Cisco To Restructure Up To 2,000 Employees Out Of Jobs. But Just Don't Call Them Layoffs.

Posted by: Peter Burrows on February 4, 2009

On Cisco’s second quarter conference call, CEO John Chambers seemed intent on not doing what nearly every big tech company (except Apple) has done in recent weeks: announce layoffs. But while there has been no across-the-board cut, the company has shed up to 1,000 employees through “realignment and restructuring” efforts over the past six quarters as the company focuses more resources on more promising growth markets. And the company expects 1,500 to 2,000 of its staffers to be similarly dis-employed in this manner in the months ahead.

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I do understand the distinction the company is making: realigning people into the best opportunities and cutting jobs in bad businesses is a constructive exercise that helps achieve something over time, rather than simple cost-cutting. “We think of this as Portfolio Management 101,” says Cisco corporate controller Jonathan Chadwick. “While this is very personal and difficult for the people involved, we’re talking about a few hundred jobs per quarter” out of Cisco’s 67,000 person workforce.

The company says it has realigned $500 million in resources over the past few months, and plans to realign another half billion in the months ahead—impressive speed for a company Cisco’s size (evidence that the council-based management approach Chambers is so proud of really is working, even in tough times when hard decisions are necessary). And Cisco management is clearly not looking to layoffs as the cost-cutting measure of first resort. Chambers says the company has already achieved a one-year goal to cut expenses by $1 billion (though some as a result of those job reductions), after just two quarters. One example: travel-related expenses per employees have dropped more than 50%.

And Chambers, thankfully, didn’t hide behind corporate doublespeak as a way of avoiding the topic of layoffs altogether. In fact, he says there may yet be one—and that if there is, it will be sizeable. He has said many times that the hardest thing he’s had to do in his career was the 18% cut the company had to make in 2001, when it was blind-sided by the Net Bust. But he believes companies can more easily weather a single big cutback than a series of smaller ones. “Our definition of a company wide layoff would most likely be at least 10% of the company. But we are not contemplating a layoff at this time.” Unless sales fall much further than the already yawning 15% decline the company expects this quarter, “We may be able to avoid a large downsizing.”

Still, a net loss of as much as 3,000 jobs sure sounds like a layoff to me. Just consider what Microsoft did a few weeks back. Once you factor people Microsoft plans to hire in the next few years, it’s 5,000 person layoff is a net reduction of just 2,000 to 3,000.

NOTE ON UPDATE OF THE HEADLINE: THe headline was originally “Cisco to restructure 3,000 Employees out of jobs.” I am changing the number to 2,000, after a Cisco spokesperson argued that the 1,000 jobs that may have been cut already shouldn’t be included in the headline given its present tense.

Reader Comments

Jimmy

February 6, 2009 12:18 PM

Hey, like they have John Lennon singing in those Cisco TelePresence ads: It's "only people"!

Mike

February 6, 2009 10:01 PM

How typical... that employers (Cisco or otherwise) spin the word 'layoff' in an attempt to minimize negative impact on the company- as if that's the most important thing, right?

How about looking at this from the perspective of the 1000s of people being laid off... people who might be single income, have families behind them, bills to pay. Feels like a 'layoff' to me, and I'm sure it does to every one of the people/families affected by this.

kiran

February 7, 2009 6:15 PM

Layoff doesnt make sense, Innovation is care of address for cisco. I hope the economic slow donw will end soon and the big gaints like micro soft, cisco, intel, caterpillar....stop and re think on talent and innovation.

yaiche

February 7, 2009 7:32 PM

hello i'm student right now but i worry about this setuation about laid off from cisco company i hope every thing doing well otherwise i have to stop go to school now. if they have laid off .

Gordon

February 7, 2009 11:13 PM

When companies let go of a lot of people during the economic down-turn. You can call it what ever you like, but in reality it is a layoff.

Rusty

February 9, 2009 5:03 PM

I hate to be the odd man out in the responses here but...

restructuring a business to make it more profitable is an exercise that will enable profitable segments of a business to retain employees working on business-critical functions.

I believe that most employees in fringe or experimental organizations are already aware of that volatility. i moved across the country one time to join a group just like that. I went there for the "out-of-the-box" creative opportunity. The economy tanks and I know right away I am going to be let go or restructured.

Anonymous

February 20, 2009 8:30 PM

Friends,

To report any suspicious activity or to make a confidential reporting of immigration or customs violations, please call 1-866-DHS-2-ICE (1-866-347-2423).

Please make the call. This is the right time to make the call. These days immigrations dept. is raiding companies for illegal activities.

