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“Shaking S--t up” form. “We had impacted a lot of people — On Election Day last November, Martinez it was not an easy thing,” Martinez said. informed Cisco employees via email that “I lost a lot of sleep over it, believe me.” layoffs were in the works, delivering the biggest blow of a months-long restruc- A culture reset turing that shifted teams left and right. By the time Cisco closes out fiscal 2019 Nearly 500 of its more than 14,000 in July, it will have racked up $1.6 billion employees were laid off. in layoffs costs and other restructuring Hundreds more in other locations from expenses. “Generous” severance packag- its total 74,200 workforce also lost their es for full-time employees included up jobs, although Cisco did not provide to five months of pay, according to two specifics. Plus, more than 10 employee former employees. groups merged into the new “Customer But layoffs are only one part of Cisco’s Experience,” or CX, group. reorganization. The company has made The change Martinez is directing has some key acquisitions — seven alone been three years in the making, ever since PAUL SAKUMA in 2018, including password authenti- Robbins announced Cisco would change cation firm Duo Security for $2.4 bil- its business model after he became CEO lion, fabless semiconductor company in 2015. The next year, 5,500 workers Luxtera for $660 million and business were laid off, though Cisco’s workforce intelligence startup Accompany for $270 had returned to its pre-Robbins levels. We are aggressively million. “She has been putting together a strat- Beyond the jobs lost through layoffs egy for how we need to be structured for transitioning to or gained through acquisitions, Cisco’s the future ... it’s an unfortunate step that software models. … senior executives also have had to juggle we needed to take in order to expedi- another complication: how to retain the tiously get to where we need to be rel- This is going to be a people it really wants to keep. ative to dealing with the renewals and critical, critical part “The bigger issue isn’t necessarily get- the lifecycle that our customers are going ting the talent, it’s more about retain- to want us to drive with them,” Robbins of our success ing former engineers and executives said in a November earnings call. in the future.” from those companies it’s acquired over That shift came to a head in the second multiple years,” said James Fish, an ana- half of 2018, when Martinez conducted a CHUCK ROBBINS, lyst with Piper Jaffray who covers Cis- top-to-bottom restructuring that result- Cisco CEO and chairman, co. “Over the last year or so, especially ed in the turnover of 20 percent of Cis- speaking at the company’s on the security side, you’ve seen some annual shareholder meeting last co’s senior leadership, including Techni- December executives (who are) part of those busi- cal Services head Joe Pinto, who worked nesses leave.” at Cisco for 27 years. Among those who have left in recent RRBY THE NUMBERS “We realized that we had all these months include David Ulevitch, the CEO teams that were touching the custom- of OpenDNS, a company Cisco acquired er completely individually,” Martinez TECH GIANT PRIMER: in 2015, and Martin Roesch, founder said. “When I go to a customer, I have to and CTO of Cisco-acquired Sourcefire, show up with five or six different people GET TO KNOW CISCO who left the company after five years as and they all were touching the customer chief architect of the company’s Security individually, with no coordination. That Business Group. was a big catalyst for us to say, ‘OK, we 1984 Perhaps one of the biggest individ- do need to change how we work with a Year began when ual exits came when Eric , a for- Leonard Bosack and Sandra Lerner customer and for that we have to actually launched the company to connect mer vice president of engineering, left change the structure.’” computer networks. Cisco in 2011, four years before Robbins Martinez enacted a new “custom- became CEO. Yuan said that if Cisco er obsession” mantra, which sources 20 years had been more nimble, he would have say directs workers to jump higher and Length of time John Chambers stayed. Instead, he created a compet- further for customers’ needs with the served as CEO, until 2015 when itor to Cisco’s WebEx online meeting understanding that under the new busi- Chuck Robbins got the job. platform. That business is Video ness philosophy, a lost customer will be Communications, a San Jose-based uni- gone for years at a time. 7 cents corn that’s laying the groundwork to go “Maria’s shaking s--t up,” said one Price of a share of Cisco stock public. Cisco project manager who, like several when it went public. It’s now “After we (WebEx) got acquired by employees the Business Journal spoke to, trading around $51 a share. Cisco, I said, ‘OK, over the next several asked to remain anonymous. “She’s been years, I will grow WebEx to a billion-dol- cutting out anything not contributing — $49.3 billion lar-plus (revenue), and then I’m going to cutting the dead weight.” Cisco’s revenue in 2018, a year leave to do something else,” Yuan said. Customers are “asking for more the company transitioned from “But after a while, I did not see a sin- than before,” said an operations project focusing on hardware to focusing gle happy customer anymore and Cis- manager. “We’re supposed to tell them, on software and subscriptions. co was unwilling to change, so I had to ‘We’re here for your needs and we’re not leave early and build something from going to fit a circle into a square, we’re $6.1 billion the ground up.” going make a circle into a circle for you.’” Deferred revenue from recurring Martinez is mindful about such depar- But the changes haven’t sat well with software and subscriptions in tures, saying that the company is trying everyone: “By December, my team end- 2018. That’s almost double the to “modernize” the culture in terms of $3.3 billion Cisco generated from ed up splitting up and I had three new software and subscriptions in 2016, speed, internal communications and bosses in the span of three months,” said the first year it started breaking out employee engagement — the latter of another employee. “Sadly, I think all of the category. which she called “critical” to Cisco being it combined has lowered morale as it has successful in its transformation. shown us we could be next on the chop- 74,200 “We have to evolve our culture to be ping block.” Number of global Cisco employees the culture that is needed for the digi- The turnover “has rattled some folks,” in 2018, with 14,120 of them tal future that we’re trying to aspire to,” one Cisco executive said. working in Silicon Valley, making she said. Martinez acknowledged the trans- it the region’s third-largest tech formation “touches everyone” in some employer. CONTINUED ON PAGE 22 COURTESY IMAGE