Employees Are Family: How John Chambers Played Hardball at Cisco Without Getting Ruthless

What we said from the very beginning was to create unprecedented opportunities for our customers, for our shareholders, for our employees and partners. That's what I believe the focus should be of companies. Customer first. To get there, you've got to also do a very good job for your investors. And the way you make that happen is employees, and they aren't employees, they're family. And it is that family culture that allowed us to run an attrition rate of under 5% for 25 years in an industry that ran over 15%.

Dart, it's a pleasure to be with you today and reconnecting after many years at Cisco.

I'm excited about it, Dart. And then when you think about it, there are many things I'm proud of at Cisco. One of them, perhaps most important, the culture that we had the courage to change the world and make a difference in so many people's lives. But it also, we built a company that focused on the outcomes and was the most powerful player in our segment of the industry, and we won every corporate social responsibility award imaginable in the process. So, good economically and good for society at the same time. But you said it right, our leaders, I don't think there's been a generation of the 1990s that came anywhere near close producing the number of leaders that we did in every function from supply chain to finance to sales to legal. We just built a machine and we had a lot of fun building it and making a difference very close to our customers.

So when I think about the purpose for a company, it isn't so much you look it up and do a ChatGPT type of scenario. What we said from the very beginning was to really create unprecedented opportunities for our customers, for our shareholders, for our employees and partners. And as simple as that sounds, that's what I believe the focus should be of companies. Customer first. To get there, you've got to also do a very good job for your investors. And the way you make that happen is employees. And they aren't employees, they're family. And I know that's a little bit old-fashioned, but it's the way I run my 24-hour startups today. We are a family. We're close together, high expectations of each other, and we're tough within it. And it is that family culture that allowed us to run an attrition rate of under 5% for 25 years in an industry that ran over 15%. And that ability to acquire companies where attrition rate used to go 20% after the golden handcuffs came off, the acquired group ran 4%. And so it was the culture that we built that created those four legs, if you will, for the future foundation of our company. And I don't think it's different, whether you're a small startup of two people or a blossoming unicorn going to decacorn and beyond, I think those are the principles that I personally would suggest people think about in terms of what's the purpose of their company and their organization. Might not be right for everyone, but boy it really worked for us.

Family means that it was hard for me being a guy to say I love you to other guys or to people beyond my immediate family. And what I realized is that if you create a culture of openness, a culture of caring, a culture of we win together or we lose together, and we're not going to lose very often, and when you need us most, we're going to be there in ways that no other company is, that's what family means. You know, Dart, that I knew every single situation out of 75,000 employees that was life-threatening for each employee, for their spouse or their kids, and we were there in a way that no one else would be. And it wasn't just going over here to Stanford or another hospital to see our employees who were recovering from issues, it was being there for them all the time, and regardless of what the insurance said, we took care of our own, and we built a culture that was really, really strong with it. And some people would say it's hard to have a family because you don't hold your family accountable. All you need to do is talk to Rebecca or Randy or Larry or any of the other leaders. I hold everybody accountable, and I expect to be held accountable myself, even more with family. Now, what it does that is so powerful, it makes you almost impossible to beat. And candidly, Dart, you know at Cisco, no one ever really beat us. We won a few battles, lost a few, but boy on every major product area, we were in the top three in the industry and that's not been done before or since. Now to your family question, we created in the first 10 years at Cisco out of our employees 10,000 millionaires. We shared the success more with our employees on a broader base rather than just keeping it primarily at the top with the key executives. By the way, we did great because the company did great and guess what? Because everybody's owners, we had a whole different mentality toward the approach on it. That's what family means. You've also got to do one of the most basic issues in leadership, which is leaders also have to hold people accountable. And if you don't step up to your issues when people aren't being successful, at first it's that person's problem, then it's the leader's problem. So one of the hardest things you have to realize, I hold my family more accountable for results than I do people I know just reasonably well. I think you get to all the powers of family and very few of the weaknesses and I practice that today as I said across my 24 startups and teaching. And it's amazingly powerful in a world where a lot of people do not put the values behind that in terms of that importance, whether it's big companies or startups that are like a Cisco, but far more that are just more of you employees perhaps as assets, move them around and go up and down on your resources based upon the financial conditions and the approach. Either strategy works. I just have a very strong bias toward how you treat employees as the fourth leg of that stick and of the foundation of the company, how I think we differentiate.

