Cisco Systems Inc.’s Organisational Theory, Design, Change

Introduction

One of the core purposes for the existence of organisations entails generating value to the different stakeholder groups. However, the organisations’ effectiveness in creating value is subject to different macro-environmental forces. These forces include economic, social, technological, political and environmental changes. Organisations do not need many years in order to implement change. Companies are forced to restructure and reorganise their operations and business units constantly in order to remain competitive.

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The organisations’ speed and focus in implementing the reorganisation and restructuring initiative influences their long-term success and survival. Thus, they are in a position to transform their operations from the current state to the future desired state.

There are different sources of organisational change. First, change can be initiated by an organisation in an effort to achieve a particular outcome. Alternatively, an organisation can be forced to change in an effort to deal with a crisis occurring in its respective industry. Thus, organisations are subject to different environmental forces. The change might arise from cultural transformations and the need to implement new business models. Most organisations have developed a negative perception towards radical change, which explains why some firms take a considerably long period before implementing meaningful change. On the contrary, organisations prefer slow and incremental change in order to give employees an opportunity to adjust to the change.

Implementing radical organisational change within a short period without encountering crisis and sustaining the positive outcome is a major challenge amongst managers. Therefore, the importance of integrating effective organisational techniques, concepts, and approaches cannot be underestimated if a firm wants to sustain long-term existence and competitiveness. Amongst the concepts that organisational managers should take into account entails the organisational design, which involves selecting and managing aspects associated with culture and structure.

The concept of organisational design enables a firm to control the different activities that are vital in attaining the set goals. Schuler, Jackson, and Luo cite a number of reasons why organisational design is critical in an organisation’s existence (71). The organisational design enables a firm to deal with contingencies, manage diversity, attain competitive advantage, be innovative, and achieve operational efficiency.

Purpose

This report intends to evaluate the organisational theory, design, and change in an organisational setup.

Research methods

In order to develop a concrete understanding of the application of these concepts in the real organisation environment, the report is based on a case study approach. The case study assesses how Cisco Systems has succeeded in implementing the three concepts. The data used in conducting the study is obtained from reviewing the past literature on the Cisco Systems’ strategic management practices and operations.

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Company background

Cisco Systems Incorporation specialises in designing, manufacturing, and marketing Internet protocol networking products associated with the information and communication industry. Since its inception in 1984, the company has maintained an exemplary performance by attracting individual and institutional customers. Some of the core customers include public institutions, businesses, telecommunication companies, and individual customers.

Due to the adoption of effective strategic management practices, Cisco has attained global footprint. The organisation recognises the importance of effective organisational structure. Subsequently, the firm has organised its operations into three main segments, which include the Asia-Pacific, Japan and China [APJC], Europe, Middle East, and Africa [EMEA], and the Americas. Cisco has developed comprehensive product portfolios, which are grouped into different categories. The core categories include the Next Generation Network [NGN] Routing, Service Provider Video, Collaboration, Switching, Data Centre, Security, and the Wireless categories (“Cisco” par.1).

Cisco recognises human capital as one of the fundamental components in the firm’s quest to achieve long-term performance. Despite its ability to derive competitive edge from the provision of top-notch technology, the firm realises that its real competitive edge is derived from its workforce (“Cisco” par.1).

The company’s organisation structure was based on a traditional ‘siloed’ structure. This structure was ineffective because it led to the duplication of the workforces’ effort. The duplication arose from the fact that the departments operated independently. Therefore, the ‘siloed’ and separate structure limited the level of focus amongst the organisation’s workforce. Cisco has adopted a functional organisational structure in an effort to ensure a high degree of operational efficiency and its operations are based on cross-functional teams.

The core organisational functions considered in the firm’s structure include legal, human resources, operations and processes, development and sales, marketing, sales, strategic advisor, software and operations, security, and growth initiatives (“Cisco” par. 1). The organisation’s decision to adopt this approach is informed by the need to create synergy through information and knowledge sharing. Additionally, boards, working groups, and councils, undertake the organisation’s core decisions.

The cross-functional organisational structure has played a remarkable role in improving innovation within the organisation. This assertion arises from the view that the cross-functional teams are in a position to develop valuable knowledge. Thus, the firm has been in a position to implement aggressive growth approaches, hence strengthening its capacity to cope with the macroeconomic changes. The organisation’s management team is comprised of two main levels of leadership, which include the executive leadership team and the senior leadership team. John T. Chambers currently heads the executive team as the Chairman and Chief Executive Officer.

