Cisco: Divide and Conquer

It was the Great Recession, and Cisco Systems’ long run of strong business results was in trouble. Sales were shrinking at the data communications pioneer, and executives were keen to cut costs. Out of the crisis emerged a new way of doing the business of HR at Cisco. About two years ago, the company effectively split human resources into tactical and strategic wings. The move put the company at the forefront of HR design and has yielded other significant benefits.

Employee satisfaction with HR services has held steady or improved, even as Cisco has delivered services 10 percent more cheaply. In addition, the HR organization has freed up some people management professionals to focus more intently on strategic talent initiatives, such as workforce planning, creating career plans and assigning goals and metrics aligned to the overall business strategy.

It hasn’t been easy. The overhaul has required a new mindset among both HR professionals and Cisco’s workforce of 75,000 people around the globe. And questions plagued the effort, especially at the outset. “There was a lot of ‘FUD’ surrounding this when we first started — fear, uncertainty and dread,” said Don McLaughlin, vice president of employee experience at Cisco and one of the architects of the shift. “We were accused of, ‘Shared services is going to outsource everything to a business process outsourcing model, we’re going to grind the cost out of it, the service is going to be awful, this is going to be a no good, terrible, horrible, very bad thing.’” But McLaughlin and his colleagues stuck with their vision, and Cisco’s experiment with chopping HR in half suggests the sum of the resulting parts can be greater than the original whole.

Shared Services, Mutual Mission
In 2012, after analyzing its business operations, Cisco’s Accelerated Cisco Transformation committee (see “Getting Its ACT Together”) decided it could save money by creating a shared services organization. Thus Cisco’s Global Business Services organization, or GBS, was born.

GBS is an operating model with an experience delivery arm and transformation arm designed to deliver and govern shared services. It’s an approach to managing a variety of services regardless of traditional functional boundaries, and it’s a commitment to improve the experience of and effectiveness with customers, partners, employees and shareholders.

GBS has 11 pillars. McLaughlin manages the employee experience pillar (Figure 1), which combines HR and IT shared services. His team is focused on the administrative operations related to traditional HR programs, such as compensation, benefits, learning and development, and staffing. The HR department still creates all of those programs and handles strategy. McLaughlin’s team executes it.

According to Dave Ulrich, a professor of business at the Ross School of Business at the University of Michigan, and a partner at The RBL Group, most corporate functions have already separated tactical from strategic work. For example, he said marketing explores customer futures, while sales monitors day-to-day merchandizing. Finance looks at longer-term economics while accounting tracks costs. HR, on the other hand, has a legacy of administrative work such as payroll or benefits processing, hiring logistics and training registration, and a strong focus on strategic work such as connecting talent, leadership and a capability to business and customer goals.

“Both create value, but tactical issues have to be managed to drive efficiency while strategic issues are managed to create innovation,” he said. “The logic, thinking, tools and activities for the tactical and strategic ideas are different, so they should be managed and worked through differently.”

McLaughlin embodies a different approach to HR. He has been with Cisco for 16 years and came out of its manufacturing wing. The company’s chief operating officer pulled him into HR for his operational mindset, and he stayed to run recruiting as vice president of staffing before serving as the company’s first chief learning officer.

Under the GBS model, McLaughlin maintains his quantitative mindset as his team manages the tactical sides of HR. Those duties include:

• Hiring — scheduling interviews and bringing in candidates.
• Training — registration and administrative work for training.
• Rewards — executing strategies on compensation, payroll, retirement and benefits.
• Communication — building the Web, managing meetings, customer service and information flow.
• Organization — preparing charts and assigning responsibilities.

This allows HR professionals to spend more time on workforce strategy (Figure 2).

“For a number of years, there has been a notion of getting HR to become a more strategic partner to the business, to really understand talent management, workforce planning and organizational design, to fully comprehend where the business is heading and how to make it grow,” McLaughlin said. “But the business always wants immediate help in the transaction space. The tyranny of the urgent draws resources into day-to-day work, and it creates a struggle of ever getting to the higher level of work.”

By removing the tactical layer of his team’s work, Charlie Johnston, Cisco’s managing director of human resources for Europe, the Middle East, Africa and Russia, said other HR professionals are having a larger strategic impact.

“We now have each HR partner focused on building people and culture plans which drive strategic transformational initiatives in the areas of talent, leadership, organization and culture,” he said.

Each of these plans has unique deliverables to the business they support. Specific examples include focusing on innovative employee engagement activities, designing and delivering leading-edge leadership development programs and strategic interventions to help cultivate the “next-generation organization” — which involves workforce planning as well as new performance and talent management systems.

“We are able to focus on cultural interventions, driving new organizational values,” Johnston said. “GBS helps enable us to step up to this by focusing on the transactional work and providing feedback to the business.”

While his organization is aiding HR by removing the transactional layer, McLaughlin said he doesn’t see it as simply administrative work. He’s focusing on changing employee experiences in a positive way by understanding employees’ preferences in the process while decreasing costs. He reinvests some of the savings into a more positive experience for employees and gives some of the savings back to the business to fulfill the company’s mission to run a leaner business.

