May 5, 2004 - From the June, 2003 issue

HP's Larry Welch On Corporate Citizenship In A Competitive And Ever Changing Global Economy

At the June Civic Entrepreneurs Summit in Sacramento, MIR interviewed Valley Vision's Larry Welch, Hewlett Packard's Global Director of Operations Procurement. Welch here comments on the challenges of restructuring government in California; the need and utility of regional collaboration; and the evolving socio-economic responsibilities that large multinational corporations competing in cost conscious global marketplace have. He also notes how many jobs at Hewlett Packard are no longer in California.

Larry Welch

Larry, you've been quite active as a corporate citizen in Valley Vision, a regional collaborative whose mission is to increase the civic and collaborative capacity of the six-county Capitol Reigon and ensure sustainable economic, social and environmental vitality. Repesenting a major corporation headquartered in California, elaborate on the challenges HP faces in this state, as well as what you must contend with as a corporate leader in your community?

HP has been going through a minute by minute decision on everything we do because of the recent merger with Compaq. We have had to make choices on issues from what products we want to sell, which people we want to keep, where we want to manufacture our products and how we reconstruct the company globally. Every aspect of our business-all the way down to which toilet paper are we going to use in a particular plant-has been a practical, fact-based decision on what is the best economic path for HP to follow.

While HP continues to be an enlightened corporation both structurally and environmentally, we are faced with an economic dilemma of being competitive or being out of business. And so, because of the abundance of regulation in California, the lack of incentives for business, the high cost of labor, the decaying infrastructure and the total number of barriers that are against business in this state, most of our decisions have concluded that it is better to do business elsewhere.

Let's take a half step back and discuss HP's decision over the years to move some of it's facilities and employees to the Sacramento area from Silicon Valley. What inspired that relocation and what decisions are being made about HP's future investment in the region?

Originally, our Roseville location was a satellite site of the Bay Area operation, built a little over 20 years ago. Roseville is seen as a low cost place to do business because of the cost of housing and the high quality of life. It was a great place for people who had grown up in the Bay Area or who wanted to relocate families to a more family-centered community and still stay in California. Over the years, the operation grew to the point where we had 6,500 HP employees and at least 6,000 more contractors working in Roseville. So, we had a direct population of 12,000-13,000 people in the Sacramento region. Over the course of time, and not just because of the merger, business decisions were made to begin to relocate those operations to other states, or in some cases, to other countries. Today, we're 50% smaller than we were three years ago. If you combine all of the direct employees and the contractors, we have about 6,000 people in Roseville.

How is globalization affecting HP's commitment to it's civic endeavors and the allocation of your management time in the community?

Some recent research revealed that out of the 100 largest economies in the world, 51 are multinational corporations. Fewer than 50% of the largest economies in the world are actually nation-states. To me, that's clearly a call to action for those corporations to take on not just economic responsibility, but also social-environmental responsibilities equivalent to those that governments and nation-states have.

And how ought/does that manifest itself?

The way that it manifests itself in my mind is that HP participates with collaboratives at a local level and at a regional level. And actually, I am an advocate of more consolidation of issues and more use of the power and the leverage of the collaboratives as a single entity. I think that the way that issues manifest themselves are pretty local in terms of environmental and social problems and solutions. I know there are state-wide polices addressing social and environmental issues, but we have to make on-the-ground decisions about land use and about social services that tend to be fairly locally based.


Now, some of those social services are broader than others. But, it's my belief that the bigger the entity, the more impact it has. And, there's not a lot that Valley Vision can do on an economic basis to make an impact at the state level about whether or not it's a good place to do business. That has to be taken at the state level and the collaboratives have to work together and leverage their power as a consolidated voice to influence policy.

This morning, Bill Hauck made mention of a growing perception that the state's political system is not only broke, but broken. Governance is an issue dominating Hewlett Packard at the moment, so the subject is not unfamiliar. Address the state's governance challenge from the perspective of the corporate citizen you are. Because of term limits, because of the way reapportionment was done, because of the imbalance in the tax and revenue system in the state, how can California government best grapple with the tough choices it must make?

It's hard to comment on an individual or specific component of the state system that's broken and about which we can point to and say, "fix that and things will be better." I completely agree with what Bob Hertzberg said about crafting a solution. We are close to a tipping point, in that there's an appetite in the state for something significantly different. If we can get to that point where we can flip the switch, take advantage of our power in business and collaboratives; if we can all come together to influence a solution, we can fix some of these problems. Is it going to happen quickly? No. Is it going to be easy? No. Do I know what the answer is? Absolutely not. But I do believe that there are people smart enough who are engaged, and if we initiate the right process, we can initiate positive change.

Bill Hauck, President of Calif. Roundtable also noted that there hasn't been the will, resolve and money in the state's business community to fund initiatives that would fix the state's politically paralyzed system. Is he right? Is he wrong?

Well, actually he may be right. There may not be the will. It's easier to flee than to fight in this case, to use the human instincts. I'm not sure that business wants to take on that fight. We'll see.

In closing, what's at stake if our political systems fails to self correct?

Fundamentally, California's economic prosperity is at stake. And, I think the quality of life in California is at stake. I want to be an environmentalist. I want to spend my time in collaboratives on land use issues, environmental issues-that's where my passion is. I spend my time on economic issues and business issues at HP. I don't have that luxury anymore. I'm a complete voice of economics and the problems that we have in economics in the state. Until we fix those, I'm afraid that everything else is directly related to our ability to fund progressive solutions to social and environmental opportunities though sound fiscal policy and fundamental financial stability.



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