Pop quiz: You’re the CEO of a major multinational company. You just completed a fiscal year in which you made $10 billion in profit. You managed to buy back nearly $3 billion in stock and paid out more than that in dividends as well. Profits were up 18% in the most recent quarter and you see revenue rising by a small amount in the next 3 months. It’s a bit less than you had hoped, but you’re still telling Wall Street you’ll be within one penny per share of where they expected on earnings and within 2% of the revenue target. Oh, and you still have $50 billion in cash on the balance sheet. So what do you do? If you answered, declare victory, double down on your prior-stated commitments to your people and promise to pursue new growth opportunities with your war chest, you wouldn’t be Cisco boss John Chambers. Instead, he’s laying off 5% of Cisco’s workforce or 4000 people.
Stories like this puzzle me now whereas they once outraged me. Either I'm getting older and wiser or their frequency leaves me increasingly numb. Maybe, I won't notice them five years from now. I hope not.
While I love the tone of the above paragraph and consider it fair, I wondered what was the rest of the story. Why did a very smart man, Cisco's CEO John Chambers, choose to not declare victory, double down on your prior-stated commitments to your people and promise to pursue new growth opportunities with your war chest? You know?
I'm willing to bet no one at Cisco knows either. Certainly none of the 4000 people being laid off know why he chose not to reinvest in their roles or new roles in new growth opportunities.
For a company built on handling data and information, making it possible to share information across a wide range of networks, etc, etc, it's an interesting anomaly in the CEO's decision to not share that information.
Maybe, he's tired. Maybe, he's earned his stock options and 4000 employees fewer sound like a good idea. Maybe, he's seen the future and he's bracing for it but can't tell his employees or the US economy what's arond the next corner, as in there are no new growth opportunities.
But nature hates a vaccuum no worse than markets and social media. I thought through this news and wondered what if he'd had an open conversation with his employees outlining some of the coming challenges.
Describe the scenarios he sees being played out for the company's future.
Share the solutions being discussed including the 5% layoff solution (always the easiest, most self-serving.
Challenge the employees to find solutions to generate the same amount of cash-flows that would be generated with the layoffs.
Share the ideas throughout the company.
Take cash-flows that exceed this threshold and put half of it in a fund for training/retraining and share the rest with the employees on a pro-rated basis based on their salaries
Continue the program with the bonus threshold being based on payroll costs not exceeding x percent of Gross Revenues.
While this sounds pollyannish, we did this at a company where I was CEO. We needed to find sources of cash-flow to replace that lost as prices dropped by over 70% and marketing in a commodity hell became increasingly expensive and unproductive. I shared the need, the idea and my idea of how to handle the bonus: a party. (I know, I know, wth was I thinking.) And they said said no they'd rather have it as a bonus. So, we did. And the ideas flowed and generated the results we wanted.
Granted this company was just a wee bit smaller than Cisco. On the other hand, the source of ideas were a wee bit fewer, too.
Moral of the story: Next time you're facing a challenge, ask your employees for solutions. Recognize them with rewards that are meaningful for them. I think you'll like the result.