Mcs final cisco case study
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Cisco uses a decentralized funding model called the Client Funded Model (CFM) for new e-business initiatives. Under CFM, business unit managers have authority to fund expenditures that increase sales and customer satisfaction. While this decentralized approach has been successful, it poses scaling challenges as initiatives have narrow scopes. Cisco should consider a centralized "Technology Research and Training Team" to keep employees informed of initiatives, reduce complexity, and establish a philosophy for discontinuing initiatives. Cisco can measure innovative efforts through goal achievement and tie compensation to these efforts using short-term bonuses and long-term stock options based on metrics like revenue growth, earnings growth, and customer satisfaction.
![Introduction of MCS in Cisco
• Designs, manufactures, and
sells networking
equipment's
• Collaborative Service
provider[infrastructure
services]](https://image.slidesharecdn.com/mcsfinal-120317014441-phpapp01/85/Mcs-final-cisco-case-study-2-320.jpg)
![Q2.Do you think Cisco should centralize any aspect of the
innovation process?
Yes. Up to some extent it is advisable ..
• A]. While the decentralized system, combined with an emphasis on
staying close to the customer, has been incredibly successful for
Cisco so far, it is not perfect.
• First, as the company grows, controlling the management becomes
more complex.
• Organization usually gets affected by the time new initiatives are
introduced.
• Major challenges are ‘staying connected’ and ‘pursuance of similar
initiatives by different business units’. It results into conflicts and
duplications.
• Also New initiative generated within business units has very narrow
scope.](https://image.slidesharecdn.com/mcsfinal-120317014441-phpapp01/85/Mcs-final-cisco-case-study-14-320.jpg)
![B]. For proper implementation of organizational strategies-
strategy
Corporate level strategy
Business unit level
• Definition of • What should be
businesses in the mission of
which Cisco will each business unit
participate • How should it
• Deployment of compete to
resources among accomplish that
those businesses mission](https://image.slidesharecdn.com/mcsfinal-120317014441-phpapp01/85/Mcs-final-cisco-case-study-15-320.jpg)
![Q. 3 Can Cisco measure innovative efforts?Tie
compensation to these efforts? If so, how?
Solution
A] Yes. In terms of ‘organizational goal achievement’.
Goal congruence is consolidation of all goals to achieve
organizational goal.
• Profitability- R.O.I.
• By maximizing shareholders value- maximize or
optimize
•Risk- high degree
•Entrepreneurial culture and compensation system-
strong
•Multiple stakeholder approach- shareholders, customers,
employees.
Thus company can identify goals for these groups and develop
scorecard to measure innovative efforts of new e-business initiative.](https://image.slidesharecdn.com/mcsfinal-120317014441-phpapp01/85/Mcs-final-cisco-case-study-18-320.jpg)
![Can Cisco tie compensation to these
efforts?
B] Yes.
manager’s total Short term Long term
compensation
package- Based on Current year Long term
Salary performance accomplishment
Benefits Bonus Paid in cash Option to buy
Incentives company’s stock
Incentive
compensation
plans](https://image.slidesharecdn.com/mcsfinal-120317014441-phpapp01/85/Mcs-final-cisco-case-study-19-320.jpg)
Mcs final cisco case study
- 1. NCRD’s Sterling Institute of Management Studies Subject: Management Control System Prof: Jyoti Singhal Case study on CISCO PRESENTED BY: AMEYA GODBOLE 08 AMAR NIKAM 21 GAURAV KHADSE 15 PRATEEK GANORKAR 07 ABHISHEK SINGH TOMAR 44 PRASAD YADAV 35
- 2. Introduction of MCS in Cisco • Designs, manufactures, and sells networking equipment's • Collaborative Service provider[infrastructure services]
- 3. Introduction continued….. • Tailor network design to respond to changing business requirements • Implement complex network upgrades, refreshes, expansions and consolidations • Improve network availability and performance • Manage costs • Simplify project coordination and accelerate implementation schedules • Reduce the risks associated with making changes to the network • Improve service delivery and control the cost of network monitoring and management
- 4. Introduction continued….. Cisco offers a full suite of infrastructure services - consulting, design, build, management and maintenance to help organizations realize the following benefits: • Reduce costs and increase productivity • Enable growth • Align IT with business • Improve end-user productivity • Mitigate risks • Improved service management and control • Enhance flexibility
- 5. Case background CISCO (Management Control System)
- 6. Facts… • Web business specially dedicated for the corporate customers • Large savings and 100% quality assurance • Outsourcing of manufacturing and Web-Based replenishment system • Robust and efficient aftersales support on net • Sales increases by 6 times in 5 year (1990-94) • HRD and R&D also on the Web • Had a real time access on the financial and operational data • Saving of $500 mn by going on Net
- 7. Continued… • Till March 2001, Cisco has been on the top position in E-business • Amir Hartman express his worry that innovation are not long lasting in this era of technology development • Issues regarding how to continue the business the way Cisco doing it for the past few years • How much to invest and how to invest? • Organizational model? • What would be measure of these innovative efforts?
