Silicon Valley-based Cadence makes the software used to design the electronic chips in almost any tech product you can think of. When the 2008 recession hit, and the market questioned Cadence’s future, the company’s leadership looked to its culture for the answer. Inspired by an unlikely venture capitalist-turned-CEO who practices purposeful and inclusive leadership, Cadence re-engaged its highly skilled and experienced workforce and wooed skeptical customers.
Under CEO Lip-Bu Tan’s For All Leadership strategy, Cadence upgraded its culture, began a journey towards Innovation by All, and achieved a financial renaissance. Today, nine out of 10 employees say Cadence is a Great Place to Work. And with the company earning a place on Fortune’s 100 Best Companies to Work For list for the past five years, the company’s stock has also more than doubled the performance of the NASDAQ over the past five years and it continues to achieve increasing financial results. Now the market is turning to Cadence for answers—especially when it comes to chips and culture.
Cadence is the second largest Electronic Design Automation (EDA) company in the world. If you have wondered how mobile companies can provide you with a new phone with significant advancements in capability and power every two years, it's because of the tools Cadence provides to its chip designers. But on October 15, 2008, Cadence’s future looked grim. That’s the day Cadence’s CEO, and four of his direct reports all stepped down. “I went from being the most junior person at the table to one of the senior people overnight,” says Tina Jones, head of human resources. “The culture had become very bureaucratic and siloed. To compete, we needed to move quickly, as one team, which meant changing the fabric of our employee culture.”
The semiconductor industry goes through notoriously volatile boom and bust cycles but 2008 was different. The global economy began the largest recession since the Great Depression, just when Cadence was changing its business model. Investors fled the stock— pushing it below $3 a share after it had been trading at more than $24 a share the previous year “Cadence is an integral part of the overall design ecosystem. Many companies cannot put out their products without our technology. But when the stock went down to $2.42, it was a terrible experience,” says Neil Zaman, the head of global sales and a 20-year Cadence veteran. “You lose credibility with the employees, you lose credibility with the investors, and you lose credibility with the customers in the ecosystem. That was the incredible challenge we faced.”
Cadence had to choose a new strategy for its survival. It chose culture, which would be a long-term effort, new and uncertain, but ultimately effective. Before 2008, Cadence had a short-term, financially driven culture. At the time, Cadence's revenue recognition model focused primarily on quarterly bookings. The company’s overall revenues grew, but the approach compromised the predictability of future revenues.
Jaswinder Ahuja, Corporate VP and India Country Manager describes the culture saying, “The leadership was looking at the rear view and driving. We were too fragmented or siloed. Collaboration across groups was at an all-time low of what I have seen in 30 years.” Tina Jones, global head of human resources, adds, “It was this cycle at the company where every quarter was serious pressure, serious stress in the system and lots of pressure with customers [to do deals]. It was a very financially and sales-driven culture.”
Then in the second half of 2007, Cadence changed the business model to one more sustainable long-term. But revenue decreased from $1.6 billion to $853 million from 2007 to 2009. Against this backdrop, Cadence’s cost base, including its highly skilled workforce, looked expensive and Cadence fell out of favor with the market as the economy and stock market slid into chaos at the end of 2008.
New leadership was in order. And it would be a surprising choice.
For the full story, read Cadence and The Culture Cure today.