Cisco Systems: Developing a Human Capital Strategy (A)

Abstract

Like many technology organizations in the late 1990s, Cisco was booming. It grew so quickly, in fact, that it was bringing in up to 1,000 new employees each month. Cisco’s solution was to acquire talent by buying small firms, topping out in one year with 24 separate acquisitions. However, in 2000 the dot-com bubble burst and Cisco quickly realized that it had another human capital challenge on its hands: How to develop, rather than hire, the strategic thinkers and leaders needed for the future. This case study explores the challenges facing Mary Eckenrod, Cisco’s Vice President of Worldwide Talent, in developing a new human capital strategy to identify and develop leaders from within the company—and to do this in a company with no tradition of developing people internally. How can Cisco move from a “buy” to a “make” human capital strategy? The lessons from this case provide a template that other organizational leaders can use in managing organizations through various stages of evolution and different types of growth.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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Resources

Exhibit 1: Cisco Selected Financial Data (Year Ending July) and Ratios

2003

2002

2001

2000

1999

Net Sales

$18,878

$18,915

$22,293

$18,928

$12,173

Net Income (loss)

$3,578

$1,893

$(1,014)

$2,668

$2,023

Net Income (loss) per share—basic

$0.50

$0.26

$(0.14)

$0.39

$0.30

Net Income (loss) per share—diluted

$0.50

$0.25

$(0.14)

$0.36

$0.29

Cash and Cash Equivalents and Total Investments

$20,652

$21,456

$18,517

$20,499

$10,214

Total Assets

$37,107

$37,795

$35,238

$32,870

$14,893

Source: Cisco.

Exhibit 2: Cisco Stock Price History

Figure

Source: Yahoo! Reproduced with permission of Yahoo! Inc. ©2010 Yahoo! Inc. YAHOO! and the YAHOO! logo are registered trademarks of Yahoo! Inc.

Exhibit 3: Cisco Selected Executive Bios

John Chambers, CEO

John Chambers is president and CEO of Cisco Systems, the worldwide leader in networking for the Internet. Since January 1995, when he assumed this position, Chambers has grown the company from $1.2 billion in annual revenues to its current run-rate of approximately $18.9 billion.

Chambers has been lauded by government leaders and countless publications worldwide for his visionary strategy, his ability to drive an entrepreneurial culture, and his warm-hearted, straight-talking approach.

This past year, Chambers spearheaded several key global initiatives, including co-sponsorship of the Jordan Education Initiative, in partnership with his Majesty King Abdullah II of Jordan and the World Economic Forum. In November, Chambers was named “The Most Influential CEO” in telecommunications by Institutional Investor magazine and in October he was named “The Most Influential Person in Communications” by Telecom Magazine. He has received numerous other awards including the Smithsonian Lifetime Achievement award and the Ron Brown Award for Corporate Leadership.

He has served two American presidents; most currently as Vice Chairman of the President George Bush National Infrastructure Advisory Council (NIAC). On this committee, Chambers provides industry experience and leadership to help protect the critical infrastructure of the United States. He was appointed to this position by President Bush in November 2002. He previously served on President Bush’s transition team as a member of his Education Committee and on former President Bill Clinton’s Trade Policy Committee.

Chambers was voted the Most Powerful Person in Networking by Network World magazine and has received many other accolades, including 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. Fortune magazine has rated Cisco in the top 100 Best Places to Work for the last seven years and also awarded Cisco the Blue Ribbon for appearing on four additional lists, including America’s Most Admired, Global Most Admired, Fortune 500, and Global 500. Cisco has consistently appeared in many other key industry “top” lists including the number one most powerful networking company by Network World, the Top 100 Best Places to Work for Working Mothers, by Working Mother magazine, the Top 15 Best Places to Work, by the Sunday Times, U.K., and the number one best employer in Australia.

In 2002, the National Investor Relations Institute, in conjunction with Barrons and Investor Relations magazines, recognized Chambers with their prestigious “Best Investor Relations by a CEO” award. Also in 2002, Chambers accepted the “Hall of Fame” award from Channel Reseller News for his success in helping channel partners build sustainable business models.

Chambers joined Cisco in 1991 as senior vice president, Worldwide Sales and Operations. Prior to joining Cisco, Chambers spent eight years at Wang Laboratories and six years with IBM. Chambers holds a law degree and a bachelor of science/bachelor of arts degree in business from West Virginia University. He later received a masters of business administration degree in finance and management from Indiana University. He is married and has two adult children.

Kate DCamp, Senior Vice President, Human Resources

Kate DCamp leads a global team of HR professionals charged with accelerating Cisco’s evolution to a development culture that builds a sustainable supply of leadership and talent from within.

