OTD Case AgilentTechnologies

GRADUATE SCHOOL OF BUSINESS
STANFORD UNIVERSITY
CASE NUMBER: OD-1A
SEPTEMBER 2001
AGILENT TECHNOLOGIES: ORGANIZATIONAL CHANGE (A)
“I was looking for people who are open and willing but who are looking for change…even though we’re
an $8 billion ‘start-up’ with 43,000 employees, we have a clean sheet to do things as we want to.”1
—Ned Barnholt, President and CEO of Agilent Technologies
On March 2, 1999, Hewlett-Packard (HP) announced a plan to create a separate company,

subsequently named Agilent Technologies, made up of HP’s businesses in Test and
Measurement, Semiconductor Products, Healthcare Solutions, Chemical Analysis, and the
related portions of HP Laboratories. Seven months later, on November 1, 1999, Agilent began
operating as a separate stand-alone company. On November 18, 1999, Agilent launched its
initial public offering, which, at $2.1 billion, was Silicon Valley’s largest IPO to date. After it
became an independent company, the Agilent team embarked on an organizational and cultural
transformation focused on corporate strategy, operations, and people practices. Six months after
the IPO, Agilent ranked 46th on Fortune’s list of the best companies to work for and ranked
significantly higher than HP, which came in at number 62. By mid-2001, Agilent had facilities
in over forty countries. It employed 46,000 people and served customers in more than 120
countries and more than half of the company’s net revenue came from outside the United States.
For the fiscal year 2000, ended October 31, 2000, Agilent booked $10.8 billion in revenue, an
increase of 29 percent over $8.3 billion for fiscal year 1999. Net income increased by 48 percent
over 1999 to $757 million (Exhibit 1).
In developing the transformation strategy, Agilent President and CEO, Ned Barnholt, grappled
with how to improve the efficiency and effectiveness of the new company, while still
maintaining the best portions of HP’s culture and practices. He and his transformation team
embarked on the delicate task of updating the HP values so ingrained in his workforce. Barnholt
adopted HP’s values of innovation and contribution, trust and respect for individuals, and
uncompromising integrity, but he added three new values: speed, focus, and accountability.
Barnholt also wanted to improve the company’s efficiency in terms of shared services (e.g. IT
and HR). For example, he initiated a program to shift the company from 2,000 legacy IT
1
Peter Meade, “The ‘$8 B Start-up’ Starts Out,” Communications News, July 2000, p. 14-15.
This case was written by Victoria Chang under the supervision of Professors William Barnett and Glenn Carroll at
Stanford Graduate School of Business as the basis for class discussion rather than to illustrate either effective or
ineffective handling of an administrative situation.
Copyright © 2001 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order
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Version (A) 12/01/01
Agilent Technologies (A) OD-1A p. 2
systems to four company-wide systems. Barnholt wanted the businesses to focus more on
external market and competitive issues, rather than internal operational issues. To accomplish
this, he fundamentally changed how business leaders operated by moving accountability for
shared service functions away from the businesses to the corporate center so that business leaders
would focus on marketing, R&D, and manufacturing, and other directly owned activities.
In mid-2001, amidst the company’s transformation efforts, the Agilent team faced a series of
unexpected challenges. On April 5, 2001, Barnholt announced that business conditions had
worsened further than previously expected, especially within the communications and
semiconductor end markets. He lowered Agilent’s revenue and earnings estimates for Q2 2001
to below the original estimate of $2.9 billion. Later in May, he gave growth guidance of 10 to 15
percent rather than 20 percent. Barnholt told analysts that he planned to cut salaries across the
board by 10 percent without layoffs because he believed that the cyclical downturn would be
short-lived. The salary cut would save Agilent $70 million per quarter in operating expenses.
Other cost cutting measures would include cuts in discretionary spending, travel, and temporary
employees, as well as reduced production schedules or temporary plant shutdowns.
In May 2001, Barnholt walked toward a conference room in the new Agilent offices in Palo Alto,
California. He had called a meeting with his management team to discuss the company’s
transformation efforts since independence. The economic downturn seemed to vindicate his
earlier decisions to streamline and simplify. However, Barnholt wondered whether he and his
team had gone too far in the organizational and cultural changes they had tried to implement.
Agilent’s Chief Operating Officer, Alain Couder, expressed a similar sentiment when he said,
“Perhaps we’re centralizing too much, but when you have a pendulum, it goes one way all the
way and many times you have to swing it back some.”2 Barnholt wondered whether his vision of
speed, focus, and accountability would be compatible with HP’s legacy values and culture; and if
they were compatible, how would he integrate the two?
THE HP CULTURE AND ORGANIZATION
HP’s founders, Bill Hewlett and Dave Packard, with the help of HP’s businesses, had created a
distinctive culture and set of management practices known as “the HP Way:” (1) maximize
profit, (2) offer customers value, (3) focus on contribution (HP strove to offer unique products
and services and was not a “me too” company), (4) use growth as a measure of success and
survival, (5) employment security comes from growth, (6) guide the organization by objectives,
and (7) contribute to the community. The founders developed the HP Way to ensure that the
company’s growth would not inhibit the entrepreneurial spirit that distinguished the company.
For decades, HP’s organization had been highly decentralized. Throughout its history, the
company relied on rich informal networks (based on the long tenures of employees and
employee rotation) for communication. The company gained a reputation for having an open
culture in which employees, including the CEO, worked in open cubicles. Operating divisions
had significant autonomy, controlling their own R&D, finance, marketing, and HR functions.
Decision-making was primarily consensus-based. The decentralized structure was often cited for
stimulating product innovation amongst engineers and within divisions. In the 1980s, HP moved
2
Interview with Alain Couder. Subsequent quotes are from this interview unless otherwise stated.
to a more centralized organization in order to provide its non-technical customers with integrated
solutions to their computing needs. In 1990, HP shifted back to a decentralized organization due
to the company’s decline in innovation, time to market, and performance (Exhibit 2).
RATIONALE FOR SPIN-OFF
In March 1999, HP announced that it would spin off the components of the company that would
become Agilent in order to achieve greater strategic focus. Within HP, Test and Measurement,
Semiconductor Products, Healthcare Solutions, and Chemical Analysis had labored in relative
obscurity. They were largely overshadowed by HP’s powerful consumer brand in products such
as inkjet printers and personal computers. The only time investors cared about the measurement
businesses was when their problems dragged down HP’s overall earnings, as they did during the
Asian economic crisis in 1998.
As HP approached the mid-1990s, it experienced more and more difficulty meeting analyst
estimates and growing revenue. From mid-1996 through mid-1998, HP failed to meet analyst
earnings estimates for six out of eight quarters. Decentralization led the company to miss
opportunities to gain efficiencies across the businesses and to fail to invest adequately in new
business opportunities. Many senior executives noted that controversial, cross-business
decisions were sometimes deferred or driven down to group presidents. One executive discussed
the problems of decentralization: “Several computing systems weren’t looked at in total—UNIX
and PC were treated separately in silos…this meant that investment and return were tracked
separately and the customer experience varied. This was also true with printers. They were
divided into Laser and Ink-Jet silos,” said Carolyn Ticknor, President of Imaging and Printing
Services.3
HP’s Board of Directors began to investigate ways to revitalize and re-energize the company.
“We did a study on why large companies stall and we learned a lot in the process. After that, we
tried a lot of things inside the company to get ourselves better aligned around individual
businesses. But at the end of the day, we decided that HP had become a fairly complex company
and it’s very difficult to run a large company with multiple business models...if we were just one
$40 billion business, it would be a lot easier,” recalled Barnholt.4 Barnholt described HP’s core
business of computers and printers as a model with tight margins, indirect channels, and a strong
emphasis on marketing. In contrast, the measurement businesses required direct selling and a
much higher investment in R&D to develop cutting-edge technologies and turn those
technologies into useful products.
One alternative for improving the alignment around the individual business was to create a
holding company with HP’s businesses operating underneath the center. However, HP’s Board
worried that the operational and technological linkages between its businesses would make the
holding company structure difficult to manage. Another alternative was to separate HP into
three parts: a computer business, printer business, and test and measurement business (and to
then spin-off new businesses as they developed). The Board ultimately decided to break the
company into two parts for the sake of simplicity. “Splitting up the shared resources and
3
Philip Meza, “The New HP Way,” Stanford Graduate School of Business, August 15, 2000, p. 6.
4
Interview with Ned Barnholt. Subsequent quotes are from this interview unless otherwise noted.
infrastructure was bad enough as it was with two parties, but if you had to split it three ways, it
would have been a nightmare. A three-way split might have made more sense from a strategic
standpoint since there were three focused businesses, but from a purely pragmatic point of view,
we couldn’t split it three ways,” recalled John Eaton, Vice President of Corporate Development.5
With two rather than three companies, it became instantly clear that the computer/printer
business would retain the HP brand name (Exhibit 3).
In an era in which companies tended to focus on one business area, some analysts perceived
Agilent, with its multiple businesses, as a move in the opposite direction. Agilent did
everything from testing products for semiconductors and wireless telephones to designing and
producing chemical analysis equipment and clinical measurement systems (Exhibit 4). “We are
a technology company with deep expertise in many disciplines,” Barnholt explained, and pointed
to some of HP’s achievements—a semiconductor product for Microsoft’s mouse came from
HP’s medical-imaging efforts and a breakthrough in photonic switching emerged from HP’s
renowned inkjet technology.
PREPARING FOR THE SPIN-OFF: MARCH 2, 1999 TO OCTOBER 31, 1999
Barnholt recalled the excitement he and his team felt about the spin-off: “In hindsight, there
were probably not a lot of things that HP held us back from doing, but just the act of being
independent opened up a whole new horizon…all of a sudden the blinders were off and we could
spend a billion dollars to buy a life science company if we felt that we wanted to, but at HP, they
would have wondered why is a computer and imaging company spending money on this.
Everything was on the table and we could go out and do anything we wanted.”
During Barnholt’s first year of leadership, he focused on building the new Agilent brand,
establishing an independent operation, and building “esprit de corps” among Agilent’s
employees through the vision, corporate objectives, and values. He also had the challenging task
of bringing Agilent through an initial public offering.
AGILENT: FIRST STEPS
Building the Brand

