HIRING FOR EXCELLENCE AT CISCO SYSTEMS

“Our philosophy is very simple – if you get the best people in the industry to fit into your culture and you
motivate them properly, then you’re going to be an industry leader.”

- John Chambers, CEO, Cisco Systems, in September 1997.

CISCO
Cisco Systems Inc. was founded in 1984 by Leonard Bosack and Sandy Lerner, a husband-and-
wife team working in computer operations at Stanford University. The invented a technology to
link the separate computer systems at Stanford. Cisco’s products enable computers to
communicate with each other, offering customers end-to-end network solutions. Cisco has been
at the heart of many historic changes in technology. The company helped catalyze the industry’s
move toward internet protocols and is now at the centre of fundamental changes in the way the
world communicates; it is worldwide leader in networking for the internet. It is leading the
transition to a network-centric technology environment. Almost 14 billion devices will be
connected to the internet by 2010. As the network evolves into a platform, users will be able to
communicate from any device and in whatever mode they choose.

As $12 billion high-technology Company, Cisco went public in 1990. Its revenue growth has
been nearly hundredfold in seven years. It is the fastest-growing company of its size in history,
faster even than Microsoft, with a market capitalization of over $200 billion. Cisco competes in
markets where hardware is obsolete in 18 months and software in six. Cisco’s stock has risen
roughly 50,000 percent during the decade between 1990 and 2000. In fiscal 2005, Cisco
achieved record performance across almost all financial and operational metrics and generated
$7.6 billion in cash. The annualized revenue per employee, a measure of productivity, was
approximately $7, 00,000 in 2002, up from approximately $4, 50,000 in fiscal 2001. This is
significant given that the firm also increased headcount in fiscal 2005 by 12 percent, primarily in
sales. Cisco is one of America’s great success stories.

‘The Cisco City’ in San Jose emerged as one of the biggest Internet economy industrial parks
with around 13,000 employees spread over 40 buildings in the campus. Cisco believed that in the
ever-changing environment of the IT industry to remain leader it required the best people in the
industry.
CISCO’S LEADERSHIP, CULTURE AND VALUES
A John chamber, Cisco’s CEO, has an energetic, self-effacing manner; ‘my definition of
leadership is, don’t ask someone else to do something you wouldn’t do’. John Chambers’
kindness is never mistaken for weakness. Three things that can get someone fired at Cisco are

1) not producing business results;

2) not recruiting and developing the right people; and

3) not being a team player.

Cisco defines its mission to ‘be the supplier of choice by leading all competitors in customer
satisfaction, product leadership, market share, and profitability’.

Its business purpose is ‘to shape the future of global networking by creating unprecedented
opportunities and value for our customers, employees, partners, and investors’. Cisco’s culture
was founded on the principles of open communication, empowerment, trust, integrity, and giving
back to the community. These same values thrive at Cisco today.

Cisco espouses five core values:

1) dedication to customer success;

2) innovation and learning;

3) partnerships;

4) teamwork; and

5) doing more with less.

Each of these values is continually articulated and reinforced in the mission statement, current
initiatives, policies and practices, and culture of the company. Not many companies take their
culture as seriously as Cisco in managing the business and in hiring. Ross Fowler faced 18
interviews before he was hired as managing director, Australia. Many of these interviews were
conducted to ensuring that the culture and values fit between Cisco and Fowler was good. Cisco
sees it as a two-way process; both company and candidate are encouraged to assess each other.
According to Fowler, the key elements of Cisco’s culture are having stretch goals, fun,
teamwork, the ability to drive change, and giving back to the community. Cisco values the
ability to sense when the market has moved and the ability to adapt accordingly very highly. The
single most important value at Cisco is competence – one has to be good at what one does – and
is enforced more by peer pressure than by management. If one cannot do one’s work, one get
pushed out fairly quickly. Another important value is frugality; all Cisco employees, from the
top down, always fly economy class. This is to ensure that the value is delivered to the
shareholder. However, frugality at Cisco is not about being cheap, but about getting the ‘best
value’.

Cisco’s values are considered very important for continued success. Therefore, its HR group
ensures that the culture is aligned with the business strategy and continually reinforced. Talk
about the culture is backed up by actions. A range of mechanisms is used to reinforce values.
‘All hands’ meetings are held quarterly to communicate the company values and to ensure that
everyone feels included. The culture and values are also emphasized is communications through
the company intranet. Important events are delivered to the desk top computers of employees.
Attempts are made to create an exciting environment, characterized by high levels of motivation,
empowerment, and recognition. Cisco has parties, including a Christmas bash with 100 food
stations and entertainment. They also provide other employee services, such as onsite stores, dry
cleaning services, fitness centers, ATMs, automobile oil changes, and mobile dental clinics with
appointments made via e-mail.

