Highlights from Atlanta 2001

SARA E. MELENDEZ: Welcome to our second CEO Summit during our conference. The purpose of these meetings is to bring together the top leaders of about 100 of our membership organizations who are attending the conference to get a dialogue going among your peers about important current issues that the sector is thinking about and/or dealing with. And to help us get started on those dialogues, we invite someone to kick it off for us.

So, before we do that, I want to thank our sponsors: First of all, the American Legacy Foundation, for having arranged for all of this for us, and we want to thank the Georgia-Pacific Corporation for allowing us to use this beautiful space. Had we known we were going to have such a big space, we would have invited many more people, but this is going to be a wonderful dialogue.

And now to start us on this dialogue, we have a very special friend of INDEPENDENT SECTOR, Dorothy—Dot—Ridings, CEO of the Council on Foundations. As you all know, she's a former board member of INDEPENDENT SECTOR, a former publisher of a newspaper, and a dear friend and has had a lot of experience doing this. You all may remember she used to moderate presidential debates on television.

MS. RIDINGS: Sara, that was a long time ago.

MS. MELENDEZ: Most of us here are old enough to remember.

We're in very good hands to lead us in this conversation today. Thanks, Dot.

MS. RIDINGS: Thank you, Sara.

Whenever I see a group like this that is self-selected, I'm reminded of being at a League of Women Voters convention some many, many years ago. At this particular one, there were 1,400 people, and most of them—we had 1,400 leagues at that time and each one had on their name badge, you know, Sara "So and So," President, and the League of Women Voters of Waterloo Falls or something. All of the badges said "president." We were jammed onto an elevator, and this one poor lone man in the back who was there, not with our convention, looked around and said, "I've never seen so many presidents in my life."

And now we're in a room full of CEOs to talk to someone who can give us some thoughts about his experience as CEO of a truly exceptional company in the United States and one that has truly been exceptional in its philanthropic outreach as well. So it's my real pleasure to be here with John Morgridge.

You know, yesterday in the question and answer session after our dinner plenary, there was a question from the audience, and there was a young woman who was asking, "Where is the leadership of the sector?" Now we can agree or not on the issues about which she was asking that question, which those of you who were there will probably remember, but I would suspect that we're going to be hearing that question more and more in the coming weeks and months and perhaps even years as we experience a shaky economy, a government that is reordering its spending priorities and certainly a period of some personal insecurity for an awful lot of people in this country and elsewhere too. So we're going to be hearing that question, where is the leadership?

One prime example of the answer to that question is the man who will be holding a conversation with us this afternoon and who will address the afternoon plenary session on the relationship between good giving and good business. Now that topic is a particular currency right now in corporate philanthropy, but it also holds lessons for every single segment of the independent sector.

Now a brief biography of John Morgridge is in your conference materials, and I will mention only that he became CEO of Cisco Systems in 1988 and now serves as its chairman. He is widely known in philanthropic circles as an innovator, as well as a sound business person and one who has never lost sight of the fact that people are at the core of his success as an executive and his success as a member of the caring family of philanthropy.

Now Cisco has both a corporate giving program and a foundation that focuses on the company's core values of education, leveraging technology and employee involvement. And in his plenary presentation, John is going to talk about these three areas and Cisco's specific responses to them in an Internet economy, with special emphasis on workforce development, boosting nonprofit capacity in technology, and growing a new generation of philanthropists through their own employees.

Now, as CEOs, we all know the special responsibility for leadership that must come from the top of any organization, and I am inviting John to share some thoughts about that with us today, and we're going to have a conversation with him on the issues that are of such relevance to all of us as the CEOs of our diverse organizations.

So, John, I'm going to invite you to make a few remarks, if you'd like, or if you want to begin a conversation, however you want us to begin.

MR. MORGRIDGE: Well, I guess I could just make a few observations.

First, and you probably know this better than I, when you involve people, the development cycle typically is relatively long, and so you ought to take kind of a long view as to how you develop a culture or an environment that enables and encourages people to give back.

Certainly, in the case of Cisco, we started very early on with a number of programs, and I guess I was a little—we hire a lot of smart people, and I was a little surprised at how long it took to develop an insight and kind of a feeling that it was an important part of our business model, but I would say that in the 10-plus years that the company has existed—actually, it's about 15 years old, but it's kind of a public company since 1990—that it has come a long way and that the changes have taken place at all levels of our institution.

Certainly, starting with John Chambers our current president, he is very outspoken about the fact that he came into an environment where it was an important part of the culture. It took him a while to understand that and to see how important it was to the vitality of the organism, which is an interesting observation because he had worked for two very large international companies prior to that, and yet he came into our environment—and we were a relatively small company at that time. We were probably a $100-million company, as against a $20-billion company today—and yet he has gained an appreciation for it, an appreciation for it at a level where he is an active participant, both at a persona level and at an organizational and corporate level.

