Cisco to Shift Some Pay From Bonuses to Salaries Amid Inflation Crunch

(Bloomberg) -- Cisco Systems Inc. is shifting a slice of its workers’ pay out of bonuses and into their base salary, in response to concerns about soaring inflation.

The biggest maker of computer networking equipment will rejigger compensation packages at the start of its new fiscal year in August, according to Chief People, Policy and Purpose Officer Fran Katsoudas. The decision came after the company surveyed employees to find out what mattered most to them regarding their paychecks. The company is also experimenting with a four-day workweek and aims to reduce its real estate footprint by as much as 30% by shutting some older offices and creating new “collaboration hubs” in New York, Atlanta and other cities.

“We asked them what compensation levers they appreciate more,” Katsoudas said in an interview. “With inflation going on around the world, they want cash in hand. So we’re shifting a few of our programs to really drive more of that cash to employees.” 

Cisco’s move comes as inflation continues to take a big bite out of household budgets. U.S. consumer prices rose in March by the most since late 1981, and Americans are paying much more for gas, food and rent. Wages have also risen, but they’re not keeping up with inflation. That’s prompted millions of employees to jump ship for the promise of higher pay, a trend that Cisco hopes to ward off by tweaking salaries and bonus pay. Cisco’s shares are down nearly 20% this year, part of a broader selloff of technology stocks. 

The networking giant also expects to need between 20% and 30% less office space, Katsoudas said, as it consolidates its holdings and builds new offices that feature a blend of open space, small “huddle” rooms and places to socialize. The 59,000-square-foot New York office at 1 Penn Plaza next to Madison Square Garden, which reopened earlier this month, has only 50 desks, down from the original plan to include 150, leaving much more space for groups to gather for teamwork, training or socializing.  One conference room includes bar stools, while others have small booths right outside for post-meeting conversations. The company is even looking to hire a “collaboration concierge,” a sort of cruise director for the office who will organize events and activities, while also helping staff navigate their new environs.  

“I have to create a buzz here,” said Mark Miller, a Cisco business development director who spearheaded the office’s redesign, which began in October 2019 but was delayed by the pandemic. “We don’t want to commute just to compute.”

So far at least, most Cisco employees are forgoing the commute entirely. Just under 20% have returned to its offices at least three days a week since reopening its U.S. locations March 1, which is lower than Katsoudas expected. Early enthusiasm for returning to the office has waned since last year, according to a January survey of more than 6,600 U.S. adults from pollster Morning Consult. Fewer than half of workers who were fully remote due to Covid-19 would like to return to the office as soon as it’s safe to do so, down from 64% who said so in January 2021.

“We are still ramping up,” she said. “Work is not a place you go, it’s a thing you do. I want people to feel they have choice.”  

Like other companies, Cisco hopes to entice workers back into offices with relocations and refurbishments that make the office more of a destination than daily drudgery. Last year it moved its Midwest regional office from suburban Rosemont to downtown Chicago, leasing space in the city’s landmark Old Post Office building. The company is also opening a new Paris office, Katsoudas said, and plans to consolidate its scattered buildings in the tech hub of Austin. The shift has prompted the closure of regional offices, like those in Connecticut and New Jersey.

“In many cases, we were in the right cities but the wrong neighborhoods,” Katsoudas said. “Right now people want to be in cities, they want to be downtown, where they can walk around and grab dinner afterwards. It’s not just about the square footage, but the experience we want for our people.” 

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