Organisation Design - Cisco (OB)

ORGANISATIONAL DESIGN OF CISCO
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ORGANISATION ORGANISATION
AL DESIGN AL DESIGN
OF CISCO OF CISCO
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1.Introduction
Organisation design is not simply about mapping out an organisational structure, but also
about how the organisation is aligned with all other aspects, functions, processes and
strategies within the business. When looking at organisation design, the context within which
the business exists must be taken into consideration. The chapter begins by discussing what
an organisation actually is before looking at how organisation designs have evolved over
time. The chapter then considers various forms of design, factors that influence design, and a
range of tools and models you can use to understand how organisation design fits together.
The chapter concludes by investigating what role hrm plays within organisation design.
Throughout the chapter there are questions and case studies. We strongly urge you to take
time out to try to answer the questions. Only by doing so can you fully understand the
complexity and relevance of organisation design.
Whether we are aware of it or not, we have at some stage in our lives belonged to at least one
organisation. We also can quite easily identify organisations. These organisations can be
international (e.g. the world bank, national (e.g.parliament and the national health service,
or local (e.g. a local charity. !ut what exactly is an organisation" most of us would consider
it to be composed of a number of people, but would we say it also consists of the buildings
that the group of people use" #aturally there are many definitions. $cnamara (%&'%
suggests that (in its simplest form) an organisation is (a person or group of people
intentionally organised to accomplish an overall, common goal or set of goals).
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2.Definition and Meaning of Organization design

Organization design
*can be defined as the process of reshaping organi+ation structure and roles .Or ,s the
alignment of structure, process, rewards, metrics and talent with the strategy of the business.
Organi+ational design is the way an organi+ation is to be structured and operated by its
members. -t is both a plan and process.
Organisational design is often defined narrowly as the process of reshaping organi+ation
structure and roles. -t can, however, more usefully be defined as.
/ aligning the structure, processes, people, co0ordination and control mechanisms, and lateral
connections of an organisation with its strategy and operating environment.1
The underlying logic for this is that for an organisation to be successful, and be able to
execute its chosen strategy, it must have a formal design which addresses two complementary
problems.
'. 2ow to partition the overall task of the organisation into smaller tasks of sub0units,
and
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%. 2ow to co0ordinate these smaller sub0unit tasks so that they fit together to efficiently
realise organisational goals.
Organisational design is part of the broader fields of organisational development (often
colloquially referred to as (O3) and organisational effectiveness. These fields include more
behaviourally0centred approaches to improving effectiveness such as leadership behaviours,
organisational culture and interpersonal communication.
/4the vast ma5ority of people go to their 5obs each day wanting to contribute to the mission
of the organisation they work for. Too often, however, the organisation is a barrier to, not an
enabler of, individual effort.1
6. 7albraith
There is a large body of research showing strong links between the design of organi+ations
and their effectiveness. This research has generated various organisational design
frameworks, most notably 6ay 7albraith)s (star model) which can be used to diagnose and
decide action on design issues. The research and frameworks have some common
foundational themes.
8 9uccessful organisational design is approached holistically. ,ll components of an
organisation : its people, formal structures, organising processes etc interact to determine
effectiveness. ,ny approach which does not consider these, or which deals with them in
isolation is unlikely to generate an effective outcome.
8 ;very organisation exists to achieve something in a particular environment. To be
successful an organisation)s design should reflect and match the choices, complexity,
constraints and opportunities inherent in its strategy and operating environment. ,s these
change, so should an organisation)s design in response.
8 ;ach component of an organisational design should combine with all the others to support
strategy execution. The better the alignment or coherence between components, the greater
the organisation)s likely effectiveness.
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3.What is organizational design?
,n organi+ation or organisation is an entity, such as an institution or an association, that has a
collective goal and is linked to an external environment. The word is derived from the 7reek
word organon, itself derived from the better0known word ergon which means *organ* .
Organi+ational design is a step0by0step methodology which identifies dysfunctional aspects
of work flow, procedures, structures and systems, realigns them to fit current business
realities<goals and then develops plans to implement the new changes. The process focuses on
improving both the technical and people side of the business.
Organi+ational designis the creation or change of an organi+ation=s structure. The
organi+ational design of a company reflects its efforts to respond to changes, integrate new
elements, ensure collaboration, and allow flexibility.
Organi+ing a business is difficult. Once an organi+ation has a plan, the next step is to make it
happen. The ma5or characteristics of organi+ational structure is, in many ways, like the
important parts of a 5igsaw pu++le>you pick them out, one by one. -n particular, the two
basic forms of organi+ational structure are mechanistic and organic.
?or most companies, the design process leads to a more effective organi+ation design,
significantly improved results (profitability, customer service, internal operations, and
employees who are empowered and committed to the business. The hallmark of the design
process is a comprehensive and holistic approach to organi+ational improvement that touches
all aspects of organi+ational life, so you can achieve.
;xcellent customer service
-ncreased profitability
@educed operating costs
-mproved efficiency and cycle time
, culture of committed and engaged employees
, clear strategy for managing and growing your business
!y design we)re talking about the integration of people with core business processes,
technology and systems. , well0designed organi+ation ensures that the form of the
organi+ation matches its purpose or strategy, meets the challenges posed by business realities
and significantly increases the likelihood that the collective efforts of people will be
successful.
,s companies grow and the challenges in the external environment become more complex,
businesses processes, structures and systems that once worked become barriers to efficiency,
customer service, employee morale and financial profitability. Organi+ations that don)t
periodically renew themselves suffer from such symptoms as.
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-nefficient workflow with breakdowns and non value0added steps
@edundancies in effort (/we don)t have time to do things right, but do have time to do
them over1
?ragmented work with little regard for good of the whole (Aroduction ships bad parts
to meet their quotas
Back of knowledge and focus on the customer
9ilo mentality and turf battles
Back of ownership (/-t)s not my 5ob1
Cover up and blame rather than identifying and solving problems
3elays in decision0making
Aeople don)t have information or authority to solve problems when and where they
occur
$anagement, rather than the front line, is responsible for solving problems when
things go wrong
-t takes a long time to get something done
9ystems are ill0defined or reinforce wrong behaviors
$istrust between workers and management
3.1 Methodology
,lthough adaptable to the si+e, complexity and needs of any organi+ation, the design process
consists of the following steps.
Charter the design process
,s senior leaders, you come together to discuss current business results, organi+ational
health, environmental demands, etc. and the need to embark on such a process. Dou establish
a charter for the design process that includes a /case for change,1 desired outcomes, scope,
allocation of resources, time deadlines, participation, communications strategy, and other
parameters that will guide the pro5ect.
(,t times, senior teams may go through either a strategic planning process or an executive
team development process prior to beginning a redesign initiative, depending on how clear
they are about their strategy and how well they work together as a team.
Assess the current state of the usiness
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Dou don)t want to begin making changes until you have a good understanding of the current
organi+ation. Esing our Transformation $odel, we facilitate a comprehensive assessment of
your organi+ation to understand how it functions, its strengths and weaknesses, and alignment
to your core ideology and business strategy. The assessment process is astounding in the
clarity it brings an organi+ation)s leaders and members, not only regarding how the
organi+ation currently works but how the various parts are interrelated, its overall state of
health and, most importantly, what needs to be done to make improvements.
Design the ne! organization
The senior team (and<or others who have been invited to participate in the process, look to
the future and develop a complete set of design recommendations for the /ideal future.1 ,t a
high level, the steps in this process include the following.
3efining your basic organi+ing principle. (Will you organi+e primarily around functions,
processes, customer0types, technologies, geographies, etc."
9treamlining core business processes>those that result in revenue and<or deliverables to
customers.
3ocumenting and standardi+ing procedures.
Organi+ing people around core processes. -dentifying headcount necessary to do core work.
3efining tasks, functions, and skills. What are the performance metrics for each
function<team" 2ow are they evaluated and held accountable"
3etermining facility, layout and equipment needs of various teams and departments
throughout the organi+ation.
-dentifying support resources (finance, sales, 2@, etc., mission, staffing, etc. and where
should these should be located.
3efining the management structure that provides strategic, coordinating and operational
support.
-mproving coordinating and development systems (hiring, training, compensation,
information0sharing, goal0setting, etc..
,t some point the design process morphs into transition planning as critical implementation
dates are set and specific, concrete action plans created to implement the new design. ,nd a
key part of this step includes communicating progress to other members of the organi+ation.
, communications plan is developed that educates people in what is happening. ;ducation
brings awareness, and everyone)s inclusion brings the beginning of commitment.
I"ple"ent the design
#ow the task is to make the design live. Aeople are organi+ed into natural work groups which
receive training in the new design, team skills and start0up team building. #ew work roles are
learned and new relationships within and without the unit are established. ;quipment and
facilities are rearranged. @eward systems, performance systems, information sharing,
decision0making and management systems are changed and ad5usted. 9ome of this can be
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accomplished quickly. 9ome may require more detail and be implemented over a longer
period of time.
Are0design Workflow
Aost0design Workflow
The first chart illustrates the tendency of most people within organi+ations to think in terms
of silos and organi+e people according to the similarity of their functions.
The second chart illustrates how the company redefined structural boundaries to become
much more cross0functional on the front end of their business. They combined people from a
number from a number of departments into teams that took full responsibility for managing
customer orders. The company was able to improve their total billings of a ma5or product line
by F&G and increase their margins by %FG.
Of course, this chart greatly simplifies all of the design decisions which included
improvements in workflow and system support, and the role of leaders and other support
functions in the new organi+ation. !ut this gives you an idea of the kinds of integration and
improved collaboration that can result from organi+ational design.
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#.$he %&olution Of Organisational Design $heory
We saw in the previous section that organisations are deliberately structured and have design.
, particular design of an organisation might be described as bureaucratic : that is to say, it
has bureaucracy. What do we mean by this, and how does it relate to organisation design"
Our understanding of bureaucracy generally comes to us through the work of the 7erman
sociologist $ax Weber ('HIJ:'K%&, who uses the term in relation to his discussion of
authority. Weber explores why it is that we obey other people and suggests three types of
authority. traditional, charismatic and legal0rational.
-t is the legal0rational authority that applies to bureaucracy. This type of authority depends not
on tradition, as in the case of monarchy, or on the charismatic qualities of a person. The
reason we tend to obey this authority is because it has been defined, structured and limited by
certain rules designed to achieve specific goals. Thus, within a company managers ought to
be obeyed because they occupy the (office) of a manager, and there are restrictions to the
extent of their authority, which has been rationally determined. This would be a different
situation from, for example, a young child who obeys the parents purely because they are the
parents and because parents are traditionally obeyed. Begal0rational authority tends to co0
exist within certain types of organi+ations referred to by Weber as having (bureaucratic
administration). What he means by this is that organisations develop robust processes,
structure and rules for workers to follow. -t is these features that, when they are put together
in an organisation, we refer to as bureaucracy. Weber then goes on to say that organisations
adopting the (bureaucratic administration) type are (superior to any other form in precision, in
stability, in the stringency of its discipline, and in its reliability) (Weber 'KJL, pMML.
$oreover, he suggests that the capturing of technological knowledge is the (source) of the
bureaucratic administration. -n other words, following industrialisation, developing
organisations increased the number of managerial workers who were responsible for
capturing, measuring and evaluating work practices. This new knowledge needed to be
formulated in a structured way so that organisational processes could be followed, measured
and understood. This in turn facilitated an element of control, which in Weber)s view
contributes to the efficiency of the organisation. Organisational 3esign Meffective design for
an organisation is one where its structure is bureaucratic. -t is this structure that allows greater
control of the organisation and in turn leads to greater efficiencies
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'.(i) *ey %le"ents in Organizational Design
Organi+ational design is engaged when managers develop or change an organi+ation=s
structure. Organi+ational 3esign is a process that involves decisions about the following six
key elements.
Wor+ (pecialization
3escribes the degree to which tasks in an organi+ation are divided into separate
5obs. The main idea of this organi+ational design is that an entire 5ob is not done
by one individual. -t is broken down into steps, and a different person completes
each step. -ndividual employees speciali+e in doing part of an activity rather than
the entire activity.
Depart"entalization
-t is the basis by which 5obs are grouped together. ?or instance every organi+ation
has its own specific way of classifying and grouping work activities.
There are five common forms of departmentali+ation.
,unctional Depart"entalization. ,s shown in the ?igure %0', it groups 5obs by
functions performed. -t can be used in all kinds of organi+ationsN it depends on the
goals each of them wants to achieve.