For the first three to four months after the spin-off announcement, Agilent operated as “NewCo”
while the team assessed over ten thousand names for the new company. “We ended up with
‘Agilent’ partly as a way to remind us every day that speed was one of our core values…and it
was a constant reminder to us and our employees that this was the standard that we had to hold
ourselves to,” said Barnholt. The company threw a celebration in the summer of 1999 to unveil
the new name, logo, and tagline, “Innovating the HP Way.” Selected employees from around the
world came to celebrate in San Jose. Francis Fischer, the advertising executive who helped
launch Agilent’s advertising campaign commented on the challenges of branding Agilent.
“What makes this a challenge is that Agilent does components as well as the equipment itself,”
he said. “It’s the chip inside your cell phone that tells your cell phone how strong a signal it has.
5
Interview with John Eaton. Subsequent quotes are from this interview unless otherwise noted.
Agilent is a lot like Intel, in that you want people to think of choosing equipment with Agilent
components inside.”6
Developing Agilent’s Vision, Corporate Objectives, and Values

Barnholt knew that building credibility with his employees would not be an easy task. He
discussed the challenges he faced: “There were a lot of sad faces when we announced the split
of HP, and a lot of people were wondering whether the businesses would survive or not…many
employees thought they should stay with HP since HP was a safer bet and had the brand name.”
Many employees also did not want to relinquish their association with HP since Test and
Measurement was the original HP business. Many employees felt that the Test and
Measurement business was spinning off HP, rather than the other way around.
To allay employee fears, Barnholt wanted to ensure that the new company would begin with the
right vision, corporate objectives, and values. He developed a vision for the company that
emphasized improving people’s lives. Many employees joined the company because they were
inspired by Barnholt’s vision to “provide innovative technologies that change the way people
live and work.” Barnholt described his vision:
I wanted to send a message to employees that we were a start-up with the scale and the
reach of an $8 billion dollar company. We would emphasize three important values: (1)
speed, (2) focus, and (3) accountability. We wanted to be faster and more responsive to
customers; to make sure we aligned our channels and our marketing programs with our
communications and life sciences business; and to overcome the feeling at HP that the
contributions of individuals or groups didn’t matter. As Agilent, everything we did
would be magnified and that translated into accountability.
Although employees acknowledged Barnholt’s vision, they had joined Agilent for the same
reasons they had joined HP: for the core HP values. In response, Barnholt modified his original
message and included more about the HP heritage to incorporate the employees’ value
orientation: “I changed my message a little and started saying that we’re going to bring forward
the very best from HP, the best values, and the best of the HP culture. One was in the way we
treat each other and our strong belief in our people as a competitive differentiator and second
was our culture of innovation and contribution.”
Establishing an Independent Operation: “Clone and Go”

Barnholt took the existing HP processes and systems and replicated them, with the goal of
establishing an independent operation in eight months, by late 1999. This was called the “Clone
and Go” strategy. Because of HP’s highly integrated global infrastructure, the separation was
tremendously complex (intertwined information systems, HR, logistics, and assets). “Agilent
began operating as a separate company on November 1, 1999. At the same time we began the
legal process of transferring all of the relevant assets and operations from HP to the new
company. This was an incredibly complex operation that had to be completed before the IPO on
November 18. We were really nervous that one domino would fall out of place and ruin the
whole operation,” recalled Eaton.
6
Laurie Freeman, “Fischer Helps Make Agilent’s Dreams Come True,” B to B, November 6, 2000, p. 46.
Transferring Relevant Assets from HP to Agilent

HP comprised approximately 170 legal entities that were not business-related, but were primarily
geographic or country-related organizations. “HP had a very convoluted worldwide structure,”
said Eaton. “In order to execute the spin-off, we couldn’t tear all of this infrastructure apart so
we duplicated that structure worldwide, otherwise we would destroy all of the already existing
benefits and watch the whole intricate web collapse, if we weren’t careful.” The team spent a
great deal of time creating new entities associated with the new company and transferring assets
from HP to the new entities. Instead of forming 170 legal entities, the team managed to shave
the number down to 80 legal entities. “In a few cases, we couldn’t actually split the HP entity
since it would be a huge tax liability. For example, in Germany, all of our land is held in a tax
trust that we can’t undo, so HP and Agilent now both lease buildings from this tax trust,”
explained Eaton.
Beyond creating legal and tax structures worldwide and allocating and transferring assets and
liabilities related to the 170 legal entities, the team had to deal with six hundred physical sites,
clone the network and IT infrastructure (move more than 1,600 servers and clone more than 500
major applications), negotiate and execute intellectual property and license agreements of more
than 11,000 patents/licenses, negotiate and implement more than 1,000 service agreements,
transfer, assign, and re-negotiate over 1,400 third party agreements, and allocate 16,000 shared
employees between the two companies (employees who didn’t fall specifically into either HP or
the new company—usually functional employees such as HR). The spun-off businesses also had
a number of interdependencies with HP such as cash, pension and benefits, employee stock
programs, tax issues, contracts, and intellectual property. “Taxes and patents were the two
toughest categories to resolve,” said Eaton. “Many of the patents were clearly HP’s or ours, but
a few of them such as the ones related to inkjets were complex since we used them in life
sciences and in the optical switch and they were critical for our business and HP’s.
Understandably, HP also didn’t want us using patents to make products for their competitors
such as Sun Microsystems.”
Relocating Shared Employees

To determine the human resources needed by Agilent, the transformation team “decided what
resources we needed and ended up with three thousand of the sixteen thousand shared services
employees,” recalled Eaton. “A lot of people didn’t think going to the new company was a good
thing initially and people saw the formation of Agilent as a result of HP’s 1998 to 1999
downturn, but people didn’t really take note of the fast track communications pieces of our
business.” Other employees happily joined the new company because of promotion
opportunities and the uncertainty of HP’s new management. “In the first three months after the
separation was announced, it was difficult to get people to come to the new company unless
there was a clear leader or manager they wanted to come with. But later, at the time of the IPO,
we received a lot of interest from HP employees who wanted to come to the new company,” said
Eaton. The team set and met its June 30, 1999 deadline to assign every shared services
employee to either the new company or HP. The team allowed employees to express their
personal preferences and tried to honor preferences as much as possible. Employees could also
transfer to or from Agilent and HP until April 30, 2000. “During that time, we thought over
1,000 people a month would transfer between the companies, but the number was closer to 300
people per month. For every two people who came to Agilent from HP, only one person went to
HP from Agilent, and given the size of the two companies, you’d think it would be the opposite,”
said Jean Halloran, Vice President of Human Resources in Agilent.7
Reassessing HP Laboratories
Another complication was how to divide HP Laboratories. HP Labs was the number two R&D
lab in the United States. Since 1966, the lab had been at the center of HP’s basic and applied
research. For example, 70 percent of HP’s Test and Measurement revenue was derived from
products that came out of the Lab during 1996-1999. At the time of the spinoff from HP, Agilent
received 40 percent of HP Labs.
Facilities Challenges
Facilities posed another challenge. From the announcement of the split in March 1999 to June
2000, many employees who had transferred to the new company still remained physically
located at HP sites. “Up until our new Agilent headquarters building opened, we were still
sharing HP facilities at HP headquarters. We were separated a bit, but not much. We didn’t take
over a floor, but we had some cubicles intermingled with HP cubes and we all shared a cafeteria
and listened to HP announcements over the speaker systems, so we did not have our own clear
identity,” said Eaton. From March 1999 to November 1999, the team planned the process of
splitting off and prepared for operations, but the split did not technically occur until November.
“We planned for the split, but we weren’t actually operating as an independent company. We
were still 100 percent HP, and theoretically, HP could have cancelled the whole thing,” recalled
Eaton. “You were still an HP employee and nothing had changed, except that you got this little
tag on you that said, if this split is allowed, you’re going to be part of something different and
people quickly developed critical mass so the split-off employees wouldn’t be isolated.”
A New Chief Operating Officer and Board