DECENTRALIZATION IS ENCOURAGED
Employees do not have to take permission on every little thing. At Cisco, senior management
gets cubicles in the centre of the fluorescent-lit space while employees get the windows. All
offices are of the same size. Consistent with its emphasis on people management, the company
was ranked 24th on Fortune’s list of the ‘100 Best companies to Work for in America’ in 1999,
and was ranked fourth on Fortune’s list of America’s most admired companies in 2000.

PEOPLE AT CISCO
In 1999, the company had more than 26,000 employees operating in over 54 countries; in 2005,
38,056; and today, more than 47,000. Women who were vice presidents or even more senior
numbered 33 at last count. Cisco has a voluntary attrition rate among employees of about 8%,
much lower than the average 30% employee turnover at Silicon Valley. Working with Cisco is
an experience in itself. Its employees believe that ‘It’s addictive to work for Cisco. It can take
over your life if you let it’. Cisco employees are always smiling, because it is a great place to
work and they are all getting rich from stock options.

Diversity Initiatives at Cisco

Cisco is dedicated to connecting business, people, and communities. As a leading global
company, it recognizes that inclusion and diversity of thought is a business imperative.
Achieving business objectives is seen as directly related to the advantage of having an inclusive
workforce and a diverse group of suppliers. Employees at Cisco come from different cultures
and geographies, with a variety of viewpoints and styles of interacting, unique backgrounds,
experiences, and values. Cisco believes that such a diverse workforce gives the company access
to new ideas, promotes better decision-making, and helps the firm understand the needs of the
customers better. A workforce of inclusion also allows the firm to be well-positioned to
anticipate important market changes, and be more responsive to customer needs. Cisco’s Equal
Opportunities Policy commits the company to recruit, promote, re-assign, and train people,
regardless of race, color, religion, gender, sexual orientation, age, disability, or nationality.

Cisco boasts of a global workforce. In 2005, 71% percent of the employees at Cisco were based
in the US, 15% in Europe and Middle East, 9% in the Asia Pacific region, 2% in Japan, and 3%
in central and South America. To promote and foster an environment that supports diversity,
Cisco encourages networks that enable employees to connect with other employees who share
cultures, identities, or career goals.

EMPLOYEE COMPENSATION AT CISCO

Cisco Systems: Employee Compensation Data

Company reviews of Employee Salaries at Cisco Systems provide a salary comparison between
various positions, including software engineers. Software engineers at Cisco earn a competitive
median salary of $82,775. In comparison, senior software engineers at Cisco have a median
salary of $104,633, an increase of about $29,000 for those promoted to the senior level. Another
company in the same industry, Sun Microsystems, has similar employee salaries for software
engineers. At Sun Microsystems, software engineers have a median salary of $77,097, about
$5,000 less than the median salary at Cisco. In contrast, this employee salary data also shows
that senior software engineers at Sun Microsystems have a median salary of $116,099,
dramatically higher than median salary at Cisco.

Employee Compensation by Years of Experience can also be relevant to company salary

research. Cisco employees with less than one year of experience can expect a median salary of
$63,202. After twenty years of experience, this median salary increases to $119,843. Looking at
the Company Data for Sun Microsystems, you can see that median salaries there are higher than
those at Cisco. Recent college graduates can expect a median salary of $68,467, about $5,000
higher than the median entry-level salary at Cisco. Employees at Sun Microsystems who have at
least twenty years of experience earn a median salary of $120,641. Other company data on
Median Bonuses at Cisco shows that the median bonus for senior level positions is about
$12,000. This figure can vary depending on experience, from $5,000 for entry-level employees
to $15,000 for more experienced workers.

RECRUITMENT AND SELECTION

Effective recruiting can be a powerful strategic weapon. Developing innovative sources to find
the best people is just as important as the selection process. The challenge is not only hiring the
right people, but to find them before the competitor. Cisco is known for its non-traditional
recruiting methods. To attract the highest caliber people, Cisco’s recruiting team targets what
they call passive job seekers – people who are happy and successful where they are – because the
most sought-after employees are not very accessible. Cisco sources revealed that the company
had a policy of attracting the ‘top 10-15%’ people in the networking industry. It believed that if it
could get the best people in the industry and retain them, it would remain the industry leader.
According to Cisco’s vision statement, “Attracting, growing and retaining great talent is critical
to sustaining Cisco’s competitive advantage.” Thus effective recruitment was used as a powerful
strategic weapon by the company. As Barbara Beck, vice president for human resources says
they ‘usually are not cruising through the “want ads”.