?igure %0'?unctional 3epartmentali+ation example
3ifferent aspects on this type of departmentali+ation.
Aositive ,spects #egative ,spects
;fficiencies from putting together
similar specialties and people with
common skills, knowledge, and
Aoor communication across
functional areas
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orientations
Coordination within functional
area
-n0depth speciali+ation
Bimited view of organi+ational
goals
-roduct Depart"entalization. -t groups 5obs by product line. ;ach manager is
responsible of an area within the organi+ation depending of his<her speciali+ation
?igure %. Aroduct 3epartmentali+ation example
9ource. !ombardier ,nnual @eport
,llows speciali+ation in particular
products and services
$anagers can become experts in
their industry
Closer to customers
3uplication of functions
goals
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.eographical Depart"entalization. -t groups 5obs on the basis of territory or
geography.
?igure %0M. 7eographical 3epartmentali+ation example
$ore effective and efficient
handling of specific regional
issues that arise
9erve needs of unique geographic
markets better
Can feel isolated from other
organi+ational areas
-rocess Depart"entalization. -t groups on the basis of product or customer flow.
?igure %0J. Arocess 3epartmentali+ation example
$ore efficient flow of work
activities
Can only be used with certain
types of products
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Custo"er Depart"entalization. -t groups 5obs on the basis of common customers
?igure %0F. Customer 3epartmentali+ation example
Customers= needs and problems
can be met by specialists
goals
Chain of co""and
-t is defined as a continuous line of authority that extends from upper organi+ational levels to
the lowest levels and clarifies who reports to whom. There are three important concepts
attached to this theory.
,uthority. @efers to the rights inherent in a managerial position to tell people what to do and
to expect them to do it.
@esponsibility. The obligation to perform any assigned duties.
Enity of command. The management principle that each person should report to only one
manager.
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(pan of Control
-t is important to a large degree because it determines the number of levels and managers an
organi+ation has. ,lso, determines the number of employees a manager can efficiently and
effectively manage.
Centralization and Decentralization
$ore Centrali+ation $ore 3ecentrali+ation
;nvironment is stable
Bower0level managers are not as
capable or experienced at making
decisions as upper0level managers.
Bower0level managers do not want
to have say in decisions
3ecisions are significant.
Organi+ation is facing a crisis or the
risk of company failure.
Company is large.
;ffective implementation of
company strategies depends on
managers retaining say over what
happens.
;nvironment is complex, uncertain.
Bower0level managers are capable
and experienced at making
decisions.
Bower0level managers want a voice
in decisions.
3ecisions are relatively minor.
Corporate culture is open to
allowing managers to have a say in
what happens.
Company is geographically
dispersed.
;ffective implementation of
company strategies depends on
managers having involvement and
flexibility to make decisions
,or"alization
-t refers to the degree to which 5obs within the organi+ation are standardi+ed and the extent to
which employee behavior is guided by rules and procedures.
/.$ypes of Organisational Design
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/.1.What are the co""on types of Organisational Designs?
There are two main types of Organisational 3esign :
Traditional
Contemporary
$raditional
(i"ple
Bow departmentalisation
Wide spans of control
Centralised authority
Bittle formalisation
$ost commonly used by small businesses
?ast, flexible, inexpensive to maintain
#ot appropriate as organisation grows and relying on one person is risky
,unctional
,n organisational design that groups similar or related occupational specialities
together
Cost saving advantages from specialisation
;mployees are grouped with others who have similar tasks
?unctional specialists become insulated and unaware of what other units are doing
Aursuing functional goals can lead to manager losing sight of what is best overall for
the organisation
$any medium si+ed organisation use this design
;.g. 2@, finance, operations etc..
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Di&isional
,n organisation made up of separate, semi0autonomous units or divisions
?ocuses on results : division managers are responsible for what happens to their
products and services
3uplication of activities and resources increases cost and reduces efficiency
Conte"porary
$ea"
,n organisational structure in which the entire organisation is made up of work groups or
teams
Ad&antages
;mployees are empowered
;mployees are more involved
@educes barriers among functional areas
Disad&antages
#o clear chain of command
Aressure on team to perform
Matri)
$atrix is a structure that assigns specialists from different functional areas to work on
pro5ects, but who returns to their areas when the pro5ect is completed.
Creates a dual chain of command (unlike a unity of command
%"ployees ha&e 2 "anagers 0 a product "anager and a functional "anager
!oth managers need to Communicate regularly
Coordinate work demands
@esolve conflicts together
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Aro5ect is a structure in which employees continuously work on pro5ects
,s one pro5ect is completed employees move on to the next
#o formal department that employees return to on completion of a pro5ect
#o departmentalisation or rigid organisational hierarchy
$anagers serve as mentors, facilitators, and coaches
Ad&antages
?luid and flexible design that can respond to environmental changes
?aster decision making
Disad&antages
Complexity of assigning people to pro5ects
Task and personality conflicts
1oundaryless
, structure that is not defined or limited to artificial hori+ontal, vertical or external
boundaries
@emains flexible and unstructured
Can respond quickly to fast0moving marketplace
;liminates chain of command
@eplace departments with empowered teams
2irtual
,n organisation that consists of small core full0time employees and that hires outside
specialists temporarily as needed to work on pro5ects
3et!or+
Eses its own employees to do some work activities and networks of outside suppliers
to provide other needed product components or work processes
9ometimes known as $odular organisation
,llows organisations to concentrate on what they do best
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,nd to contract out other activities to companies that can do those activities best
,dvantages.
2ighly flexible
3raws on talent wherever it is found
3isadvantages.
Back of control
Communication difficulties
Design Challenges Managers ,ace $oday
*eeping e"ployees connected
?inding a way to keep widely dispersed and mobile employees connected to the
organisation
Organisational design issues in relation to sustainability
The si+e of the organisation affects the implementation of sustainability operations
, large company needs more elaborate strategies, policies and structures
#eed to engage employees to be able to successfully implement and integrate
sustainable practices
1uilding a learning organisation
Bearning organisation. an organisation that has developed the capacity to
continuously learn, adapt and change
-t describes an organisational mindset
@evolves around4
Organisational 3esign
-nformation 9haring
9hare information and collaborate
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@equires minimal structure and physical barriers
Teams are an important feature and empowered employees
9hare information OA;#BD, ,CCE@,T;BD, T-$;BD $,##;@
4eadership
Creating a shared vision for the future and keeping employees working towards that
vision
Culture
Create a sense of community
$anaging global structural issues
@elevant because of the global nature of modern business
9tructures and strategies worldwide are similar (the behaviour within them is unique
though
2ave to consider the cultural implications of certain design elements
;.g. ?ormalisation (rules and bureaucratic mechanisms may be more important in
less economically developed countries because they have lower levels of professional
education and skills.
5.What is Organizational structure?
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,n organi+ational structure defines how activities such as task allocation, coordination and
supervision are directed towards the achievement of organi+ational aims. -t can also be
considered as the viewing glass or perspective through which individuals see their
organi+ation and its environment.
Organi+ations are a variant of clustered entities. ,n organi+ation can be structured in many
different ways, depending on their ob5ectives. The structure of an organi+ation will determine
the modes in which it operates and performs.
Organi+ational structure allows the expressed allocation of responsibilities for different
functions and processes to different entities such as
the branch, department, workgroup and individual
Organi+ational structure affects organi+ational action in two big ways. ?irst, it provides the
foundation on which standard operating procedures and routines rest. 9econd, it determines
which individuals get to participate in which decision0making processes, and thus to what
extent their views shape the organi+ation)s actions.
5.1 6istory
Organi+ational structures developed from the ancient times of hunters and collectors in tribal
organi+ations through highly royal and clerical power structures to industrial structures and
today=s post0industrial structures.
,s pointed out by B. !. $ohr, the early theorists of organi+ational structure, Taylor, ?ayol,
and Weber *saw the importance of structure for effectiveness and efficiency and assumed
without the slightest question that whatever structure was needed, people could fashion
accordingly. Organi+ational structure was considered a matter of choice... When in the 'KM&s,
the rebellion began that came to be known as human relations theory, there was still not a
denial of the idea of structure as an artifact, but rather an advocacy of the creation of a
different sort of structure, one in which the needs, knowledge, and opinions of employees
might be given greater recognition.* 2owever, a different view arose in the 'KI&s, suggesting
that the organi+ational structure is *an externally caused phenomenon, an outcome rather than
an artifact.* -n the %'st century, organi+ational theorists such as Bim, 7riffiths, and 9ambrook
(%&'& are once again proposing that organi+ational structure development is very much
dependent on the expression of the strategies and behavior of the management and the
workers as constrained by the power distribution between them, and influenced by their
environment and the outcome.
Operational organizations and infor"al organizations
Infor"al organization and ,or"al organization
The set organi+ational structure may not coincide with facts, evolving in operational action.
9uch divergence decreases performance, when growing. ;.g., a wrong organi+ational
structure may hamper cooperation and thus hinder the completion of orders in due time and
within limits of resources and budgets. Organi+ational structures shall be adaptive to process
requirements, aiming to optimi+e the ratio of effort and input to output.
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5.2 $ypes
6ierarchical organization and ,lat organization
-re7ureaucratic structures
Are0bureaucratic (entrepreneurial structures lack standardi+ation of tasks. This structure is
most common in smaller organi+ations and is best used to solve simple tasks. The structure is
totally centrali+ed. The strategic leader makes all key decisions and most communication is
done by one on one conversations. -t is particularly useful for new (entrepreneurial business
as it enables the founder to control growth and development.
They are usually based on traditional domination or charismatic domination in the sense
of $ax Weber=s tripartite classification of authority.
1ureaucratic structures
Weber ('KJH, p. %'J gives the analogy that /the fully developed bureaucratic mechanism
compares with other organi+ations exactly as does the machine compare with the non0
mechanical modes of production. Arecision, speed, unambiguity, 4 strict subordination,
reduction of friction and of material and personal costs0 these are raised to the optimum point
in the strictly bureaucratic administration.1 !ureaucratic structures have a certain degree of
standardi+ation. They are better suited for more complex or larger scale organi+ations, usually
adopting a tall structure. The tension between bureaucratic structures and non0bureaucratic is
echoed in !urns and 9talker=s distinction between mechanistic and organic structures.
The Weberian characteristics of bureaucracy are.
Clear defined roles and responsibilities
A hierarchical structure
@espect for merit
!ureaucratic 9tructures have many levels of management ranging from senior executives to
regional managers, all the way to department store managers. 9ince there are many levels,
decision0making authority has to pass through more layers than flatter organi+ations.
!ureaucratic organi+ation has rigid and tight procedures, policies and constraints. These kind
of structure is reluctant to adapt or change what they have been doing since the company
started. Organi+ational charts exist for every department, and everyone understands who is in
charge and what his responsibilities are for every situation. 3ecisions are made through an
organi+ed process, and a strict command and control structure is present at all times.-n
bureaucratic structures, the authority is at the top and information is then flowed from top to
bottom. This causes for more rules and standards for the company which operational process
is watched with close supervision. 9ome advantages for bureaucratic structures for top0level
managers are they have a tremendous control over organi+ational structure decisions. This
works best for managers who have a command and control style of managing. 9trategic0
decision making is also faster because there are fewer people it has to go through to approve.
9ome disadvantages in bureaucratic structures are it can discourage creativity and innovation
in the organi+ation. This can make it hard for a company to adapt to changing conditions in
the marketplace.
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-ost7ureaucratic
The term of post bureaucratic is used in two senses in the organi+ational literature. one
generic and one much more specific. -n the generic sense the term post bureaucratic is often
used to describe a range of ideas developed since the 'KH&s that specifically contrast
themselves with Weber=s ideal type bureaucracy. This may include total quality management,
culture management and matrix management, amongst others. #one of these however has left
behind the core tenets of !ureaucracy. 2ierarchies still exist, authority is still Weber=s
rational, legal type, and the organi+ation is still rule bound. 2eckscher, arguing along these
lines, describes them as cleaned up bureaucracies, rather than a fundamental shift away from
bureaucracy. 7ideon Ounda, in his classic study of culture management at =Tech= argued that
=the essence of bureaucratic control 0 the formalisation, codification and enforcement of rules
and regulations 0 does not change in principle.....it shifts focus from organi+ational structure
to the organi+ation=s culture=.