Management practices and attributes that make Cisco Systems excellent

Formation of mergers and acquisition

The ICT industry has undergone a significant transformation over the past few years. One of the major transformations entails the increase in the intensity of competition. Over the past decade, the industry has experienced an increment in the number of players due to the high profitability potential. The profitability has originated from the increment in the consumption of ICT services. Cisco Systems experiences intense competition in its different market segments. For example, in the networking segment, the firm’s core competitors include North Telecom [Nortel], Lucent Technologies, 3Com, and Bay Networks. Other key competitors include the International Business Machine, Hewlett-Packard, Oracle, and Microsoft. The changing nature of the industry has led to an increased industry consolidation in an effort to remain competitive.

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The strategic management practice adopted by a firm determines its long-term existence. In an effort to achieve and sustain a competitive market position, Cisco Systems has integrated effective management practices. One of the management practices that the firm has adopted is change management. Frensch affirms that all organisations encounter change characterised by varying complexity and significance to the long-term existence (34).

Cisco Systems recognises change as a fundamental source of competitive advantage by developing resilience to the industry changes. Thus, the firm has undertaken remarkable change efforts such as mergers and acquisition. Frensch asserts that mergers and acquisitions have become one of the most effective ways through which organisations can develop a high competitive edge (35). Over the past two decades that the firm has been in operation, Cisco Systems has acquired a number of firms in the ICT sector.

In 2015, Cisco Systems Inc. has acquired a number of firms. On 1st April 2015, the company acquired Embrane, which specialises in the provision of lifecycle management platform for different applications such as virtual private network [VPNs], SSL offload engines, Firewalls [FW], and Load Balancers. This acquisition will play an essential role in improving the company’s efficiency especially within the data centre. The company expects “the unique skill-set and talent of the Embrane team, combined with Cisco engineering expertise to extend the Nexus product footprint and application centric infrastructure” (“Cisco” par. 7).

Furthermore, the acquisition will improve the company’s capacity to offer high-quality ICT services by modernising its data centres. For example, the firm will offer different data packages such as the 10G, 40G, and 100G.

Similarly, Cisco finalised the acquisition of Tropo on 29th May 2015. Tropo specialises in offering cloud API platform, which means that customers can enjoy real-time communication seamlessly using different Internet-enabled devices. The acquisition of Tropo has contributed to a remarkable improvement in the Cisco Systems’ ability to improve the functionality of its ICT services amongst its customers. The acquisition will contribute to the firm’s capacity to serve the growing demand of the developer community. Another major accomplishment that the firm has realised in the recent past relates to the acquisition of Piston Cloud Computing on 3rd June 2015.

Piston specialises in the development of software that enables organisations to deploy large-scale distributed systems. The acquisition is aimed at improving the Cisco Systems’ ability to offer inter-cloud services.

The formation of mergers and acquisitions entail a major organisational change. Therefore, the success of the mergers and acquisitions depends on the acquirers’ strategic management acumen. Past studies indicate that mergers and acquisitions are some of the change efforts that experience the most rates of failure. A survey conducted by the Boston Consulting Group on 277 mergers undertaken by US firms between 1985 and 2000 shows that over 64% of the mergers resulted in the destruction of value (Frensch 32). Additionally, over 56% of the mergers failed within 2 years of their formation (Frensch 32).

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Culture management

One of the major sources of failures in mergers and acquisitions entails the existence of cultural differences between the firm being acquired and the acquiring entity. Schuler, Jackson, and Luo argue that the cultural differences encountered in mergers and acquisitions arise from differences in corporate culture (84). Moreover, Badrtalei and Bates argue that mergers and acquisitions lead to the combination of two organisations characterised by diverse organisational and operational strategies, hence increasing the likelihood of conflict and confusion on the culture to follow amongst the firms’ workforces (27).

In the course of its operation, Cisco Systems has integrated an effective organisational culture that is characterised by teamwork and collaboration. Furthermore, an organisation’s culture is characterised by the stipulated norms, beliefs, attitudes, and values. Gitelson, Bing, and Laroche assert that cultural differences lead to culture clash, which increases the likelihood of conflict and the lack of collaboration in undertaking different organisational activities (53).

In order to ensure the success of mergers and acquisitions, it is fundamental for the organisations’ management teams to invest in effective organisational culture integration and acculturation process. Through cultural integration, a firm is in a position to develop a new organisational culture. However, the cultural integration requires the acquiring company to develop sufficient understanding regarding the culture of the firm being acquired.