- 8. Continued… • Change is also reluctant Innovation at Cisco • In spite of being a huge organization with more than 30,000 thousand employees, Cisco encourages their employee to work as an entrepreneur • Give more emphasis on Risk taking, initiatives and responsibility values • E-business initiatives were considered as overall organizational goal • Decentralize business units
- 9. Pros and Cons • “CFM-Client Funded Model” • Incentives systems that focuses on customer satisfaction • Customer intimacy • Still not the most recognize e-business company • Innovations are appreciated and created different small business units which are accountable • Strategy to remain short term focused, worked well but how long Cisco would continue to do that • Didn’t have the philosophy of “when to pull the plug” for small projects which are not paying off • Managerial decision based on the compensation structure depends on three- revenue growth, earning growth & customer satisfaction
- 10. Problems with Cisco’s current system • It is not perfect for Cisco having decentralize system and staying close to customer simultaneously • Large size of company • Keeping all employee at same level of cognizance about the initiatives • Most of the time initiatives generated are from customer feedback which are incremental and of short term variety • Initiatives generated tends to be in narrow scope Three possible solutions: • Centralize think tank • Venture engineering team • Internal venture capital group
- 11. Q. 1 What do you think of the way Cisco funds new e-business initiatives? The Cisco funds its new e-business initiative is very ideal. • What Cisco did? – Initially, Funding came through the IT department. – Due to this the e-business initiatives were all evaluated on the basis of cost reduction, often overlooking impacts on sales, customer satisfaction, or employee retention. Hence Cisco bought new funding mechanism in action.
- 12. – Which was decentralizing the IT investments, along with which Client Funded Model (CFM) was formed. – In CFM business-unit manager was given authority to make whatever expenditures were sensible to increase sales and customer satisfaction. – In addition, the organizational structure was also changed.
- 13. • Why the new funding mechanism was correct? – In discretionary expense center the cost is controlled by allowing the manager of the business unit in planning, discussing what task should be taken and what level of effort should be put into it. – Due to which the cost incurring can be reduced.
- 14. Q2.Do you think Cisco should centralize any aspect of the innovation process? Yes. Up to some extent it is advisable .. • A]. While the decentralized system, combined with an emphasis on staying close to the customer, has been incredibly successful for Cisco so far, it is not perfect. • First, as the company grows, controlling the management becomes more complex. • Organization usually gets affected by the time new initiatives are introduced. • Major challenges are ‘staying connected’ and ‘pursuance of similar initiatives by different business units’. It results into conflicts and duplications. • Also New initiative generated within business units has very narrow scope.
- 15. B]. For proper implementation of organizational strategies- strategy Corporate level strategy Business unit level • Definition of • What should be businesses in the mission of which Cisco will each business unit participate • How should it • Deployment of compete to resources among accomplish that those businesses mission
- 16. Business unit level strategy can be properly implemented- What type of initiative to be generated How much efforts to be taken to create breakthrough initiative Whether to go for acquiring small companies Or to pursue breakthrough opportunities in house To widen the scope of initiative, white space opportunities must be overlooked. For developing projects across business unit, Involvement of senior executives to establish connection and to guide the collaboration is required. Therefore cisco requires some sort of centralized organization that focuses on innovation.
- 17. Which of the three possibilities below seems most appropriate? Why? 1. A centralized Technology Research and Training Team : “Think-tank” that studies emerging technologies and keeps business managers informed of what will soon be possible 2. A “Venture Engineering Team”: Centralized technology research and implementation team 3. An Internal Venture Capital Group : Centralized technology business analysis and funding team. A centralized “Technology Research and Training Team” one of the possibilities that CISCO is looking for is best one because … It will keep employees cognizant of the current initiative and ramification of those initiative. Complexity will be reduced. Scope of new initiative will become wider. & to have definite philosophy on when to “pull the plug”. It will help in developing as well as discovering new Innovations which is ultimately beneficial to CISCO.
- 18. Q. 3 Can Cisco measure innovative efforts?Tie compensation to these efforts? If so, how? Solution A] Yes. In terms of ‘organizational goal achievement’. Goal congruence is consolidation of all goals to achieve organizational goal. • Profitability- R.O.I. • By maximizing shareholders value- maximize or optimize •Risk- high degree •Entrepreneurial culture and compensation system- strong •Multiple stakeholder approach- shareholders, customers, employees. Thus company can identify goals for these groups and develop scorecard to measure innovative efforts of new e-business initiative.
- 19. Can Cisco tie compensation to these efforts? B] Yes. manager’s total Short term Long term compensation package- Based on Current year Long term Salary performance accomplishment Benefits Bonus Paid in cash Option to buy Incentives company’s stock Incentive compensation plans
- 20. rewards Managers put great deal of efforts on initiatives that are rewarded, and less on initiatives that are not rewarded. efforts
- 21. Impact of compensation system on employees- – Cisco has incentive system focused on customer satisfaction- – Employee became passionate about staying on leading edge of technology- – They coveted opportunities to work on innovative e-business project. – Technologists have become motivated- – Business unit managers aggressive about seeking customer feedback and use this feedback process to generate new e- business initiative. – Compensation structure of cisco is based on 3 metrics- revenue growth, earnings growth and customer satisfaction. This shapes managerial decisions on investing in innovative e-business functionality. therefore Cisco can tie compensation to measure innovative efforts.
- 22. Conclusion Various tools of MCS discussed in this case, such as • Decentralization & centralization • Compensation and incentives mechanism • Revenue center • Organizational goals and strategies Can definitely help companies to bring in a system that will efficiently and effectively control their management and sustain their respective business.