,nother smaller group of theorists have developed the theory of the Aost0!ureaucratic
Organi+ation., provide a detailed discussion which attempts to describe an organi+ation that is
fundamentally not bureaucratic.Charles 2eckscher has developed an ideal type, the post0
bureaucratic organi+ation, in which decisions are based on dialogue and consensus rather than
authority and command, the organi+ation is a network rather than a hierarchy, open at the
boundaries (in direct contrast to culture managementN there is an emphasis on meta0decision
making rules rather than decision making rules. This sort of hori+ontal decision making
byconsensus model is often used in housing cooperatives, other cooperatives and when
running a non0profit or community organi+ation. -t is used in order to
encourage participation and help to empower people who normally experience oppression in
groups.
9till other theorists are developing a resurgence of interest in complexity theory and
organi+ations, and have focused on how simple structures can be used to engender
organi+ational adaptations. ?or instance, $iner et al. (%&&& studied how simple structures
could be used to generate improvisational outcomes in product development. Their study
makes links to simple structures and improviser learning. Other scholars such as 6an @ivkin
and 9igglekow, and #elson @epenning revive an older interest in how structure and strategy
relate in dynamic environments.
,unctional structure
, functional organi+ational structure is a structure that consists of activities such as
coordination, supervision and task allocation. The organi+ational structure determines how
the organi+ation performs or operates. The term organi+ational structure refers to how the
people in an organi+ation are grouped and to whom they report. One traditional way of
organi+ing people is by function. 9ome common functions within an organi+ation include
production, marketing, human resources, and accounting.
This organi+ing of speciali+ation leads to operational efficiency where employees become
specialists within their own realm of expertise. The most typical problem with a functional
organi+ational structure is however that communication within the company can be rather
rigid, making the organi+ation slow and inflexible. Therefore, lateral communication between
functions become very important, so that information is disseminated, not only vertically, but
also hori+ontally within the organi+ation. Communication in organi+ations with functional
SYSTEMS
23
organi+ational structures can be rigid because of the standardi+ed ways of operation and the
high degree of formali+ation.
,s a whole, a functional organi+ation is best suited as a producer of standardi+ed goods and
services at large volume and low cost. Coordination and speciali+ation of tasks are
centrali+ed in a functional structure, which makes producing a limited amount of products or
services efficient and predictable. $oreover, efficiencies can further be reali+ed as functional
organi+ations integrate their activities vertically so that products are sold and distributed
quickly and at low cost. ?or instance, a small business could make components used in
production of its products instead of buying them.
;ven though functional units often perform with a high level of efficiency, their level of
cooperation with each other is sometimes compromised. 9uch groups may have difficulty
working well with each other as they may be territorial and unwilling to cooperate. The
occurrence of infighting among units may cause delays, reduced commitment due to
competing interests, and wasted time, making pro5ects fall behind schedule. This ultimately
can bring down production levels overall, and the company0wide employee commitment
toward meeting organi+ational goals.
Di&isional structure
The 3ivisional structure or product structure is a configuration of an organi+ation, which
breaks down the company into divisions that are self0contained. , division is self0contained
and consists of a collections of functions which work to produce a product. -t also utili+es a
plan to compete and operate as a separate business or profit center. ,ccording to
Painbooks.com, divisional structure in ,merica is seen as the second most common structure
for organi+ation today.
;mployees who are responsible for certain market services of types of products, are placed in
divisional structure in order to increase their flexibility. The process can be further broken
down into geographic (for example a E.9 3ivision and an ;E division, and product services
for different consumers (for example companies or households. ,nother example of
divisional structure would be an automobile company which utili+es a divisional structure.
The company would have one division for trucks, another for 9EQ9, and another for cars.
The divisions may also have their own departments such as marketing, sales, and
engineering.
The advantage of divisional structure is that it uses delegated authority so the performance
can be directly measured with each group. This results in managers performing better and
high employee morale. ,nother advantage of using divisional structure is that it is more
efficient in coordinating work between different divisions, and there is more flexibility to
respond when there is a change in the market. ,lso, a company will have a simpler process if
they need to change the si+e of the business by either adding or removing divisions. When
divisional structure is utili+ed more speciali+ation can occur within the groups. When
divisional structure is organi+ed by product, the customer has their own advantages especially
when only a few services or products are offered which differs greatly. When using divisional
structures that are organi+ed by either markets or geographic areas they generally have
similar function and are located in different regions or markets. This allows business
decisions and activities coordinated locally.
SYSTEMS
24
The disadvantages of the divisional structure is that it can support unhealthy rivalries among
divisions. This type of structure may increase costs by requiring more qualified managers for
each division. ,lso, there is usually an over0emphasis on divisional more than organi+ational
goals which results in duplication of resources and efforts like staff services, facilities, and
personnel.
Matri) structure
The matrix structure groups employees by both function and product. This structure can
combine the best of both separate structures. , matrix organi+ation frequently uses teams of
employees to accomplish work, in order to take advantage of the strengths, as well as make
up for the weaknesses, of functional and decentrali+ed forms. ,n example would be a
company that produces two products, *product a* and *product b*. Esing the matrix structure,
this company would organi+e functions within the company as follows. *product a* sales
department, *product a* customer service department, *product a* accounting, *product b*
sales department, *product b* customer service department, *product b* accounting
department. $atrix structure is amongst the purest of organi+ational structures, a simple
lattice emulating order and regularity demonstrated in nature.
Weak<?unctional $atrix. , pro5ect manager with only limited authority is assigned to
oversee the cross0 functional aspects of the pro5ect. The functional managers maintain control
over their resources and pro5ect areas.
!alanced<?unctional $atrix. , pro5ect manager is assigned to oversee the pro5ect. Aower is
shared equally between the pro5ect manager and the functional managers. -t brings the best
aspects of functional and pro5ecti+ed organi+ations. 2owever, this is the most difficult system
to maintain as the sharing of power is a delicate proposition.
9trong<Aro5ect $atrix. , pro5ect manager is primarily responsible for the pro5ect. ?unctional
managers provide technical expertise and assign resources as needed.
$atrix structure is only one of the three ma5or structures. The other two are ?unctional and
Aro5ect structure. $atrix management is more dynamic than functional management in that it
is a combination of all the other structures and allows team members to share information
more readily across task boundaries. -t also allows for speciali+ation that can increase depth
of knowledge in a specific sector or segment.
There are both advantages and disadvantages of the matrix structureN some of the
disadvantages are an increase in the complexity of the chain of command. This occurs
because of the differentiation between functional managers and pro5ect managers, which can
be confusing for employees to understand who is next in the chain of command. ,n
additional disadvantage of the matrix structure is higher manager to worker ratio that results
in conflicting loyalties of employees. 2owever the matrix structure also has significant
advantages that make it valuable for companies to use. The matrix structure improves upon
the /silo1 critique of functional management in that it diminishes the vertical structure of
functional and creates a more hori+ontal structure which allows the spread of information
across task boundaries to happen much quicker. $oreover matrix structure allows for
speciali+ation that can increase depth of knowledge R allows individuals to be chosen
according to pro5ect needs. This correlation between individuals and pro5ect needs is what
produces the concept of maximi+ing strengths and minimi+ing weaknesses.
SYSTEMS
25
Organizational circle8 "o&ing ac+ to flat
The flat structure is common in small companies (entrepreneurial start0ups, university spin
offs. ,s companies grow they tend to become more complex and hierarchical, which leads to
an expanded structure, with more levels and departments.
2owever, in rare cases, such as the examples of Qalve Corporation, 7it2ub,
-nc. and MLsignals, the organi+ation remains very flat as it grows, eschewing middle
managers. ,ll of the aforementioned organi+ations operate in the field of technology, which
may be significant, as software developers are highly skilled professionals, much
like lawyers. 9enior lawyers also en5oy a relatively high degree of autonomy within a
typical law firm, which is typically structured as a partnership rather than a hierarchical
bureaucracy. 9ome other types of professional organisations are also commonly structured as
partnerships, such as accountancy companies and 7A surgeries.
Often, growth would result in bureaucracy, the most prevalent structure in the past. -t is still,
however, relevant in former 9oviet @epublics, China, and most governmental organi+ations
all over the world. 9hell 7roupused to represent the typical bureaucracy. top0heavy and
hierarchical. -t featured multiple levels of command and duplicate service companies existing
in different regions. ,ll this made 9hell apprehensive to market changes,
S'MT
leading to its
incapacity to grow and develop further. The failure of this structure became the main reason
for the company restructuring into a matrix.
9tarbucks is one of the numerous large organi+ations that successfully developed the matrix
structure supporting their focused strategy. -ts design combines functional and product based
divisions, with employees reporting to two heads. Creating a team spirit, the company
empowers employees to make their own decisions and train them to develop both hard and
soft skills.
9ome experts also mention the multinational design, common in global companies, such
as Arocter R 7amble, Toyota and Enilever. This structure can be seen as a complex form of
the matrix, as it maintains coordination among products, functions and geographic areas.
-n general, over the last decade, it has become increasingly clear that through the forces of
globali+ation, competition and more demanding customers, the structure of many companies
has become flatter, less hierarchical, more fluid and even virtual.
One of the newest organi+ational structures developed in the %&th century is team and the
related concept of team development or team building. -n small businesses, the team structure
can define the entire organi+ation. Teams can be both hori+ontal and vertical. While an
organi+ation is constituted as a set of people who synergi+e individual competencies to
achieve newer dimensions, the quality of organi+ational structure revolves around the
competencies of teams in totality. ?or example, every one of the Whole ?oods $arket stores,
the largest natural0foods grocer in the E9 developing a focused strategy, is an
autonomousprofit centre composed of an average of '& self0managed teams, while team
leaders in each store and each region are also a team. Barger bureaucratic organi+ations can
SYSTEMS
26
benefit from the flexibility of teams as well.Uerox, $otorola, and 3aimlerChrysler are all
among the companies that actively use teams to perform tasks.
3et!or+
,nother modern structure is network. While business giants risk becoming too clumsy to
proact (such as, act and react efficiently, the new network organi+ations contract out any
business function, that can be done better or more cheaply. -n essence, managers in network
structures spend most of their time coordinating and controlling external relations, usually by
electronic means. 2R$ is outsourcing its clothing to a network of L&& suppliers, more than
two0thirds of which are based in low0cost ,sian countries. #ot owning any factories, 2R$
can be more flexible than many other retailers in lowering its costs, which aligns with its low0
cost strategy. The potential management opportunities offered by recent advances in complex
networks theory have been demonstrated including applications to product design and
development, and innovation problem in markets and industries.
2irtual
Qirtual organi+ation is defined as being closely coupled upstream with its suppliers and
downstream with its customers such that where one begins and the other ends means little to
those who manage the business processes within the entire organi+ation. , special form of
boundaryless organi+ation is virtual. 2edberg, 3ahlgren, 2ansson, and Olve ('KKK consider
the virtual organi+ation as not physically existing as such, but enabled by software to
exist. The virtual organi+ation exists within a network of alliances, using the -nternet. This
means while the core of the organi+ation can be small but still the company can operate
globally be a market leader in its niche. ,ccording to ,nderson, because of the unlimited
shelf space of the Web, the cost of reaching niche goods is falling dramatically. ,lthough
none sell in huge numbers, there are so many niche products that collectively they make a
significant profit, and that is what made highly innovative ,ma+on.com so successful.
2ierarchy0Community Ahenotype $odel of Organi+ational 9tructure
2ierarchy0Community Ahenotype $odel of Organi+ational 9tructure
SYSTEMS
27
-n the %'st century, even though most, if not all, organi+ations are not of a pure hierarchical
structure, many managers are still blind to the existence of the flat community structure
within their organi+ations.
The business is no longer 5ust a place where people come to work. ?or most of the
employees, the firm confers on them that sense of belonging and identity :: the firm has
become their /village1, their community. The firm of the %'st century is not 5ust a hierarchy
which ensures maximum efficiency and profitN it is also the community where people belong
to and grow together, where their affective and innovative needs are met.