Since beginning in her leadership role in Cisco in May 2000, Kate and her team have developed and implemented new leadership processes and programs to develop the next generation of leaders, transitioning Cisco from a company that brought in talent through direct hiring and an aggressive acquisition strategy. The team is also taking Cisco from a leader in e-HR to the next level by creating efficient and effective business processes that utilize the full power of intelligent networks and the Internet and increase the return on investment in talent.

Kate has more than 20 years of human resources and business experience. Before joining Cisco, Kate served as Global Leader Compensation and Executive Programs for GE Capital where she designed and managed the executive, compensation, and recognition related programs for the company’s 130,000 employees and 28 businesses.

Prior to GE, Kate held several other Human Resource leadership roles, including Director of Executive Programs at The Associated Group in Indianapolis, where she led executive development and developed the annual business operating plan and metrics. While at The Associated Group, Kate developed a new compensation strategy for Anthem and a new compensation and governance model for the Acordia Companies as part of the plan for an IPO of this subsidiary business on the New York Stock Exchange.

Mary Eckenrod, Vice President, World Wide Talent Management

Mary Eckenrod is currently Vice President, World Wide Talent, for Cisco Systems, Inc., which she joined in June, 2001. She is focused on accelerating the identification, assessment and development of Cisco’s top leadership talent. She also leads the company’s talent resourcing, executive education and staffing, learning and development, university relations and campus recruiting, and performance management initiatives.

Her previous experience includes 15 years at Rockwell International as Director of Global Human Resources and Organizational Development responsible for succession management, the Rockwell Leadership Institute, organizational development, global diversity, and employee development. She had similar responsibilities at Johnson Controls International. After completing a BS in Chemistry Education from the University of Wisconsin, she taught high school chemistry, physics and algebra. Her Masters in Finance/Organizational Behavior and Doctoral coursework in Business Strategy are from the University of Wisconsin where she has also taught in the MBA program.

Eckenrod has been active professionally, including the Human Resource Planning Society (Executive Committee, Board of Directors, 2004 Conference Co-Chair, Midwest and California affiliates Board of Directors and national committees), SHRM (Wisconsin Chapter President, officer and board positions). She has also been on several not-for-profit boards including Dean’s Advisory Boards at Marquette University and University of Wisconsin Business School. She is a frequent presenter at business conferences.

Randy Pond, Senior Vice President, Operations, Processes, and Systems

Randy Pond is the Senior Vice President of Operations, Processes, and Systems at Cisco Systems Incorporated. In this role, Pond oversees the organizations of Worldwide Manufacturing, Information Technology, Customer Service, Legal Affairs, Government Solutions, and Corporate Security Programs. Pond also serves as chair of Cisco’s Business Process Operations Council and Business Oversight Board; two strategic executive councils within Cisco.

Pond joined Cisco in September 1993 through the acquisition of Crescendo Communications. In his ten years with the company he has held numerous roles within Manufacturing, including his initial role as Director of Operations. In 1994 Pond assumed leadership of Cisco’s Supply/Demand group, and later in 1994 was appointed Director of Cisco’s worldwide manufacturing operations, responsible for planning, production operations, and distribution and logistics.

He was promoted to Vice President of Manufacturing in 1995, responsible for all aspects of manufacturing operations, including new product introduction, planning, procurement, productions operations, and distribution and logistics. In January 2000, Pond was promoted to SVP of West Coast and Asia operations. From 2001 to August 2003, Pond became responsible for all of World Wide Manufacturing Operations, including product fulfillment and logistics.

Some of Pond’s key accomplishments include overseeing Cisco’s West Coast Operations by leading the implementation of Enterprise Resource Planning in manufacturing, establishing the consistency of process and metrics across manufacturing operations, and making customer fulfillment a strategic initiative.

Prior to joining Cisco, Pond held the positions of Vice President Finance, Chief Financial Officer and Vice President of Operations at Crescendo Communications, and VP of Manufacturing and VP of Finance at Versatec, Inc, a wholly owned subsidiary of Xerox Corporation. He has also served in various finance and operations positions at David Systems, Xerox Corporation, Schlumberger and Arthur Andersen.

Pond is on the Board of Directors for The Children’s Discovery Museum of San Jose and Northwestern University. He has a bachelor’s degree in accounting and economics from Ball State University in Indiana.

Source: Cisco.

Exhibit 4: Cisco Retention Statistics

FY

No. Hired

No. Still Here

Percent Still Here

Turnover

1991

281

126

45%

7.0%

1992

407

237

58

6.0

1993

631

408

65

5.9

1994

964

647

67

6.4

1995

1,880

1,448

77

6.0

1996

4,800

3,749

78

7.3

1997

3,586

3,097

86

7.0

1998

5,034

4,799

95

5.0

1999

7,689

7,219

95

6.3

Source: Cisco.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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