For the past several years, Cisco has averaged over 1,000 new hires every three months, an
achievement by any standard, since Silicon Valley is one of the tightest job markets in the US.
The recruiting team at Cisco first identified the kind of people they needed to hire, their ideal
recruitment targets. They then held focus groups with the ideal recruitment targets, such as
senior engineers and marketing professionals from competitors. Through these focus groups, the
recruiting team found out where these people spent their time and how they hunted jobs. The
team then innovated a hiring process that reached these potential applicants through a variety of
routes not usually used in recruiting, such as infiltrating art fairs and microbrewery festivals and
other places they frequented. Silicon Valley’s annual home and garden show has been a
particularly fruitful venue. The first-time homebuyers that the event attracts also tend to be
young achievers at successful high-technology companies. Cisco recruiters work the crowd,
collecting business cards from prospects, and speaking with them informally about their careers.

Cisco continues to place newspaper help-wanted advertisements, but rather than listing specific
job openings, the advertisements feature its internet address and an invitation to apply. Beck
notes that Cisco is a high-technology company and ‘if you don’t leverage the technology, you
won’t be able to leverage HR’s capabilities’. On the internet, it can post hundreds of job
openings in expensively and lots of information about each one. The website has a built-in
monitor that measures important aspects of its recruiting programmes, such as the number of
visits to its site. Since most prospects visit the website from their workplaces, the company can
even tell where they work.

Besides this, Beck also notes, that the top 10% of the highest-performing employees are not
typically found in the first round of layoffs from other companies. Moreover, the top performers
are not likely to be usually cruising through the ‘want ads’. Therefore, the strategy for recruiting
the high performers relies heavily on the internet.

E-recruiting at Cisco
The company’s website (http://www.cisco.com/jobs) has become a turbo-charged recruiting tool.
An individual looking for a job at Cisco can search by keyword to match one’s skills with the job
openings. One can also file a resume or create one online using Cisco’s resume builder. By
monitoring the website, the recruitment team realized that their jobs page recorded over 500,000
hits per month, with the heaviest load occurring between 10 am and 2 pm. This meant that
people were looking for jobs on company time. To help facilitate this practice, Cisco is
developing software to make life easy for stealthy job-seekers. It will let users click on pull-
down menus and profile themselves in 10 minutes. If the boss walks by, users can hit a button
that activates a screen disguise, changing it to ‘Gift List for Boss and Workmates’ or ‘Seven
Successful Habits of a Great Employee’. The website has caused 30-50% of all resumes to be
submitted electronically and routed automatically into a database that can be accessed
immediately.

The website actively targets passive job seekers by making it fun and easy to match personal
skills and interests to job openings. Through focus groups, Cisco sought to learn how happily
employed people could be enticed to interview for a job. The firm goes beyond technology.
Focus group results showed that referrals from friends were a powerful factor in the job search
process. The response ‘I’d do it if a friend told me he had a better opportunity at Cisco than I
have at my current employer’ caused Cisco than I have at my current employer’ caused Cisco to
launch an initiative-the ‘friends’ programme-to help prospects make a friend at Cisco who could
describe what it was like to work there. The Friends programme on Cisco’s website involves
potential recruits by allowing them to pair up with a volunteer ‘friend’ from within the company.
Cisco establishes connection with a potential employee on their website. Their ‘Make Friends @
Cisco’ button begins the process of establishing an ‘e-mail pal’. The objective is to connect
potential recruits to real people in the company. The recruits are then swept into the recruiting
pipeline. Cisco employees are matched with people who have approached the company as
prospects and who have approached the company as prospects and who have similar
backgrounds and skills. They then call these prospects, or ‘visitors’ as they are called at Cisco,
to tell them in their own words about life at the company. The new friend teaches the visitor
about Cisco, introduces the visitor to the right people, and leads the visitor through the hiring
process.

It works like this. A designer of printed circuit boards clicked on the ‘Make Friends @ Cisco’
button at the website. She received a call from a printed circuit board designer at Cisco, the
volunteer friend, who talked about life at Cisco. The volunteer referred her to his boss and a few
days later she visited Cisco. After five interviews, she accepted a job, even though she had been
with her earlier firm 11 years and was not really looking to leave. Having a ‘friend’ made the
difference. When a recruit is invited to visit the company, the volunteer friend/host may pick the
recruit up at the airport, show them around the area, escort them through the interview day, and
generally be the ‘at-ease-link’ in the recruitment process. According to Fortune, 1,000 Cisco
employees have volunteered for the programme, enticed by a generous referral fee and a lottery
ticket for a free trip to Hawaii for each reference hired. Referees are eligible for other prizes
such as stainless steel commuter mugs and athletic bags. Though the programme is advertised
only in local movie theatres, Cisco receives 100-150 requests each week from applicants wishing
to be introduced to a friend at Cisco. This source provides about a third of Cisco’s new hires.