Bim, 7riffiths, and 9ambrook (%&'& developed the 2ierarchy0Community Ahenotype $odel
of Organi+ational 9tructure borrowing from the concept of Ahenotype from genetics. *,
phenotype refers to the observable characteristics of an organism. -t results from the
expression of an organism)s genes and the influence of the environment. The expression of an
organism)s genes is usually determined by pairs of alleles. ,lleles are different forms of a
gene. -n our model, each employee)s formal, hierarchical participation and informal,
community participation within the organi+ation, as influenced by his or her environment,
contributes to the overall observable characteristics (phenotype of the organi+ation. -n other
words, 5ust as all the pair of alleles within the genetic material of an organism determines the
physical characteristics of the organism, the combined expressions of all the employees)
formal hierarchical and informal community participation within an organi+ation give rise to
the organi+ational structure. 3ue to the vast potentially different combination of the
employees) formal hierarchical and informal community participation, each organi+ation is
therefore a unique phenotype along a spectrum between a pure hierarchy and a pure
community (flat organi+ational structure.
9.Organizational Designs and %"ployee eha&ior
#ot everyone prefers the freedom and flexibility of organic structures. 9ome people are most
productive and satisfied when work tasks are standardi+ed and ambiguity is minimi+ed that
is, in mechanistic structure. 9o any discussion of the effect of organi+ational design on
employee behavior has to address individual differences. To illustrate the point, let us
consider employee preferences for work speciali+ation span of control and centrali+ation.
The evidence generally indicates that work speciali+ation contributes to higher employee
productivity, but at the price of reduced 5ob satisfaction. 2owever, this statement ignores
individual differences and the type of 5ob tasks people do. Work speciali+ation is not an
unending source of higher productivity. Aroblems start to surface and productivity begins to
suffer, when the human diseconomies of doing repetitive and narrow tasks overtake the
economies of speciali+ation. ,s the workforce has become more highly educated and
desirous of 5obs that are intrinsically rewarding, the point at which productivity begins to
decline seems to be reached more quickly than in the past decades.
SYSTEMS
28
,lthough more people today are undoubtedly turned off by overly speciali+ed 5obs than were
their parents or grandparents, it would be naive to ignore the reality that there is still a
segment of the workforce that prefers the routine and repetitiveness of high 5obs. 9ome
individuals want work that makes minimal intellectual demands and provides the security of
routine. ?or these people high work speciali+ation is a source of 5ob satisfaction. The
empirical question, of course, is whether this represents % per cent of the workforce or F% per
cent. 7iven that there is some self selection operating in the choice of careers it might include
that negative behavioral outcomes from high speciali+ation are most likely to surface in
professional 5obs occupied by individuals with high needs for personal growth and diversity.
, review of the research indicates that it is probably safe to say there is no evidence to
support a relationship between span of control and employee performance. ,lthough it is
intuitively attractive to argue large spans might lead to higher employee performance because
they provide more distant supervision and more opportunity for personal initiatives, the
research fails to support this notion. ,t his point, it)s impossible to state that any particular
span of control is best for producing high performance or high satisfaction among employees.
,gain, the reason is probably individual differences. That is, some people like to be left
alone, while others prefer the security of a boss who is quickly available at all times.
Consistent with several of the contingency theories of leadership it is expected that factors
such as employee experiences and abilities and the degree of structure in their tasks to
explain when wide or narrow spans of control are likely to contribute to their performance
and 5ob satisfaction. 2owever, there is some evidence indicating that in a manager)s 5ob a 5ob
satisfaction increases as the number of employees supervised increases.
-t is found fairly strong evidence linking centrali+ation and 5ob satisfaction. -n general,
organi+ations that are less centrali+ed have a greater amount of participative decision making.
,nd the evidence suggests that participative decision making is positively related to 5ob
satisfaction. !ut again individual differences may surface. The decentrali+ation satisfaction
relationship is strongest with employees who have low self esteem. !ecause individuals with
low self0esteem have less confidence in their abilities, they place a higher value on shared
decision making which means that they are not held solely responsible for decision outcomes.
SYSTEMS
29
9.1 Organizational Designs and %"ployee 1eha&ior
-mpossible to generali+e due to individual differences in the employees
@esearch findings
: Work speciali+ation contributes to higher employee productivity, but it reduces 5ob
satisfaction.
: The benefits of speciali+ation have decreased rapidly as employees seek more intrinsically
rewarding 5obs.
: The effect of span of control on employee performance is contingent upon individual
differences and abilities, task structures, and other organi+ational factors.
: Aarticipative decision making in decentrali+ed organi+ations is positively related to 5ob
satisfaction.
Aeople seek and stay at organi+ations that match their needs.
SYSTEMS
30
:.Aout Cisco (yste"s

Cisco 9ystems, -nc.
Type Aublic
Traded as #,93,V. C9CO
3ow 6ones -ndustrial ,verage
Component
9RA F&& Component
#,93,V0'&& Component
-ndustry #etworking equipment
?ounded 9an ?rancisco, California, E.9.
('KHJ
?ounders Beonard !osack
9andy Berner
@ichard Troiano
2eadquarters 9an 6ose, California, E.9.
,rea served Worldwide
SYSTEMS
31
Oey people 6ohn Chambers
(Chairman R C;O
7ary $oore
(Aresident and COO
Aroducts #etworking 3evice
#etwork $anagement
Cisco -O9 and #U0O9 9oftware
-nterface and $odule
Optical networking
9torage area networks
Wireless, Telepresence, QO-A,
9ecurity
3atacenter
Bist of Cisco Aroducts
@evenue E9W JH.I&L billion (%&'M
E9W JI.&I' billion (%&'%
Operating
income
E9W ''.'KI billion (%&'M
E9W '&.&IF billion (%&'%
#et income E9W K.KHM billion (%&'M
E9W H.&J' billion (%&'%
Total assets E9W '&'.'K' billion (%&'M
E9W K'.LFK billion (%&'%
Total equity E9W FK.'%H billion (%&'M E9W
F'.M&' billion (%&'%
;mployees LF,&JK (%&'J
9ubsidiaries Bist of acquisitions
Website Cisco.com
Cisco is an ,merican multinational corporation that designs and sells consumer electronic,
networking, voice and communications technology services. The company was one of the
first to sell commercially successful routers that supports multiple network protocols.
Cisco 9ystems, -nc. is an ,merican multinational corporation headquartered in 9an 6ose,
California, that designs, manufactures, and sells networking equipment. The stock was added
to the 3ow 6ones -ndustrial ,verage on 6une H, %&&K, and is also included in the 9RA
SYSTEMS
32
F&& -ndex, the @ussell '&&& -ndex, #,93,V0'&& -ndex and the @ussell '&&& 7rowth 9tock
-ndex.
:.1 6istory
One of the many buildings on the Cisco 9ystems campus in 9an 6ose
'KHJ:'KKF. early years
Cisco 9ystems was founded in 3ecember 'KHJ by Beonard !osack, who was in charge of
the 9tanford Eniversity computer science department=s computers, 9andy Berner, who
managed the 7raduate 9chool of !usiness= computers, and @ichard Troiano. 3espite
founding Cisco in 'KHJ, !osack, along with Oirk Bougheed, continued to work at 9tanford
on Cisco=s first product which consisted of exact replicas of 9tanford=s *!lue !ox* router and
a stolen copy of the Eniversity=s multiple0protocol router software, originally written some
years earlier at 9tanford medical school by William Deager> a 9tanford research engineer >
which they adapted into what became the foundation for Cisco -O9. On 6uly '', 'KHI,
!osack and Oirk Bougheed were forced to resign from 9tanford and the university
contemplated filing criminal complaints against Cisco and its founders for the theft of its
software, hardware designs and other intellectual properties. -n 'KHL, 9tanford licensed the
router software and two computer boards to Cisco.
-n addition to !osack, Berner and Bougheed, 7reg 9at+, a programmer, and @ichard Troiano,
who handled sales, completed the early Cisco team. The company=s first C;O was !ill
7raves, who held the position from 'KHL to 'KHH. -n 'KHH, 6ohn $orgridge was appointed
C;O.
The name *Cisco* was derived from the city name, 9an ?rancisco, which is why the
company=s engineers insisted on using the lower case *cisco* in its early years. The logo is
intended to depict the two towers of the 7olden 7ate !ridge.
On ?ebruary 'I, 'KK&, Cisco 9ystems went public (with a market capitali+ation of
W%%J million and was listed on the #,93,V stock exchange. On ,ugust %H, 'KK&, Berner
was firedN upon hearing the news, her husband !osack resigned in protest. The couple walked
away from Cisco with W'L& million, L&G of which was committed to their own charity.
,lthough Cisco was not the first company to develop and sell dedicated network nodes, it
was one of the first to sell commercially successful routers supporting multiple network
protocols. Classical, CAE0based architecture of early Cisco devices coupled with flexibility
SYSTEMS
33
of operating system -O9 allowed for keeping up with evolving technology needs by means of
frequent software upgrades. 9ome popular models of that time (such as Cisco %F&& managed
to stay in production for almost a decade virtually unchanged>a rarity in high0tech industry.
,lthough Cisco was strongly rooted in the enterprise environment, the company was quick to
capture the emerging service provider environment, entering the 9A market with new, high0
capacity product lines such as Cisco L&&& and Cisco LF&&.
!etween 'KK% and 'KKJ, Cisco acquired several companies in ;thernet switching, such
as Oalpana, 7rand 6unction, and most notably, $ario $a++ola=s Crescendo Communications
which together formed the Catalystbusiness unit. ,t the time, the company envisioned layer
M routing and layer % (;thernet, Token @ing switching as complementary functions of
different intelligence and architecture>the former was slow and complex, the latter was fast
but simple. This philosophy dominated the company=s product lines throughout the 'KK&s.
-n 'KKF, 6ohn $orgridge was succeeded by 6ohn Chambers.
'KKI:%&&K. -nternet and silicon intelligence
The phenomenal growth of the -nternet in mid0to0late 'KK&s quickly changed the telecom
landscape. ,s the -nternet Arotocol (-A became widely adopted, the importance of multi0
protocol routing declined. #evertheless, Cisco managed to catch the -nternet wave, with
products ranging from modem access shelves (,9F%&& to core 79@ routers that quickly
became vital to -nternet service providers and by 'KKH gave Cisco de facto monopoly in this
critical segment.
-n late $arch %&&&, at the height of the dot0com bubble, Cisco became the most valuable
company in the world, with a market capitali+ation of more than E9WF&& billion. -n 6uly
%&'J, with a market cap of about E9W'%K billion, it is still one of the most valuable
companies.
$eanwhile, the growth of -nternet bandwidth requirements kept challenging traditional,
software0based packet processing architectures.
The perceived complexity of programming routing functions in silicon, led to formation of
several startups determined to find new ways to process -A and $AB9 packets entirely in
hardware and blur boundaries between routing and switching. One of them, 6uniper
#etworks, shipped their first product in 'KKK and by %&&& chipped away about M&G from
Cisco 9A $arket share. Cisco answered the challenge with homegrown ,9-Cs and fast
processing cards for 79@ routers and Catalyst IF&& switches. -n %&&J, Cisco also started
migration to new high0end hardware C@90' and software architecture -O90U@.
%&&I:%&'%. The 2uman #etwork
,s part of a massive rebranding campaign in %&&I, Cisco 9ystems adopted the shortened
name *Cisco* and created *The 2uman #etwork* advertising campaign.
S%&T
These efforts
were meant to make Cisco a *household* brand>a strategy designed to support the low0end
Binksys products and future consumer products (such as ?lip Qideo camera acquired by Cisco
in %&&K.
On the more traditional business side, Cisco continued to develop its extensive enterprise0
focused routing, switching and security portfolio. Vuickly growing importance
of ;thernet also influenced the company=s product lines, prompting the company to morph
SYSTEMS
34
the successful Catalyst IF&& ;thernet switch into all0purpose Cisco LI&& routing platform.
S%'T
2owever, limits of -O9 and aging Crescendo architecture also forced Cisco to look at
merchant silicon in the carrier ;thernet segment. This resulted in a new ,9@K&&& product
family intended to consolidate company=s carrier ethernet and subscriber management
business around ;PChip0based hardware and -O90U@. Cisco also expanded into new markets
by acquisition>one example being a %&&K purchase of mobile specialist 9tarent
#etworks that resulted in ,9@F&&& product line.
A Cisco facility in Chennai;India. India is one of the co"pany<s largest o&erseas "ar+ets
and production centers.
Throughout the mid0%&&&s, Cisco also built a significant presence in -ndia, establishing its
7lobali+ation Centre ;ast in !engaluru for W' billion, and planning that %&G of Cisco=s
leaders would be based there.
