Cisco Systems:Acquiring and Retaining Talent in Hypercompetitive Markets [*]

By O'Reilly Iii, Charles A.; Pfeffer, Jeffrey | Human Resource Planning, September 2000 | Go to article overview

Cisco Systems:Acquiring and Retaining Talent in Hypercompetitive Markets [*]


O'Reilly Iii, Charles A., Pfeffer, Jeffrey, Human Resource Planning


As remarkable as Southwest Airlines is, some people will remain cynical about a company's ability to get extraordinary performance from ordinary people. After all, they will say, this is the age of the Internet, of high technology, of blinding speed and revolutionary change. In this world, the argument goes, only organizations with extraordinary talent are likely to prosper--and these people don't come cheap. As described by the magazine Fast Company, this new marketplace is also a "free agent nation," with workers pursuing their own careers and owing loyalty only to "the brand of you." [1] While not trivializing the success of Southwest, the newer, hipper manager would note that running an airline is not exactly high tech. Sure, there are technical aspects to it, but fundamentally running an airline today is pretty much like it was 30 years ago. And whatever changes have occurred (for instance, the use of yield management software to help maximize revenues per flight or the ability to make reservations over the Web) have occurred comparatively slowly, giving management plenty of time to adjust. So, the fact that Southwest achieves its competitive success through clear values and tight alignment and consistency between its strategy and its people practices is interesting, but possibly not relevant for today's fast-paced world of high technology.

A more forceful version of this argument might even claim that Southwest's quaint ideas about leveraging people could be a disadvantage in today's hypercompetitive market. "Get real," the new paradigm manager might say, "we're competing on Internet time!" Worrying about soft issues like values and putting people first can divert attention from the marketplace and technology. Thinking about people and not business results can easily result in a firm missing the next technological wave or, worse, being stuck with people who don't have what it takes--the losers who aren't able to find a great new job elsewhere. What matters are results-- and this means doing whatever it takes to attract and retain the brightest minds for as long as the project lasts, even if it's as long as a year or two. [2]

For this reason, we offer you another mystery: Cisco Systems, a company that has succeeded in this new high-tech world by doing things that are reminiscent of Southwest's practices, even as they are different in some of the specifics. A reporter from The Wall Street Journal noted that "Cisco is among the rarest of Wall Street birds: an internet-driven company with a proven business plan, actual products and ample profits." [3] To many people, Cisco is a $12 billion high-technology stealth company: 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. It operates in the heart of Silicon Valley, where employee turnover averages almost 30 percent, and yet the turnover at Cisco is less than 10 percent. Its CEO, John Chambers, gets less attention than that paid to bigger stars of the high-tech world such as Bill Gates, Andy Grove, Larry Ellison, or eve n Lew Platt of Hewlett-Packard. But Cisco's success has dazzled Wall Street. If you had the prescience to invest $1,000 in Cisco stock in 1990, you'd now be walking around with roughly $100,000. Put another way, Cisco's stock has risen roughly 50,000 percent during the decade (adjusted for nine stock splits). [4]

How did this company, with its unglamorous origin in making routers for computer networks, become the worldwide leader in networking for the Internet--a company referred to in a recent article as "the Godzilla of datacom"? [5] This is a company that has repeatedly reinvented itself by focusing on different technologies, products, and markets. The first mystery is figuring out what Cisco has that others don't, how it has been able to be so flexible and fast, and what the company's sustainable competitive advantage is and where it comes from. …

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