Cisco's Controversial Organizational Model: Another Reorganization!

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However, some analysts and ex-employees of Cisco were not happy with the new management structure. They felt that it had led to chaos and had slowed down decision making at times. Some sources close to the company also claimed that Cisco's new management structure had at times resulted in a slowing down of its response to competitors' moves. They pointed out that in late 2007, Cisco had been slow to react to Hewlett-Packard Company’s (HP) move to start a warranty for its switches that provided free upgrades and support. Critics argued that Cisco’s response had been delayed because decision making had become slower with it having to work through multiple committees ...

Chambers argued that the company had arrived at its management structure after giving a lot of thought to it, continuously refining it since it was introduced in 2001. For instance, in May 2009, he told executives that he did not want them to work on more than four or five committees after some executives complained that they were overstretched. Chambers said that the new organization had served the company well. Moreover, Cisco had reached a position where instead of being led by 10 people heavily leaning on the CEO, it was being run by the top 500 people in the company....

By early 2011, criticism of Ciscos strategy and its board and council structure had reached a crescendo. Some critics contended that Cisco had overstretched itself through its long history of acquisitions, transferring Cisco cash to other firms’ shareholders, hurting Cisco's valuation, and leaving the company struggling. According to Thomson Reuters data, between 2000 and early 2011, the company had invested US$34 billion in acquisitions. It bought home routers, Web-based anti-virus software, web conferencing software, set-top boxes, and video cameras, but many of these businesses failed to deliver adequate returns....

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.” He admitted that the company had disappointed investors, confused its employees, and lost credibility in the marketplace. In the memo, he wrote: “[O]ur strategy is sound… It is aspects of our operational execution that are not. We have been slow to make decisions, we have had surprises where we should not, and we have lost the accountability that has been a hallmark of our ability to execute consistently for our customers and our shareholders...

Chambers was credited with championing much of Cisco’s rapid growth in the 1990s. Some analysts felt that he had been great at operating Cisco as long as he had been in a growth market, but had failed as customers turned to cloud computing and greater use of mobile telephony networks. His reorganizing efforts had also been of little benefit, they said. Critics felt that after the setbacks, Cisco needed a radically new strategy...

Exhibit I: Cisco's Organizational Structure (1997)
Exhibit II: Cisco's Organizational Structure (August 2001)
Exhibit III: Cisco's Selected Financial Data*
Exhibit IV: Break-up of Cisco's Net Sales*
Exhibit V: Cisco's Acquisitions (2000-2011*)
Exhibit VI: Management Structure at Cisco (August 2009)

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