It is believed that about 60% of the people who join Cisco do so because they have a friend there.
Every time a referral is hired, the Cisco employee gets $500-2,000. Referral rates at Cisco are
twice the industry norm. Cisco uses internal communication tools such as newsletters and the
intranet to update employees about the referral programme. The real power of Cisco’s website is
not that it helps active job seekers move more quickly; it is that the website sells the company to
people who are happy and satisfied in their current jobs and have never thought about working at
Cisco. The firm targets the passive job-seeker.

Cisco is also making their managers’ time-consuming recruiting process easier by hiring in-
house headhunters. Since hiring a new salesperson six months earlier can mean several million
dollars in incremental revenue, expediting the hiring process far outweighs the expense of the
additional staff. Based on performance reviews conducted three months after employees start
work, and a continued low turnover rate, the networking giant believes its talent pool remains
undiluted. Chambers says, ‘Our philosophy is very simple-if you get the best people in the
industry to fit into your culture and you motivate them properly, then you are going to be an
industry leader’.

REAPING THE BENEFITS

Cisco believed that its new recruitment philosophy should also be made a part of the overall
corporate culture. By late 1999, Cisco’s job page was recording around 500,000 hits per month.
The company generated a stream of reports about who visited the site and fine-tuned its strategy
accordingly. By the time the new recruitment initiatives were established, Cisco, which was
hiring approximately 8,000 people a year, received 81% of the resumes were from the web,
eventually 66% of the new recruitments were from the candidates who had sent their resumes
through the Cisco website. It was also reported that about 45% of company’s new recruits came
from the Amazing people program.

Cisco’s hiring cycle also came down to 45 days from 68 days. The recruitment costs in this
‘direct mode’ amounted to $6,556 per capita, which was around 40% below the industry average.
Referral rates at Cisco were twice the industry norm and that created a performance edge as most
recruits were qualified employees with vast experience. By 2001, referrals and the friends
program accounted for 50-60% of new employees. Most importantly, the retention rate at the
company had also increased. The employee turnover figure was 6.3% in 1999, a very low rate
compared to the industry norms, which varied from 18-28%.
THE NEED FOR A NEW APPROACH TOWARD RECRUITMENT
Traditional sources of competitive advantage are believed to have become less important for
companies in the internet era. Analysts claim that the primary source of competitive advantages
in the infotech industry are a firm’s human resources, which would be critical for its success in
the long term. Thus, real challenge faced by the companies was in hiring and developing the best
talent. This is all the more crucial for companies in western countries, which face the problems
of an aging workforce, shrinking pool of younger workers, a mismatch between the
technological skill in demand and supply of those skills.

During the IT industry boom, the demand for ‘quality employees’ increased substantially.
However, the labour markets were not able to satisfy these demands. Employers, particulary,
faced two trends; the labour force growth rate was declining from an annual rate of 2% in the
early 1990s to a rate of 1.3% in the late 1990s; the quality of labour had also declined over the
years. Surveys of CEOs and Senior HR managers in the US revealed that as many as 35-50% of
job applicants did not have the basic skills. The lack of skilled labour produced structural
unemployment. Thus, the low labour force growth rate combined with skill supply/demand
mismatch made companies face constant labour shortages. This meant htat they needed to
aggressively target qualified personnel. Due to the above reasons, companies turned to novel and
creative recruitment solutions which led to wider use of e-recruitment.

E-recruitment is not one specific technique. It consists of various tools and there are many ways
to use them. Commercial sites, specialized job sites, chat rooms or newsgroups and company
websites have emerged as the major techniques. Job sites are commercial ‘all-purpose’ websites
like HotJobs.com and naukri.com. according to reports, there are roughly around 2,500 such
sites, with two million or more resumes on file. Services offered by most of sites are free.
Newsgroups and chat rooms generally allow open postings that include resumes and job
announcements. They have a limited reach due to lack of uniformity in postings and the
cumbersome search process. However, they target specific market segments.

Analysts opine that tools like e-recruitment, are necessary to meet a company’s staffing
objectives. The distribution and collection of the computerized resume databases reduces the
time and cost compared to traditional recruitment processes. Staffing costs are also less, mainly
because it is a paperless process. The specialized tracking software allows applicants to match
specific job criteria. Some analysts have pointed out that though e-recruiting offered many
advantages, it also exposed companies to several challenges to the recruitment process.