Cisco's Controversial Organizational Model: Another Reorganization!

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Faced with increased criticism of the business performance of Cisco System, Inc (Cisco), John T. Chambers (Chambers), the company’s Chairman and CEO, introduced changes in Cisco’s strategy in the first half of 2011. He also pared down the controversial management structure at Cisco which had been the subject of much debate over the last few years. As a leader in switches, routers, and other Internet technology, Cisco wanted to make the transition from being just a seller of these to being a company that was the most trusted business and technology adviser to its clients.

For this, the company had reorganized its organizational structure in 2001, forming cross-functional teams to break free of the "silo culture" earlier prevalent in the company. Subsequently, it refined the model and came up with an organizational structure comprising councils, boards, and working groups. These committees working at different levels were cross-functional in nature, and according to the company, lent Cisco the speed, scale, flexibility, and rapid replication that were required for a large company to remain innovative in a rapidly changing industry.

While some industry observers felt that such a model would be effective, others felt that rather than promoting innovation, the structure would impede it. They wondered how a complex multilayered organizational model based on committees could speed up decision making. With Cisco's sub-optimal performance in 2010 and the early part of 2011, Chambers' detractors contended that both Cisco's strategy and the organizational model had failed. Critics claimed that the strategy and the structure had confused employees, slowed down decision making, led to an exodus of key executives, and resulted in Cisco losing market share in its core businesses.

In April 2011, Chambers admitted in an internal memo that Cisco had lost its way with too many consumer acquisitions and that it would now make sure it "refocuses on the core." The following month, Chambers announced a massive reorganization, a key aspect of which was that the number of internal councils was reduced from nine to three. While some analysts welcomed the move, others were worried that Chambers had not abolished the council and board structure altogether.

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