photograph by Nigel Parry
"You won't have to depend on the CEO anymore," says Cisco's John Chambers. | photograph by Nigel Parry
Chambers still commands-and-controls, at least some of the time. European customers, for instance, convinced him that so-called smart-grid technology was a form of routing and switching, something that Cisco already understood and that customers needed. So he greenlighted it from the top. "By handling peak loads, switching to alternative-energy sources, we can dramatically reduce the cost of electricity and cut carbon emissions," he says. "It can be a $1 billion or $10 billion business for us."
But Chambers seems genuinely committed to reducing his own personal impact. And the impact and importance of any successor as CEO. The company has stated that Chambers, now 59, will remain chief for at least the next three to five years; that doesn't mean, though, that the window of "who's next" speculation won't open soon. Chambers is quite aware of how the battle over Welch's perch at GE cost that company many of its brightest top executives. His new corporate structure is gauged to limit that kind of fallout. "I now compensate our leadership team based on how well they do on collaboration and the longer-term picture," Chambers says. "If we take the focus off of how they did today, this week, this quarter, it will work."
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Can Cisco-style collaboration really work outside of Cisco? Its supporters inside the company argue that the global marketplace and the ubiquity of Web 2.0 tools demand a workforce empowered to generate ideas, solve problems, and contribute to the greater good without micromanagement. Ricci, who meets with 50 to 75 customers a year, says, "It's the No. 1 item on the list of most CEOS -- to break down the barriers, between me and my customers, and me and my partners."
But Ricci admits, "I think that culture is really a reflection of the CEO personality. It's possible Larry Ellison would make a great CEO of Cisco, in terms of his business skill, but he's so different from John that he would probably spend the next 20 years trying to make the company be like him." Ricci believes that Cisco's guideline for collaboration is a great way to run a company and build a great workforce, "but only if it is what the CEO believes, that this is how people should behave."
Because if top executives have to cede control over their resources, the CEO does too. At Cisco, Chambers says, the ratio of distributed innovation to traditional decision making is about 70-30. "That's the right mix for us." But the ratio is not set in stone. Unlike last-century manufacturing-based leadership systems like Six Sigma that are designed to make management consistent and predictable, Ricci says, "we want to add variability, not remove it." So Cisco is prepared to help other companies find the right mix for them.
Chambers's big gamble (and he does gamble; employees talk admiringly of his skill at Liar's Poker) is turning Cisco from a technology company into a leadership consultancy. Its competitors -- which used to be the likes of Juniper Networks and Alcatel-Lucent -- now range from 3Com to Microsoft to IBM, as he drives the company to seek out areas for growth. The fizzling enthusiasm of venture capital for startups reduces the likelihood of any serious challenge from young companies new to the collaborative marketplace. With some key acquisitions in 2006 and 2007, including Scientific Atlanta, Cisco has even signaled that it wants to own the set-top-box market that controls home video, which could pit the company against cable firms and big media. And though Cisco doesn't ostensibly charge for consulting services, it could eventually add the Accentures of the world to its competitive set. "We're a tech adviser on architecture, yes," Chambers says, "but how does it all tie together? We're really talking about business-process change. And since we've done it for ourselves, we can show others how."
Back in the mid-1990s, Chambers says, "our customers literally pulled us kicking and screaming into providing consultancy." He tells me about the time the CEO of USAA asked him to come down and help the financial-services company figure out what to do with the Internet: "I said, 'Sir, I'm not in that business.' 'If you do it,' came the reply, 'I'll give you all my networks.' And I said, 'Sir, I'm in that business!' " Chambers believes that he is seeing the same situation now -- people who are aware that blogs and wikis and Twitter exist but who don't know how to use them safely and effectively. "We've been working on this for seven years," he says. "We've added culture to our core competencies."
CMO Bostrom points to Cisco.com, where customers can get real-time answers to their questions, participate in discussion forums, watch videos, and share ideas with other customers, vendors, and Cisco employees. Cisco.com even has a mildly hip consumer section with helpful blog posts and programming called "Digital Cribs," where the cool (video artist Lincoln Schatz) and famous (NBA player Shane Battier) share their digital lifestyles.
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Recent Comments | 120 Total
December 2, 2008 at 4:05pm by Traci Fenton
Thanks for the great article. Cisco socialist? Nope, I think they're becoming a model of a democratic company. Can this work outside of Cisco? Yes, and it already has. Our company, WorldBlu , publishes annually The WorldBlu List of Most Democratic Workplaces, which ranges from small to Fortune 500 companies (eg: Linden Lab, Pandora, BzzAgent, DaVita, Great Harvest Bread Company, Zingerman's and more).
It would be great to have Cisco apply for our award -- and hopefully make the List, further reinforcing that this is indeed the future of work.
Traci Fenton
Founder + President
WorldBlu, Inc.
December 6, 2008 at 10:34am by Dominik Zynis
Interesting article Cisco has been trying to do the collaboration thing for quite some time now, looks like it may be paying off.
