By Dean Zatkowsky

Many businesses are going through the exercise of cutting costs to compensate for declining revenues. Some have chosen a path pioneered by David Packard.

In 1970, when the economy stumbled and Hewlett-Packard faced layoffs, Packard proposed - and the company embraced - a novel alternative. Rather than layoff 10% of the workforce, the entire company took a 10% work schedule cut, working just nine days every two weeks. As Packard explained in The HP Way, "The net result of this program was that effectively all shared the burden of the recession, good people were not released into a very tough job market, and we had our highly qualified workforce in place when business improved."  Packard hastened to point out that this solution only applied to what was clearly a temporary situation; the company could not guarantee full employment under all scenarios.

David Packard and Bill Hewlett's approach to management bequeathed many gifts to today's managers and their teams. "Management by Objective", for example, defined meritocracy in the workplace, empowering individuals to be creative problem-solvers. Not only does the process create an organic and self-sustaining kind of teamwork, but also prevents "diworsification" for companies, which can stay focused on what they do best and what fits their core competencies.

Likewise, "Management by Walking Around" improves communication, improves quality, improves teamwork, and improves profits. Hewlett and Packard's visible presence and easy availability (they insisted on a company-wide open-door policy, believing that interruptions were a small price to pay for the advantages of open and frank communication with the talented people they hired) earned them deep credibility with their co-workers.  A fellow working a drill press on the outskirts of the factory knew that the CEO and President of the company understood what he did and appreciated his contribution.

Flextime was another fascinating - and revolutionary - innovation of "The HP Way." As Packard explained, "To my mind, flextime is the essence of respect for and trust in people. It says that we both appreciate that our people have busy personal lives and that we trust them to devise, with their supervisor and work group, a schedule that is personally convenient yet fair to others."

Packard saw that the future of industry was a future of learning, and he designed his organization to attract people who shared his and Hewlett's devotion to life-long education. One illustrative invention was the Honors Cooperative Program: "The program made it possible for us to hire top-level young graduates from around the country with the promise that if they came to work for us and we thought it appropriate, they could attend graduate school while on full HP salary. Originally, the company paid part of their tuition as well, and more recently has paid all of their tuition. More than four hundred HP engineers have obtained master's or doctorate degrees through this program. It has enabled us to hire the top engineering graduates from universities all across the country for a number of years - an important factor in the ultimate success of our company."

When we think of today's economic troubles as "unprecedented," we give ourselves an easy excuse for refusing to learn from the past. I'd advise every manager and entrepreneur in America to turn off their televisions and set aside their newspapers for a couple of hours to read The HP Way, which holds many of the answers they seek.

Dean Zatkowsky, managing partner of Dizzy One Ventures, LLC, is co-author of The Entrepreneurial Investor: The Art, Science and Business of Value Investing, and Two Billion Dollars in Nickels: Reflections on the Entrepreneurial Life