Question

How does Chambers justify changing Cisco’s business structure from command and control to teamwork and collaboration?

Answer 1

Structures sometimes get too complex and need to be simplified. Most observers believe that Cisco Systems Inc., which designs, produces and sells networking equipment, fits this description. John Chambers, CEO of the company, has shifted Cisco from a centralized orientation to a focus on horizontal connections. Cisco had four forms of such links as of late 2009. A small team of individuals assigned to one of forty-seven boards for any given project. Each board had 14 members. Forty-three of these boards referred each to a council of twelve.

Fourteen members were also distributed by each council. The councils referred chambers and fifteen other top executives to an administrative committee. The councils were bypassed by four of the forty-seven boards, reporting directly to the operating committee. Such systems are so complicated and time-consuming that some top executives spend 30% of their working hours sitting on more than 10 committees, commissions, and the management committee.

Because it is competing in fast-changing high-tech markets, Cisco had to be able to quickly make strategic moves. This is avoided by the complex organizational structures of the organization. A rival, Hewlett-Packard (HP), started offering a repair service at the end of 2007 that provides free maintenance and updates on the market of computer network switches. Because Cisco's response to this proposal had to pass through several boards, it wasn't until April 2009 that the company took action. Cisco's market share dropped during the delay as consumers acknowledged HP's warranty

This and other problem created by the overly complex structure of Cisco was so severe that one columnist wondered aloud. Chambers reversed the course in the summer of 2011 and decided to return Cisco to a more traditional structure, while reducing the workforce of the company by 9 percent. Time will tell if these structural changes would raise the stock price of Cisco, which dropped to $18 in mid-2011, but recovered to $24 by 2014.