Chuck Robbins, the CEO of networking hardware pioneer Cisco, told the managers that the company would increase its operating expenses by $1 billion over the next 12 months. The increase in operating costs comes in response to a rise in employee departures that is shaking up most tech companies.
The decision to increase operating expenses is surprising given that Cisco’s revenue growth flatlined in the last quarter of the fiscal year. The tech giant’s free cash flow fell, resulting in a general shrinkage of operating expenses, making Robbins’ announcement more than surprising. It’s unclear whether the new deal will fall through, and the company hasn’t mentioned Robbins’ plan in its quarterly earnings report or conference call on Wednesday.
The $1 billion boost to operating expenses should happen over the 2023 fiscal year, which began on July 31st. The expenses translate directly into more money for the salaries to keep people from leaving the company.
Robbins’ plan is unexpected, given the current climate in the entirety of the tech sector. Most tech companies are currently busy “tightening the belt,” meaning they’re freezing hiring, laying off employees, or cutting their expenses. If Cisco were to pull off the planned increase, it would become one of the few companies in the tech sector to take active measures in combating high staffing turnover rates. Microsoft and Amazon also announced broad pay increases to try and retain their employees amidst worsening macroeconomic conditions and growing inflation.
Among the most influential macroeconomic factors are Russia’s war on Ukraine, supply chain failures, and COVID-19-related measures in China. Since no macroeconomic conditions show improvement, it’s fair to expect further economic deterioration and even higher turnover rates.
Companies that, unlike Cisco, show no initiative for improving the working conditions of their employees are currently facing serious backlash. With rising inflation and high cost of living, the very least companies can do is show a willingness to take an active part in bettering the lives of their employees. If there’s one thing that COVID-19 has made abundantly clear, it’s that people take note of how well companies treat their employees in times of hardship.
In the long run, companies won’t benefit from turning their backs on people that dedicated their time and effort to building said companies from the ground up. Cisco will certainly be among those that go down in history as workers’ allies and not enemies.