For example, the employee experience pillar of GBS coordinates interviews with prospective candidates. Hiring managers open a requisition when looking to fill a position. The recruitment organization finds candidates and invites those who are chosen to schedule interviews. From there, it’s in McLaughlin’s hands. His team measures cycle time — from the time the request to schedule an interview is made to how long it took to get the candidate scheduled. Were there any cancellations? How satisfied was the hiring manager with the interview process? How satisfied was the candidate?

McLaughlin said that for every service his team provides, he can tell executives the cost to deliver it, the customer satisfaction score and whether the service is driving productivity or changing employee experience.

“We now utilize statistical process control to understand and measure the performance of the services we provide,” McLaughlin said. “We review processes at a minimum on a quarterly basis to make sure we are progressing on schedule and to keep our priorities fresh.”

Staying in Touch
Under this model, McLaughlin works closely with Cisco’s HR leaders across the company’s three regions — Americas, EMAR and Asia Pacific — who report to Kath Weslock, the company’s chief human resources officer. McLaughlin’s boss is Olivier Kohler, senior vice president of Cisco’s connected business operations group. Both Kohler and Weslock report to the company’s chief operating officer, Gary Moore.

To make all of the puzzle pieces fit, McLaughlin has people like Michelle Witty on his team. Witty is a regional director of employee experience, based in London. While she’s technically on McLaughlin’s team, based in the U.S., she spends the majority of her time with Johnston, who is also in London.

“She attends all of my team leadership meetings and is integrated into the management system and the governance so we can have a relationship at the highest level to talk about the HR strategy and how employee experience can help us bring that to life,” Johnston said.

Johnston said he and McLaughlin chat virtually monthly and he and Witty meet every two weeks. As GBS grows, the three are working more closely together. When the organization was created in April 2012, Johnston estimates 25 to 30 percent of his team moved to GBS. Employee experience has 250 employees, many of whom came from a variety of Cisco departments.

“GBS has changed our organizational structure, but our HR employees are now seeing the benefit of being part of a bigger organization,” Johnston said. “They’re still close to HR but have an opportunity to learn from other parts of the organization, such as IT, that might be better at process improvement and gathering metrics.”

McLaughlin said it was a mindset shift for many in the staff he created.

“It was different for many of the people I inherited to start thinking about what they did as a service,” he said. “I told them, ‘There’s going to be a consumer of your service, you need to be able to ‘cost’ your service. You need to understand the capacity that you can deliver against the budget that you have been provided so that when there are swings in demand, you’re running that service as a business and can quickly respond to the corporation.’”

Pushing Employees to Be Independent
Under the GBS model, Cisco’s 75,000 employees all refer to the company’s revamped Human Resources Response Center for HR issues, and to the Global Technical Response Center when they have an information technology question. While these customer service centers existed before GBS, they have changed in function and appearance. Previously employees were often guided toward their regional HR leaders for assistance, and processes weren’t consistent. Similarly, both response centers had different structures, and the differences made it hard for employees to navigate the portals.

“By creating a common architecture, I now have the ability to look at the data flows, the business processes, the knowledge management systems, and create a common, global architecture, which improves the employee experience,” McLaughlin said. “If I can create a single point of entry, I can create efficiencies and drive the cost out. Today if my budget gets cut, I can immediately say, ‘OK, based on my aforementioned metrics, here are the services we are no longer going to provide to employees.’”

It’s about streamlining the process. And while it places more responsibility on employees to visit the portals and contact McLaughlin’s team instead of walking into the office of the HR manager in their office, it’s worth it, according to Gerry Ledford, senior research scientist at the Center for Effective Organizations at the University of Southern California.

“Cisco is a very complex organization with a lot of different businesses that have different requirements,” he said. “If the organization wants a standard philosophy on something like compensation across different business, it’s hard to maintain that with dozens of HR groups working on the tactical aspects around the world, each doing their own thing and supporting their unique business. It’s a lot less hand holding for employees this way, but they’re getting a much more consistent message on what the company’s trying to do.”

Ledford said that while previously there may have been a compensation person in every business unit, making customized service a possibility, a shared services model, such as GBS, demands employees to seek help more independently, but their issues can be addressed more quickly and consistently.

According to McLaughlin, since the employee experience pillar was created, he has been able to improve or sustain the employee satisfaction scores of every service his team provides. Further, he has delivered all services 10 to 12 percent more cheaply than before.

“I can take that money and give some back to the corporation, and they’re happy because we’re fulfilling our promise to Wall Street. But I can also invest some of it back in my organization and create programs and processes that will improve our employees’ experiences,” he said.

It’s hard to draw a straight line between McLaughlin’s work and Cisco’s bottom-line business results. But since the inception of GBS, Cisco’s net income and earnings per share have grown steadily each quarter.

McLaughlin, for one, is confident Cisco’s move to split HR in half has paid off in full. “We’ve stripped the strategic from the transactional, operational work successfully and brought strategies to life in a way that works for employees while saving the company money,” he said. “Exactly what we set out to do.”