At the other end of the spectrum, we've been promoting outreach on the part of our employees for a long period of time, starting initially with a program of actually making our equipment available to, first, educational institutions and now pretty much on a broad basis of nonprofits, where our employees, at a relatively nominal cost, can donate equipment to either their school or their favorite charity, and yet it's taken a long time. We've had that program for a decade, and yet it's taken a long time for it to gain traction and understanding.

So I think that, as anyone in the giving field understands, it takes a long time to develop both relationships and attitudes. You know, it took the earthquake in India to finally cause our Indian employees to really come together. It was a little before, but they had come together and established their own charity, their own corporate or employee fund, but it was really the earthquake that energized them to give back to their native country, which was surprising to me because we've had a number of programs there where we've donated equipment, including a program with CARE.

It was interesting. Many of our Indian employees would come to me and say, "John, are you willing to donate this equipment?" Which was a little surprising in that all of them could donate equipment also.

So I think the thing that I've learned is that the evolution of a culture and the development of this giving back, it takes a long time to develop and that to really imbue in kind of the genes of the entity takes longer than you think. You have to stay to the task.

MS. RIDINGS: Well, he's talking about a length of time. I'm reminded of the fact that INDEPENDENT SECTOR considers itself a very young organization, and it just recently has celebrated its 20th anniversary, and Cisco didn't even exist when INDEPENDENT SECTOR was born.

MR. MORGRIDGE: No.

MS. RIDINGS: So there may be something to that longevity, and yet that's a really very short period of time.

I think we would also recognize, however, that both of those institutions, both INDEPENDENT SECTOR and Cisco Systems, has had exceptional leadership from its very start, so let's talk about that a little bit. So we've got to give some credit to that as well.

MR. MORGRIDGE: I don't know about the leadership. I think that it certainly is fundamental that the leadership have that vision because that is, they not only have to have the vision, it's got to be kind of ingrained in them. They have to have that passion.

The other thing I guess I would say is that I think the other thing that Cisco has done well is to think in terms of all of the assets that it has, rather than just the cash asset, think of all of the assets it has and, more importantly, assets that it doesn't have that it can leverage—assets that it doesn't have that it can leverage to carry out given tasks. I think all organizations have to think in those kind of terms because I think we think too narrowly, generally.

MS. RIDINGS: When you say "assets it doesn't have that it can leverage," can you give us an example?

MR. MORGRIDGE: Yeah, I'll give you an example of—one major example would be our efforts in our academy program, where we're now training—we're in 133 countries. We're training some over 200,000 students in technology and yet we don't own a classroom, we don't own a teacher. None of those students are our students. We don't provide the PCs, you know. Those are other people's assets. All we've done is provided the nucleus to energize and to aggregate all of those assets to accomplish a given task.

Certainly, I think that this country particularly has a lot of either underutilized or not totally utilized assets, and I think most organizations tend to think too narrowly. They tend to think that they really can only rely on those things that they control, that they own, that are theirs and yet we're a very rich country, in terms of assets that are available to us, and the key is to find out what is the enabling force that aggregates those to accomplish a given task. That often is not just dollars. That often is some other kind of capability.

MS. RIDINGS: I know you're going to talk about a lot of this, this afternoon.

MR. MORGRIDGE: Right.

MS. RIDINGS: You're going to talk about the education—

MR. MORGRIDGE: Yes.

MS. RIDINGS: —and your outreach in the technological, the digital divide, and so forth. I have to tell you on a personal level the things that have impressed me the most have been what I just think are such creative and innovative things that when I hear about them, I say, of course, that's such a natural, but somebody has to think of it.

Let me gave you the two examples that came to my mind when I thought about that. One was you have a workforce of some people who are experiencing wealth for the first times in their lives or they're going to be experiencing wealth. My information is that—

MR. MORGRIDGE: Maybe they did experience—

[Laughter]

MS. RIDINGS: Back up.

MR. MORGRIDGE: That was a great experience, by the way. I mean, they thoroughly enjoyed it while it lasted.

[Laughter]

MS. RIDINGS: Is your giving counselor still in place?

MR. MORGRIDGE: I think our giving counselor is still in place.

MS. RIDINGS: Okay. Because that's one of the examples. For example, they provided a grant—and correct me if I get all of this wrong, but this is what I've read about this—the Community foundation of Silicon Valley, another one of our members, to hire a giving counselor who worked at Cisco to be the adviser, and consultant and outreach person to their employees on how to give more smartly. Now I think that is extraordinarily creative.

Another one was, you know, like in any company of this type, there's going to be periods of business downturns, and certainly you referred to that a minute ago, and the necessity for some layoffs. I know in the past—I think this is on hiatus right now—but you had a program of fellows—

MR. MORGRIDGE: We currently have it.

MS. RIDINGS: Oh, it's still in place, where an employee facing layoff could take a reduced salary, but go to work full time for a nonprofit agency and lend their skills and talents to that nonprofit agency. Now, see, I think that's brilliant. Where did those ideas come from?

