Cisco's Organizational Structure and its Collaborative Approach to Decision Making
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Case Code: HROB132 Case Length: 25 Pages Period: 2001-2010 Pub Date: 2010 Teaching Note: Not Available |
Price: Rs.400 Organization: Cisco Systems, Inc. Industry: Information Technology Countries: US; Global Themes: Organizational Structure, Organizational Design, Decision Making |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Cisco's Organizational Structure
Right from its initial years, Cisco had a flat organizational structure. Over the years, the company had brought about certain changes in its organizational structure focusing on cross functional teams. Internally the company called it a Networked Virtual Organization. Unlike a traditional hierarchical structure which looked like a tree, the organizational structure at Cisco could be best described as a circle...
Rationale of the Reorganization
Speaking about the organizations structure, Chambers, said, "Our organization structure leverages the power of communities of interest which we call councils which we believe are $10 billion opportunities, boards that we see as $1 billion opportunities and working groups. These organization structures allow us to more effectively prioritize resource across over two dozen cross functional opportunities as well as within each of our corporate functions." According to Chambers, such structures were required for a large company to continue innovating and delivering growth....
How it Started
The idea for the new structure occurred during the economic down turn in 2001, when Cisco wrote off US$2.2 billion in losses. Realizing the Cisco's hierarchical structure was preventing it from moving fast, Chambers started grouping executives into cross-functional teams. By placing executives in fields as disparate as engineering and marketing, he tried to break down traditional "silos" and promote speed in making decisions.....
Results
In late 2008, while Cisco's stock was witnessing a decline, analysts said that the company was still in a strong financial position with US$26 billion in cash. “Not only do we have the $26 billion, we now have 26 new market adjacencies that are not relevant to our revenue today, but they will be three to four years from now," said Chambers. Ricci claimed that in the fiscal year 2008, there was "a tenfold increase in new projects” and the company was also able to reduce operating expenses from about 38 percent at the height of the tech boom to between 35-36 percent. According to Chambers, this vindicated his decision to opt for the new organizational structure. While many companies were trying to survive the economic downturn, Cisco was preparing to grow aggressively and gain market share.......
Accolades
Some industry observers and analysts felt that Cisco's organizational structure and its collaborative approach to decision making was an effective one - potentially the organization of the future. "Now instead of a small group of executives telling everybody else what to do, people have authority to figure out for themselves what to do...
Criticism
However, some analysts and ex-employees of Cisco were not happy with the new organizational structure at Cisco. The structure led to chaos and slowed down decision making at times, they said. "Right now it's chaos because there's so much on everybody's plate," said Geoffrey Moore, a management consultant who has worked with Cisco.....
Cisco's Response
Chambers acknowledged that his critics could be right in their criticism of Cisco's organizational structure and its approach to decision making. However, he said that the company had arrived at its organizational structure after giving a lot of thought to it, continuously refining it since it was introduced in 2001...
Looking Ahead
In November 2009, speaking about Cisco's future strategy, Chambers said, "The improving economic outlook combined with what appears to be a very solid execution on our growth strategy due to our organization structure and innovative business model enabled Cisco to move into 30 plus market adjacencies while reducing non-GAAP operating expenses by 10% year over year and also reducing headcount."...
Exhibits
Exhibit I: Cisco's 11 Technology Groups
Exhibit II: Cisco's Market Share in Different Segments
Exhibit III: Net Sales and Net Income of Cisco: 2000-2009
Exhibit IV: Cisco's Market Transition
Exhibit V: Top 10 in 2009: Fortune 100 Best Companies to Work
Exhibit VI: Cisco's Top Five Opportunities
Exhibit VII: Some Instances of What the Organizational Structure Helped Enable Cisco To Do
Exhibit VIII: Cisco's Acquisitions: 2007-2009
Exhibit IX: Some Specific Instances Where Cisco's Organizational Structure Enabled Effective and Speedy Decision Making
Exhibit X: Cisco's Three year Stock Chart
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