Ned Barnholt had spent the majority of his career at HP. Barnholt joined HP in 1966 in the
company’s former Microwave Division and worked in various positions ranging from research
and development engineer to product manager. Prior to Agilent, Barnholt served as Executive
Vice President and General Manager of the Measurement Organization. He commented on how
HP influenced him and his role at Agilent:
It’s been exciting and a dream come true, having spent many years at HP. I’ve
grown up in the HP values and have a very strong belief in its values around
people and innovation and I frankly couldn’t operate any differently because
that’s what I grew up in for thirty-four years. On the one hand, that’s good. On
the other hand, if the company was going to be different, then I realized I needed
to be different. I’ve really stretched myself to look at areas where I needed to be
thinking about things differently.
To balance his HP background, in February 2000, Barnholt recruited Alain Couder as Chief
Operating Officer and Executive Vice President. “I wanted to bring in the COO who came from
the outside [even though Couder did spend some time at HP]. Most of my managers came from
HP. We also brought in a number of other people from different companies at fairly senior
levels in our functional areas as well as in the businesses,” said Barnholt. Prior to joining
7
Interview with Jean Halloran. Subsequent quotes are from this interview unless otherwise noted.
Agilent, Couder served as chairman, president, and CEO of Packard Bell NEC where he
improved operational performance and drove innovation. Couder worked at Groupe Bull from
1991 to 1998 and helped the French computer company develop its vision and strategy. Prior to
Groupe Bull, he worked at HP as a general manager in the computer business in the United
States and France from 1984 to 1991.
Couder shared the responsibility of the President’s office with Barnholt. In this position, Couder
focused on operations and their improvement, management processes, and short-term strategic
and tactical issues, while Barnholt focused on long-term strategic issues. The business group
heads reported to Barnholt for strategy and direction and partially to Couder on functional issues.
“Some business managers go to the person who will give them the answer they want to hear, but
we have learned to work together and my office is right next to Ned’s office so it makes it
easier,” said Couder.
Barnholt also recruited an active and objective Board of Directors. “I wanted to recruit an active
board that would be willing to fire me if I wasn’t doing a good job, and I believe I currently have
that. They’re very active and engaged,” said Barnholt. Agilent’s Board had a non-executive
chair, Jerry Grinstein, who had experience serving as the non-executive chair of Delta Airlines.
The Board consisted of eight people, all with U.S. backgrounds (Exhibit 5). Barnholt was the
only Agilent insider. The board members met approximately six times per year.
THE IPO: “DAY ONE OPERATIONS”
On August 16, 1999, the team filed a registration statement with the SEC to bring Agilent public.
To celebrate the filing and the official name launch of the company, Barnholt invited 300 site
representatives from across the globe to the Technology Museum in San Jose. After the
celebration, Barnholt and his team continued preparing for the split and the IPO. Barnholt hired
investment bankers to help shape the company’s communication to Wall Street. The team
needed to persuade institutional investors that HP was not just unloading the dregs of its
business. The difficult task of positioning Agilent in a positive way was compounded when HP
hired a new president and CEO, Carly Fiorina, who was spearheading her own “reinvention”
efforts. “It was very important to synthesize a very complicated story and make it
understandable to the Street,” said Tim Sullivan, the investment banker working on the deal.8
Management developed a presentation to explain the rationale and benefits of the spin-off to
Wall Street that included “greater strategic focus and intensity,” “increased speed and
responsiveness,” “better incentives for employees and greater accountability, “benefits from
Agilent Technologies Laboratories,” and “more direct access to capital markets.”
Analysts had a hard time valuing the company: “In our view, there is no company like Agilent;
it is a test and measurement company, a health care products company, a chemical analysis
company, and a semiconductor products company. The common element in all these businesses
is the technological innovations Agilent has contributed to the market it serves,” said
SalomonSmithBarney analysts.9 Agilent’s IPO on November 18, 1999 was a huge success. The
8
Mark Veverka, “Plugged In: Agilent IPO Illuminates a Long-Ignored Business as Morgan Stanley Battles
Goldman for Tech Crown,” Barron’s, December 27, 1999, p. 38.
9
John B. Jones, “Agilent Technologies, Inc.,” SalomonSmithBarney Equity Research, December 27, 1999, p. 3.
stock closed on its first day of trading at $42 per share, a 40 percent increase on its offer price of
$30 per share. The proceeds from the IPO were distributed as a dividend to HP, which in turn
agreed to provide Agilent with approximately $1.1 billion in start-up funding. For the
celebration, Barnholt invited 50 employees from around the world to visit the New York Stock
Exchange. “We had people from China, Europe, and South America who never expected to see
this in their lives. A lot of it was about sending a message to employees and getting them
involved in the excitement about creating a new company,” said Barnholt.
“DAY TWO OPERATIONS” AND ORGANIZATIONAL TRANSFORMATION
After Agilent’s successful IPO, Barnholt and his team launched the transformation. “During our
‘day one’ planning, my first reaction was to make a lot of changes, but I agreed with the day one
operations team that we would save all of our transformation efforts until after we started
operating as a separate company,” said Barnholt. “I really wanted to change Agilent’s culture,
but I knew that cultural change would not happen overnight and that I needed to develop a
strategy to guide cultural change.” (Exhibit 6).
In the fall of 1999, the team (along with McKinsey and other consultants) benchmarked a dozen
“high-growth” and “high-performance” companies that Agilent wanted to emulate, including
Cisco, QUALCOMM, Dell, Nokia, and Intel. The team met with these companies and identified
characteristics of high-growth and high-performance companies. Characteristics included an
obsession with customers, a bias for action, strong values around people, and innovation not just
in products, but also in processes and business models. The Agilent team used these
characteristics as a roadmap to develop more specific goals. “For example, we noted that many
of our traditional peer organizations had growth rates of around 12 percent per year compounded
annually; we looked at these companies and decided we wanted to be more in the 15 to 20
percent range,” said Barnholt.
Based on his team’s analysis of high-growth and high-performance companies, Barnholt decided
to focus Agilent’s transformation on three areas: (1) strategy, (2) operations, and (3) people
practices. He called the transformation the “beAgilent” campaign. Some team members noticed
the pace of change picked up when COO Couder arrived. “Even though we were fast, when
Alain came in, he was even faster and we immediately began talking about Stratos, Excella, and
Vantage, [the initiatives] which he named,” said a member of the team.
Strategy: Stratos
Historically HP developed and managed strategy in a decentralized, “bottom up” fashion where
heads of business groups had maximum freedom: “We ran the four big businesses like a holding
company…the situation was that 80 percent of the company (by revenue) had been run outside
the corporate center,” said Susan Bowick, HP’s Vice President of Human Resources.10 Barnholt
wanted to take a more top down approach to strategy where the corporate center was more active
in developing strategy and evaluating new opportunities. Each month, in his staff meeting with
his senior management team, Barnholt would devote one day to discussing Enterprise-level
strategic issues such as portfolio balance, cross-Group opportunities, macro-trends, and the
challenges of new business creation.
10
Meza, op. cit., p. 4.
Barnholt led the strategy team to assess Agilent’s portfolio of businesses and to determine the
relative value contribution of each to the company overall. The analysis resulted in the decision
to exit the health care business. “We decided to exit the healthcare business because to be
successful, we would have to spend a lot of money to build and scale our business to compete
with other companies such as Siemens and GE, and we felt we could better spend our money in
communications and life sciences,” noted Barnholt. In late 2000, Agilent sold its health care unit
for $1.7 billion to Royal Philips Electronics of The Netherlands. Agilent’s health care unit was
responsible for $1 billion of revenues for the first three quarters of the financial year ended
October 31, 2000 and represented 13 percent of the company’s revenue. Based on the team’s
strategic analysis, Agilent also exited a number of other smaller businesses, such as its video
broadcast server business. Barnholt commented on the diversity of Agilent’s businesses and the
company’s growth strategy:
If you look at HP’s historical average of 18 percent growth per year, it achieved that by
innovation that allowed it to evolve from a measurement company, to a computer
company, to a printer company, and now today they’re in the consumer business. I want
to apply that to Agilent. Today we’re largely a communications and electronics
company. The next big thing is life sciences. I want our businesses to focus on today
and the labs to focus on these longer-term innovations. A lot of analysts were skeptical
about Agilent being in different businesses and we experienced a lot of pressure in the
first year to sell off various pieces of the company and focus. You really have to think
about what’s the right thing for the company in the long-term, and selling the healthcare
business was a strategic decision based on our desire to invest in other high growth areas.
Even though Agilent exited the health care market, the company remained in the life sciences
business because Barnholt believed that there were potential synergies between communications
and life sciences: “Life sciences is a market undergoing a lot of change; it’s very fragmented
and there’s not a lot of market leadership out there. It lends itself to companies like Agilent that
can bring new technologies into the market. The business models are also similar, requiring a
direct channel and low volume, high mix manufacturing.”
The strategy team identified five growth opportunities outside of Agilent’s main business areas
for Agilent Labs to investigate further. In 2001, Barnholt allocated $100 million of incremental
R&D to these opportunities. In addition, the company decided to augment its R&D capabilities
with a more proactive Corporate Development function for acquisitions, strategic alliances, and
venture investing. Agilent acquired numerous companies through 2001 that were intended to
strengthen existing businesses. One example was Agilent’s acquisition of SAFCO. Agilent
already provided test and measurement products that helped wireless service providers install
and optimize their networks. SAFCO’s portfolio added software and services expertise
including network planning and design and competitive network benchmarking. The union
positioned Agilent to deliver end-to-end products and services for network planning, design,
installation, optimization and operations of wireless networks. Agilent acquired Objective
Systems Integrators (OSI) for $665 million in November of 2000. OSI produced system support
software for communications service providers. With OSI, Agilent could offer a broader range
of network monitoring and service assurance capabilities to its current customer base. For
earlier-stage technologies, the company launched “Agilent Ventures” to invest in high growth
areas such as optical networking, wireless communications, and life sciences. Through strategic
venture investing they hoped to find new companies as potential technology partners or future
acquisition candidates.
Operations: Excella
Agilent launched an operational improvement program, internally called “Excella,” led by COO
Alain Couder. The team wanted to (1) improve operational efficiencies and (2) shift the focus of
business leaders from internally based metrics to the external marketplace. To accomplish these
objectives, Couder consolidated shared services activities and implemented a more centrally
driven shared services structure, shifting many functional employees to the central organization.
He also made a number of changes in the formal organizational structures within the business
groups to foster market alignment and shifted country managers for greater central control.
Central Shared Services

Couder wanted to centralize and standardize common processes such as payroll, payments to
vendors, operations procurement (office furniture, supplies, etc.), but not functions such as order
fulfillment. Couder shifted the majority of the shared service employees to the central shared
services organization. If business managers needed additional tailored IT services, they had to
convince Couder of their needs, rather than make the decisions on their own. In order to change
managers’ behaviors, Agilent measured its business leaders on revenue and profit targets against
controlled costs, excluding shared service allocations and charge backs. Shared services were
billed as corporate overhead so the businesses could focus solely on “getting products out the
door and benchmarking themselves against their peers in the industry,” said Barnholt. Under
HP, General Managers’ (what business leaders were called at HP) budgets were evaluated based
on all the costs of their units, up to 50 percent of which they did not directly control, causing
many of them to focus inordinately on the internal rules of cost allocation. These changes helped
the business leaders focus all of their efforts on managing their businesses for maximum value
creation.
Barnholt believed such changes translated into business success: “We’re actually seeing some
benefit to centralization. We’ve been able to reduce our infrastructure costs and our business
managers are doing a much better job of getting new products out the door. In addition, in 2001,
we’re going to have more new products out the door than we have had in the last five years on an
annual basis.” Couder agreed: “By Q2 2001, we will have significantly reduced our SG&A
because of the Excella program; we’re finally starting to see the results of all of our efforts.”
Barnholt commented on Excella’s progress:
We’re in the process of changing many of our HR systems to deliver them via the Web.
We’ve consolidated many of our financial transaction service centers so that we can take
advantage of scale, we’ve reduced our IT costs by reducing the number of PCs and
printers per person, we’ve consolidated the IT resources into one organization whereas in
the past, every division would have its own IT organization, leading to over 2,000 IT
systems. Now we’re moving down to four systems—Peoplesoft for HR, Vantive for
customer support, Broadvision for our Web platform, and Oracle for all of our ERP and
finance.
One of the challenges of implementing centralized services was overcoming resistance from the
businesses. Barnholt commented:
We did encounter and still are encountering a lot of resistance. At HP, things were
decentralized and businesses and General Managers had a lot of power. Some business
leaders made the transition quickly, but others did not. The notion of changing the
governance model so that business leaders don’t get to pick their IT systems is difficult.
We want the business leaders to focus on customers, competition, and growth.
Functional heads should worry about being best in class in terms of performance, costs,
and service levels. We had a few false starts with explaining the governance model to
business leaders—it took six to nine months to get my direct reports to fully understand
what the new model was. We had more buy-in at the next level down before we had
buy-in amongst management in some areas. I thought they were on board and
understood, but they actually weren’t when they started working and realized that they
couldn’t run workplace services and other things anymore.
Business Group Organizational Changes