Cisco Systems recognises the existence of cultural differences before implementing the mergers and acquisitions. In a bid to deal with this challenge, the firm establishes an integration team comprised of members drawn from the two organisations’ management teams. The integration team evaluates the points of difference between the two firms such as the decision-making process in a bid to make the necessary adjustments. One of the issues that the integration team focuses on entails undertaking cultural due diligence, which provides the firm with sufficient information before embarking on the mergers and acquisitions.

The objective of the cultural due diligence is to assess the degree of fit between the two organisational cultures. The cultural due diligence is undertaken by evaluating the firms’ strategic aspects such as vision statements, core values, mission goals, objectives, beliefs, norms , the customer focus approach, human resource management practices such as employee empowerment, and the firms’ strategic direction. Through cultural due diligence, the Cisco Systems’ management team is in a position to select organisations that are characterised by a relatively high degree of congruence. Furthermore, the management is in a position to harmonise the cultural differences.

In the course of undertaking cultural due diligence, the integration team ensures that a high degree of involvement is undertaken. The firm achieves this goal by communicating with employees from different levels of management. Consequently, the integration team is in a position to understand the various aspects that comprise the organisational culture of the firm being acquired. Therefore, the firm is in a position to understand the extent to which the employees identify with their firm. Furthermore, involvement makes the employees feel that the acquisition is not a threat to their job. This aspect has played a significant role in minimising culture clash in the Cisco Systems’ merger and acquisition processes.

Hofstede cultural dimension theory

In the course of undertaking cultural due diligence, Cisco Systems integrates the Hofstede’s cultural dimensions theory. The theory underscores the existence of different cultural inclination between the involved firms. The core dimensions considered include power distance, uncertainty avoidance, individualism and collectivism, long-term orientation, and masculinity versus feminity. According to Hofstede, power distance refers to the extent to which an organisation appreciates the existence of inequality and equality in a certain society or group (72). The power distance in a particular organisation can be high or low.

A high power distance means that an organisation does not include employees in the decision-making process, which leads to bureaucratic tendencies. In the course of its operation, Cisco Systems has integrated a collaborative decision-making process. Thus, the firm’s executive and senior leadership teams assess the opinion of its workforce prior to undertaking major change decisions. Therefore, one can argue that the firm has decentralised its organisational structures extensively, hence the decision-making process. The collaborative decision-making process has played a fundamental role in improving the effectiveness and efficiency with which Cisco Systems undertakes the merger and acquisition initiatives.

Furthermore, Hofstede argues that an organisation’s long-term success is subject to the degree to which it values and supports interpersonal relationships (72). Cisco Systems has incorporated interpersonal relationships as one of the foundations in implementing its strategic management initiatives such as mergers and acquisitions. Therefore, most of the firm’s change processes are undertaken through a group effort, as evidenced by the adoption of the cross-functional teams in undertaking major change projects. The cross-functional team not only enhances the firm’s performance, but it also contributes to the employees’ growth and development. For example, the employees are empowered adequately by sharing knowledge amongst workmates from different departments.

By developing a collectivist approach, the organisation is in a position to establish an environment of information and knowledge sharing, which leads to the attainment of the desired level of synergy. The Cisco Systems’ decision to implement the concept of merger and acquisition in its strategic management practices is informed by the need to develop a high organisational value by gaining additional expertise and skills of the firm being acquired.

However, achieving this synergy depends on the effectiveness and efficiency with which the firm being acquired is fully integrated into the acquiring firm. By valuing a collective approach, Cisco is in a position to instil a high degree of organisational identification amongst employees of the firm being acquired. Thus, the firm’s employees become loyal to the new firm, which reduces the probability of decline in their productivity. Therefore, one can argue that the concept of teamwork has contributed remarkably to the Cisco Systems’ effectiveness and efficiency in gaining a high competitive advantage as the firm is in a position to leverage on the additional skills and expertise from the acquired firm.

With reference to masculinity and feminity, Cisco Systems has established a balance between the two dimensions. This aspect has arisen from the realisation of the fact that both the male and female genders are capable of executing the assigned roles and responsibilities successfully. Thus, the firm has incorporated both male and female leaders in the different levels of management, which shows that it values the input of all genders. Consequently, the firm provides both men and women in the workforce with an opportunity to undertake different roles. Through this approach, the organisation has been in a position to eliminate bias in its human resource management practices.