I applaud Mr. Chambers for democratizing some of the decision making at Cisco which contributes to the use of their own technologies and allows them to practice what their sales people preach. However, the author of this article did a disservice to Cisco investors by claiming that the company is becoming socialist, and given its employees false-hope. Turning a corporation into a Socialist would ultimately mean that the corporate Gini coefficient for Cisco employees would show a drastic movement at a large expense to Mr. Chamber's and other top executives' yearly earnings.
I don't think we are there yet.
December 7, 2008 at 8:20pm by Barton Friedland
It's interesting how ideas take hold and are, like things, popular, based on who uses them and how they are presented. However, both the style of the article and the photography make it more of a marketing piece than a case study. Still, as a marketing piece, it does a great job explaining why these ideas are so important. For a more in-depth view, see Margaret Wheatley's work. Ricardo Semler's Semco has used this approach for years and many of the fundamental concepts discussed are seen in lean manufacturing and agile software development processes. It is good to see these steps taking place as well as further support for these principles to become more generalized. This follows from the thesis of our paper on strategy, organization, and process: http://www.luminousgroup.net/docs/Strategy,%20Organization,%20and%20Proc...
December 10, 2008 at 6:24am by James Gilbert
OK, you got the word "socialist" into big letters to get attention, but c'mon Ms. McGirt, socialists do the opposite of what Cisco is doing: They centralize everything. So, you're either being disingenuous or naive. One wishes Mr. Obama and our Congressional leaders would learn from John Chambers, but then that would empower the American people instead of themselves.
December 13, 2008 at 7:21pm by Nicholas Pontius
Great article. This is what is meant by a Learning Organization (ie: the 5th discipline). As a leader I want to know more about the boards and councils that were frequently mentioned. How do they work, Who is responsible and how is leadership shared at these boards and councils.
January 6, 2009 at 5:58pm by William Farnsworth
I found the article well written and a compelling read but I have to agree with Mr. Gilbert’s comment. I realize that socialism is very much in vogue these days so calling a system that is clearly portrayed as free enterprise, a socialist enterprise seems to be a bait-and-switch. On the other hand, if Ms. McGirt’s article can persuade industry and the federal government to practice Cisco’s brand of “socialism” there might be hope for us yet.
January 11, 2009 at 12:59am by Mark Dust
This is not "socialism", it is a great example of Shared Leadership. We must get away from the traditional top down leadership methodology which has been followed since the early 1900's. During the industrial revolution the top down approach worked very well because usually management were the only ones with an education. The workers were largely uneducated immigrants that didn't speak English. Today's companies are largely made up of Knowledge Workers who are highly educated and can lead themselves. The only false impression in this article is that Cisco is the only company that has discovered the power of Shared Leadership and John Chambers is the "guru" of this type of leadership. Several people are publishing research on Shared Leadership. One of the foremost thinkers on shared leadership is Craig L. Pearce. He has contributed many articles and books to this field of study. Check out Shared Leadership Reframing the Hows and Whys of Leadership, Craig L. Pearce and Jay A. Conger. Another author to explore this area is Charles C. Manz. He has published around 20 books on Self and Shared Leadership.
January 26, 2009 at 5:48pm by Paula Cassin
Ellen, I would agree with a lot of the commenters here - this is clearly not an example of 'socialism'.
In a socialist model, everyone pools their efforts and are rewarded based on 'need' rather than talent or skill or contribution. This is why they tend to fall apart- individuals inevitably stop making an effort when the rewards aren't there.
I assume that the company's leaders still are being remunerated at top-dog levels much higher than the rest of the company, in line with their responsibilities. What's happened is their individual incentives have been aligned to foster innovation and partnership and keep them from competing with peers for resources. Now they are aligned directly to their company's survival and ability to evolve, rather than to their division's budget numbers or outputs.
The more interesting part is the decentralization of decision-making that's underway. I'd be interested to know how employees are remunerated or incented to work this way - are they being rewarded individually (or even as individual teams) for the success of their efforts, or is it considered part of the job to collaborate and work on a myriad of fluid projects that constantly morph.
April 4, 2009 at 9:27am by David Weigelt
The writer of this article definitely does a disservice to herself and Cisco in her characterization of Cisco as socialist. That said, this is a nice glimpse into how democratizing leadership and innovation can transform a company and reap financial rewards. David Wolfe, the author of Firms of Endearment is currently working on a new book for which he explores how corporations needs to shift from Newtonian thinking to what he calls "Organic" or "Quantum" thinking. As the owner of a small company, I would love to hear how this works for small companies and how companies that operate in this manner assure that there will be tangible outcomes at the end of the day. My friend and mentor, Mr. Wolfe, would tell me that this is very Newtonian thinking on my part. I guess that's where 70/30 ratio (Shared Leadership vs. Command and Control) comes in.