To improve operations, Agilent changed the formal organizational structure within and between
the business groups to foster better market alignment, while still maintaining the same structure
of five business units (excluding the Healthcare Solutions Group). First, the Wireless Service
Provider Test Division moved from the Electronic Products and Solutions Group to the
Communications Solutions Group. This move had market based (alignment with other
Communications Solutions Group business units selling to telecommunication service providers)
as well as technologically based (synergies between these products and the Communications
Solutions Group’s OSS business) benefits. Second, the Optical Switch program moved from the
Communications Solutions Group to the Semiconductor Products Group. The switch was grown
as an incubator-like project in the Communications Solutions Group and leveraged the optical
expertise within that group, but had a business model and customer set better suited for the
Semiconductor market. The Semiconductor Products Group then added several other product
lines to the switch, creating the Optical Networking Division.
Third, the Electronic Products and Solutions Group shifted from a classic divisional structure,
with seventeen product divisions, to a “front-back” organizational model in order to gain greater
focus on markets and synergy within product lines. This new structure had four customer-
focused Market Solution Units (MSUs) that identified market opportunities and seven Product
Generation Units (PGUs) that identified products that met the new market opportunities
identified by MSUs. The “front” referred to the customer-interfacing untis, while the “back”
referred to product development. “Before we moved to this new model, marketing wasn’t
structured in a way that allowed us to find new and emerging opportunities,” said Byrne.
Fourth, the Chemical Analysis Group made a similar change, creating a Chemical Solutions
business unit and a Life Sciences Solutions unit. They shared some common products and
technologies, but they focused on very different markets.
Country Manager Centralization

As part of the organizational transformation, Agilent eliminated certain country manager
positions or made the positions part-time. Bob Walker discussed the rationale: “One example is
that we didn’t want to pay the lowest tax bill in Germany, but the lowest tax bill overall, and
sometimes we would pay more in Germany so that we could pay less overall or the other way
around. The country managers controlled resources and decision-making in important countries
such as Germany and Japan and sometimes made locally-based decisions that weren’t the best
decisions for the company as a whole.”
People Practices: Vantage
Leadership
In order to make the operations programs a success, Barnholt wanted to change the mindset of
Agilent’s leaders about human resources. He and Jean Halloran, Vice President of Human
Resources, devised a change program called “Vantage” that focused on people practices. The
team identified 75 early adopter employees or “change agents” who would make HR-oriented
recommendations aligned with Agilent’s values and strategy. The Vantage team gave
themselves 75 days to recommend to management how Agilent should change its HR systems
and develop leadership conferences to begin implementing the change.
From June to November of 2000, Agilent conducted 13 leadership-training sessions with 7,000
managers and supervisors. The leadership training programs, lasting two days each, were
designed to help Agilent’s leaders reach new management and performance levels, and included
a discussion of the new performance evaluation system. “It was all about resetting expectations,
raising the bar, and communicating that what was acceptable before would no longer be
acceptable. We wanted to communicate to leaders that it was okay to challenge the status quo
and make changes using their own ideas,” noted Barnholt.
Barnholt also spent two days meeting with Agilent’s top 200 employees in groups of 30. These
sessions were called Business Leader Forums. “These were what I called ‘in the pit’ sessions
where, just like Jack Welch, I would get in the pit with my senior leadership team and talk about
my vision for the company and engage in an open discussion with these leaders,” said Barnholt.
The Business Leader Forum discussions often centered on helping business managers focus on
growing the business and achieving profit goals and relinquishing control over functional areas
such as IT.
Pay and Performance Practices

The Vantage program aimed to overhaul Agilent’s compensation and performance systems.
Neal Wagner, Director of Compensation, commented on HP’s compensation system: “At HP, we
had tables that showed a person would get a 5 to 7 percent raise if they were ranked and paid in a
certain category. It was very formulaic and basically a cost management program in which
everyone was treated the same, the average, and there was little differentiation between top
performers and everyone else.”11 The compensation overhaul had two components: (1) an
overhaul of the employee base salary ranking system inherited from HP and (2) a shift of
11
Interview with Neal Wagner. Subsequent quotes are from this interview unless otherwise noted.
Agilent’s compensation program to more of a variable program to differentiate top and bottom
performers.
The team benchmarked thirty global high-performance technology companies to determine base
pay. Employees were measured on results, criticality of skills, future potential within Agilent,
and demonstration of Agilent values. Under the HP ranking system, criticality of skills and
future potential were not included as metrics. Employees were ranked into bands, relative to
their colleagues. Agilent maintained HP’s concept of “relative rankings,” but altered the number
of rank bands from five to three and reduced the frequency of pay evaluations from quarterly to
once a year. A separate category called “performance improvement required” or PIR included
employees who did not meet expectations and received warnings and corrective
recommendations. The Vantage team overhauled the ranking forms as well. HP’s employee
ranking form included ten pages of questions and HP managers often resisted completing the
form. The Vantage team changed the system and pared down the form to four questions on one
page.
In terms of variable compensation, in November 1999, Agilent shifted 80 managers to a variable

compensation program and in the summer of 2000, it shifted 900 additional managers to a
variable compensation program called a “pay for results” program. For example, 200 managers
had approximately 50 percent of their compensation as variable compensation. Barnholt’s
upside was 100 percent and the business leaders reporting to him had a 60 percent variable
component. In general, though, employees fell into the 20-25 percent range. By mid-2001, the
management team was in the process of assessing a variable compensation program for all
Agilent employees, but most likely would not implement the program until 2002.
All employees did receive an “Agilent results bonus,” which resembled a profit sharing program
that rewarded employees for their contributions to the company’s success. The results bonus had
both a business-specific and an overall-company component. Agilent granted stock options to
approximately one-third of the employee base and the “Spark Program” granted stock options to
any employee in the company for exceptional performance at any time. The company also
distributed 100 shares to every employee on June 2, 2000, in the form of a “Founder’s Grant.”
The team took an aggressive stance in the first round of stock grants because they feared losing
HP employees whose HP stock would have automatically vested at Agilent’s IPO, with a three-
month window to exercise (a clause in HP employee stock option agreements stating that options
would automatically vest in the case of a divestiture). The team encouraged employees to
convert their HP stock to Agilent stock, and approximately 80 percent of the employees ended up
converting to Agilent stock.
PERSPECTIVES ON THE TRANSFORMATION
General Results and Perspectives

Many employees thought that the management team handled the actual spin-off well: “The split
was well done; they kept us informed and explained why they were doing most of the things they
were doing,” commented John Moss, then a Strategic Alliances Manager in the Network
Solutions Division.12 “I think we did some really good work around patents and we put our A
team in place for that, but we had a few geographical issues in which employees bonded more
tightly with the country organization rather than with the new business units and I think we could
have done a better job in that area…we were lucky that our business took off then too,” said
Byron Anderson, Senior Vice President and General Manager of the Electronic Products and
Solutions Group.13
Walker noted the benefits and challenges of creating a new company from people with a
common background: “The management team is all quite aligned on fundamental values
because most of us have HP backgrounds; the advantage is that we make decisions pretty quickly
because we have less contention. But the trap is that you can come to the wrong decision really
fast…to Ned’s [Barnholt] credit, he has brought in new people and a new Board.” Eaton
commented: “I think that bringing in an external COO was brilliant…Ned knew that Alain and
he had two very different styles and approaches to business. It took a little time for them to
delineate responsibilities, but bringing in Alain was another opportunity to show employees that
Agilent was a different company. It probably could have been managed better, though, since a
perceived conflict between the CEO and COO developed unnecessarily.”
When Couder first arrived at Agilent and began exercising authority, a few business managers
who had worked with Barnholt “back-doored” Couder and discussed issues directly with
Barnholt. “Ned would do things in the same way as he always had, forgetting that Couder
probably should be handling that and Couder would be working on the same thing and everyone
would find out after it became messy by e-mail,” commented a senior staff member. “It’s better
now, though. They have healthy disagreements and the shared service functions report directly
into Alain.” Couder discussed his relationship with Barnholt: “We don’t always agree, because
we have very different backgrounds, but we are learning how to work together…I also launched
a 360 degree evaluation on myself six months into my job and received some very surprising
feedback about my style—that I was too blunt, didn’t listen, etc., and I am trying to work with
people to improve on this…it’s difficult to be accepted here and simultaneously to push things
forward aggressively,” said Couder.
Measuring Transformation Results

