Cisco Internal Governance Case Study

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Background In 1995, John Chambers joined Cisco Systems as president and CEO. After six years under the supervision of Chambers, the company went from generating $2.2 billion in annual sales to $22.3 billion. As a result of the market downturn in 2001, the company suffered its first loss and laid off 18% of its workforce. Chambers quickly realized Cisco was in need of significant organizational restructuring if Cisco were to survive and thrive the downtown. This change shifted the company from a decentralized firm that only focused its three work silos of Marketing, Engineering and Sales to segregated and specific customer groups to a centralized firm that focused on collaboration and relevant technologies for given customer groups. This…show more content…
Cisco was able to recognize that a centralized and functional structure was necessary in order to avoid product and resource redundancies; however by doing so, Cisco also risked losing its customer-centricity focus that had set it apart in the market for years. To help mitigate these risks as well as encourage and ease the change transition, Chambers decided to implement a cross-functional system of executive level councils. During the 2001 functional reorganization, three cross-functional business councils were created with the goal of “aligning the organization and driving productivity gains… while ensuring that a customer-mindset remains the company’s focus every step of the way”. These councils continued to expand and improve between 2001 and 2007 (see Appendix 1). The capability to create additional capacity in the form of organization and product expansion for Cisco was the driving force behind the internal governance system. Although this new collaborative system increased and altered previous methods and processes Cisco leaders, management and VP’s were accustomed to, thus acting as a resisting force, the existing culture at Cisco was such to embrace change rather than fight it. The purpose of the change was to bring Cisco “closer to its customers,
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