MR. MORGRIDGE: Well, you know, I think there are two keys to that. One is you have to have kind of a business environment that permits good ideas to be generated at all levels and within all structures of the company. So that certainly, and that's been true across in our environment in a lot of different areas, in terms of coming up with ideas and applying them.

And then the second is I think that you have to have an environment where it is very acceptable, as part of the company culture, to be creative in the way we do our giving back programs, so that you create the environment that permits those ideas to generate, to be germinated and blossom. Actually, the Academy Program was done the same—came from an employee who was a system engineer and, you know, I teach entrepreneurship at Stanford, and a lot of the students probably aren't going to start their own companies.

But entrepreneurship, as kind of a methodology, is important in all institutions. You have to have an environment that permits it to kind of blossom and be tested, and all of that I think is a tribute to the culture of the company, the fact that those two ideas, and many, many others, actually came to fruition within the company culture.

MS. RIDINGS: That takes more than just a suggestion box, doesn't it?

MR. MORGRIDGE: That takes more than just a—and I'll tell you what it takes. It takes management that's willing to listen to those ideas, to sit down and encourage people who express those kinds of interests.

I was at a meeting in Seattle here about 2 years ago. It was a community college, and they were looking for some directors, college directors, and they asked the local manager. And he said, "You know, in our company, not only are we totally free to do that, but we're encouraged to do it," and it's the latter that's important, the fact that they feel that they're encouraged to do those things.

MS. RIDINGS: And they believe that they will be heard.

MR. MORGRIDGE: And they believe that they will be heard.

MS. RIDINGS: We're going to go to the audience in just a minute, so prepare your questions, but I do want to turn for a minute to the after-math of September 11th because Cisco played a pivotal role in the establishment of the American Liberty partnership, which brought together six differing and competitor Internet companies. I'll name them. Since you're here, we'll give a little bit of credit to Amazon, and eBay, and AOL-Time Warner, and, boy, I didn't even write them down.

MR. MORGRIDGE: Microsoft.

MS. RIDINGS: Microsoft.

MR. MORGRIDGE: Right.

MS. RIDINGS: Did I get them all, and you all.

AUDIENCE PARTICIPANT: Yahoo!

MS. RIDINGS: Yahoo! Thank you.

MR. MORGRIDGE: Yahoo! That's right.

MS. RIDINGS: I'm embarrassed I forgot. But you all were the sixth partner and played a pivotal role on that. Tell us how that happened. How did that come about?

MR. MORGRIDGE: Well, you know, I think a lot of those things come about as a result of the fact that we've had, and I don't know that this is universally true in business segments or business, from a geographic standpoint, but certainly in the high-tech world there is a tremendous amount of cross-dialogue, cross-dialogue at all levels of the organization.

And that cross-dialogue—and this is with competitors, often. I mean, it may include competitors. It often does, in our case, include competitors—and it's that cross-dialogue that creates the environment that permits something like that to actually transpire, to cause to happen. So that our people who were involved in our giving programs, I know we've had dialogue and activities with Yahoo. We've had dialogue, fewer activities with Microsoft, a long list. AOL, all of those folks are aware of our programs. We're aware of many of their programs, and it's that kind of discussion that results in that kind of a coming together on a particular issue at a particular time.

MS. RIDINGS: Is it your observation that that same thing is true in other segments of the economy?

MR. MORGRIDGE: You know, my observation would be that it varies by industry and that some industries tend to be very insular and others, there is some, but I would say, as a general rule, and one of the reasons that this exists is because there's a lot of fluidity in the employees.

MS. RIDINGS: Of course.

MR. MORGRIDGE: So many of our employees may have worked for Yahoo or they may have worked at Microsoft, probably not AOL, but maybe a part of a company that AOL acquired, and that certainly provides a vehicle. You know, as I look at our competitors, we have people pretty much at all levels that have come from our competitor, and that in itself is a natural bridge if you permit that kind of—if the culture permits that, and it is very true in high tech, not all companies, but generally it's fairly true in high tech, I think less so in most other industries.

I would also observe, and as a matter of fact someone told me that a professor at one of the schools was going to do a study on the fact that high-tech CEOs talk to each other here in this country and don't anywhere else in the world.

MS. RIDINGS: Interesting.

MR. MORGRIDGE: That, you know, the president of Olivetti, he knows the name of, but doesn't talk on a regular basis to the president of Siemens or the president of Boole or the president of Ericcson, that it is unique, that John Chambers and I know Eric Veneman very well, you know, and periodically have coffee or breakfast with him. I think that's a trait that is unique to our industry.

MS. RIDINGS: Well, this leads me to think about the similarities in the segment that this group is involved with. There is a fluidity among our employees as well. Many of our employees will come from other nonprofit organizations, institutions, and bring with them a lot of learning and cross-fertilization.

MR. MORGRIDGE: Right.

MS. RIDINGS: I'm not so sure about how we do in terms of talking to each other, as you're describing, and we don't have the profit issue that we need to be concerned about.

I'd be very interested in any observations any of you have or your questions for, yes, right here. Bob?

