“The most painful decision I ever made was three to four weeks ago … I made the decision to lay off 4,000 people.”

So said Cisco Systems Chairman and CEO John Chambers at the CEO Forum in Raleigh on Wednesday.

Chambers added that while he is not proud of a recent decision that he made to cut some 5 percent of the networking giant’s global work force, he does believe it is the right decision for the long term success of the company. Cisco announced the job cuts a week ago despite a strong earnings report.

“It was purely that we had to transition from this inconsistent market,” said Chambers of the layoffs, “and if I did that in the old world way, our company would miss opportunities and we would be become roadkill.”

Prior to today’s event, a Cisco spokesperson said that the company had no specific information about layoffs at Cisco’s office park in the Triangle. The office in the Triangle is Cisco’s second largest corporate campus in the United States, with more than 5,000 employees. Chambers spent Wednesday at the Triangle campus.

“We are hard to beat,” said Chambers, “and we’re not a perfect company.” The company, said Chambers, “always does the right thing,” even if shareholders, or others, aren’t happy about the decisions.

“This is the hardest economy to read that I’ve seen in my life,” said Chambers, arguing that it is the inconsistency of data that currently drives the business decisions for companies.

It is the very fact that the market is inconsistent and volatile, said Chambers, that makes good leadership so important.

Leaders must know how to stay the course and how to adjust, said Chambers, given the current volatility and pace of change in the market. The pace of change isn’t just accelerating, said Chambers, “it’s growing exponentially.”

Some other key points:

  • “[Change] happens in our industry at a tremendous pace,and it’s about to happen in every industry.”  Because of this, leaders must “build a culture that can adjust to change.”
  • “All of us will get knocked on our tail and how you handle that will determine the success of your company.”
  • “At Cisco, we pivot on two fronts; we don’t compete against competitors, we compete against market conditions.”
  • “We are not an Apple, or a Steve Jobs, we move based on our customers.”
  • “Catching market transitions is the way I pivot.”
  • “The ability to move across products is something we decided to do early on.”

Part of Cisco’s strategy, he added, is an aggressive acquisition strategy.

“Any time we move into a new market, we do it with acquisitions,” said Chambers.

Cisco has acquired more than 150 companies, said Chambers, and approximately one-third of these companies fail. It’s a ratio that Cisco accepts, said Chambers, because taking risks is the only way to maintain a competitive edge.

When considering an acquisition, said Chambers, he asks two questions: “is this acquisition something that is strategic for our future,” said Chambers, “and can it help me get 40% market share in a certain industry?” The number isn’t that important, said Chambers, it’s the discipline and strategy behind the decision.

“When I buy a company,” said Chambers, “I am buying it for $1-2 million per employee.” They’re big bets, and the company assumes a lot of risk.

Yet, the company makes these acquisitions because it gives Cisco “the ability to capture market decisions,” said Chambers, “and then tie it all together.

The rationale behind the layoff, explained Chambers, was to stay competitive in emerging market decisions based on data from current Cisco customers. It’s a risk, said Chambers, but it is one that Cisco must make.

“I have every competitor,” he added, “the minute they stop taking risk.”