--David Weigelt, CEO of Immersion Active and Co-Author of Dot Boom: Marketing to Baby Boomers through Meaningful Online Engagement
April 13, 2009 at 8:00am by Bob Jacobson
Good article, thoughtful comments.
The "socialism" tag isn't as off-base as some commenters make it out to be. Modern socialist theory and John Chambers' theory aren't that far apart. Its dogmatic to associate socialism only with the Soviet model of state socialism or our own sad experience with corporate socialism in the financial sector. Applying Cisco's model to socialism would improve it as much as it will improve management and innovation in a corporate setting. Smart is smart in any context.
April 13, 2009 at 8:02am by Bob Jacobson
Good article, thoughtful comments.
The "socialism" tag isn't as off-base as some commenters make it out to be. Modern socialist theory and John Chambers' theory aren't that far apart. It's dogmatic to associate socialism only with the Soviet model of state socialism or our own sad experience with corporate socialism in the financial sector. Applying Cisco's model to socialism would improve it as much as it will improve management and innovation in a corporate setting. Smart is smart in any context.
August 17, 2009 at 11:35pm by Nathanial Ann
Cisco socialist? Nope, I think they're becoming a model of a democratic company.
Good article, thoughtful comments.
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August 25, 2009 at 1:25pm by pauls simes
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September 18, 2009 at 8:24pm by Anthony Burton
Honestly, I think he is doing a good job at running the company. Times are changing and so do the people who lead businesses. Hopefully all will go well.
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October 5, 2009 at 5:23am by Arnold Johnson
Chambers was actually voted the Most Powerful Person in Networking by Network World magazine amongst other accolades, such as the Distinguished Industry Leader Award from the IEEE and the My Boss is a Patriot award and the Above and Beyond award by the Employer Support of the Guard and Reserve (ESGR) for Cisco's exemplary treatment of employees deployed to military service. What a guy... Chris editor of alli reviews
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October 14, 2009 at 5:47am by Kaewjung Narak
Of all of the maturing tech giants that have struggled to keep investors interested in recent years (think Microsoft, Intel, Oracle, IBM), Cisco has arguably done the most impressive job of maintaining profits while building new growth opportunities. Darren editor of collectible action figures
October 17, 2009 at 11:23am by Howard Carl
An interesting take on things. I love the description of Cisco as "the plumber of the technology world". It's so apt, in a positive way. John Chambers and Cisco have clearly learned from the 2001 debacle, something many companies never recovered from. Howard the car broker.
October 28, 2009 at 8:49pm by Jim Smith
This is interesting. At least the CEO isn't making them all take illegal drugs.
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This is a great tale of how Cisco was able to sustain in global crisis. It gives insight into the management which was spread over 500 employees with a lot of discretion in making decisions. The department and the heads of the organization were integrated and worked collectively, thus reducing cost and saving resources. It believed in sharing knowledge within the organization and this was achieved through information shared on their extranet, which also promoted creativity and innovation. Cisco not only increased its profit but enhanced the idea of CSR by providing support to its business partner in times of natural calamity.
November 12, 2009 at 10:34am by terry rae
This is a great tale of how Cisco was able to sustain in global crisis. It gives insight into the management which was spread over 500 employees with a lot of discretion in making decisions. The department and the heads of the organization were integrated and worked collectively, thus reducing cost and saving resources. It believed in sharing knowledge within the organization and this was achieved through information shared on their extranet, which also promoted creativity and innovation. Cisco not only increased its profit but enhanced the idea of CSR by providing support to its business partner in times of natural calamity.
November 12, 2009 at 10:34am by terry rae
This is a great tale of how Cisco was able to sustain in global crisis. It gives insight into the management which was spread over 500 employees with a lot of discretion in making decisions. The department and the heads of the organization were integrated and worked collectively, thus reducing cost and saving resources. It believed in sharing knowledge within the organization and this was achieved through information shared on their extranet, which also promoted creativity and innovation. Cisco not only increased its profit but enhanced the idea of CSR by providing support to its business partner in times of natural calamity.
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This is a great tale of how Cisco was able to sustain in global crisis. It gives insight into the management which was spread over 500 employees with a lot of discretion in making decisions. The department and the heads of the organization were integrated and worked collectively, thus reducing cost and saving resources. It believed in sharing knowledge within the organization and this was achieved through information shared on their extranet, which also promoted creativity and innovation. Cisco not only increased its profit but enhanced the idea of CSR by providing support to its business partner in times of natural calamity.
November 12, 2009 at 10:35am by terry rae
This is a great tale of how Cisco was able to sustain in global crisis. It gives insight into the management which was spread over 500 employees with a lot of discretion in making decisions. The department and the heads of the organization were integrated and worked collectively, thus reducing cost and saving resources. It believed in sharing knowledge within the organization and this was achieved through information shared on their extranet, which also promoted creativity and innovation. Cisco not only increased its profit but enhanced the idea of CSR by providing support to its business partner in times of natural calamity.