Let's do this by the book. We'll introduce ourselves and who we represent.

QUESTION: Bob Stellar… I have two statements and one question.

You used the word "leadership," and there used to be a rule of thumb in corporate contributions that each corporation would take 2 percent of their net earnings before taxes and at least do that much in terms of contributions budgeted. I know John Whitehead and Paul Ostergard and some other folks are going around talking to CEOs trying to get that back in place. I know it's probably a very difficult thing to do now that the economy is waffling some. So I'd like to hear about that, where that is.

The second issue, there's a call for some leadership by a coterie of CEOs, as a lot of foundations and contributions officers are not given unrestricted support. If they just do that, they're doing their jobs, but they're giving out grants with a lot of restrictions that are making nonprofits jump through hoops that are a little foreign or on the cusp of their mission. There's a much greater need for general operating support.

And then my question is, is when is my Cisco stock going to go up?

[Laughter]

QUESTION: When yours does, huh?

MR. MORGRIDGE: No, no, no. That's the wrong answer. The question is how insightful were you in the purchase of your Cisco?

[Laughter]

MR. MORGRIDGE: You know, if you bought it at the public offering, you would have paid 6 cents a share, and 6 into $17 or $18 is not a bad return over a 10-year period of time, so everything is relative.

[Laughter]

MR. MORGRIDGE: Relative to the first question. Certainly, in my 40 years of business, I've kind of been exposed to different models of corporate philanthropy, all the way from kind of institutionalized United Way giving at a company to the Minneapolis model that held sway for probably a couple of decades, wherein there were very kind of premier Fortune 500 companies there, and there was an expectation, indeed, almost a requirement, that the companies set aside not 2 percent, but maybe 5 percent in their giving.

All of those are kind of foreign to our industry or at least to parts of our industry; certainly, all of the start-up companies in our industry. Those kind of cultural things are foreign, both because most of the executives were never exposed to them. They're too young to have been exposed to them, and I don't know that a fixed percentage really is a meaningful measure because what it says is it says that really all you're going to do is give money.

Now most of who give 2 percent, I'll grant you, give more than money, but it seems to me that the key to corporate philanthropy is what I call goal alignment. It seems to me that sustainable corporate-giving programs require some kind of self-interest in the goal alignment for them to be sustained over extended periods of time. Granted, you know, you can do the "one of" donation, but I think that the more meaningful ones are those that capitalize on the broader set of assets the company has and where there are mutual interests, mutual things that can be accomplished.

Certainly, in our Academy Program, there is a mutual interest. There is a shortage on a global basis of trained technologists, and it is a restriction on the amount of equipment we can sell because it limits the ability of our clients to install it and make it productive.

So there are parallel interests. Our ability to invest in that is enhanced as a result of those parallel interests between what the world needs and what we're attempting to accomplish. I think those are the best programs.

And I think, getting back to what Dot said, if you create an environment internally, you'll come up with those kind of programs. If you create an internal environment in the company, you'll come up with those kind of programs where there is the parallel interest, even to the extent, for instance, of the nonprofits. We're making an investment now. We're making an investment in bringing technology to the nonprofit world, and certainly there is self-interest in doing that. There is certainly self-interest on the part of Cisco in doing it, but it leverages off of all our capabilities and all of our assets.

You know, for me to ask our employees to go and tutor reading is a lot different than asking our employees to be supportive of a technology training activity at a high school, totally different kind of capability that we bring and that they bring. So I think that, going forward, more companies are going to have to think in this kind of a dimension, where the goals are at least tacitly aligned.

The second question was, you know, I think part of that is I think that it's a challenge across the board. It pretty much bankrupted the United Way in San Jose, and the reason it did is they were collecting money on a restrictive basis and giving it out based on their old formulas. So they created a huge debt to their donors and to a certain class of recipients, and it was that differential ultimately that caused them to get into serious trouble.

I think that part of it is incumbent on nonprofit organizations to think a little more creatively. I'm on the board of a small nonprofit called Interplast that does cleft palates and hair lips around the world and other reconstructive surgery. They have, for a long time, have had trip sponsorship at $30,000. You, as a donor, could sponsor a trip to India or Pakistan or someplace for $30,000. The problem was there was only $1,000, only $1,000 out of the $30- that was in there for, it was pretty much direct headquarters costs. It probably should have been $5,000. So the more trips they sold, guess what, the more trouble they got in because they didn't have the unrestricted funds to run the headquarters.

So some of it, it seems to me, is a case of how you package your donations. Unfortunately, I think the trend of specified giving is not a trend that's going to be truncated in the near term. I think a lot of the new givers that are coming into the community will start out that way. They'll say I want the money spent specifically on, and so it is something, and I don't have an easy answer, other than I think you do have to think in terms of incorporating in those programs more indirect costs than most people have done today.

They always say, yeah, well, your overhead is too high, so I'm not going to make the donation, but it's a challenge.

MS. RIDINGS: Yes. Right there?