The masculinity versus feminity aspects are entrenched fully in the firm’s human resource management practices. In its strategic human resource management practices, Cisco Systems appreciate human capital as one of the fundamental organisational assets. Subsequently, the firm is focused on developing a strong workforce in an effort to leverage on the skills, knowledge, and the inherent talent in the workforce. Thus, in its recruitment processes, Cisco Systems does not discriminate human capital based on demographic characteristics such as race, gender, sexual orientation, nationality, origin, and age amongst other variables. On the contrary, Cisco Systems appreciates diversity as a source of organisational strength.

The organisation’s approach towards diversity has played an essential role in improving the Cisco Systems’ competitiveness in the ICT industry. For example, the organisation is in a position to attract exemplary talent with reference to ICT from the global labour market. Thus, the firm’s effectiveness and efficiency in developing new ICT products is enhanced considerably. Furthermore, individuals derive a high level of satisfaction for being associated with Cisco.

In addition to the above aspects, the firm’s organisational culture is comprised of a high uncertainty avoidance index. Cisco appreciates taking risks as a source of competitive advantage. The ICT industry is characterised as one of the most volatile industries. Thus, the industry players cannot ignore the significance of adjusting to the changing business environment. By incorporating uncertainty as a key component in its strategic management, Cisco has been in a position to engage in major organisational transformation efforts. This aspect enables the firm to align with the prevailing trends in the ICT industry.

Reward management

The employees’ long-term existence and loyalty towards a particular organisation are influenced by the benefits derived. One of the ways through which a firm can increase the level of motivation amongst the workforce is by integrating effective reward system. In the course of its operation, Cisco Systems has integrated a comprehensive reward management approach. The reward system is comprised of both the employees’ benefits and the disciplinary mechanisms.

First, the firm ensures that its employees are rewarded fairly and equitably. In a bid to achieve this goal, Cisco Systems have incorporated both the monetary and non-monetary benefits in the reward system. Under the monetary system, the firm ensures that employees are remunerated fairly and equitably. Thus, the firm’s management team ensures that it is compliant with the minimum wage stipulated by the International Labour Organisation [ILO]. Furthermore, the firm ensures that employees are paid a bonus for any additional effort portrayed such as working overtime. Employees are also offered other monetary benefits such as health insurance cover, transport, and house allowances. This aspect shows that the firm is conscious of improving its workforce’s standards of living.

Apart from monetary compensation, Cisco has also entrenched non-monetary compensation approaches in its reward system. One of the rewards that the firm considers entails employee promotion. However, the firm is committed to ensuring that employees are promoted fairly depending on their effort and contribution to the organisation’s operation. Employee promotion is undertaken on a merit basis. Thus, employee promotion is based on a comprehensive appraisal program.

The program assesses the employees’ performance over a considerable duration. The results of the appraisal are communicated to all employees in order to ensure that they understand their performance. This aspect provides them with an opportunity to identify the gaps in their performance, hence increasing the likelihood of future adjustments. Therefore, one can argue that the employee appraisal programme enables the firm’s workers to benchmark their performance against those of their colleagues. Subsequently, the firm is in a position to create healthy competition within the workforce.

The concept of employee promotion has played an essential role in improving the firm’s attractiveness to employees. This aspect arises from the view that employees develop the perception that the organisation will provide an opportunity for personal growth and development. For example, employees are in a position to progress through their desired career path in the different organisational segments. In addition to the above aspects, the Cisco Systems’ reward system is comprised of psychological approaches. One of the most notable approaches entails recognising employees who depict exemplary performance.

Through employee recognition, the firm increases the level of motivation amongst its workforce. Similarly, the firm recognises the fact that negative employee behaviour can lead to poor organisational performance. Subsequently, the firm has integrated reprisal as one of the core components of its reward system. This aspect has contributed remarkably to the entrenchment of positive behaviour amongst the firm’s workforce. Furthermore, the integration of reprisal in the reward system has contributed to the adherence to the firm’s codes of conduct.

Leadership

An organisation’s ability to influence its workforce and develop a strong competitive advantage is influenced directly by the leadership style adopted by the senior management team (Gitelson, Bing, and Laroche 23). Cisco Systems has integrated transformational leadership style. The choice of this leadership style is influenced by the need to improve the firm’s effectiveness and efficiency in adjusting to the prevailing industry changes.

Under the transformational leadership style, Cisco Systems has been in a position to nurture a collaborative working environment. This aspect arises from the fact that the organisation recognises the workforce as a source of new knowledge and insight. One of the fundamental aspects that Cisco Systems considers in its transformational leadership efforts is communication.

