SAN JOSE (Reuters) - Cisco Systems Inc (CSCO.O) Chief Executive John Chambers said on Tuesday that the office of the CEO will be less hierarchical in five years, although he has not yet decided on when he would hand over to a successor.
In one of his most candid remarks about the future leadership of the world’s top network equipment maker, Chambers told Reuters he envisioned a more collaborative executive suite.
“In terms of how we evolve our entire leadership team, including the office of the CEO, it’s very likely to be different five years from now than it was five years ago,” Chambers, one of Silicon Valley’s longest-serving CEOs, told Reuters in an interview.
“There will probably be a title of CEO, but the next CEO will probably be more a leader of a council than a ‘command and control’,” said Chambers, 58, who also is Cisco’s chairman.
Since Chambers took the CEO role in January 1995, Cisco has grown from a company with $1.2 billion in annual revenues to around $40 billion, as the expansion of the Internet fueled demand for routers and switches that direct Web traffic. Cisco also has been expanding into new areas such as online video.
Many analysts say Cisco has a deep bench of executive talent, but few have been identified as strong CEO candidates.
Two of Cisco’s top executives, who were seen by Wall Street as possible successors to Chambers, have left the company in the last year: Michelangelo Volpi quit to join Internet video service Joost, while Charles Giancarlo, who was chief development officer, left for private equity firm Silver Lake.
After Giancarlo’s departure, Cisco reorganized management, installing a council of executives instead of appointing a CDO replacement. Chambers said the new structure helped to speed up business decisions and the concept could be applied to the CEO role in the future.
“The CEO role at Cisco going back over the last five to 10 years has been very much ‘command and control’ and I think we do it pretty well, and if we say ‘turn right,’ 65,000 people turn right,” Chambers said.
“That’s very effective when you’re in a couple product areas or one or two major cross-functional initiatives per year. It is not an effective leadership style or organization structure if you’re moving into a lot of market adjacencies and you have a lot of major cross-functional priorities.”
Chambers said that, while he was still committed to his job for the next few years, the development of new leaders was already taking place with four layers of top executives.
“The top layer is those who are ready today and there are five of them,” he said, adding that those in the lower layers could become top leaders depending on timing.
Chambers’ office, a modest room in the company’s sprawling headquarters in San Jose, is decorated with photographs of him with President George W. Bush, Secretary of State Condoleezza Rice and others.
Because of his connections with such top policymakers as Federal Reserve Chairman Ben Bernanke, as well as his ability to read technology spending trends, Wall Street takes Chambers’ comments on business conditions seriously.
Asked about the weak U.S. economy, Chambers said many Cisco customers see a recovery early next year.
“Most customers still see the turn probably late this year or early next year. More of them looking toward early next yea,” he said.
In late May, Chambers said that, based on his conversations with customers and economic leaders, the most likely scenario would be for the economy to start picking up towards the end of the year.
Since May, oil prices have continued to rise, dampening the outlook for consumer spending and threatening to ignite inflation. A deepening U.S. housing decline may also be a drag on economic growth for months to come.
“I think most of us realize that it’s probably going to be a little bit longer than the one to two quarters that some people had hoped for,” Chambers said.
But he did not see the need for a dramatic change in business strategy. Cisco plans to increase its head-count next year, unlike in 2001 when the bursting of the technology bubble brought on major job cuts.
Cisco’s overseas expansion, including an aggressive push into emerging markets, has helped the company grow, despite a weaker domestic market.
The company has forecast long-term annual revenue growth of 12 percent to 17 percent, although it is expected to fall short of that this year.
Cisco shares fell 2.3 percent in after-hours trading to $22.35, compared with their Nasdaq close of $22.88.
Editing by Carol Bishopric and Andre Grenon