QUESTION: I wanted to go back for a moment to the question with respect to the aftermath of the September 11th attacks and whether you have looked at how you conduct your businesses around the world, both the hard stuff and the soft stuff, and are you reviewing that? Do you think you're going to have to change the way you've been doing business in response to that?

MR. MORGRIDGE: Now are you talking specifically relatively to business or are you talking specific, in a more general sense, or specific sense relative to our giving?

QUESTION: I think because you're in so many countries in such pivotal parts of the world, I'm talking both about your business operations in those countries and your community relations approach in many countries where you're doing business, particularly those like India and Pakistan, where we now have so much attention being paid to the attitudes about America and about America's agenda.

MR. MORGRIDGE: Well, actually, as the company has become big and broad, we have had focus in this area, and we've had focus, particularly in terms of our philanthropy and our giving because initially the vast majority of our employee philanthropy, not unlike the U.S. model, has been locally based.

Last year was the first year that we did a worldwide food drive, a worldwide food drive, where we've always had our Cisco Foundation has always done matching of employees' donations, but we really didn't put a lot of emphasis or we didn't really cultivate, we didn't really cultivate our global giving, and particularly the giving by our employees outside the United States. So this year we're going to do even more.

Certainly, one of the things that we did do, in our programs, was we attempted to reach a lot of countries in the world. A year ago John Chambers made a commitment to put our academies in schools in half the least-developed countries of the world, and we've more than accomplished that. So we have given it its special focus.

In terms of a rather subtle part of our business, and we're not unique, but we have very few Americans that work outside the United States. We have very few Americans that work outside the United States. All of our management structure, almost all of them are nationals of the country that they're living in or, if they're not nationals of that country, they're nationals of some country other than the United States. So, culturally, we've had that kind of huge blending for a long time.

I guess that I would observe, and this is not a corporate observation, but it's just kind of a basic observation, a lot of the world lives with a lot higher risk than we do in this country. I mean, they do. I mean, our employees in Russia live with a lot more risk, although some of them would say not currently, higher risk than we have here. Certainly, all of our employees in Colombia live in a higher risk. Those in Mexico live with a higher risk. We, as a nation, are going to have to learn to live with a higher risk. We, as a company, are going to have to live with just kind of a basic higher risk.

Now that's got a lot of implications. It says that security has got to be more important. Security has been important in our company. Going forward it will be more important in terms of the company. I don't think we backed off the fact that we are an American company, you know, that's where our headquarters is. We're probably less of a significant presence because of our size than, let's say, Microsoft, on a global basis. Sometimes it's good to have big brothers in your industry. But I don't know that we've really changed—we've probably energized a number of programs and specifically global sensitivity at a higher level than we've had in the past.

One of the things that is unique about the company is that we are a network-centric company, and as a result, we are probably the first global company that has that kind of a cornerstone, and I'm amazed at how that capability creates a corporate identity that is not a national identity and that creates a corporate culture that is universal, as against a collection of national cultures that are brought together under an umbrella name, which is pretty much what you saw in global corporations of the 20th century, where there were more holding companies of national—IBM being an example; you know, IBM Japan was a lot different than IBM Argentina or IBM Deutschland or IBM France. Ours tend to be the same kind of characteristics—you see the same set of cultural characteristics across the company.

MS. RIDINGS: Boyd?

MR. GIBBONS: Boyd Gibbons, president of the Johnson Foundation, Wingspread, Racine, Wisconsin.

I would like to ask if you would address our own backyard. I think it is easier to think globally than it is to act locally. Our democracy is stitching itself in civic engagement, and that's probably the most difficult aspect of the business. Do you find among other corporate leaders an interest in seeing how companies, their employees, as individual citizens, can get engaged in public life and what companies can do to encourage it?

MR. MORGRIDGE: Well, it strikes me that this gets back to the earlier discussion of assets and the broad definition of a company's assets. The key, in my mind, is to undertake programs that capitalize off of the human capital that you have in your company. In our case, that's reasonably easy to do. My wife and I have been involved in a school district in East Palo Alto called the Ravenswood School District, which has quite frankly struggled for a decade with technology, some of it ours, some of it from our competitors, but they recently attempted a fresh start to try and bring their network together and make it functional.

It was easy for me to engage one of our employees. It happens to be a gentleman who I probably only met once, other than via voice mail, although we've had a fair amount of dialogue on the voice mail, and he became engaged in that school district and, in effect, over a period now of about a year has finally helped them stitch together that. Now, in his day job or in his 7-by-24 job in our company, he does the same thing internally to the company. I think those are the kind, you know, when you talk about engaging your people, I think that those are the kinds of things that work the best.

I was with the CFO of a very large U.S. company, and he was talking about a project that they had where they used their employees to teach math and science, and he talked about how difficult it was to get it to scale and to make it effective. I think that speaks to the idea that sometimes you have projects that you attempt to engage your employees in that they don't bring any particular special skill sets to. As a result, it is very hard to get it going.