2owever, Cisco continued to be challenged by both domestic ,lcatel0Bucent, 6uniper
#etworks and overseas competitors 2uawei. 3ue to lower0than0expected profit in %&'',
Cisco was forced to reduce annual expenses by W' billion. The company cut around M,&&&
employees with an early0retirement program who accepted buyout and planned to eliminate
as many as '&,&&& 5obs (around 'J percent of the LM,J&& total employees before
curtailment. 3uring the %&'' analyst call, Cisco=s C;O 6ohn Chambers called out several
competitors by name, including 6uniper and 2A.
On %J 6uly %&'%, Cisco received approval from the ;E to acquire #39 (a TQ software
developer for E93 F billion. This acquisition signaled the end of the *The 2uman #etwork*
strategy as Cisco found itself backing off from household hardware like Binksys
S%LT
and ?lip
into the cloud and software market.
%&'M:Aresent. The -nternet of ;verything
Cisco launches its first global re0branding campaign for the first time in six years with its
*TO$O@@OW starts here* and *-nternet of ;verything* advertising campaigns. These
efforts were designed to position Cisco for the next ten years into a global leader in
connecting the previously unconnected and facilitate the -A address connectivity of people,
data, processes and things through cloud computing applications and services.
On 6uly %M, %&'M, Cisco 9ystems announced a definitive agreement to acquire 9ourcefire for
W%.L billion.
On ,ugust 'J, %&'M, Cisco 9ystems announced it is going to cut J,&&& 5obs, which is roughly
IG of the company, starting in %&'J.
Cisco is opening an -nternet of ;verything research centre in Toronto, Ontario.
-n ,pril, %&'J, Cisco 9ystems announced W'F& $illion to fund early0stage firms around the
globe to focus on the -nternet of ;verything. The investment fund was allocated to
investments in -oT accelerators and startups such as The ,lchemist ,ccelerator, ,yla
#etworks and ;Q@DT2#7. ,fter the announcement, The ,lchemist ,ccelerator announced
Cisco as a strategic partner and launched an individual program specifically focused on
advancing the growth of -oT startups. This new funding increased Cisco -nvestments=
thematic investing to W%F& million total, adding to the previously announced W'&& million
SYSTEMS
35
commitment to startups focused on the emerging -nternet of ;verything (-o; market
opportunity.
Cisco 9ystems has seen a huge drop in export sales because of spying fears from the
,merican #ational 9ecurity ,gency using backdoors in its products.
On ,ugust 'M, %&'J, the company announced it was laying off another I,&&& workers or HG
of its global workforce, as part of a second restructuring.
:.2 Media and a!ards
Cisco products, most notably -A phones and Telepresence, are frequently sighted in movies
and TQ series. The company itself and its history was featured in the documentary
film 9omething Qentured which premiered in %&''.
Cisco was a %&&%:&M recipient of the @on !rown ,ward, a E.9. presidential honor to
recogni+e companies *for the exemplary quality of their relationships with employees and
communities*. Cisco commonly stays on top of ?ortune *'&& !est Companies to work for*,
with position #o. %& in %&''.
:.3 Ac=uisitions
$ain article. Bist of acquisitions by Cisco 9ystems
Cisco acquired a variety of companies to spin products and talent into the company. -n 'KKF:
'KKI the company completed '' acquisitions. 9everal acquisitions, such as 9tratacom, were
the biggest deals in the industry when they occurred. 3uring the -nternet boom in 'KKK, the
company acquired Cerent Corporation, a start0up company located in Aetaluma, California,
for about E9WL billion. -t was the most expensive acquisition made by Cisco to that date, and
only the acquisition of 9cientific ,tlanta has been larger. -n 'KKK Cisco also acquired stake
for W' !illion in OA$7 Consulting to enable establishing -nternet firm $etrius founded by
Oeyur Aatel of ?use. 9everal acquired companies have grown into W'!nX business units for
Cisco, including B,# switching, ;nterprise Qoice over -nternet Arotocol (QO-A
platform Webex, and home networking. The latter came as result of Cisco
acquiring Binksys in %&&M and in %&'& was supplemented with new product line
dubbed Cisco Qalet.
Cisco announced on 6anuary J, %&&L that it would buy -ronAort in a deal valued at E9WHM&
million and completed the acquisition on 6une %F, %&&L.
SJJT
-ronAort was best known for its
-ronAort ,nti9pam, its 9ender!ase email reputation service, and its email security appliances.
,ccordingly, -ronAort was integrated into the Cisco 9ecurity business unit. -ronport=s
9enderbase was renamed as 9ensorbase to take account of the input into this database that
other Cisco devices provide. 9ensor!ase allows these devices to build a risk profile on -A
addresses, therefore allowing risk profiles to be dynamically created on http sites and 9$TA
email sources.
Cisco announced on $arch 'F, %&'% that it would acquire #39 7roup for WF!. The
transaction was completed on 6uly M&, %&'%.
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36
-n more recent merger deals, Cisco bought 9tarent #etworks (a mobile packet core company
and $oto 3evelopment 7roup, a product design consulting firm that helped develop Cisco=s
?lip video camera. ,lso in %&'&, Cisco became a key stakeholder in e09kills Week. -n $arch
%&'', Cisco completed the acquisition of privately held network configuration and change
management software company Aari #etworks.
,lthough many buy0ins (such as Crescendo #etworks in 'KKM, Tandberg in %&'& resulted in
acquisition of flagship technology to Cisco, many others have failed>partially or completely.
?or instance, in %&'& Cisco occupied a meaningful share of the packet0optical
market, revenues were still not on par with E9WL billion price tag paid in 'KKK for Cerent.
9ome of acquired technologies (such as ?lip from Aure 3igital saw their product lines
terminated.
-n 6anuary %&'M, Cisco 9ystems acquired -sraeli software maker -ntucell for around WJLF
million in cash, a move to expand its mobile network management offerings. -n the same
month, Cisco 9ystems acquired Cognitive 9ecurity, a company focused on Cyber Threat
Arotection. Cisco also acquired 9olve3irect (cloud services in $arch %&'M and Ebiquisys
(mobile software in ,pril %&'M.
Cisco acquired cyber0security firm 9ourcefire, in October %&'M.
On 6une 'I, %&'J, Cisco announced that it has completed the acquisition of threat7@-3, a
company that provided dynamic malware analysis and threat intelligence technology.
On 6une 'L, %&'J, Cisco announced its intent to acquire privately held Tail0f 9ystems, a
leader in multi0vendor network service orchestration solutions for traditional and virtuali+ed
networks.
:.# -roducts and ser&ices
Cisco=s products and services focus upon three market segments>;nterprise and 9ervice
Arovider, 9mall !usiness and the 2ome.
:.' Corporate "ar+et
Corporate market refers to enterprise networking and service providers.
!orderless networks for their range of routers, switches, wireless systems, security systems,
W,# acceleration, energy and building management systems and media aware networks.
:./ Collaoration
-A video and phones, TeleAresence, 2ealthAresence, Enified Communications, Call Center
systems, ;nterprise social networks and $obile applications
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37
:.5 Datacenter and 2irtualization
Enified Computing, Enified ?abric, 3ata Centre 9witching, 9torage #etworking and Cloud
Computing services.
-A #7# (#ext 7eneration #etworks
2igh0end routing and switching for fixed and mobile service provider networks, broadcast
video contribution<distribution, entitlement and content delivery systems.
9mall businesses
Cisco small business 97M&&0%H %H0port 7igabit ;thernet rackmount switch and its internals
9mall businesses include home businesses and (usually technology0based startups.
@outers and switches
The machines that route and redirect packets across a network, including those for
networks of smart meters.
9ecurity and surveillance
-A cameras, data and network security etc.
Qoice and conferencing
QO-A phones and gateway0systems, Web;x, video conferencing
Wireless
Wi?i ,ccess points
#etwork storage systems
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38
Aersistent people storage on networks, either in the traditional sense or in a cloud0like
manner.
2ome user
2ome user refers to individuals or families who require these kinds of services.
SL'T
!roadband
!roadband refers to cable modems.
?lip Qideo
With the acquisition of Aure 3igital Technologies, Cisco began to sell a line of video
recording devices called *?lip Qideo* that had been Aure 3igital=s only line of products. This
line of products was not as popular as Cisco had thought it would have been, and on ,pril '%,
%&'', Cisco announced they were discontinuing all ?lip camera production. Cisco Ymi
product line>video conferencing for home also proved to be a short0lived bid for consumer
multimedia market and did survive in Cisco product lineup.
2ardware
, Cisco ,9$<%0M%;$ router deployed at C;@# in 'KHL
, Cisco LKI&7 -A Ahone
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39
Cisco EC9 blade servers
:.9 Cisco Career Certifications
Cisco 9ystems also sponsors a line of -T Arofessional certifications for Cisco products. There
are five levels of certification. ;ntry (CC;#T, ,ssociate (CC#, < CC3,, Arofessional
(CC#A < CC3A, ;xpert (CC-; < CC3;, and recently ,rchitect, as well as eight different
paths, @outing R 9witching, 3esign, #etwork 9ecurity, 9ervice Arovider, 9ervice Arovider
Operations, 9torage #etworking, Qoice, 3atacenter and Wireless.
, number of specialist technician, sales and datacenter certifications are also available.
Cisco also provides training for these certifications via a portal called the Cisco #etworking
,cademy. Vualifying schools can become members of the Cisco #etworking ,cademy and
then provide CC#, level or other level courses. Cisco ,cademy -nstructors must be CC#,
certified to be a CC,- certified instructor.
Cisco often finds itself involved with technical education. With over '&,&&& partnerships in
over IF countries Cisco ,cademy program operates in many exotic locations. ?or example, in
$arch %&'M, Cisco announced its interest in $yanmar by investing in two Cisco #etworking
,cademies in Dangon and $andalay and a channel partner network.
:.: Criticis"s and contro&ersy
(hareholder relations
, class action lawsuit filed on ,pril %&, %&&' accused Cisco of making misleading statements
that *were relied on by purchasers of Cisco stock* and of insider trading. While Cisco denied
all allegations in the suit, on ,ugust 'H, %&&I, Cisco=s liability insurers, its directors, and
officers paid the plaintiffs E9WK'.LF million to settle the suit.
Intellectual property disputes
On 3ecember '', %&&H, the ?ree 9oftware ?oundation filed suit against Cisco regarding
Cisco=s failure to comply with the 7AB and B7AB license models and make the applicable
source code publicly available. On $ay %&, %&&K, Cisco settled this lawsuit by complying
with ?9? licensing terms and making a monetary contribution to the ?9?.
Censorship in China
Cisco has been critici+ed for its involvement in censorship in the Aeople=s @epublic of China.
,ccording to author ;than 7utmann, Cisco and other telecommunications equipment
providers supplied the Chinese government with surveillance and -nternet infrastructure
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40
equipment that is used to block -nternet websites and track Chinese online activities. Cisco
says that it does not customi+e or develop speciali+ed or unique filtering capabilities to enable
governments to block access to information and that it sells the same equipment in China as it
sells worldwide.
Wired #ews had uncovered a leaked, confidential Cisco power point presentation that details
the commercial opportunities of the 7olden 9hield Aro5ect of -nternet control. -n her article,
5ournalist 9arah 9tirland accuses Cisco of marketing its technology *specifically as a tool of
repression.*
$a) fraud in&estigation
On October 'I, %&&L, the !ra+ilian ?ederal Aolice and !ra+ilian @eceita ?ederal (equivalent
to the ,merican -@9, under the *Aersona Operation*, uncovered an alleged tax fraud scheme
employed by Cisco 9ystems !ra+il Chief Carlos @oberto Carnevali since %&&% that exempted
the company from paying over @W'.F billion (E9WH%J million in taxes.
