Harvard Case - Cisco Business Councils (2007): Unifying a Functional Enterprise with an Internal Governance System
"Cisco Business Councils (2007): Unifying a Functional Enterprise with an Internal Governance System" Harvard business case study is written by Ranjay Gulati. It deals with the challenges in the field of Organizational Behavior. The case study is 26 page(s) long and it was first published on : Jan 6, 2009
At Fern Fort University, we recommend Cisco implement a comprehensive, multi-pronged approach to unify its functional enterprise with an internal governance system. This approach should focus on fostering a collaborative culture, empowering cross-functional teams, and establishing clear decision-making processes. This will require a combination of organizational change, leadership development, and strategic communication initiatives.
2. Background
Cisco, a global leader in networking technology, faced a challenge in 2007: its rapid growth and diversification had led to a siloed organizational structure, hindering collaboration and innovation. The company relied heavily on functional departments, creating communication barriers and impeding cross-functional initiatives. John Chambers, Cisco's CEO, recognized this issue and sought to implement a new governance system ' the Business Councils ' to address the problem.
The main protagonists in this case are John Chambers, the CEO, who spearheaded the initiative, and the various executives and managers across different functional departments who were tasked with implementing the new governance system.
3. Analysis of the Case Study
This case study highlights the challenges of managing a large, complex organization and the need for a robust governance system to facilitate collaboration and innovation. We can analyze the case through the lens of organizational behavior, organizational structure, and leadership:
Organizational Behavior:
- Siloed Structure: Cisco's functional structure created silos, hindering communication and collaboration between departments. This led to a lack of shared understanding, duplication of efforts, and limited innovation.
- Power Dynamics: The functional structure fostered a power dynamic where department heads prioritized their own goals, leading to competition and conflict rather than cooperation.
- Lack of Trust: The siloed structure and power dynamics contributed to a lack of trust between departments, hindering effective collaboration.
Organizational Structure:
- Functional Structure: Cisco's functional structure, while efficient in managing specific tasks, impeded cross-functional initiatives and innovation.
- Business Councils: The Business Councils were designed to break down silos and foster collaboration by bringing together representatives from different functional areas. However, the success of this model depended on effective leadership, clear roles and responsibilities, and a culture of collaboration.
Leadership:
- Leadership Styles: John Chambers' vision for a more collaborative and innovative Cisco required a shift in leadership styles. He needed to empower managers to collaborate across departments and encourage a culture of shared responsibility.
- Change Management: Implementing the Business Councils required effective change management strategies to address resistance to change, communicate the vision clearly, and provide support to employees.
4. Recommendations
To address Cisco's challenges, we recommend the following:
1. Foster a Collaborative Culture:
- Leadership Buy-in: John Chambers and other senior executives must actively champion the new governance system and model collaborative behaviors.
- Communication and Transparency: Clearly communicate the benefits of the Business Councils and the need for collaboration. Promote transparency in decision-making and information sharing.
- Team Building: Implement team-building activities and cross-functional workshops to foster trust, communication, and collaboration between departments.
2. Empower Cross-Functional Teams:
- Clear Roles and Responsibilities: Define clear roles and responsibilities for each Business Council member to avoid confusion and conflict.
- Decision-Making Processes: Establish clear decision-making processes within each Business Council, ensuring all relevant stakeholders are involved and have a voice.
- Performance Management: Develop performance metrics that measure the success of the Business Councils and incentivize collaborative behavior.
3. Establish a Strong Internal Governance System:
- Centralized Oversight: Create a central governance body to oversee the Business Councils, ensure alignment with corporate strategy, and address any conflicts or issues.
- Regular Reviews and Feedback: Implement regular reviews of the Business Councils' effectiveness, gathering feedback from members and stakeholders to identify areas for improvement.
- Training and Development: Provide training to Business Council members on effective collaboration, conflict resolution, and decision-making skills.
5. Basis of Recommendations
These recommendations are grounded in the following considerations:
- Core Competencies and Consistency with Mission: The recommendations align with Cisco's mission to be a global leader in networking technology by fostering innovation and collaboration.
- External Customers and Internal Clients: The recommendations aim to improve internal collaboration, which ultimately translates to better customer service and product development.
- Competitors: In a rapidly evolving industry, Cisco needs to be agile and innovative to stay ahead of competitors. A collaborative culture and effective governance system are crucial for achieving this.
- Attractiveness ' Quantitative Measures: While quantifying the impact of cultural change is challenging, the recommendations are expected to lead to increased efficiency, reduced duplication of efforts, and improved product development timelines, ultimately contributing to increased revenue and profitability.
6. Conclusion
Cisco's decision to implement the Business Councils was a bold step towards addressing the challenges of a rapidly growing and diversifying organization. By fostering a collaborative culture, empowering cross-functional teams, and establishing a strong internal governance system, Cisco can effectively leverage its vast resources, accelerate innovation, and maintain its position as a global leader in the technology industry.
7. Discussion
Alternatives Not Selected:
- Retaining the Functional Structure: While this option would maintain existing structures, it would perpetuate the silos and hinder innovation.
- Merging Departments: This approach could lead to significant disruption and resistance, and may not address the underlying issues of collaboration and communication.
Risks and Key Assumptions:
- Resistance to Change: Implementing the Business Councils will require overcoming resistance from employees accustomed to the functional structure.
- Culture Change: Shifting to a collaborative culture requires a significant cultural change, which takes time and effort.
- Leadership Commitment: The success of the initiative depends on the sustained commitment of senior leadership to champion the new governance system.
8. Next Steps
- Pilot Program: Implement a pilot program with a select group of Business Councils to test the model and gather feedback.
- Communication and Training: Develop a comprehensive communication plan to inform employees about the new governance system and provide training on collaboration and teamwork.
- Performance Monitoring: Develop performance metrics to track the effectiveness of the Business Councils and identify areas for improvement.
- Continuous Improvement: Regularly review and adjust the governance system based on feedback and performance data to ensure its effectiveness and sustainability.
By taking these steps, Cisco can successfully implement its new governance system, fostering a collaborative culture, empowering cross-functional teams, and driving innovation for sustainable growth.
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Case Description
In response to the 2001 market downturn, Cisco Systems implemented a major restructuring that transformed the company from a decentralized to centralized organization. While recognizing that a centralized, functional structure was necessary to avoid product and resource redundancies, it also risked making the company less customer-centric. To mitigate this risk, Cisco implemented a cross-functional system of executive-level councils that would bring leaders of different functions together to collaborate and focus on the needs and issues of specific customer groups. Each council employs a "Three-in-a-Box" leadership model consisting of an executive leader from the engineering or technology business unit, a member of the go-to-market team, and an operations resource director. Each council is also accountable to the Operating Committee, which is chaired by CEO John Chambers and determines the long-term corporate strategy and allocation of corporate resources. Many other companies have failed at facilitating collaboration across functions-particularly large organizations-but Cisco's system has been successful because the company remained committed to the system, required a consistent infrastructure while also allowing for flexibility, gave members decision making authority, and used council leaders who thrive in collaborative environments. The success of the council system led to the creation of 20 boards of "sub-councils" in 2007. The boards are charged with driving development efforts and customer reach further into the organization by addressing specific issues too narrow for the councils to address.
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