In terms of the transformation, Agilent’s management team wanted to measure their results
quantitatively. They evaluated attrition rates and employee surveys to determine employee
satisfaction. Throughout the process, the company had maintained a low attrition rate, below
HP’s rate and less than half of that of most of its competitors. Agilent’s attrition rate in 1999
was 11 to 11.5 percent, compared with the industry average of 25 to 30 percent. “That number
[11 percent] was high for us, but much lower than industry average; previously it was 6 and as
low as 4 percent in the measurement business, but you have to keep in mind that it was during
the hot dot-com time [1999],” recalled Wagner.
The team also distributed quarterly employee surveys in October 2000 and March 2001. The
survey asked questions such as (1) Have you ever thought about leaving Agilent? (2) Would you
12
Interview with John Moss. Subsequent quotes are from this interview unless otherwise noted. John Moss is now
Outside Counsel Manager in Agilent’s Intellectual Property Practice Group.
13
Interview with Byron Anderson. Subsequent quotes are from this interview unless otherwise noted.
recommend Agilent to a friend? (3) Do you feel well informed about how the company’s doing?
(4) Do you feel you’re given enough information to allow you to focus your own work activities?
Its employees ranked Agilent higher than the competition in management, communications,
commitment to the firm, and speed. Employees ranked Agilent lower in areas such as
aggressiveness and quickness in reacting to the fast changes in the marketplace. Tony Coleman,
HR Director of the Semiconductor Products Group, commented:
I think at this point we are still evolving our new company and although our results have
been mixed, I think we have made tremendous progress. Our new mantra has been
speed, focus, and accountability as we also keep the best of the past. On speed, we have
made good strides as evidenced by how fast we were able separate, although we carry
some of our heritage with us. On focus, we have also made progress particularly as
businesses increase focus on customer requirements and our challenge moving forward is
to leverage our technologies across businesses to deliver even greater value to our
customers. On accountability, some of our heritage shows up in the way we manage
employee performance. We are not as aggressive as other companies with managing the
lower end of the performance scale. In addition, while a high integrity collegial
environment is very important to us, we tend to avoid confrontation and don’t want to
hurt anyone’s feelings. On the other hand, we have been named one of the best places to
work by Fortune Magazine in the U.S.14
Executives such as Walker agreed: “We’re still not able to move fast enough, not courageous
enough to acknowledge that some of our leaders aren’t the best in the industry, not courageous
enough to abandon certain customers who are spending a lot of our time and money and are not
going to pay off, and we’re not taking on new ideas and abandoning old ones fast enough.”
Another senior manager discussed the cultural transformation challenges: “I think this is sort of
like a mom and a dad thing [in reference to Barnholt and Couder]. As long as mom and dad are
arguing, you don’t have to do anything as a kid. You just wait for mom and dad to stop arguing.
Ned could have fired 10,000 people three months ago. That’s what Alain might have done, but
Ned doesn’t want to break the trust and respect of employees. Alain might have been more top-
down. So, where are we on this? I’d like to bring in leadership principles that can build into our
culture, rather than break our culture. If we break our culture, we end up with nothing. But what
is it going to be? Top-down or an accountability culture embedded in trust?”
Other employees noted communication as a challenge: “When I first saw Stratos, Excella, and
Vantage in our weekly e-mail newsletters, I have to be honest that I didn’t know what they were.
In fact, I don’t know much about them now. I don’t think they’ve gotten the word out
pervasively. Perhaps my job is not affected directly by the programs. But at the beginning, I did
go to all the division coffee talks where the division manager got up and talked about a wide
range of things, but not those programs,” said one employee. Another senior manager agreed
that communication needed to increase: “I think that Ned needs to spend more of his time in
trying to figure out how to change the culture. We need to be having more dialogue and I need
to do this better myself. People sense that change is needed, but they don’t know how to make it
happen.”
14
Interview with Tony Coleman. Subsequent quotes are from this interview unless otherwise noted.
Strategy
Agilent’s business leaders saw the benefits of strategy efforts such as the purchase of OSI,
investments in optical and wireless technology, and venturing programs. However, some
leaders felt that the Stratos efforts could accelerate:
We haven’t had as many strategy efforts as I would have liked partly because Ned is
leading it and it’s a big time commitment…Agilent’s play is a synergistic model, but we
don’t have a good governance model for how the businesses work together. We’ve
moved chips around within the businesses, but we haven’t done much synergistically.
Ned doesn’t like to put resources at the corporate level, but I think there are some ways
to put enough resources at the corporate level to enable businesses to work together, be
more synergistic, and create new businesses.
Bill Sullivan, Senior Vice President and General Manager of the Semiconductor Products Group,
discussed the Stratos effort: “I think Ned clearly has a key role to play in making this happen.
One advantage he has is that the people on his staff have worked together for a long time and
know how to get the right people engaged quickly. Those people could probably benefit from a
little more structure in deciding how to move ahead on Stratos.”15
Another senior manager commented on his own group’s efforts to capture synergies: “In terms of
synergies across businesses, our group has been working with the Semiconductor Group to do
more integration up the value chain…I’ve got a few of my project managers helping the group
with architectures and other areas because I have a long term interest in the company, not
because there’s a performance incentive component or processes in place.” Businesses often
established their own mechanisms to capture white space opportunities within their individual
areas. For example, the Electronic Products and Solutions Group established its own ventures
team to develop alliances and acquisitions and to identify white space opportunities.
Operations
The centralization of functional shared services such as IT and HR led to tensions between the
business groups and headquarters. “The general view on the part of the corporate headquarters
[not specifically Agilent, but in general] is that the people out in the businesses are just a bunch
of Neanderthals who don’t get it and hopelessly reinvent things. But if the businesses are
reinventing systems, it’s usually for a good reason. Centralized systems can be limiting, there’s
no doubt about it. But I’m convinced that if they are run well, central organizations can
empower an organization’s speed,” commented Walker. Walker discussed the shift of some
shared services areas away from corporate and back towards the businesses: “After the clone
and go period, we needed to cut things such as IT down. In order to do so, we needed to have
one czar responsible for IT and make some difficult and somewhat arbitrary decisions.
However, I can see us swinging back to a model that more involves the business leaders and the
IT functions within the businesses more. We will continue to get arguments from the businesses
that they need customized IT, and eventually we’ll strike the right balance.”
Many at the business level saw some benefits of the Excella programs. “The Excella program
really has made a big difference and helped us streamline where we spend our money in terms of
15
Interview with Bill Sullivan. Subsequent quotes are from this interview unless otherwise noted.
IT…seven years ago, our Test and Measurement organization spent, not invested, but spent a lot
of money towards a new Test and Measurement-wide IT system that never worked…the
centralization of implementing a new enterprise resource planning system has helped,” said
Anderson. “Excella is a great idea. We have way too much complexity in the company and
we’re spending way too much money. They’ve made the right decisions about the tools, right
priorities, etc,” said Byrne.
However, at the same time, some business leaders thought that Agilent had shifted too far
towards being a centralized organization. “We’ve gotten a little carried away with some of the
centralization. It has gotten in the way of allowing the businesses to move fast and left us with
little room to do things ourselves. Some corporate folks are more centralist and have less
understanding of how we really add value to our customers and have a very simplistic supply
chain model in mind. So there’s good healthy tension there,” said one senior manager. He cited
an example of the tension between corporate and businesses: “My organization has our biggest
new product year by 50 to 80 percent and unfortunately the new products will be ready to go
right when we’re ready to turn on our new enterprise resource planning systems. It will be
interesting to see how we manage any conflicts that come up.”
By 2001, to adjust information flows, Agilent planned to shift back towards a more decentralized
country manager structure, “Things became less coordinated once the country manager position
was eliminated,” said Walker. Couder discussed the shift back to country managers: “Everyone
reports to the functional managers [such as Marketing, Sales, Manufacturing], but I’m trying to
push them to manage in a geographically decentralized manner. We are putting in place site
managers and country managers so that local teaming can happen between functions and
business people through a country manager that has a very clear understanding of how things are
done at a local level.” Couder discussed the decentralization/centralization challenges: “In IT, I
know I’m centralizing a lot by giving everything to our CTO in terms of decision-making and
budget. When we benchmarked companies, we learned that most didn’t give the budget directly
to the CTO. The businesses could decide what investments to make. After we set everything up,
at Agilent, we’ll probably shift to that model.”
Others felt that the operations transformation was too ambitious. “The first red flag is that we’re
working on too many things simultaneously—13 or so different efforts within Excella. That’s
one thing that Alain [Couder] has resisted, which is to cut back on Excella efforts. But if the
programs aren’t executed well, we will stumble on execution and when that happens, the wolves
will turn on it and they’ll turn on the idea, even when it’s a great idea. I don’t think the Excella
team has spent enough time in the businesses, trying to understand the businesses,” commented a
senior manager.
People Practices
In general, many at Agilent felt satisfied with the people practices efforts, but wanted more
follow-up. “They’ve done a good job launching it and I think Jean [Halloran] and the team are
working hard in this area. However, if you were to go to most mid-level managers and ask them
what is Vantage, they would say it was an effort last year and that it doesn’t exist anymore. The
leadership piece really needs to be reinforced in the organization or else it looks like HR system
changes rather than deep changes in the organization,” said one high-level manager. Another
commented on the Vantage program and HR in general: “I’m mixed about the HR model that
we have. We use the services of central HR for 14,000 people. I only have 20 HR people. The
jury’s still out because I’m worried that the middle managers don’t have enough people
management skills to do this well on their own.” Regarding the challenges of changing Agilent’s
culture, he continued: “I think Ned has not yet made the decisions about how you put in speed
and accountability into the organization without breaking the fundamental values of trust and
respect, and our culture of collaboration.” Another influential manager echoed his concern, but
believed that the legacy of HP’s culture would protect the organization against negative effects
associated with compensation or organizational change:
All the things I just described to you about how we know how to get the right people in a
room is based on the experience of working here for so long. The assumption is that
we’re all in it together. However, when you say, this individual over here gets rewarded
based on X metrics, and this individual over here on Y metrics, and the person over on Z
metrics, and then someone asks somebody to work cross organizationally. At most
companies, people just don’t work together. Why should I give you the time of day if it
takes one second away from me and that’s going to affect my pay, right? And so the
good news is we’ve had the other culture for so long, that it’s still okay here. But I've
been very much against rolling this system out beyond the functional managers because I
know what effect it’s going to have at the engineering level and essentially at every level
when employees get pitted against each other for resources.
Business managers generally felt communication could be improved. “I’ve been extremely
disappointed in the communications area and we’ve been doing a fair amount at the business
level with streaming video and web pages,” said a senior manager at the business level.
Many employees discussed their disappointment in Agilent’s financial performance. “I think

that everyone felt that the split would create a fair amount of wealth, but the 100 share founder’s
stock was issued at around $80 dollars per share and now it’s in the thirties so that’s a painful
thing. In terms of our HP stock options, most of us didn’t exercise them instantly, but converted
them to Agilent options which are now all underwater as well,” said Moss. One senior manager
discussed the new incentive pay programs: “There have been very mixed reviews on the
incentive programs…we spend three times as much time sorting out some incentive pay issues at
staff meetings than we spend on getting orders and that’s just wrong.” He cited the
complications of determining a fair incentive pay structure within an organization that
encouraged teamwork and helping other businesses within the company succeed: “My people do
a lot of work for other businesses and they can’t understand why they’re doing the same work as
another person in another business, but the other person might get a larger bonus,” he said.
Some HR employees felt the incentive pay changes were extreme: “I don’t know if you want to
introduce an incentive program that delivers 50 percent of someone’s pay. That requires a little
bit of discussion and maybe we’re going a little bit too far,” commented one manager.
Another manager commented on the pay for performance system execution: “When we
launched the Vantage training, we didn’t talk about accountability. We talked all about the
upside. We talked about pay for performance, but we didn’t talk about affordability so everyone
expected lots of raises. The business guys, like me, ended up being the bad guys, so the
execution needs to be better.” Another felt that the company’s retention efforts were against HP
traditions: “We spent a lot of money on retaining people after the split for 18 months. In
hindsight, some places it probably was important, but most places it didn’t matter. It was unclear
to me. It was counter-cultural and we did it because we were reacting to this new company and
all the hype and in hindsight, I wouldn’t have done it that way again.”
Employees generally approved of the new streamlined performance evaluation process.

