Why Companies Exist

In a speech David Packard, co-founder of HP, gave to managers in 1960 he said,

“we inevitably comes to the conclusion that a group of people get together and exist as an institution that we call a company so they are able to accomplish something collectively which they could not accomplish separately. They are able to do something worthwhile - they make a contribution to society (a phrase which sounds trite but is fundamental).”

A significant number of people think of HP as a printer and computer company. Or, as a company focused on the enterprise. Something that is often lost in the conversation is that HP is considered to be the birthplace of Silicon Valley. The garage where HP was founded is a historical landmark. HP was a startup right out of a garage.

David Packard’s philosophy on business and companies are different from that which many of us experience. They were different from many in his time as well. Several people had urged me to read The HP Way where Packard shares the HP philosophy and his background.

He put into words what I’d often felt. When I sign on to work for a company I look what we, as a team, will be creating to contribute to people. If a companies goal is to make money, how is it beneficial to society?

He expanded quite a bit on this idea. For example, he noted:

At HP, as in other technical companies, there is no shortage of ideas. The problem is to select those likely to fill a real need in the marketplace.

Packard had a bit to say on money as well. He believed a company should make a profit for a number of reasons including:

  1. As a sign customers want something. If people aren’t willing to pay for it does it fill a need?
  2. To bankroll future investments. Going to a bank or someone else to get a loan caused problems if the idea didn’t make money. Bankrolling ideas on a companies profits was safer for a company.

Hewlett and Packard built a company that tried to fill needs in society. They did it from a startup in a garage into a large company in numerous countries. They built the kind of company Steve Jobs was noted as admiring.

When it comes building and working for companies along with the companies place in society it’s worth keeping Packards words in mind.