The other side of the coin is that our people in Raleigh 2 years ago did the networking for the Special Olympics, I mean, just a natural set-up, and they did an excellent job. They also got the kids out of our academies and the high schools locally in Raleigh-Durham area to help them design it, to install it, to run it for I guess it was along not quite a week that they had the Special Olympics. Did a superb job. That's a very good tie-in between the capability, our products, our people, our partners in taking on.

Now I think those are the kinds of things that you have to think in terms of. Yeah, you can always do the "one of" Habitat build for a day, but for sustainable activities, I think you have to have more of a parallelism between your interests, and your capabilities and the requirements of the nonprofit that you're engaging.

MS. RIDINGS: Peter?

QUESTION: Yes, I'm Peter Goldberg, and I'm president of the Alliance for Children and Families, headquartered in Milwaukee.

I want to follow up a little bit on Boyd's question, taking a slightly different context or a different application of it, which is around the issues of the leadership development. I imagine that in an organization like Cisco, much like many of our own organizations, we're doing all kinds of leadership development activities, but I'm a little bit curious about what kind of leadership development activities take place in an organization like Cisco. And as part of that, is there exposure to principles or values or issues around corporate social responsibility, and some of those larger external issues, external to what the operating environment of Cisco might be, that of part of the culture of leadership development in a high-tech company like Cisco.

MR. MORGRIDGE: I don't know that I have a good answer to that. The thing I would observe is a couple things. Certainly, employees always look to what you're doing. What are you involved in? What are you saying? How are you participating? When I say "you," I mean you at all levels in the structure; you as the vice president, you as the director of some part of the group, you as the individual contributor and how the organism reacts to your participation.

In terms of actual training, you know, training in our company takes place in a lot of different ways, but I would say the vast majority of our training is not training in a setting such as this. The vast majority of our training is done on the Web. Our employees and our managers they get their training in that environment.

You know, we just went through a very difficult period. We laid off 8,500 people, but I think that almost universally, both those that were laid off and those that carried out the program would say that it was well planned, they were well trained, it was very clear, in spite of the fact that the layoffs took place in 67 different countries around the world, under all different kinds of legal requirements, but we trained all of the managers that had to carry that out in advance. The training was all Web-based on demand, and we did it in 60 days. I don't know of a single lawsuit that was generated out of that layoff.

Now, granted, the company set a high standard. We gave 6 months severance to all of those employees, and most of those employees probably were with us less than 3 years, most probably less than 2 years. So it was generous, but that also speaks to the kind of company and the kind of culture you have. You have that kind of internal culture, it speaks to the kind of external culture that the company is going to have. I don't think there is one specific way to do it. It is a whole combination of things that you have to undertake and do.

I spoke the other, here, what was that a month ago, at the Advocacy—what is that—Child Advocacy? Are any of you familiar with that program, where employees can become a child—well, people become advocates for children where the parents are not qualified, and they in effect live—in effect, they become the parent mentor, the parent guardian, not necessarily mentor, for the child over a fairly extensive period of time, as they go through the courts, and they may end up maybe in a foster home and ultimately placed.

I was not knowledgeable on that. I had never been to it. They had a benefit. One of our vice presidents asked me if I would go and speak. I went and spoke. There were a dozen, out of our 40,000 employees, a dozen of them are advocates in that program. It sends a message, and that message ripples, you know. It's that kind of thing that you have to do.

Now we're fortunate that we have a chairman who doesn't have any operating responsibility and can attend sessions like this. If I were the CEO, there's no way I could sit on this—spend this time. You're too valuable an asset.

That's the other thing you have to think about in your organizations, it seems to me, is that you establish someone not necessarily just the one that writes the checks and buys the tables, but someone who is involved in the community on a personal level and becomes a spokesman for the corporation, and that has a double benefit. It's got an external benefit, but it's got a very important internal benefit; the fact that you're there, that you'll go there, that you'll speak to that group.

MS. RIDINGS: Way up there on the aisle.

QUESTION: Bob Edgar, general secretary of the National Council of Churches.

Prior to September 11th, there was a lot of conversation about faith-based initiatives. After September 11th, there was a recognition that Christians didn't know very much about Muslims, and there was not a lot of interfaith conversation. I noticed, as someone who has to raise money, that a lot of corporations have a restriction about giving to church or church-based or para-church organizations.

I wonder, in light of September 11th and our need to have more conversations across faith traditions, whether or not you would encourage both corporations and foundations to think about ways to engage more with the religious community?

MR. MORGRIDGE: I would make just a general observation that faith-based organizations fall in the category of potential latent assets that you can leverage. As an example, we actually have Academy programs in churches in the UK now. You don't normally think of churches as being good venues for training people in technology, but as it turns out, in that particular country, churches represent the social institution that a lot of the folks that are economically challenged and new to the country kind of bind to. Therefore, that is a wonderful vehicle to reach that particular community and probably would be difficult to do, even through their educational institutions, which maybe the traditional folks in a country are aware of, but someone new to the country may be a little less comfortable with.