However, some employees commented on the inability to give feedback on the evaluation form,
after managers had written the reviews. Employees felt that the previous forms had more space
for such comments. Although Agilent did not have a formal 360-degree performance evaluation
process, many business leaders, including Anderson, conducted their evaluations in this manner.
“I did 360 degree evaluations, but the way the system is set up I could just write a review for my
employees and send it straight to HR,” said one senior manager. Agilent planned to incorporate
a feedback mechanism for employees in the 2002 evaluation process.
THE ECONOMIC DOWNTURN
Agilent met analyst’s consensus earnings estimates during Q1 2001 at $.51, excluding goodwill
and one-time charges, in line with street estimates of $.50 per share. However, orders declined;
for example, semiconductor test was down 25 percent sequentially and 40 percent yr/yr.
Unfortunately, the markets that had been beneficial to Agilent over the past several years such as
semiconductors, semiconductor test, and communications test were exactly those that were
falling off most rapidly in the economic downturn. Though Agilent continued to make progress
in restructuring, reducing expenses, and refocusing its business model, it was not nearly enough
to offset the general weakness seen in technology markets. Agilent’s management team lowered
guidance for the company from 20 percent annual growth down to 10 to 15 percent revenue
growth. Couder felt that the economic downturn helped the transformation efforts: “The one
advantage in the economic situation is that now I have the burning platform to accelerate the
transformation.”
Ten Percent Wage Cut and Other Measures

Compensation merit increases were decreased from an average of 8 to 9 percent down to 6 to 7
percent in the spring of 2001 in response to the economic downturn. Agilent managers protected
their top performers and reduced merit increases for the lower ranked employees. As the
economic downturn worsened, Barnholt decided to implement a temporary 10 percent across-
the-board wage cut. Agilent was one of the first companies in Silicon Valley to implement this
measure in an effort to avoid widespread layoffs. Barnholt felt strongly against laying off
employees and thought that the downturn would reverse by the end of 2001: “Everyone would
like to see you just lay off employees. I would not have asked my employees to take a cut if I
didn’t believe this was a business cycle versus some structural change.” Many employees
supported the 10 percent salary cut. “People like me who have been here since the 80s have
been through tough times and we understand that we’re going to have business cycles, so we’d
all rather take the 10 percent hit and retain as much expertise as possible, rather than having 10
percent of the skilled people laid off and never come back. I think people are supportive of
that,” said Moss.
In addition to the 10 percent salary cut, Agilent reduced its temporary labor, froze open
positions, and looked for other opportunities to cut discretionary costs. It implemented a limited
“Workforce Management Program” that eliminated a number of jobs, mainly manufacturing
positions. Agilent reassigned the affected employees to other positions, placed them in a “re-
assignable” category (employees who had skills that Agilent still valued), or an “un-assignable”
category (employees who had skills that Agilent no longer needed). The re-assignable
employees had 60 days to find another job in the company, which many employees found
difficult due to the tight budgets and shortage of job openings. The un-assignable employees had
30 days to find a new job opportunity within Agilent.
Although employees understood that Barnholt wanted to show employees that he valued them
during difficult times, some employees and management team members felt that the wage cut
was not drastic enough. “I’m concerned about the wage cut, that it wasn’t drastic enough. What
happens in late 2001 when things don’t turn around and we have to lay off employees? I think it
makes us lose credibility with employees,” said one management team member. Even Barnholt
worried that he had not taken action quickly enough: “I probably should have slammed on the
brakes sooner on hiring people and recognized that this growth phase was going to be a bubble.
I had a gut feeling late last fall, but I should have acted a few months earlier,” commented
Barnholt.
FUTURE CHALLENGES
Assembled in the conference room, Ned Barnholt and his team reflected on Agilent’s short
history. They believed that they couldn’t have written a better script for the first year and a half
of the company. The company had achieved early financial success and had launched an
ambitious organizational and cultural transformation. At the same time, he and his management
team wondered whether they had made the best decisions for Agilent or if they had been too
aggressive with their efforts. As the new implementation began to gel, they wondered how they
could further develop a new and sustainable culture, without losing the values inherited from HP.
Case Discussion Questions:
1. What were the key challenges that the Agilent management team faced in launching Agilent?
2. Evaluate Agilent’s organizational and cultural transformation strategy.
3. Evaluate Agilent’s organization and cultural transformation execution.
4. What should Ned Barnholt and his team do going forward?

Exhibit 1
Agilent’s Financial Summary
2001E %Yr/Yr 2000 %Yr/Yr 1999 %Yr/Yr 1998 %Yr/Yr 1997 %Yr/Yr 1996 %Yr/Yr
Revenue 9,428 (12.5) 10,773 29.3 8,331 4.8 7,952 2.1 7,785 5.5 7,379 11.9
Cost of Products & 5,330 (3.5) 5,522 25.8 4,388 (2.7) 4,512 9.4 4,126 5.8 3,901 17.0
Services
% Revenue 56.5 51.3 52.7 56.7 53.0 52.9
Gross Profit 4,098 (22.0) 5,251 33.2 3,943 14.6 3,440 (6.0) 3,659 5.2 3,478 6.7
% Revenue 43.5 48.7 47.3 43.3 47.0 47.1
R&D 1,450 15.3 1,258 26.2 997 5.2 948 7.7 880 9.3 805 5.2
% Revenue 15.4 11.7 12.0 11.9 11.3 10.9
SG&A 2,339 (17.3) 2,828 28.3 2,205 7.6 2,050 7.4 1,909 6.2 1,798 8.7
% Revenue 24.8 26.3 26.5 25.8 24.5 24.4
Operating Earnings 309 (73.5) 1,165 57.2 741 67.6 442 (49.2) 870 (0.6) 875 4.0
% Revenue 3.3 10.8 8.9 5.6 11.2 11.9
Other Inc (exp) (35) 83 46 (46) (47) (21)

Pretax Earnings 274 (78.0) 1,248 58.6 787 98.7 396 (51.9) 823 (3.6) 854 9.6
% Revenue 2.9 11.6 9.4 5.0 10.6 11.6
Taxes 93 410 275 139 280 312
% Rate 34.0 32.9 34.9 35.1 34.0 36.5
Net Earnings 181 (78.4) 838 63.7 512 99.2 257 (52.7) 543 0.2 542 8.6
% Revenue 1.9 7.8 6.1 3.2 7.0 7.3
EPS $0.39 (78.2) $1.81 62.3 $1.11 64.6 $0.68
Diluted Shares 459 (1.0) 464 0.9 460 21.1 380
Working Capital 2,500 (13.7) 2,897 56.0 1,857 25.8 1,476 4.8 1,408 (2.8) 1,449 4.4
Sales/Avg WC 3.5 4.5 5.0 5.5 5.4 5.2
Total Assets 6,500 (22.8) 8,425 54.8 5,444 9.2 4,987 (0.4) 5,006 6.1 4,720 6.0
Sales/Avg Assets 1.3 1.6 1.6 1.6 1.6 1.6
Shareholder’s 5,446 3.4 5,265 55.7 3,382 11.9 3,022 (2.8) 3,110 3.7 2,998 6.0
Investment
ROE 3.4 19.4 16.0 8.4 17.8 18.6
D&A 530 7.1 495 4.2 475 (0.4) 477 16.6 409 2.0 401 0.0
Cash Flow 711 (46.7) 1,333 35.1 987 34.5 734 (22.9) 952 1.0 943 0.0
per share $1.55 (46.1) $2.87 33.9 $2.15 11.1 $1.93 0.0 $0.00 0.0 $0.00 0.0
EBITDA 839 (49.5) 1,660 36.5 1,216 32.3 919 (28.1) 1,279 0.2 1,276 0.0
per share $1.83 (48.9) $3.58 35.3 $2.64 9.3 $2.42 0.0 $0.00 0.0 $0.00 0.0
% Revenue 8.9 15.4 14.6 11.6 16.4 17.3
Capital Expenditures 646 (21.6) 824 89.9 434 5.9 410 (29.6) 582 4.1 559 0.0
% Revenue 6.9 7.6 5.2 5.2 7.5 7.6
Source: Company Reports and Merrill Lynch Estimates.
Agilent’s Revenue and Growth FY’00
Chemical
Analysis
10% Healthcare
+ 1% Solutions
13%
$1.0 B (6%)
$1.4 B
$6.1 B
$2.2 B
Test and
Measurement
Semiconductor
57%
Products
+50%
20%
+37%
Source: Agilent.
Exhibit 1 cont’d
Agilent’s Core Technology
Communications/Electronics Healthcare & Life Sciences
• Measurement science
• Electronic circuit and systems design
• Fiber Optic and Optoelectronic devices and systems
• Applications software and solutions integration
• Radio frequency/microwave • Chemical

• Optics/photonics separation/analysis
• High-speed optoelectronics • Molecular biology
• High-speed electronics • Microfluidics
• Solid-state materials/devices • Ultrasound imaging
• Communication protocols • Cardiology
• Network monitoring/mgt. • Patient monitoring
Agilent Laboratories
Source: Agilent.
Exhibit 1 cont’d
Agilent’s Road to Independence
March 2, 1999 November 1, 1999

HP announces creation Agilent starts operating June 2, 2000
of two independent as an independent Agilent becomes
companies company fully independent
July 28, 1999 November 18, 1999

Agilent’s name is introduced Agilent’s IPO takes place
Source: Agilent.
Exhibit 2
HP’s Organization, 1996
President &
CEO
Lewis Platt
Corporate HQ
Total Revenue
$38.4 bn
Computer Test and Measurement Measurement Systems

Richard Belluzzo Edward Barnholt Doug Carnahan HP Laboratories
Revenue Revenue Revenue Joel Birnbaum
$31.4 bn $3.8 bn $3.2 bn
Computer Systems Coms Test Solutions Components

Dick Watts Byron Anderson Bill Craven
Customer Support Microwave & Coms Medical Products

Ann Livermore Richard Anderson Cynthia Danaher
Laserjet Solutions Automated Test Chemical Analysis

Carolyn Ticknor John Scruggs Rick Kniss
Inkjet Products Electronic Instruments Information Storage

Antonio Perez Thomas Vos Mike Matson
Personal Information
Duane Zitzner
Source: Agilent.
Exhibit 3
Agilent’s Organization Post-Split
President and CEO