I think you nailed it pretty well. In fact, I think better than I wrote in the book, actually. So, compliment to you on your summary of it. Make no mistake about it. I'm extremely competitive. I offer no apologies for that. And maybe I'll be better in my next life, but I doubt it. I love to compete. But I only treat people like I'd like to be treated myself. I never do something to a competitor I'd have a problem if they did to me. I try to always just do the right thing. Not perfect, doesn't mean I don't make mistakes on it. But just do the right things as you compete. But I think if you're going to play in this world, you're going to disrupt or you're going to get disrupted. And we wrote the textbook on that at Cisco for the internet era in the '90s. And like I alluded to earlier, out of 18 major products we had what was it? 12 that were number one in market share, often well above 50%. Three that were number two and three others that were number three. That's never been done before or since. And it is that spirit of competitiveness together and always keeping the focus, competition is external. Internal friction is politics. You can't have passive-aggressive behavior. You've got to say, you either get on the bus and we're one team or if you choose not to join us, then you need to go somewhere else. Our attrition rate, as I pointed out, was extremely good, but we recruited the right people, the right culture. And then we got leaders who really believed in it and practiced it and who owned it. I've never raised my voice ever in business, saying I used to think that that meant that I hid pretty well, that I'm very competitive and have a tough side if needed. And I think it was Rebecca Jacoby who really called me on that one time and said, "John, everybody knows you got a tough side and they respect that, but don't kid yourself. They know that's there if it's needed." I think that's also part of competing. If you don't have that toughness, you don't survive in today's world. It doesn't mean you have to be ruthless. It doesn't mean you don't treat your employees well. It doesn't mean you don't treat your customers well. And as basic a rule as it sounds, if every decision you make, you just do what's the right thing, it's amazing how you can take complexity out of unbelievably complex situations and just say, "What should we do?" and the answer is boom. Is there an example of that? When we acquired a company, and we acquired 180 of them, and I think the world would say the industry that we are the best in acquisitions and M&A in the industry by far, and our hit rate was much higher, and we determined a third of our innovation was through the acquisitions, a third were through partners and a third were through internal in a way that no one had done it before. But on acquisitions, the first thing we looked at was, is this a good financial decision? First thing we looked at is, are our culture and our values similar? And second, is it truly a win-win for the company we're acquiring and for Cisco? And is it a win for the leaders? And if the answer was no, we wouldn't do it. And with the leaders, even if the pressure was on the CEO of our target acquisition, I would always have the one-on-one conversation with them almost without exception, "If you really don't want to do this, I don't want you to do it and you can tell me you don't want to and I'll find a reason we don't do it and that won't put you on the spot. But if you do want to do it, I need you committed and need you all in." So that goes back to trying to treat people like I'd like to be treated myself, being remarkably transparent and not complex on it, and negotiating good deals and acquisitions, but making sure that both sides win. All the players in terms of the shareholders, the employees, it's a win for everybody when you do these. It's not we out-negotiated you and we got a sweetheart deal at the disadvantage of your shareholders, your employees. That's my values. That doesn't mean that it applies to every company with this view, but for me in terms of what I try to accomplish, that's how I approach acquisitions every time, and it ties to your question to me.

They were amazing, too.

So if I can, let me frame it into the sequence you raised it. At Cisco, we built very strong teams through recruiting, through internal development and promotion, and through acquisitions. And the teams you just talked about came through all three of those in different ways. So when you begin to think about recruiting people, you want people number one into your culture. The number one thing that I strongly encourage all my startups to do, and we tried to practice at Cisco, if they're not a cultural match, the interview stops there. Doesn't mean they aren't a good person, but if they don't have the same attitudes toward customers, same attitude sharing the success, if they're more focused on themselves than they are how does the team win on it, if they don't try to just do the right thing every time in what they do, it doesn't mean they aren't to be successful, but that's just not a value for us. On recruiting Rebecca, it's more promoting Rebecca and she didn't want to be the CIO. She was with some friends one evening I came up and I just said, "Becky, you know and I admire you so much. I wish you'd taken the job at the CIO." There are not many people that I know that would walk away from that type of opportunity and financial success and not be tempted to do it and I think you would have been perfect, but I understand. Of course what I was doing was really teasing her hard in terms of the direction. Ended up accepting it. Then she went on to now be very successful in that role, one of the best CIOs ever, but in roles well beyond it and she ended up being a COO for Chuck, chief operating officer. So, it's recruiting the best talent through a combination of internal development, acquisitions and promotions and then making that team run well. Randy Pond, the same example. Randy is just amazing. He's one of the most talented people I've ever seen. He was CFO of a startup, i.e. Crescendo. He then went into supply chain. He could do just about any role he wanted in operations. He was no nonsense, let's make it happen, but everybody loved him. He could actually tell you, "You're messing up." and you actually walk out of the discussion feeling better rather than down about it. Our leaders were extremely good across multiple fronts and we didn't leave any one of them in a silo. We tended to move them around to different functions and I think that allows them to bring their creative and creativeness and directness for it. When you start describing Rebecca, you said she brings tears to my eyes each time I think about how great a leader she was and how much she taught me and how much I enjoyed working with her and how much you cared about her. That says it all. She gets results. She motivates people. She has high expectations, no nonsense. Don't ask her unless you really want to know the question answered. But that's the culture we built. Randy was the same way. Go through the players in terms of direction for it. And that's one of the unique things about the culture we built in so many categories. And that's the culture you want. And that goes back to the Joe Pinters of the world or whatever. Our senior team had very similar cultures and values even though our personalities and areas of interest were remarkably diverse.

I think it came from my parents. My dad was an obstetrician-gynecologist, delivered 6,000 babies, a quarter of that for free in West Virginia for those people that were not as financially well off. Mom was also a doctor, a pathologist of every class from high school to college, med school, internal medicine, psychiatry on it. She was amazingly good on the emotions and dad was very good on playing out a vision and doing pattern recognition which I learned from him extremely well in terms of how to apply and then bringing it back to the values in terms of what's important to you and the ability to have the team focused on those. So that's where I would learn it.