So, in that context, I would agree that they represent a potential leverage item, an asset that could be deployed and used in a lot of different ways. I am familiar with a charity that actually uses faith-based activities in Africa as their vehicle for a micro loan program, as an example, because they are reasonably stable and they have insight into the community relative even to the level of skills of the folks receiving the loan.

So I think, in a broader context, I don't know that it, in and of itself, is a focus, but in a broad context, certainly it has meanings. One of the ones that we're very involved in, in San Jose, is an emergency housing program that is basically a faith-based program, and they do a particularly good job, and so we, as a corporation, have funded them, and certainly we've done funding of those kinds of things through our matching grants, in addition to our specific grants.

So, in that context, I think it is an asset that should be looked at and used where it's effective.

MS. RIDINGS: Over here.

QUESTION: I want to commend you on your philosophy and your approach to how you addressed your layoffs. But I found myself thinking about the woman, Mrs. Anderson, that we just heard speak about her values organization and the fact that they are approaching layoffs.

I was wondering if there is—I have two questions. One, is there a way for those who work in the corporations to partner with those who work in the nonprofit sector to hurdle these times and share some of the ways to effect these layoffs that will not have such dreadful impacts. Having worked in the corporate sector myself, I know there's a difference. You plan differently, you plan for when you're going to get back up, and to also have the profit that you made to buffer during that period.

And then the second part of the question goes back to the question about unrestricted funds. Projects are sexy. Programs are sexy, but is there something that we could do to give the message that, in these times, we need to fund operational costs for nonprofits, and we have to give unrestricted money during these periods as an investment?

MR. MORGRIDGE: Relative to the first program, the first question, one of the things I would encourage nonprofits to do, and certainly corporations have done that, is that you identify carefully your core mission, and you develop the expertise and capability there, but for a lot of the other kinds of activities that you have, that you do like we do, and that is that we buy that capability.

Now, ultimately, that may result in someone being laid off somewhere, but it's a little different than the stress that an organization takes when it lays off. When you disengage a couple of consultants, that's a lot different than when you have to lay off someone, where it's their only source of income. I think that corporate America has, over the past decades, become much more adroit at using, at hiring certain capabilities rather than making it, encumbering it as part of the base organization. This also gives you more flexibility vis-a-vis restricted and unrestricted funding because you have some control over that spending.

I don't know that—the only advice I would have in that is that I think it's important that all nonprofits have some kind of a mix of business capability on their boards, and I think that's important because I think, like a business, it's important for you to stay in tune with how the economy is performing because it reflects what your expectations are going to be for the next fiscal year or 2 fiscal years out.

Last year, Cisco raised $3.2 million, I think it was, for food programs mostly here in the United States, a little of it elsewhere. I told the Second Harvest people, I said, look it, don't start any programs this year that you think are multi-year funding because you're not going to have that money. The money, just based on where the economy stands at the end of last year, you are not going to have that money next year. We aren't going to be able to raise that. The economy is not going to be of a nature where you can raise that kind of money.

So I think it's important to have business people on your board to help you plan through those periods. It's no guarantee, and you're still probably going to face it anyway.

What was your second question?

QUESTION: You said the trend is going to be your, you know, restricted or [inaudible], et cetera, [inaudible]. But I am asking is there something that we can partnership to educate people that this is not the time to tighten money?

MR. MORGRIDGE: Relative to restricted and unrestricted.

Certainly, you can start with your board members. Typically, they are a source of funds. Anyone in a nonprofit who has their boards give restricted funds is not getting the message out, and I am sure by now they are getting the message out, but it's probably a message you ought to build into your briefing for board members as you go forward, so that they are very clearly advised.

Now, then you can't be unfair to the board member and then come around and present them with projects all the time and ask them to fund the projects. I mean, you can't play it both ways. If you are going to have them as the source of unrestricted money, then don't challenge. Companies face those kinds of challenge relative to product mix and margin mix on their products and so on. It seems to me you should be able to work through that.

MS. RIDINGS: John, and then I'll come back over here.

QUESTION: I want to ask a question about the measurement of the impact on grantmaking programs it seems to me is an important issue for foundations. I want to know if you at Cisco have attempted to do measuring [inaudible] results of your grantmaking programs and, if so, if you have any conclusions with which you can share with us.

MR. MORGRIDGE: I think it's very hard to measure the impact of programs where you're not the project manager. When you're the project manager, then I think it's much easier for us to measure, and I'll give you some examples.

Certainly, in the Fellows program, we are the project manager, and we will, at the end of the year, having put those fellows out in nonprofits, come to a conclusion about how effective it was, and what was good about the program, what didn't work in the program, what we change in the program if we either carry it on or do it again.

Likewise, with the Academy program, where we are the project manager. We run that, so we have very good insight into what we've accomplished, what it's cost us, and not so much on the outcomes. If there's any weakness, we haven't—we know how many we've graduated. We've graduated 45,000 from the program in the last 4 years, but I can't tell you what they're doing and whether or not they have good jobs, and ultimately that is the test. It's not just for them to graduate from the four semesters.