Ned Barnholt
General Test and Measurement
Counsel
Electronic
Craig Nordlund Automated Communications Semiconductor Chemical Healthcare
Products &
Test Solution Products Analysis Solutions
Solutions
CFO
Byron Anderson John Scruggs Tom White Bill
Bill Sullivan
Sullivan Rick
Rick Kniss
Kniss TBH
TBH
Bob Walker
• Wireless • Optical Switch
Service
HR
Provider Test
Division
Jean Halloran
• Plus 16 other
Strategic divisions
Programs
Bill Hahn
CTO Agilent Laboratories

Tom Saponas
Agilent’s New Organization, 2001
CEO
Ned Barnholt
Test and Measurement
COO
Electronic
Alain Couder Semiconductor Healthcare Chemical
Products
Products Solutions Analysis
& Solutions
CFO
Byron Anderson Bill Sullivan Steve Rusckowski
Ruschowski Chris
Rickvan Ingen
Kniss
Bob Walker • 4 market solution units • Optical • Chemical Solutions
Networking Sold to Royal Philips Business Unit
General • 7 product generation
Division Electronics in 2000
Counsel units • Life Sciences
Solutions Unit
Craig Nordlund Automated Test
John Scruggs
Human John Scruggs
Resources Communications
Jean Halloran Solutions
Communication Tom White
& Marketing • Wireless Service
Provider Test Division
Bill Hahn
CTO Agilent Laboratories
Tom Saponas
Source: Agilent.
Exhibit 4
Industry Overview
Many of the markets Agilent served underwent and continued to undergo rapid change and
growth. The communications industry continuously evolved due to the demand for Internet
access and data transmissions services. Traditional copper-based technologies could no longer
meet the high-volume transmission requirements of Internet access and other high-speed
communications. Fiber optic networks increasingly replaced copper-based technologies. This
increased the demand for high-speed electronic components to connect the electronic systems
controlling the network to the transmission fiber. The manufacture, physical installation, and
maintenance of network switches and routers relied on sophisticated testing, calibration, and
measurement instruments and systems. Communications service producers and Internet service
providers required advanced test and monitoring solutions to adequately service customers.
Manufacturers of cellular handsets, base stations, and other wireless network equipment required
advanced design software and test measurement instruments and systems to develop,
manufacture, and deploy advanced wireless communications products.
The semiconductor and electronics industries were largely driven by rapid technological
advancement, a phenomenon commonly known as Moore’s Law, which states that the
functionality and performance of a digital integrated circuit doubled roughly every 18 to 24
months. Decreased size and greater density of the individual electronic components on the
integrated circuit drove improvements in the performance and functionality of the device and
decreased price to the end user. This continuous cycle of increased performance at lower costs
drove the pervasiveness of semiconductor devices in multiple applications, from
communications networks to consumer products. At the same time, the cycle placed increasing
demands on companies that developed and used electronic components, products, and systems to
keep up with the fast pace of technological advances. The effect of Moore’s Law created major
business opportunities for Agilent. Each new integrated circuit design presented new challenges
for test and measurement systems; smaller, more densely packed elements; faster operating
speeds; and greater complexity. Semiconductor devices and electronic components and
assemblies composed an increasing proportion of the overall value of end products, increasing
the importance of test within electronic component and systems design and manufacturing
process. The increasing pervasiveness of semiconductor devices created strong growth
opportunities for many of the company’s products, including its electronic and optical
components, its high frequency and digital design solutions, as well as its automated test
equipment used in high-volume manufacturing settings.
Finally, the life sciences industry and pharmaceutical industry experienced pressure to develop
new drugs efficiently and effectively. This required analytical instruments to improve the
productivity of drug discovery efforts within restrictive government regulations.
Source: Agilent.
Exhibit 4 cont’d
Agilent’s Businesses
Test and Measurement

Agilent’s Test and Measurement business addressed the needs of companies in the
semiconductor, electronics, communications, and related industries. It addressed three major
customer groups including the communications network equipment manufacturers and service
providers, electronic component and equipment manufacturers, and semiconductor
manufacturers and purchasers of semiconductors. The company’s test and measurement
products were used to improve time-to-market, lower manufacturing costs, and improve product
quality. The company was a leader in its space and estimated that its test and measurement
products possessed over 20 percent of the market (estimated to be $20 billion in 2000 and $25
billion in 2002).16 Communications drove 50 percent of Test and Measurement and 25 percent
of total revenues at Agilent. Test and measurement products at Agilent ranged from single-unit
electronic measurement devices priced under $1,000 to large-scale integrated test products priced
at $1 million and higher. Product applications included test products for fiber optic, broadband
wire-based, radio frequency, and microwave communications networks and products, network
test equipment for service providers to install and maintain connections to the Internet, and test
products to manufacturers of cellular handsets and wireless telephone infrastructure.
Chemical Analysis
The company’s Chemical Analysis business was the leading provider of analytical instrument
systems that enabled customers to identify, quantify, analyze, and test the atomic, molecular,
physical, and biological properties of substances and products. Scientists, engineers, and
technicians working in R&D, quality assurance, quality control, and manufacturing used the
company’s products. Analysts estimated that the analytical instrument market size was $18
billion in 2000 with growth rates at approximately 8 percent annually.17
Semiconductor Products
Agilent’s Semiconductor Products business supplied semiconductor components, modules, and
assemblies for wired and wireless communications, information processing, imaging, optical
positioning, and solid-state lighting. Agilent’s semiconductor products fell into two primary
markets—communications and computing. Increasing chip complexity (higher speeds, higher
pin count, and greater number of transistors) drove the demand for Agilent’s products. As
semiconductors increased in complexity, chipmakers needed to upgrade obsolete testers to
confirm that new, more advanced chips functioned properly. After the spin-off from HP,
Agilent’s semiconductor group began to carve out a position as a chipmaker in communications,
competing with players such as Intel, Motorola, and Texas Instruments in the emerging wireless
and Internet space. A number of main initiatives drove Agilent’s chip business. First, the
company employed new chip technologies to shrink the size of radios, enabling such products as
Samsung Electronics’ “Dick Tracy” Internet phone. Second, Agilent leveraged printer
technology from HP days to assert itself in imaging, pushing the concept of “embedded cameras
everywhere” to transmit data wirelessly at high frequency into a network.
16
John B. Jones, “Agilent Technologies, Inc.,” SalomonSmithBarney Equity Research, December 27, 1999, p. 23.
17
Ibid.
Health Care Solutions Business

Agilent’s health care solutions provided medical professionals with electro-medical clinical
measurement and diagnostic products. The company’s products helped medical professionals
gather and analyze information in hospital intensive care units and emergency rooms, outpatient
clinics, doctors’ offices, patients’ homes, and other settings. Products and services included
patient monitoring systems, imaging systems, external defibrillators, cardiology products, and
related professional services and support.
Source: Agilent.
Exhibit 4 cont’d
Worldwide Test and Measurement Market, 1998
Unnamed Other R&S

16% 2%
LTX Named Other
TTC
1% 25%
1%
Nat.Instru
1%
Network Gen
2%
W&G
2%
Schlumberger
3%
Anritsu
3% Agilent
Fluke 23%
3%
Tektronix Advantest Teradyne
4% 6% 7%
(1) Does not include service.

Source: Agilent.
Exhibit 5
Agilent’s Key Management Team Members
Ned Barnholt served as president and chief executive officer of Agilent. Prior to this role, Barnholt served as a HP
executive vice president and the general manager of the Measurement Organization—the organization containing all
of Agilent's business groups. Under his direction, the Measurement Organization attained fiscal 1998 revenues of
nearly $8 billion. Barnholt joined HP in 1966 in the company's former Microwave Division, applying engineering
and business expertise to positions that successively included research-and-development engineer, marketing
engineer and product manager. In 1973, he became product marketing manager for the Stanford Park Division, and
then marketing manager for the Santa Clara Division in 1976. In 1980, he was promoted to general manager of the
Spokane (Wash.) Division for the Microwave and Communications Group, and then to general manager of the
Electronic Instruments Group in 1984. Barnholt was elected a vice president in 1988, and in 1990 was appointed
general manager of the Test and Measurement Organization. His appointments to senior vice president and then
executive vice president followed in 1993 and 1996. He assumed his current position as president and chief
executive officer of Agilent Technologies in March 1999. Barnholt received both a bachelor's degree and a master's
degree in electrical engineering from Stanford University. He is a director of KLA-Tencor Corporation. Barnholt
also serves on the New York Stock Exchange Listed Company Advisory Committee (LCAC).
Alain Couder served as executive vice president and chief operating officer for Agilent. Couder shared the
responsibilities of the president's office with Ned Barnholt. He came to Agilent from Packard Bell NEC, where as
chairman, president and chief executive officer he was credited with dramatically improving operating performance
and spearheading a drive for innovation. Couder improved the operational efficiency at Packard Bell NEC by $500
million in 18 months. He also put in place a global management process to take advantage of the company's scale,
making NEC the fifth leading PC supplier worldwide. At Groupe Bull from 1991 through 1998, Couder helped
create the French computer company's vision and business strategy. He also played an instrumental role in taking the
company public. Couder was general manager of the open system and software division before being named Groupe
Bull's COO in 1997. Couder was also a Hewlett-Packard veteran, having served as a general manager in the
computer business in the U.S. and his native France from 1984 through 1991. Before joining HP, he spent 14 years
with IBM, conducting applied research in new computer architecture, PBX architecture, signal processing and voice
recognition. Couder received a master's degree in electrical engineering from Ecole Superieure d'Electricite, Paris
Jean Halloran was senior vice president of Human Resources for Agilent Technologies. Halloran's responsibilities
included directing Agilent's global policies and programs for leadership and talent development, compensation,
benefits, staffing and workforce planning, human resources systems, education and organization development.
Halloran joined HP’s Medical Products Group in 1980. Within that group, she held a number of positions in Human
Resources, Manufacturing and Strategic Planning before becoming group personnel manager. In 1993, Halloran was
promoted to personnel manager for the Measurement Systems Organization and recently was appointed to director
of Corporate Education and Development for HP. She has served as Agilent's senior vice president, Human
Resources since August 1999. Halloran, received her bachelor's degree in art history from Princeton University and
a master's degree in business administration from Harvard University.
Robert Walker was executive vice president and chief financial officer of Agilent Technologies. Walker applied
the experience of his 24-year tenure at Hewlett-Packard Company to his current position, overseeing the
management of Agilent's financial functions, including business development. Before his current appointment at
Agilent, Walker was the vice president and general manager of Hewlett-Packard's Professional Services Business
Unit. His career with the HP began in 1975, when he joined HP's Loveland Colorado Instrument Division as an
accountant. In the years following, Walker was promoted to accounting management positions of successively
greater responsibility. In 1979, he was appointed controller for the San Diego Division, and was then named to the
same position for the Electronics Measurement Group in 1982 and the Manufacturing Systems in 1984. Later that
same year, he became the business manager of U.S. Field Operations. Walker's experience also includes five years
as a controller in both the Computer Business and Computer Systems Organizations. He spent four years leading
HP's Information Technology function and was elected HP vice president in 1995. He was appointed to his current
position as Agilent's chief financial officer, in March 1999 and executive vice president in May 1999. Walker
received his bachelor's degree in electrical engineering and MBA in finance from Cornell University.
William Hahn was senior vice president of Communications for Agilent Technologies. Prior to this role, Hahn was
the controller for HP’s Measurement Organization, which had become Agilent. Hahn joined HP in 1975 as the
general accounting manager in the Palo Alto Manufacturing Division. He moved to Corporate Consolidations in
1976 and to HP's European headquarters in Geneva in 1978 as a finance manager. Hahn was named controller for
the Finance and Remarketing Division in 1982 and for the Information Networks Division in 1984. In 1986, Hahn
was appointed marketing manager for the Network Marketing Center, and in 1988 for the Personal Software
Division. He was named group controller for the Workstation Group in 1989 and for the Networked Systems Group
in 1990. In 1992, Hahn became the manager of the Computer Systems Americas Marketing Center. Hahn left HP in
1993 to become the vice president of finance, manufacturing and chief financial officer at Aspect
Telecommunications, and returned to HP in 1995 as operations manager for the Interactive Broadband program. He
was named sector controller for the Measurement Organization in 1997 and assumed his current post as senior vice
president of Communications for Agilent in 1999. Hahn received a bachelor's degree in accounting and computer
science from Iowa State University and a master's in business administration from Santa Clara University.
Thomas Saponas was a senior vice president and chief technology officer of Agilent. Saponas' responsibilities
included developing the company's long-term technology strategy and overseeing the alignment of the company's
objectives with its centralized research-and-development activities. Saponas had over twenty-seven years of
experience in engineering and management, refined over the course of his career with HP that he began in 1972 as a
design engineer in the company's Automatic Measurement Division. During the following twelve years, Saponas
contributed in increasing levels of responsibility in research-and-development management positions at HP. In 1986,
he was selected to serve as a White House Fellow in Washington, D.C. Saponas returned a year later to HP, where
he managed R&D for the Electronic Instruments Group (EIG), then a division of HP's Test and Measurement
Organization. He continued to apply his expertise in strategic management as he became a division marketing
manager and general manager within the group. In 1998, he was promoted to vice president and general manager of
EIG. In August 1999, Saponas was elected to his post as senior vice president and chief technology officer for
Agilent. Saponas received a bachelor's degree in electrical engineering/computer science and a master's degree in
electrical engineering from the University of Colorado.
Business Group Leaders

