Confidential

4. Change is constant • HP/Compaq merger: May 2002 • Realignment involving more than ½ HP employees: May 2004 • Goal to improve customer focus, growth, simplification • 3 CEOs in 35 business days • February 9: Carly Fiorina steps down • Bob Wayman named Interim CEO • March 29: Mark Hurd appointed new CEO Change HP Confidential

5. Communication challenges • 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 Communication HP Confidential

6. 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

7. “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 “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 Communications during M&As HP Confidential

8. 22% 21% 19% 31% 7% People issues account for nearly half of merger failures People and culture are at the heart of integration work Percent of responses Poorcommunication Business issues or other Corporate culturalclashes Poor management Lack of employeesupport Source: The Art of M&A Integration, industry literature, Roffey Park Management Institute, McKinsey Culture-related issues HP Confidential

9. Merger communications plan

10. 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 • Pulse survey results showed understanding and support increased 11% from January – March Plan HP Confidential

11. 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

12. Introducing a New CEO • Integrated program management office (PMO) for announcement • CEO’s 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 Mark’s vision for HP’s future HP Confidential

13. Deconstructing “commitment” Commitment consists of two components, rational and emotional Employee engagement framework Discretionary effort Performance Engagement drivers Commitment Intent to stay/ leave Retention Rational commitment The extent to which employees believe that managers, teams or organizations are in their self-interest (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

14. Employee engagement • 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 Monthly photo contest 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 HP Confidential

15. Engaging employees in the brand • Special promotions offered at up to 35% off including TVs, digital cameras, printers • Increase employee purchases more than 400% • Create HP brand ambassadors Enhanced EPP discounts Fender +hp guitar contest • Photo contest using HP cameras • Awarded special-edition Stratocaster guitars • 1,200 entries, 156,000 views to photo gallery • 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 Science of Printing HP Confidential

16. Ask HP 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 Employee clicks Ask HP link on portal HP Confidential

17. Transforming Internal Communications Continuous communications • 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 Two-way communications Aligned communications • 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 • Recognized strategic importance of IC • Established Internal Communications Program Management Office • Coordinated messaging across HP • Increased IC effectiveness Today: Accelerating growth Basic communications Employee and leadership engagement • Direct, one-way communications • Solid, basic tools • Limited feedback from employees • 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 2003 2004 2005 HP Confidential

18. 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 HP Confidential

19. 2004 awards • Dalton Pen Communications Award • IABC Gold Quill Merit Award • Ragan’s Top 10 Employee Publications Awards • U.S. Int’l Film and Video Festival • Chicago Film Festival • CINE • ASPC • Magnum Opus HP Confidential

20. Q&A