I think, on the other side, what we've typically done is we've been pretty involved in the people we've given money to. So we have employees that are engaged in those organizations, and so we get an insight, a general insight, particularly on those where we've given significant amounts of money, and those would be the Second Harvest programs, both the one in North Carolina, the one in San Jose, the one in Boston, where we've given large amounts of money, but I don't think we have any particularly good formula or methodology to answer your question specifically.

MS. RIDINGS: The very top—is that Sandy?

QUESTION: Yes. I'm Sandy Cloud, the president of the National Conference for Community and Justice.

John, instead of Dot Ridings sitting by your side, the person who is sitting by yourself is the president of the United States of America, and he's brought you into the office, and you've got a very quiet, reflective conversation going on, and he asks you for your really deep and reflective thoughts about September 11th, post-September 11th.

The question he asks is what are we doing right in the world and what do we need to be doing a little bit better; particularly as someone who is a senior business person in our country, very well-respected, you've got a global operation, that we ought to be thinking about doing that maybe we're not doing today?

And, secondly, he asks you what's the unfinished business that we ought to be attending to post-9/11 as a result of what's happened?

MR. MORGRIDGE: You know, I'm often asked to give a 5-year forecast, and one of the things I say is, with things that insightful, I'd need an awfully good bottle of wine. I don't know that the answer would be any better, but I would think the answer was better.

[Laughter]

MR. MORGRIDGE: You know, it's interesting to me that, and maybe you have the same feelings as to how people feel about America. It's strange that I think it's different about how they feel about America and how they feel about Americans, how they feel about America and how they feel about Americans. I think there are a lot of people in the world who know Americans and have very positive feelings about them. For some reason, that doesn't seem to materialize in how they feel about America. Maybe America is just too powerful; where, as an individual, you don't represent that power in quite the same constraint.

I was at my 50th class reunion, and all of us wrote a little biography about what we've been doing, and one of our members had traveled, had spent a lot of his life in the Middle East, and I asked him the question how come the Arab world hates us?

And he told me a story about living in Cairo for a year or two years and how he had developed this very strong friendship with an Egyptian lad. He couldn't figure out how the guy could hate America so much and still have this friendship.

And he said, "Well, that's different." He said, "I like Americans, I just hate America." And I think there are a lot of factors that are involved in that, and I don't think there's any easy solutions to how we adjust it, but certainly our ability, our ability to fly around the world and bomb people probably endear us to most of the world.

I really don't know what's required to change that. I will say one thing, and that is—and I've learned this at a kind of a very much smaller level—and that is that in the Bay area, we/Cisco have had some challenges, particularly, well, perhaps the best example was the land that we bought in South San Jose for a big installation, and there was a lot of contention around it.

Ultimately, it was passed, and we were supported unanimously by the City Council, and the reason was that the person from the homeless shelter, the Second Harvest Food Bank, the Center for Battered Women, there were probably three or four others, got up and said, hey, this is a great company. They're a wonderful part of this community. We should encourage them to stay and grow here.

I don't know that America, in total, has figured out quite how to do that yet. You know, we're one of the most giving people in the world, and both domestically and even at an international level we're a very giving people. Yet, somehow we've never quite figured out how to bring that factor and the people that are recipients, who are very good friends of ours, to kind of get them to step forward and articulate it.

I think any institution can face that. You have to think about it, and you have to be active in attempting to address it. I don't know we, as a people, whether we have done that very effectively, either in the United Nations or in any other form around the world.

I don't know if that's a good answer. Oh, and I'd make one other observation, and that is that, you know, one of the things our corporation has been very good at is we may not be the greatest strategic planners in the world, but we're very good at executing, and we're particularly good at executing in times of dislocation, times that, if you've ready Andy Groves' book, which it's not a book that this community would probably read, called, "Only the Paranoid Survive," but he talks about inflection points, inflection points in the corporate history, and the action that they take at the inflection point.

We are at a very dramatic inflection point. What an inflection point does is it disassembles a lot of prior kind of arrangements and relationships and presents an opportunity to rearrange those, to recreate them in a new form, to do new forms of things, and I think we are there. We, as a country, are there. I think a lot of organizations are there, and I think it's an important time to think about it and take action.

I think this country, as an example, is open to a call to action over and above just finding the terrorists, over and above just finding the terrorists. There is now an opening where someone, some leader, could capitalize on that for a new call to action. We've seen it in our history. I mean, it's been done by presidents and other leaders at various times in our history. I think we are at such a point. I think it could be done.

Sometimes the plan is not as important as calling it and getting people mobilized to do it.

MS. RIDINGS: And there were lots more hands, but the clock on the wall is telling us that John is just 40 minutes away from a major plenary presentation, and we probably need to let him have at least a sip of water and a little respite so that he can do that task.

We are all looking forward to that, but meanwhile, thank you so much for joining us.