Antitrust la!suit
On 3ecember ', %&&H, $ultiven filed an antitrust lawsuit against Cisco 9ystems, -nc. in an
effort to open up the network maintenance services marketplace for Cisco equipment,
promote competition and ensure consumer choice and value. $ultiven=s complaint alleges
that Cisco harmed $ultiven and consumers by bundling and tying bug fixes<patches and
updates for its operating system software to its maintenance services (9$,@Tnet and
through a series of other illegal exclusionary and anticompetitive acts designed to maintain
Cisco=s alleged monopoly in the network maintenance services market for Cisco networking
equipment. Cisco responded by accusing the person who filed the anti0trust suit, !ritish0born
Aeter ,lfred0,dekeye, with hacking and pressured the E9 government to extradite him from
Canada, where he was giving evidence against Cisco in an anti0trust hearing. Canadian 6udge
@onald $cOinnon, who oversaw the extradition hearing, stated the real reason for the
extradition proceedings was because ,lfred0,dekeye *dared to take on a multinational giant.*
2e also condemned the E9 prosecutor for hiding the fact that ,lfred0,dekeye was in legal
proceedings against Cisco 9ystems, for stating that ,lfred0,dekeye had left the E9, in a
time period when he had not and a formal request for extradition was not filed against ,lfred0
,dekeye when he was taken into custody. 6udge $cOinnon described the information
provided by Cisco and the E9 prosecutor as *full of innuendo, half0truths and falsehoods,*
adding that *This speaks volumes for Cisco=s duplicity* and accused them of *unmitigated
gall* in using such a heavy0handed move as an unsupportable arrest and 5ailing to pressure
,lfred0,dekeye to drop or settle his civil antitrust complaint.
:.1> Cisco O&er&ie!
Cisco is the worldwide leader in networking that transforms how people connect,
communicate and collaborate. ,t Cisco (#,93,V. C9CO customers come first and an
integral part of our 3#, is creating long0lasting customer partnerships and working with
them to identify their needs and provide solutions that support their success.?ounded in 'KHJ
by a small group of computer scientists from 9tanford Eniversity, Cisco engineers have been
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41
leaders in the development of -nternet Arotocol (-A0based networking technologies since the
company=s inception.This tradition of innovation continues with industry0leading products in
the core areas of routing and switching, as well as advanced technologies in areas such as
Enified Communications, #etwork 9ecurity, Qideo, Qirtuali+ation and Cloud Computing.
-nnovation is a core part of the Cisco culture and annually WF.K billion is invested in @R3N
Cisco has more than %H,&&& ;ngineers worldwide.
Cisco .loal ,acts
-ncorporated on 3ecember '&, 'KHJ in California
Went public on ?ebruary 'I, 'KK&. #,93,V #$. C9CO (Common 9tock
VJ ?D='J ;mployee Count. LF,&&&X
6ohn T. Chambers is the Chairman and Chief ;xecutive Officer, Cisco
?D)'J revenue was WJL.' billion
Cisco India
Cisco -ndia commenced operations in 'KKFN -ndia, as a region, is part of the ,A,C theater
Cisco has seven sales offices in the region 0 #ew 3elhi, $umbai, !angalore, Chennai,
Aune, Oolkata and 2yderabad.
The Cisco 7lobal 3evelopment Center is in !angaloreN the largest outside of the E9. The
'$ square foot campus houses Cisco=s @esearch and 3evelopment (@R3, -T , 9ervices and
Customer 9upport teams. The centre develops disruptive business models for Cisco to create
new go0to0market channels, markets, processes and technologies for emerging markets. The
,dvanced 7lobal !riefing Center located here showcases Cisco=s latest technology solutions
and proof0of0concepts.
Currently HM& patents have been filed from -ndia and F&& issued for innovations across all
technologies.
The Cisco ,9@ K&' @outer developed by Cisco=s engineering team in -ndia received the
#,99CO$ -nnovation ,ward %&'% for innovation in creating a unified platform to serve the
needs of %7<M7<J7 mobile backhaul and Carrier ;thernet applications.Z %&'J Cisco and<or
its affiliates. ,ll rights reserved. This document is Cisco Aublic. Aage % of M
Cisco -ndia has won two ,egis 7raham !ell ,wards for %&'%. Cisco=s Enified Computing
9ystem (EC9 C series % socket $M 9erver software and #exus M&&& 9eries 9witch software
won awards for innovation in the Cloud 9ervices and Telecom -nfrastructure categories
respectively.
Cisco has 5oint 3evelopment Centers with Wipro Technologies and -nfosys Technologies
in !angaloreN 2CB Technologies in Chennai and Pensar Technologies in Aune.
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42
Cisco=s go0to0$arket strategy is through partners
o %F&&X Aartners
o 'M 7old Aartners : ,ccenture 9ervices Avt Btd, !ritish Telecom -ndia Avt ltd, Tech
$ahindra, 3imension 3ata -ndia Btd, 2CB Comnet , 2CB -nfosystems Btd, -!$, Orange
!usiness 9ervices, ,7C #etworks, Qelocis , Wipro, TC9, Aroactive
o '& 9ilver Aartners : Bocu+, AC 9olutions , #irmal 3atacomm, 9O -nternational, ,llied
3igital 9ervices Btd, #etplace Technologies Avt Btd, Central 3ata 9ystems A. Btd, -ntec
-nfonet, 9yndrome Technologies and $illennium -T (9ri Banka
o J 3istributors: -ngram $icro, @edington, Compuage and -nflow Technologies
9upport and 9ervice 0 ;xtensive support system for customers with %% premium depots
(logistics centres.
!esides that, Cisco is the only vendor to have a support program called ,@#!3 (advance
replacement next business day for its resellers.
Cisco Capital was launched in %&&F to offer flexible leasing and financial services to
customers and partners.
Currently, there are 'KK ,ctive Cisco #etworking ,cademies across %J states R union
territories in -ndia with 'K,'J'active students. Overall, K&,&'H 9tudents (%HG female have
been impacted since the program inception and there are %J,F%&Cisco certification ready
graduates through the program.
India Mar+et (hare 4eadership
Core Technologies
;#T @outer. LIGN 9A @outer. IFGN 9witch (B%0BM. ILG (CD V'='J, -3C
,dvanced Technologies
WB,#. J'G (CD V'='J, -3C
9ecurity. M'G (CD V'='J, ?rost R 9ullivan
UHI !lade. 'JG (CD V'='J, -3C
-A A!U. F%G (CD V'='J, ?rost R 9ullivan
9ome key customers across -ndia
Corporate 0 ?ord -ndia, 3r. @eddy=s Baboratories, Tata 7roup, $ahindra R $ahindra,
Barsen R Toubro,
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43
7as ,uthority of -ndia, -ndian Oil Corporation, Be @oyal $eridien, Ta5 7roup of 2otels and
2industan Bever
9ervice Aroviders 0 Tata, @eliance, !harti, Q9#B, !9#B, $T#B, 9-?D and -3;,
Cellular
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44
1>.Cisco<s Organizational Design ? (tructure
3esigning Channels of 3istribution
Cisco 9ystems. $anaging the 7o0to0$arket
Aroduct design and development.
-ndirect sales and distribution through resellers became the ma5orsales channel ,its
/value0added reseller1 (Q,@was the most successful indirect sales channel strategy
at that time.
10.1 Cisco<s Organizational Design ? (tructure and its
Collaorati&e Approach to Decision Ma+ing
Cisco 9ystems, -nc. (Cisco, an -nternet
technology company, had an
organi+ational structure comprising of
various cross0functional teams. The key
decisions in the company were taken by
councils, boards and working groups.
These committees (around I& as of %&&K
working at different levels were cross0
functional in nature, and according to the
company, lent Cisco speed, scale,
flexibility, and rapid replication.
Cisco had made the shift to this type of
organi+ational structure in %&&' and had
refined it in subsequent years. ,ccording
to 6ohn T. Chambers (Chambers, the
Chairman and C;O of Cisco, the
company had reorgani+ed to break free of
the silo culture in the company prior to
%&&', so that it could remain agile and
innovative in a rapidly changing industry.
The company felt that the traditional command0and0control model had lost its relevance, and
the future would be about collaborate models of decision making. 2e also claimed that the
new organi+ational model had served the company well and helped implement its aggressive
growth strategy amidst the economic downturn.
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45
-ndustry observers and organi+ational experts were divided in their opinion about Cisco=s
organi+ational structure and approach to decision making. While some industry observers felt
that such a model was effective, others felt that the management0by0committee approach
would slow down decision making and impede innovation. 9ome experts were extremely
critical of Cisco=s organi+ational model. !ut others believed that if Cisco could further refine
the model by addressing some of the lacunae associated with it, it could very well be adopted
more widely and be accepted as a radical management innovation.
-ssues.
To understand the various issues and challenges associated with organi+ational design.
3iscuss the pros and cons of different types of organi+ational structures and in the
light of this analysis, critically analy+e Cisco=s organi+ational structure.
3iscuss the pros and cons of Cisco=s approach to decision making.
3iscuss ways in which the organi+ational model at Cisco can be improved further.
@ationale of the @eorgani+ation
9peaking about the organi+ations structure, Chambers, said, *Our organi+ation structure
leverages the power of communities of interest which we call councils which we believe are
W'& billion opportunities, boards that we see as W' billion opportunities and working groups.
2ow it 9tarted
The idea for the new structure occurred during the economic down turn in %&&', when Cisco
wrote off E9W%.% billion in losses. @eali+ing the Cisco=s hierarchical structure was preventing
it from moving fast, Chambers started grouping executives into cross0functional teams.
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46
''.$ypes of Organisational Design ? (tructure Cisco
Adapted
Cisco 9ystems a company that has reinvented itself time and again has proved that the key to
corporate success lies in an organi+ational structure that is both responsive and in tune with
the changing industry and market requirements.
Aroduct !ased
Ahase0'. The ;mergence of a 7iant
-n ,pril0'KKL Cisco structured its products and solutions into three customer segments.
;nterprise, 9mall<$edium business, and 9ervice Arovider. The organi+ational structure was
crafted to address two ma5or new market opportunities at that time. the service provider
migration to -A services and the adoption of -A products by small and medium0si+ed
businesses through channel distribution. The change was a marked departure from a product0
focused structure, which had been Cisco)s hallmark since inception back in'KHL, to a
customer0oriented, solutions0based structure.
,ll of Cisco)s research0and0development and solutions marketing would be organi+ed under
the three Bines of !usiness. The Bine of !usiness teams defined and implemented
both market and operational strategies that enabled them to deliver end0to0end solutions to
their target customers. The new organi+ational alignment meant increased focus on specific
customer segments to provide complete end0to0end solutions, including integrated software,
hardware and network management. The different market segments at the time had nothing in
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47
common. The fact that Cisco was riding high on the imploding growth in the networking
industry meant Cisco did not have to worry so much on costs since margins very high.
An analysis on the effecti&eness of @-roduct 1asedA organizational structure re&eals the
follo!ing attriutes.
Aroduct Centric Organi+ation ;ffectiveness
Onowledge 9haring Bow
,bility to reduce Costs Bow
?ostering -nnovation 2igh
Control and Coordination $edium
,ddressing Customer < $arket requirements 2igh
;fficiency in @esource Etili+ation Bow
Centrali+ed organi+ation
Ahase0%. The 3ot0Com $eltdown
-n ,ugust0%&&', Cisco 9ystems realigned the company=s focus around changing industry and
customer requirements and to reinforce the company as a dominant force in the networking
industry. Customer segments and product requirements that were distinct in the past had
become blurred. The downturn in the networking industry that followed the broad meltdown
across the technology industry in early %&&& meant Cisco had to act quickly to minimi+e
costs and reduce overhead. To respond to these changes Cisco +eroed in on a centrali+ed
engineering and functionally driven organi+ational structure.
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48
The centrali+ed structure was developed to bring Cisco closer to its customers, to encourage
teamwork and to eliminate product and resource overlaps and more importantly to provide
the industry=s broadest family of products united under a consistent architecture designed to
help Cisco)s customers improve productivity and profitability. The rationale behind a
centrali+ed organi+ational structure was to design all equipments using a baseline standard
and architecture, which lowered the cost of product development and manufacture. ,
centrali+ed organi+ational structure fostered deeper sharing of knowledge and components
across Cisco product groups while promoting more consistent manufacturing and testing to
reali+e economies of scale.
, centrali+ed organi+ation structure enabled Cisco to respond successfully to
changing market conditions. The company)s focus was on reigning in costs and respond to
revenue shortfalls from declining growth prospects within the industry. The emphasis shifted
from delivering new product launches or innovation to survival. ,n analysis on the
effectiveness of /Centrali+ed1 organi+ational structure reveals the following attributes.
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49
Centrali+ed Organi+ation ;ffectiveness
Onowledge 9haring 2igh
,bility to reduce Costs 2igh
?ostering -nnovation Bow0$edium
Control and Coordination 2igh
,ddressing Customer < market requirements Bow
;fficiency in @esource Etili+ation 2igh
Technology Organi+ation
Ahase0M. Convergence
-n 3ecember0%&&L Cisco announced a new /Technology Organi+ation1 structure to address
the challenges imposed by the next phase of -nternet growth and productivity centered on the
demands of tremendous growth in video, the revolution in the data center, collaborative and
networked Web %.& technologies, where the network emerged as a platform for all forms of
communications and data management. The new organi+ational structure enabled Cisco to
position itself for growth in new market and cater to new and emerging markets in China,
!ra+il and -ndia.