Remember the 5 firms that ICE raided in regards to H1B visa fraud last week. 11 of them are under arrest and they may serve up to 15 to 20 years of prison time.

Its not just the employer who is breaking the law, employees are supporting them too. As far as L1 visa interview goes, they know from the forum what questions they are asked and they know what to answer even if it is not the right answer.

For L1 visa they have to say they are working on a proprietary tool and have specialized skills to get the visa even if they don’t have those skills. This is fraud and they need to go to jail.

Remember the only way to stop these guys is by putting not 11 but atleast 1100 in jail. They can afford to pay as mush fine as required without any issues and still continue the same old unethical practice. It’s only the jail time that they are scared off and which will make them stop.

So guys if you are suspicious of any illegal activities on H1 or L1 please call ICE. You can call from public phone and don’t have to reveal your identity.

Please make the call. For those you already have a job, you may be the next one to get fired.

Please spread the word and let your friends, family, relatives know about this. Email this content to everybody that you know.

Please help.

unknown

February 24, 2009 8:04 PM

for every job loss at Cisco (US), there will be 2 new hires in india.. Cisco=India.. it is a shame but it is true.

Whatever

February 24, 2009 10:33 PM

Call it what you want but, when you want but...when you no longer have a job it sucks...doesn't matter what you call it and they (Cisco) are getting a free ride because they don't call it what it is...a layoff.

John

February 26, 2009 11:24 PM

Layoff not only in US, its all over cisco. So,
for every job loss at Cisco (US), there will be 2 new hires in india.. Cisco=India..

is not correct..
If they want to do cost cut, why cant they follow a different strategy? pay cut, allowance cut.. what not..

Cutting down CEO's salary itself will light at many houses!! Isn't it?

Naveen

March 9, 2009 5:18 AM

India is no more Cheap.. so the myth about outsourcing to India to cut costs is no more a reality. Infact Cisco has laid off 300 Employees in one of their BUs in bangalore.

So guys this is a Global Issue not just for employees in the US, but for employees across the globe.

Jesse

March 15, 2009 10:36 PM

I find it a little sad that so many people look at companies like Cisco in such a negative fashion. If Cisco did not exist, then none of those thousands of people would have jobs anyway. Should Cisco go bankrupt and fire all of its employees instead of re-sizing to fit the ecinomical downturn? What would help keep those jobs more would be larger tax cuts for these large corperations. More money in their pockets means more people they can keep employed. When an economy drops (Which is part of the natural order of the economy) businesses which provide non-esential services are the first to falter. I'd rather Cisco restructure and resize itself so that it can survive this storm than for it to sink. When the times get good again they will be able to continue to grow.

They all Suck

July 8, 2009 3:52 PM

Cisco has $33 Billion, that's with a B, in the bank. Profitable or not, realigning, restructuring to be more profitable is all BS. With that much money they should be able to restructure and keep these people until the economy turns around.

rusty

July 16, 2009 12:50 PM

as one of the cisco employees who just today was "restructured" out of a job i can tell you that the decision criteria for whom to let go are deeply flawed. for example, rather than select the least capable, least productive, or even the least effective person i was chosen because at this particular moment my responsibilities are most easily moved to the remaining people in my organization. in other words, without any forward thinking i was let go because the snapshot of what's on my plate today was easiest to spread around. although my knowledge, skills, and potential far outweigh some individuals who still have their cisco jobs, those were not a factor in the choice of who to let go. nor was it considered that given my years of experience and my depth of knowledge i could take on the responsibilities of any other person on my team. scary that a company with so much at risk would use such a capricious method of allocating resources.

and to the point made above about spending some of their cash to retain talent through the difficult economy, over a 1-year period it would cost about $500M to retain the 2000 people who were laid off. a mere fraction of the $33B in the bank and just enough time to allow for a recovery. more importantly, it would allow them to retain the talent and experience that have built up over time. i was with cisco for 9 years.

Julio Loayza

August 27, 2009 11:58 AM

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Sharon

October 11, 2009 1:43 AM

I think more money in their pockets means more people they can keep employed. When an economy drops (Which is part of the natural order of the economy) businesses which provide non-esential services are the first to falter. voucher | coupons are more important than ever to people trying to save money on their shopping online.

peter

October 11, 2009 1:45 AM

How about looking at this from the perspective of the 1000s of people being laid off... people who might be single income, have families behind them, bills to pay. Feels like a 'layoff' to me, and I'm sure it does to every one of the people/families affected by this.coupon codes are good

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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