Xerox was having difficulties when newly appointed CEO Anne Mulcahy took over the helm in 2000. It got into even deeper trouble the day she was announced as the new CEO when the stock took a 15% plunge on the NYSE. Not exactly a vote of confidence. A 27 year Xerox veteran, Mulcahy took charge when Xerox was going through its second consecutive year of steep losses. Bankruptcy rumors were starting to rumble in the background like a fast approaching thunderstorm. Hoping to get some financial advice on how to turn the company around she consulted Warren Buffet, the famous US billionaire and investment guru. Rather than giving her the financial advice that she thought she was seeking he instead encouraged her to do a walkabout of Xerox. He told her to learn about the people she would be leading and the customers she’d be serving and worry less about the shareholders and financial analysts. Taking his advice to heart, the new CEO logged over 100,000 miles in her first year on the job visiting Xerox locations and customers around the world.1
In her ‘walkabout’ visits Mulcahy’s goals were simple, to boost moral and to listen to employee perspectives about what was wrong with the company as she encouraged people to ‘tell it like it is’. She would later tell a business school class “when your organization is struggling you have to give people the sense that you know what’s happening, and that you have a strategy to fix it. Beyond that, you have to tell people what they can do to help.” She went on to tell her audience that “effective communication, especially in a time of crisis, was perhaps the single most important component of the company’s successful turnaround strategy,” 2
In all her travels and listening Mulcahy was also very firm. The other message she delivered was that she expected total support from the Xerox team. In no mixed terms she directed her charges to go back to basics, run lean and work hard for the team or leave Xerox. It was a tough message, but it left her with a dedicated workforce aligned around a common set of objectives.
Early on, Mulcahy set a goal of reducing costs by 1 billion dollars in her first year. As part of reaching that goal seven thousand Xerox employees were laid off and many non core assets were sold. While cutting costs she made a commitment that savings would not come from core areas of business and in fact she increased spending on R&D, Engineering and other key areas.
Between company visits she also took the time to listen to her customers. They told her what they most wanted was a partner who could save them money and help them better serve their customers (imagine that). In practical terms for banks that meant creating personalized client statements and for law firms it was sorting and printing large quantities of electronic documents for litigation. Xerox clearly saw the opportunity to focus on services and in 2002 launched its global services group which is still one of its fastest growing business units today.
When looking back today and talking about the strategic planning Mulcahy said strategic choices can be “roughly right… but the real precision comes from your ability to adapt”. She could have been paraphrasing Dwight Eisenhower who said “In preparing for battle I have always found that plans are useless, but planning is indispensable”. From an initial drop of 15% Xerox stock has quadrupled under Mulcahy’s tenure and likely the best is still in front of them.
What can we learn for Xerox?
- Strategy is about making tough choices – make them!
- Even in tough times, invest in opportunities
- Communicate with your employees – especially in times of crisis
- Make commitments and expect commitments
- Develop strategic plans but adapt as circumstances change. (Plans are ” more of a guideline really” as Captain Barbossa from Pirates of the Caribbean would say)
“The skill is to stay connected to customers and to move quickly to capture the opportunity or avoid a risk” and Mulcahy has shown us how to do this expertly!3
For further reading on Xerox and Mulcahy:
1. Cognitive Fitness R Gilkey and C kilts HBR Nov 2007 PP 562.
2. Mulcahy Took a No-Nonsense Approach to Turn Xerox Around” Stanford Graduate School of Business News December 2004′
3. We saw the opportunity’ NEW YORK (Fortune) October 9 2006– Fortune interviews Anne Mulcahy, CEO, Xerox Corporation Interviewed by Eugenia Levenson
4. From VPHR to CEO — Xerox’s Anne Mulcahy October 19, 2006 By Elaine Quayle, White paper by HR Blr.com
5. Anne Mulcahy Time on line Sunday April 30 2006 Dodi Tsiantar
6. Anne Mulcahy Has Xerox by the Horns May 2003 Business Week