John Scruggs was senior vice president and general manager for Agilent Technologies' Automated Test Group, and
supervised the testing of semiconductor components and electronic assemblies while also directing the service and
support of all automated testing equipment. Scruggs’ career began as an engineer in the Integrated Circuit
Department HP and since then, he has held numerous managerial positions in the Instrument and Manufacturing
Test Divisions. In 1992, Scruggs was promoted to general manager of the Automated Test Business Unit, which was
elevated to group status in 1995. A year later, he was appointed vice president of this group, and assumed his current
position as senior vice president and general manager of Agilent Technologies' Automated Test Group in August
1999. Scruggs received a bachelor's degree in electrical engineering from New Mexico State University and a
master's degree in electrical engineering from Arizona State University.
William Sullivan was senior vice president and general manager for Agilent Technologies' Semiconductor Products
Group. He joined Hewlett-Packard Company in 1976. In 1995, he was promoted to general manager of the Optical
Communication Division. Two years later, Sullivan was appointed a general manager of the Communication
Semiconductor Solutions Division, which was formed by combining the semiconductor portion of the former
Communication Components Division with the Optical Communication Division. He became general manager and
vice president of the Components Group, now called the Semiconductor Products Group, in 1998. Sullivan assumed
his current role as senior vice president and general manager, Semiconductor Products in August 1999. Sullivan
received a bachelor's degree in environmental science from the University of California at Davis.
Chris van Ingen was senior vice president and general manager for Agilent Technologies’ Chemical Analysis
Group. Van Ingen joined HP in 1977 as a mass-spectrometer sales engineer in the Netherlands. In 1979, he was
promoted to CAG district sales manager in the Netherlands. He was named the Netherlands country manager for
CAG in 1981. Van Ingen moved to HP's Avondale division in Pennsylvania in 1984 as business development
manager and in 1986 became the division's product marketing manager. In 1989 he became the Americas Marketing
Center manager, and in March 1999 was named vice president, sales, support and marketing for CAG. He was
appointed to his current position in May 2001. Van Ingen, held a bachelor’s degree in analytical chemistry.
Thomas White was senior vice president and general manager for Agilent’s Communications Solutions Group.
White's experience in electrical engineering began in HP’s London offices, where he started as a staff engineer in the
Test and Measurement sales office in 1979. Since then, White has held numerous managerial positions in the
Telecommunications Division throughout the United Kingdom. In 1994, he was promoted to general manager of the
Queensferry Telecommunications Division in Scotland and then general manager of the Computer Peripherals
Bristol Division in 1996. White was appointed vice president and general manager of the Communications Solutions
Group in 1997. White has served as Agilent's senior vice president and general manager, Communications Solutions
since August 1999. White received a bachelor's degree in electrical engineering from Liverpool University.
Byron Anderson was senior vice president and general manager of Agilent’s Electronic Products and Solutions
Group. Anderson started his HP career 30 years ago. His experience was in microwave-technology development
and product-division management. In 1991, Anderson was promoted to general manager of the Communications
Test Business Unit, currently known as the Communications Solutions Group. He was appointed a vice president of
that group in 1995. He assumed his current position as senior vice president and general manager of Electronic
Products and Solutions Group in August 1999. Anderson received a bachelor's degree in electrical engineering from
South Dakota State University and a master's in business administration from Harvard University.
Agilent’s Board of Directors

Gerald Grinstein Thomas E. Everhart Heidi Kunz
Non-executive Chairman of President Emeritus Executive Vice President and
the Board California Institute of Chief Financial Officer
Technology Gap Inc.
Edward W. (Ned) Barnholt
President and Chief Executive Robert J. Herbold David M. Lawrence, M.D.
Officer Executive Vice President and Chairman of the Board and
Agilent Technologies Chief Operating Officer Chief Executive Officer
Microsoft Corporation Kaiser Foundation Health
James Cullen Plan, Inc. and Kaiser
Retired President and Chief Walter B. Hewlett Foundation Hospitals
Operating Officer Independent Researcher and
Bell Atlantic Corporation Director A. Barry Rand
Center for Computer Assisted Senior Advisor
Research in the Humanities Cendant Corporation
Source: Agilent.
Exhibit 6
Agilent’s Cultural Transformation
Agilent’s Values
Heritage New
Values Values
• Innovation and contribution • Speed

• Trust, respect and teamwork • Focus
• Uncompromising integrity • Accountability
Agilent’s Behaviorial Transformation
Old Behaviors New Behaviors
• Acting with a stewardship mentality • Driving for breakthroughs in growth and

value creation
• Getting details right • Developing a bold compelling vision
• Focus on diligent task completion • Focus on value creations (why)
(how)
• Slow and deliberate decision making • Bias for action
• Insular observer of industry • Active shaper and insider of major
industry innovations and initiatives
• Filling positions from within • Finding the best possible talent
anywhere
• Operating with an egalitarian mentality • Meritocracy around performance
• Entitlement • Performance driven with accountability
Source: Agilent.

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OTD Case AgilentTechnologies

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GRADUATE SCHOOL OF BUSINESS

AGILENT TECHNOLOGIES: ORGANIZATIONAL CHANGE (A)

—Ned Barnholt, President and CEO of Agilent Technologies

On March 2, 1999, Hewlett-Packard (HP) announced a plan to create a separate company,

THE HP CULTURE AND ORGANIZATION

RATIONALE FOR SPIN-OFF

PREPARING FOR THE SPIN-OFF: MARCH 2, 1999 TO OCTOBER 31, 1999

AGILENT: FIRST STEPS

Building the Brand

Developing Agilent’s Vision, Corporate Objectives, and Values

Establishing an Independent Operation: “Clone and Go”

Transferring Relevant Assets from HP to Agilent

Relocating Shared Employees

A New Chief Operating Officer and Board

THE IPO: “DAY ONE OPERATIONS”

“DAY TWO OPERATIONS” AND ORGANIZATIONAL TRANSFORMATION

Central Shared Services

Business Group Organizational Changes

Country Manager Centralization

People Practices: Vantage

Pay and Performance Practices

In terms of variable compensation, in November 1999, Agilent shifted 80 managers to a variable

PERSPECTIVES ON THE TRANSFORMATION

General Results and Perspectives

Measuring Transformation Results

Many employees discussed their disappointment in Agilent’s financial performance. “I think

Employees generally approved of the new streamlined performance evaluation process.

THE ECONOMIC DOWNTURN

Ten Percent Wage Cut and Other Measures

Case Discussion Questions:

2. Evaluate Agilent’s organizational and cultural transformation strategy.

3. Evaluate Agilent’s organization and cultural transformation execution.

4. What should Ned Barnholt and his team do going forward?

Other Inc (exp) (35) 83 46 (46) (47) (21)

Source: Company Reports and Merrill Lynch Estimates.

Agilent’s Revenue and Growth FY’00

Communications/Electronics Healthcare & Life Sciences

• Radio frequency/microwave • Chemical

March 2, 1999 November 1, 1999

July 28, 1999 November 18, 1999

Computer Test and Measurement Measurement Systems

Computer Systems Coms Test Solutions Components

Customer Support Microwave & Coms Medical Products

Laserjet Solutions Automated Test Chemical Analysis

Inkjet Products Electronic Instruments Information Storage

President and CEO

CTO Agilent Laboratories

Agilent’s New Organization, 2001

Test and Measurement

Health Care Solutions Business

Unnamed Other R&S

(1) Does not include service.

Business Group Leaders

Agilent’s Board of Directors

• Innovation and contribution • Speed

Agilent’s Behaviorial Transformation

Old Behaviors New Behaviors

• Acting with a stewardship mentality • Driving for breakthroughs in growth and

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