Over the years, Cisco Systems has integrated the two-way communication system. The approach has enabled the company to develop a comprehensive understanding of its workforce. For example, the lower level employees are in a position to communicate their views and opinions on the firm’s operations to the top management. Subsequently, the employees develop a sense of belonging. Another aspect that the firm has incorporated in its transformational leadership efforts entails teamwork. This concept has enabled Cisco Systems to nurture a strong work environment due to the synergy that arises from the cross-functional teams.

The transformational leadership approach has enabled the firm to deal with conflicts that arise in the course of undertaking different operational activities. Cisco ensures that conflicts are resolved amicably through mediation. The team leaders act as the mediator in the event of conflicts. Consequently, the team leaders are in a position to restore a collaborative working environment.

Conclusion and recommendations

The above analysis shows that the Cisco Systems’ success over the years has arisen from the integration of effective strategic management practices. One of the organisational concepts that the firm appreciates focuses on the development of competitive advantage through the formation of mergers and acquisitions. Despite the high number of documented cases of failure in merger and acquisitions, Cisco Systems has employed the practice continuously as one of the sources of competitive advantage.

Its success in implementing the acquisitions is associated with the integration of effective organisational culture and cultural management practices. One of the cultural management practices that the firm has entrenched entails cultural integration. The firm undertakes extensive cultural due diligence in an effort to understand and harmonise the prevailing cultural differences.

Moreover, the integration of the Hofstede cultural theory has played a remarkable role in improving the firm’s effectiveness in managing the cultural differences between the firm and firm being acquired. The theory has enabled the firm to appreciate cultural differences as a source of competitive advantage. Additionally, the firm appreciates diversity as a fundamental organisational asset. Through this approach, the firm has been in a position to sustain an optimal market position in the global ICT industry by improving its ability to attract and retain an effective and efficient human capital, hence improving its competitiveness.

The Cisco Systems’ excellence over the years has also arisen from the integration of effective reward management practices. The reward system is comprised of both monetary and non-monetary rewards. The firm’s reward system contributes to the improvement in the level of job satisfaction in the workforce. The reward system is founded on the concepts of fairness and equity. Moreover, the system provides employees with an opportunity to progress through their desired career path in the ICT industry.

The firm’s excellence over the years has arisen from the integration of effective leadership practices. By adopting transformational leadership, Cisco Systems has developed and sustained a high degree of employee engagement and involvement. The transformational leadership has enabled the firm to incorporate employees in the decision-making process, hence improving their level of identification towards the firm. Furthermore, the transformational leadership style has enabled the company to be effective in resolving conflicts that arise in the workplace. The Cisco Systems’ adoption of the two-way communication approach has also played an essential role in improving its capacity to deal with emerging issues in the workplace, hence sustaining its positive performance.

In order to sustain its positive performance, Cisco Systems should take into account the following aspects.

  1. The firm should evaluate the effectiveness of its strategic management practices continuously in order to determine their effectiveness in improving the organisation’s overall performance. One of the areas that the firm should focus on relates to job satisfaction. For example, the firm should undertake job evaluations in order to determine the extent to which the various job roles add value to both the employee and the organisation. The findings of the review should form the basis for making the necessary changes such as job redesigning.
  2. The firm should consider strengthening its organisational culture. This goal can be achieved by promoting the concepts of leadership, teamwork, and effective communication. These management aspects will strengthen the degree of organisational identification within the workforce.
  3. The firm should review continuously the effectiveness of its strategic management practices such as the acquisition strategy. The findings of the review will allow the organisation to determine the contribution of the strategy to its competitive advantage, hence the need for change.

Works Cited

Badrtalei, John, and Daniel Bates. “Effect of organisational cultures on mergers and acquisitions: The case of DaimlerChrysler.” International Journal of Management 24.3 (2007), 303–317. Print.

Cisco: Acquisitions summary 2015. Web.

Frensch, Florian. The social side of mergers and acquisitions; cooperation relationship, New York: Springer, 2008. Print.

Hofstede, Geert. Culture’s consequences: Comparing values, behaviours, institutions, and organisations across nations, Thousand Oaks: Sage, 2001. Print.

Gitelson, George, John Bing, and Lawrence Laroche. The impact of culture on mergers and acquisitions, New York: ITAP International Incorporation, 2004. Print.

Schuler, Randall, Susan Jackson, and Yadong Luo. Managing human resources in cross border alliances, New York: Routledge, 2004. Print.

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