/The Technology Organi+ation1.
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50
The changes were designed to enhance Cisco=s effectiveness and efficiency globally in
delivering integrated products and solutions, as well as to provide greater synergies in its
development process. The need for innovation and ability to cater to
different marketsegments that had different product requirements necessitated a move toward
a product0technology based organi+ational structure. With the industry evolving towards a
services based Aay0,s Dou 7o1 revenue model Cisco had to develop products with
scalability, reliability and adaptability in mind. The emphasis on software and centrali+ed
nature of the 9oftware 7roup allowed Cisco to access resources globally while driving
integration and interoperability across all of Cisco product lines.
,n analysis on the effectiveness of the /Technology Organi+ation1 structure reveals the
following attributes.
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51
Technology Centric Organi+ation ;ffectiveness
Onowledge 9haring (,cross 3ivisions $edium
,bility to reduce Costs Bow
?ostering -nnovation 2igh
Control and Coordination $edium 0 2igh
,ddressing Customer < market requirements 2igh
;fficiency in @esource Etili+ation $edium
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52
12.Office Design Case (tudy8 6o! Cisco Designed
the Collaorati&e Connected Wor+place
%n&iron"ent
Opti"ized !or+place reduces real estate costs and oosts e"ployee producti&ity and
satisfaction.
1usiness Challenge
Cisco 9ystems[ employees work differently than they did as recently as a few years ago. ,n
increasingly global workforce and customer base makes it more likely that employees need to
work at nontraditional hours, such as I.&& a.m. or '&.&& p.m., leaving their offices vacant at
other times. $ore complex business and technology issues increase the need for collaboration
with team members in the same building or at various sites worldwide. ;mployees are often
away from their desks, in meetings or workgroup discussions. *;ven Cisco employees who
work on site are likely to be mobile within the building,* says Christine @oss, manager in the
Workplace ;ffectiveness Team for Cisco Workplace @esources (WA@, the Cisco[ group in
charge of real estate.
Bike most companies, however, Cisco designed its office space under the traditional
assumption that employees would work in their own cubicles during regular work hours and
would need assigned work spaces with their own desks, ACs, and phones. The result was that
meeting rooms were often in short supply, while offices and cubicles remained vacant IF
percent of the time on average. $ost employees had cubiclesN only those managers with eight
or more employees (direct reports have private offices. *The work environment we=ve been
building is not necessarily what employees need,* says @oss.
*#obody would consider building a manufacturing facility that they intended to use 5ust one0
third of the time,* says $ark 7olan, Cisco vice president for WA@. *,nd yet that=s what we
routinely do with workspace. We reali+ed that assigning resources based on utili+ation would
significantly reduce Cisco real estate costs.*
Cisco WA@ resolved to build a work environment based not on titles, but rather on the needs
of individuals, by giving all employees a broad choice of workspaces and technology tools to
do their 5obs. *-n college, a professor doesn=t say, =Complete this pro5ect from K.&& a.m. to
F.&& p.m. in the library,=*says 3olly Woo, Cisco workplace strategist. *@ather, you=re given a
task and a deadline, and how you complete that task is up to you. We had the same vision for
Cisco. ;mployees would have the freedom to choose their environment based on the
requirements of their current task.* !y creating a *connected workplace,* as the team dubbed
the pro5ect, WA@ hoped to achieve measurable business benefits such as reducing real estate
costs, in addition to increased productivity and employee satisfaction.
%arlier (uccess With (hared Wor+space
Cisco had previous success with the concept of shared workspace. *3uring our rapid growth
periods we had no choice but to share workspace because we couldn=t acquire new space fast
enough,* says @oss. -n the 9tockley Aark, Bondon location, for example, the ratio of
employees to workstations was six to one. ,nd in most of its sales offices worldwide, Cisco
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53
-T retained the same physical cubicles but did not assign them to specific employees. -n any
cubicle employees could log on to an -A phone as their own using the ;xtension $obility
feature of Cisco Call$anager servers.
!uoyed by the success of shared workspace in Cisco sales offices, WA@ wanted to extend it
to other Cisco facilities. The goals were to increase the number of employees in the office
without increasing real estate costs, and to create a more productive and pleasant environment
than that afforded by traditional cubicles. WA@ decided to create a proof of concept in 9an
6ose=s !uilding 'J.
Be=uire"ents ,or A Connected Wor+place (olution
Cisco employees are increasingly mobile0and less and less working at a particular desk.
Therefore, WA@=s vision was to support the new mobility of employees with technologies
such as wireless and the mobility features of Cisco -A Communications technology. The new
environment would enable them to choose any workspace for as long as they needed it, less
than an hour or all day. ?or its proof of concept, WA@ drafted the following requirements.
;ncouraging collaboration. The floor plan would provide spaces for both planned and
spontaneous meetings (see ?igure ' and for small and large groups. Technologies that
encourage collaboration over distance include Cisco QT ,dvantage for video
telephony, Cisco $eeting Alace for audio0 and videoconferencing, interactive white
boards, instant messaging, e0mail, and voice mail. Other technologies that encourage
collaboration within an onsite meeting room include portable or mobile
videoconferencing units.
@educing real estate costs. !y designing a space without assigned seating, two0thirds
of which is vacant at any given time, Cisco could comfortably assign more people to
the same si+e building. The building used for the proof of concept could
accommodate 'J& employees compared to the HH who would be assigned to the same
space in a traditional Cisco building. @eal estate costs would drop by ML percent.
@educing infrastructure costs. , wireless environment requires less cabling, one of the
most expensive infrastructure components, and fewer wall 5acks, which cost W%&&
each. -n addition, the resulting reduction in the number of switch ports would free up
space for other switch resources, such as blades for security, content serving, or
additional infrastructure applications.
,ccommodating different work styles. WA@ would design a workspace with a variety
of seating options instead of a single assigned seat for each employee. Throughout the
day, employees would select an appropriate environment to accomplish the task at
hand. meeting in a group, participating in a conference call, or working alone on a
spreadsheet or pro5ect plan. ;nabling technologies for the various workspaces include
wireless B,# and Cisco -A Communications (most notably ;xtension $obility,
Cisco -A Communicator, and Cisco Enity[ voice mail
Wor+place %ffecti&eness -roof Of Concept
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54
-replanning
WA@ created the Workspace ;ffectiveness pro5ect with the assumption that each of four
categories of workers at Cisco0engineering, sales, call center, and general administration0has
a distinct set of needs for space, services, technology, support, and policies and procedures.
WA@ supported its assumption with studies by Cisco and other technology companies
concluding that collaborative groups accomplish more than individuals.
9pecifically, WA@ designed the proof of concept to test the hypothesis that a flexible,
collaborative workspace could improve productivity and increase employee satisfaction while
reducing real estate space and costs by increasing user density. WA@ assembled a team of
specialists not only in -T, human resources (2@, and workplace resources, but also cultural
anthropology, architecture, design, psychology, and sociology. $etrics for success would
include cost savings, improved productivity, and increased employee satisfaction. Cisco -T=s
role would be to provide the tools to enable mobility and enhance collaboration among global
teams.
Cisco and WA@ regarded the proof of concept as an experiment to determine the
environments that work best for different employees under different circumstances. The plan
was for continual improvement as the team learned more.
2olunteer Becruit"ent
WA@ began by recruiting general administration workgroups to volunteer to relocate to the
proof0of0concept building, Cisco=s !uilding 'J. Qolunteers included the WA@ group itself, the
Cisco on Cisco -T infrastructure team, part of the Cisco -nternet !usiness 9ervices 7roup
(-!97, and the 2@ Creative Bearning 9tudio. Total participants numbered 'J& and included
individual contributors as well as vice presidents, directors, and managers.
-lanning
To assess employee workspace needs, WA@ conducted focus groups, employee interviews,
surveys, and observations. *We worked through representatives from each workgroup that we
identified as technology change leaders,* says Byle @ochon, Cisco -T manager. *They
brainstormed requirements from their respective teams and brought them into our focus
groups.* , frequently mentioned need was for quiet areas to be used for short periods during
the day. ,nother was personal lockers for belongings like purses or lunches, and larger filing
cabinets for employees whose 5obs required them to store forms or records.;mployees also
helped formulate the etiquette associated with each type of workspace. ?or example, focus
group participants agreed that if they had to meet with 5ust one other person about a
nonprivate matter, they could do it in an open area instead of an enclosed conference room.
Design
, central design principle for the general administration workgroups was a completely
wireless environment, to enable mobility. -T added wired 5acks, as well0although I& percent
fewer than in a typical Cisco building0for high0speed communications needs such as AC
backups and video streaming. Only administrative assistants were assigned a permanent
SYSTEMS
55
workspace, so that their teams would know where to find them without using the location
tools they would use to locate others.
The Connected Workspace floor plan was inspired by a university theme, with open spaces
called quads, pla+as where employees can meet informally, a commons area for breaks, and
enclosed offices called colleges (see ?igure J. The absence of cubicle walls lets in more
natural light and creates a more open and spacious atmosphere.
The designers included different types of work spaces to accommodate different work styles
and business needs.
-ndividual workstations, equipped with.
o 3ocking station, which enables quick connection to desktop accessories such
as flat0screen monitors, keyboard, and mouse (see ?igure F
o Cisco -A LKI& Ahone, which employees personali+e with their phone number
and preferences with a login, using ;xtension $obility or
o Cisco -A Communicator, a software -A phone that runs on a laptop and sends
voice over the wireless network. ;mployees use either wired headphones or a
wireless !luetooth headset to turn their laptops into high0quality -A phones.
;mployees who use hardware -A phones tend to retrieve their Cisco Enity
voice mail by phone while those using Cisco -A Communicator on their
laptops tend to more often use their laptop browser to review, listen to, and
manage voice mail.
o Biquid crystal display monitors at some workstations
Collaboration spaces, both formal and informal. ?ormal meeting spaces have closed
doors for privacy. They also have tables, speakerphones, and some -A
videoconferencing stations. Two of the largest meeting rooms can be quickly
reconfigured into smaller rooms using a movable wall. -nformal spaces have soft
seating on wheels, mobile tables, and movable privacy screens, enabling participants
to spontaneously create a collaborative meeting space (see ?igure I.
, quiet space, *the library,* where employees can work without distractions (see
?igure L.
, lab area to support both -T product testing and new product deployments in the
Cisco Connected Workplace test area.
;mployees often move to different areas throughout the day. When Woo was interviewed for
this story, for example, she was seated in a small conference room, which she had chosen for
privacy and so that her phone conversation would not disturb others. ,fter the interview she
planned to move to an individual workstation, the library, or a soft0seating area for individual
work.
$echnology (election
SYSTEMS
56
,fter WA@ developed the workspace requirements, the group brought its requirements to
Cisco -T. *Cisco -T was a full partner with WA@ to develop processes that would reduce
operational expense,* says @ochon. *We looked at Cisco technology roadmaps to see what=s
on the hori+on for -A telephony, specifically to enhance mobility and the user experience.
9ome of our recommendations cut costs. ?or example, in the shared workspace we reali+ed
we could allocate two wired 5acks per workspace instead of six, which is the standard at
Cisco. ,t a cost per 5ack of W%&& per line, we=re saving WH&& per employee, or W'I&,&&&.*
Cisco -A Communicator, a software0based application that delivers enhanced
telephony support through ACs with wired or wireless headsets (see ?igure H
;xtension $obility, a feature of Cisco Call$anager that enables employees to log on
within seconds to any Cisco -A phone to personali+e it with their own telephone
number and options
Cisco QT ,dvantage, for videoconferencing
Cisco Web $eeting, for audio and Web conferencing
Third0party tools that enable employees to quickly locate each other in different areas
throughout the building
Qideo conferencing units inside conference rooms, including interactive white boards
and plasma displays, to enable collaboration with remote participantsN many of these
units are on wheels so they can be used throughout the space
Cisco selected the technology at the end of ?ebruary %&&J and began the pilot in 6uly %&&J.
