The year-end layoffs that Cisco confirmed last week should not have shocked anyone.
Although the layoff will be big, 8% of the workforce or 6,000 people, this was the fourth year in a row that Cisco ended its fiscal year by telling employees to watch for pink slips.
When asked by an employee during an internal town hall meeting if year-end layoffs have become the "new normal" for Cisco, COO Gary Moore said he hoped not. The audio version of that meeting was posted online by Cisco blogger Brad Reese.
Cisco's senior leaders stressed in that meeting that Cisco wasn't trimming its overall headcount or expenses. Instead it was shifting employees from declining areas of the business to growth areas.
But Moore wants managers of those declining units to do a better job of trimming staff all year round to "make room" for the employees Cisco wants to add, instead of forcing top executives to announce another year-end layoff. He said:
This is the fourth [restructuring] in four years. ... We constrained [hiring] requisitions for anyone listing [a new job]. As a leader, they knew they were constrained. We were very careful about where we added. Some leaders did a better job than others in terms of hiring and adjusting their expectations. We saw our revenue in the first half. We were very open with every employee about that. ... We’ve invested 2,000 people last year just in cloud. One of our growth areas. We hired 1,300 people through acquisitions and 25% of all people we hired were university hires [new college grads]. We need to as leaders see that and make room, not in a yearly, annual restructuring. It’s just a wrong way to do it.
It seems like one way that Cisco might do that is by using a "stack ranking" process.
Stack ranking is a controversial employee evaluation system where employees are pitted against each other to rate comparative best and worst performers. Microsoft famously used it until recently. But it wasn't the only company that did so.
Cisco recently identified the "bottom 15%" of its employees and the top 2%, head of HR Fran Katsoudas said during the meeting.
"This is something we'll do on a very regular basis," she said.
The bottom 15% would not automatically be cut in the layoff, she said because layoffs will not be across the board but will be concentrated in underperforming business units.
Here's the rest of what we know about the layoff and workforce plans:
- Senior management was vague as to which business units would be targeted. We do know that the worst performing unit was Service Provider, which sells networking equipment to telecom, Internet and cloud providers. It declined 11% in the year. Also, the unit that sells gear to the government experienced no growth either.
- Cisco will be hiring like mad, too. Execs talked a lot about hiring for growth areas including software, security, Internet of Things, cloud and data center. The Commercial business unit, which sells much of these wares, was called out specifically as a unit that will be hiring, not letting people go.
- Despite the hiring, up to 6,000 people will be let go, Moore confirmed. "We have to bring in new talent where we don’t have the experience," Chambers said, naming software as an example. Plus the company needs people who speak the language in the emerging markets it wants to staff, Moore said.
- Cisco is not accepting volunteers for the layoff, Katsoudas said.
- Salespeople could be targeted and are being retrained. Cisco wants them selling packages of hardware and software (or "solutions" to use the jargon), not just individual products.
- Employees will be getting 89% of their bonuses, and that's good news. At the mid-year point, Cisco told employees to expect 50-75% of their maximum bonuses. (Blogger Reese posted the full memo on this.)
- Top performing employees can expect raises but not everyone else, Moore said on the call. "I don’t want everyone to believe [raises] will be so broad based that everyone will get a raise. You may be one of the people that doesn’t get one."
- Mid-management will also be targeted for layoffs but not as heavily as last year. Moore explained that last year's layoff "took out 21% of VP-and-above population." Over the year, Cisco added back 29 VP-and-above managers mostly through acquisitions, as the company limited middle-management promotions. "We’re not as top heavy as we were. There will be VPs-and-above that are part of this [layoff]." But he said Cisco is not going to single out middle management for particularly heavy cuts.
Cisco expects the layoffs to cost up to $700 million. Employees can expect a similar package to the ones given to folks in previous years. Cisco will also pay according to tenure.
Cisco PR declined to comment for this story.