%"ployee Co""unications
3uring construction, WA@ conducted workshops with pilot participants to prepare them for
what to expect. *The connected workplace is a big change for Cisco employees,* says Woo.
*Aeople are accustomed to working in the same cube or office every day. #ow, nothing
belongs to them except their personal locker. Therefore, we reali+ed that change management
would be essential to the success of this pro5ect.*
To ease the transition, Woo and the pro5ect team communicated regularly with employees to
prepare them for the change and to hear their concerns. *!efore the pilot even began we
wanted the participants to know what workspace would look like, how they could work in it,
and details about the technology tools,* she says. 3uring design, construction, and for two
weeks before and one month after the move, e0mail or in0person communications occurred
daily. #ow the team sends a newsletter when needed, about once a week.
Communications address three types of change.
9etting. ,t the beginning, Woo educated the employees about their choices of work
setting, including a workstation, open collaborative space, or closed collaborative
space. ;mployees have the option to work at home some of the time but are
encouraged to come to the office. *Within the Cisco culture, teamwork is important,*
says Woo. *, face0to0face collaborative environment creates an energy that helps
SYSTEMS
57
people be more productive. Therefore, we designed an inviting environment so
employees would want to come into the office.*
Aersonal work style. , choice of work setting gives employees the opportunity to be
more productive based on their choices. ;mployees can choose the area most
conducive to their work, from a variety of meeting rooms and areas to an even wider
variety of individual workspaces. Aeople can work together or independently, among
people or alone0always in a large, expansive, well0lit environment with many
windows. *The workplace is open and comfortable, and -=ve grown to appreciate my
ability to select my workplace rather than being required to work in the same cubicle
every day,* says participant @ich 7ore, a member of the Cisco on Cisco -T
infrastructure team. 9hefali !udhra5a, interactive designer with the 2@ Creative
Bearning 9tudio, agrees. *- wouldn=t want to work in the old cubicles environment any
more.*
Organi+ational behavior. ;mployees in the pilot pro5ect helped craft etiquette
guidelines, such as when it is appropriate to occupy a conference room. *The very
short0term view is that by sitting in a conference room all day with the door closed, an
employee can be productive,* says Woo. *2owever, if the employee leaves the room
when privacy is no longer needed, they regain the collaboration and informal
interaction that=s key to organi+ational success, and also release a resource that others
might need. That=s the big0picture view we try to encourage.*
;mployees are invited to provide input through the group=s Website. *3uring the first month
or two, employees submitted many questions and comments, ranging from etiquette
suggestions to requests for monitor stands with height ad5ustment,* says Woo. WA@
acknowledged all comments and addressed them as appropriate (see ?igure K.
Designing a W4A3 for Dense -opulations
!ecause the Connected Workplace proof of concept encourages mobility and has the capacity
for %&& employees instead of the HH that would ordinarily occupy a space of the same si+e,
Cisco -T needed to build a wireless infrastructure that could support a denser0than0usual user
population. *-n regular buildings, Cisco -T provides wireless data connectivity at a density of
about %F employees per access point,* says 3ave Castaneda, member of the technical staff in
Cisco -T. ;ach quarter of a typical building, therefore, has % or M wireless access points,
whereas the proof of concept building has '&. @easons for needing more access points
include.
$ore than twice as many employees can work in the proof0of0concept building than
in a typical Cisco building.
;mployees are encouraged to cluster in small areas, further increasing density.
SYSTEMS
58
Cisco -A Communicator uses the same wireless connection used for data, adding to
wireless bandwidth requirements.
Cisco -T continually monitors wireless usage to ensure that the infrastructure delivers the
needed performance. -n general, Cisco -T tries to ensure that no more than six to eight
employees associate with a given access point at one time. *We achieve this ratio manually
by taking =snapshots= of the number of associations on each access point,* says Castaneda. ?or
example, when employees in the pilot began congregating in a particularly sunny area near
the windows, Cisco -T discovered that more than %F laptops were associated with a single
access point and responded by adding an access point in that area. -n the future, Cisco -T
plans to install the CiscoWorks Wireless B,# 9olution ;ngine (WB9; to track the number
of associations and ensure that no single access point is overloaded.
9upporting voice over a wireless B,# requires special design attention. *Wired networks set
up for voice can provide a measure of call admission control, but wireless access points
currently can=t differentiate between a voice and data stream,* says Castaneda. ;mployees
who place wireless voice calls from Cisco -A Communicator receive the needed voice quality
when the wireless access point has sufficient capacity. 9ome employees use the wireless
Cisco -A Ahone LK%&, which provides a form of call admission control called the Vuality0of0
9ervice !asic 9ervice 9et (V!99. Castaneda explains, *The Cisco -A Ahone LK%& uses the
@eceived 9ignal 9trength -ndicator (@99- to identify the access point with the best signal
strength, and also uses the V!99 to determine how many voice channels that access point is
currently supporting. -f the strongest access point is already supporting the maximum number
of voice calls it can support with good quality, the wireless -A phone roams to the next
strongest access point signal with an acceptable V!99 voice channel utili+ation. This ensures
that wireless -A phones make a call only if the wireless network has the capacity to carry the
call with sufficient bandwidth.*
Besults
Cisco WA@ is evaluating the success of the proof of concept in terms of effectiveness and
efficiency. ;ffectiveness is the increase in productivity and participant satisfaction resulting
from the integrated workplace design and -T solutions. ;fficiency is the improvement in key
metrics such as space utili+ation and cost and portfolio optimi+ation.
.reater %"ployee (atisfaction
WA@ performs periodic interviews with each organi+ation and plans to administer a survey.
*Common feedback is that most employees like the choice of work environments, cutting0
edge technologies, light, openness, and the opportunity for inter organi+ational
collaboration,* says @oss. 9ome employees and workgroups found it more challenging to
make the transition to a mobile environment0typically the ones that spend most of their day at
desks or need to work with paper documents. ;ven these employees indicated that they like
the variety of spaces and technologies available to them. *-n the end, the most important
question is, =Would you go back to the old environment"=* says @oss. *To date, most
participants say no.*
SYSTEMS
59
Cost (a&ings
The shared workspace generates significant cost savings for Cisco, as shown in Table '.
$ale 1. Cost (a&ings fro" the (hared Wor+space
Cost Category -ercent
(a&ings
Beal estate rent8,ccommodating more people in the same amount of space MLG
Construction8!uilding a smaller space than typically required for 'J&
employees
J%G
Wor+place ser&ices. @educing utilities and maintenance costs, and nearly
eliminating the costs of moves, adds, and changes for workspaces through the
use of flexible furniture settings
MLG
,urniture8 Aurchasing less (and slightly less expensive furniture than typically
used in cubicles
F&G
I$ capital spend8 9pending less on switches and switch ports J&G
Caling8@educing the number of wired -A cables required per workspace I&G
%=uip"ent roo" space8 @acking fewer switches because of wireless
infrastructure
F&G
The total cost of the space is W''L per square foot, allocated as follows.
Construction. F'G
Technology. 'HG
?urniture. 'FG
3esign and visual communication. '&G
Change management. IG
4essons 4earned
SYSTEMS
60
The most challenging aspect of the pro5ect for -T was support, according to @ochon.
*!ecause this was a proof of concept, we had to negotiate with the Cisco -T support team to
provide resources to answer questions about Cisco -A Communicator and other newly
introduced technologies. The lesson learned was to engage the support team early and
provide them with support information in the form of ?,Vs right away so they could become
familiar with issues that are unique to the shared workspace.*
,nother lesson learned was the importance of providing power outlets at most of the
workplaces. Cautious about the limits of their laptop battery life, employees need to stay
connected to the wired power network at least part of the day, and seats near power outlets
proved popular. WA@ tried providing uninterruptible power supplies in various parts of the
building, but the units began beeping after about an hour to signal low power, disrupting
nearby employees. Currently, WA@ is addressing the need by providing more power drops
and laptop charges at more locations. ,n option under evaluation is to provide shared battery
recharging stations where employees can exchange their exhausted laptop batteries for fully
charged ones.
,t the beginning of the proof of concept, the organi+ers returned furniture and collaboration
tools to their *home* locations at the end of each week. *We encourage people to reconfigure
the furniture to suit their work needs,* says Woo. *We reali+ed at one point that if a particular
piece of furniture or tool is always moved to a certain location or arranged in a certain way,
perhaps the new location should become the designated home.*
3e)t (teps
3esigning the optimum work environments for different types of workers requires an in0
depth understanding of the movement of people within these environments. Cisco -T plans to
monitor employee movement using radio0frequency -3 (@?-3, Wi?i, and ultra0wideband
tracking. To avoid introducing privacy concerns, Cisco -T will not associate the tracking with
a particular individual. -nstead, it might track a badge that employees are asked to grab out of
a bin when they arrive at work, for instance.
To enhance safety and security, -T is investigating the use of optical tools to monitor the
number of people who enter and leave the building. ?or example, when a person with a Cisco
badge enters a building, another person without a badge might come in directly after. *-t=s
important for Cisco 9ecurity to be able to monitor this activity and track people coming in the
building,* says Castaneda. *9imilarly, it=s important to be able to track the number of people
in a building in the event of an emergency to ensure that nobody is trapped and unaccounted
for.*
Det another future plan is installing a *virtual building receptionist,* an interactive screen in
the lobby that can answer basic questions, page employees to come out and meet their
visitors, provide temporary badges to visitors, and connect visitors to a live receptionist in
another building when needed.
Cisco has completed another proof of concept for the sales environment in Charlotte, #orth
Carolina, and is planning yet another for a call center outside the Enited 9tates. *,fter the
final results of the proof of concept are in, we=ll evaluate whether and how we need to modify
the Connected Workplace to roll it out in other Cisco offices around the world,* says @oss.
*9everal Cisco companies tour the environment every week to investigate how we=re
SYSTEMS
61
integrating people, process, and technologies to support our business ob5ectives. ?or Cisco as
well as our customers, the most compelling benefits include real estate cost savings, an
enhanced ability to collaborate, and increased employee satisfaction.*
13.(WO$ Analysis of Cisco (yste"s
(WO$ Analysis
(trength
'. 7eographically 3iverse !usiness
%. ;conomies of scale lower cost and increases margin
M. 3iversified into many segments and tapping sophisticated market
J. $arket leading position brings many benefits
F. @obust financial performance
I. Onown for its strong @ R 3 division
L. , culture that experiments produces better long term values
Wea+ness
'.3eclining storage networking market
%. Weak presence in !AO technologies<market compared to global
leaders
Opportunity
'.;xpansion through 9trategic ,lliances and ,cquisitions
%. 9mart grid infrastructure could increase demand
M. Wi0?i 2ome Calling and mobile broadband
J. 3ata intensive applications
F. 3ata $ining
$hreats
'.The use of cloud servers is lowering sales and especially profits
margins for cisco=s core business.
%. Open 9ource Competitors
SYSTEMS
62
M. 2igh competitive rivalry
J. Qirtuali+ation

SYSTEMS
63
1#.Conclusion
Cisco is the leader in the network equipment industry. Their sales, profits, and revenue per
employee surpass all competitors. -mplementation of bold strategies, including information
technologies and e0business processes has made this a reality. Cisco has continued to grow
and expand globally (with the exception of the layoffs in %&&' with the help of information
technologies that connect their customers, employees, investors and partners. !usiness
processes have been streamlined by information technologies that share accurate real0time
data. Cisco 9ystems a company that has reinvented itself time and again has proved that the
key to corporate success lies in an organi+ational structure that is both responsive and in tune
with the changing industry and market requirements.
Organisation design is not simply about mapping out an organisational structure, but also
about how the organisation is aligned with all other aspects, functions, processes and
strategies within the business. Organi+ational design is the way an organi+ation is to be
structured and operated by its members. -t is both a plan and process.
Cisco has designed and structured its organi+ation in many ways like as per the technologies,
products, various issues etc and thus achieved success through it.
1'.Welography
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64
,nderson, Ahilp, Trimble, Chris, 7ovindara5an. /Cisco 9ystems, ;volution to
;0!usiness.1 %&&% Tuck !usiness 9chool at 3artmouth
\ http.<<mba.tuck.dartmouth.edu<cgl<downloads<'&&&']Cisco],.pdf^
Cisco Systems www.cisco.com
/Cisco 9ystems 9hows its ,ppreciation.1 9eptember %%, %&&M. ?inistar Corp.
\http.<<www.electronicstalk.com<news<fni<fni''F.html^

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