LOGO

Anne Mulcahy:
Leading XEROX through
the Perfect Storm (A)
Submitted By: Group 5

Amit Baweja (306)

Neeraj Gupta (320)
Nishant Kumar (335)
Kshitij Shukla (356)
Marie Françoise Marcaggi (386)
Tamara Mareschal (389)
 Contents

1 INTRODUCTION 5 NEW LEADER

2 XEROX: HISTORY 6 CHANGING LEADERSHIP AGAIN

3 REINVENTION 7 ANNE MULCAHY

4 NEW STRATEGY 8 SURVIVAL?

 Company Logo

Contents

9 THE OCTOBER 23 MEETING 14 THE BANKERS

10 THREE STRATEGIES 15 FINANCIAL CONDITION

11 TURNAROUND STRATEGY 16 LEADERSHIP

12 EXECUTING THE PLAN 17 STRATEGY IMPLEMENTATION

13 S.E.C 18 QnA
 Company Logo

Introduction
• Anne Mulcahy: COO of Xerox Corporation
• First Annual loss in 5 years
• “Xerox’s business model is unsustainable”
• Rumours by Reuters about company going to declare
bankruptcy
• Stock prices fell to $6.88
• Facing liquidity crunch
The Perfect Storm
• $ 18 bn in debt
• Market capitalization dropped to $5 bn
• Outside advisors pressurizing to file bankruptcy to
relieve Xerox from debt
• Mulcahy trying to avoid bankruptcy and get time to
implement plans to restore the company’s former
image
 Company Logo

XEROX: History
• Started in 1959 with the model 914 copier
1959 1968
Sales $32 mn $1.1bn
Employees Strength 900 24000

• 95% share of the plain-paper copier market

share by 1970

Get me 5 Xerox of
my resume !!! Get the
notes
Xeroxed !!!
 Company Logo

XEROX: History
 Company Logo

XEROX: History

GUI Laser Printing

Computer Mouse PARC Bit Mapping

Ethernet Protocol OOC Languages

Idea of “Windowing” Computer Application

 Company Logo

REINVENTION

Entry of new player like Canon, Minolta,

Ricoh and Sharp Entry of new Players

Monopoly of XEROX gone

License tech to Competitor
Lawsuit Filed in
Federal Trade
Commission Lawsuit Filed
Due to
Overwhelming
Success Anti-Monopoly Pressure
REINVENTION

TEAM
Leadership
XEROX
through
Quality
 Company Logo

REINVENTION
• Profit growth very low, stalled in early 1990s

• Finding difficult to cut cost because

• Employment level fixed by Union Contracts
• Production was vertically integrated

• CEO Paul Allaire in 1992 created

• Three geographically defined sales organizations selling
products from nine product divisions organized around market
segments
• Individual balance sheet, income statement
• Eliminated 10000 jobs and divested insurance business.
 Company Logo

REINVENTION
 Company Logo

NEW STRATEGY

 Organized into four business division.

 Production Printing and Retail channels business

were two new division

 Each Division used latest technologies in networking,

color ink and digital processing

 XEROX desktop printing business in direct

competition with H-P
 Company Logo

NEW LEADER
 Late 1990’s investor expectation for XEROX ran high

Get rid of slow Board brought

Investor Richard
Expectation
and cumbersome
bureaucracy at Thoman as
High president
XEROX

To Spark Thoman
Profit & excellent
Stand performance
Expectation at IBM
 Company Logo

NEW STRATEGY
 Richard Thoman (CFO IBM) appointed as President.

 4 Geographically oriented customer administration

consolidated into 3 customer business center

 Build service business through acquisition and buy

out partners stake in overseas joint ventures

 Fuji shares of Fuji Xerox

 Stock price went up from $30 to $ 60.

 Company Logo

NEW STRATEGY
 Issues due to reorganization:
 Sales reorganization led to
• Disrupted customer relationship
• Sales team member lost year old client relationship
• Sales team members left XEROX for another company
 CHANGE
Administration Changes OF
led to
• Increased billingLEADERSHIP
issues
• AGAIN
More complicated pricing plans
Sales team looking for new business, had to cut prices sharply leading to
decrease in profitable contacts
 External Issue
 End of domination in production printing (Heidelberg, canon etc)
 Global financial crisis (ASIA to Latin America)
 Market Shift
Early towards less margin product
2000 Stock declined
from $60 to $20
 Company Logo

CHANGING LEADERSHIP AGAIN

 Thoman was just elected so there was no successor

 Allaire suggested the name of Alan Mulcahy,

president of General Marketing Organization (GMO)

 Allaire resumed as CEO and Mulcahy as new

President and COO
 Company Logo

ANNE MULCAHY
 Started in sales (10 yrs)
 Early 1980, promoted to Management,
charged with organizing a sales team
 Promoted to VP HR in 1992
 Joined Barry Rand (VP Worldwide Ops)
team in 1996
 Became Chief Staff Officer in 1997,
reporting directly to CEO, Allaire
 Not much interested in the role of Chief
Staff Officer so grabbed an opportunity
at GMO (Web & Retail sales)
 Company Logo

ANNE MULCAHY
 Launched SOHO (Small office and home
office)
 Venture in Desktop Printing
 Competed with Industry Leader H-P
 Became COO in May, 2000
 Assembled the team – met 100 top
executives (Leadership)
 Extensive fact-finding tours
 Visiting employee operations & major
customers
 Except SEC, dealt with everything
 Realized that everyone was unaware of
the seriousness of the situation XEROX
was in
 Company Logo

ANNE MULCAHY
 Leadership traits of Mulcahy
 Be informed
 Be calm and confident
 Provide clear direction
 Develop an action plan
 Leverage your supporters

 Initial plan
 Save each dollar
 Personal attention to customer
 Incentive and benefits to sales team
 Company Logo

SURVIVAL?
• Liquidity
THEcrisis increased
BUSINESS MODELdue to shrinking profits
OF XEROX IS
• XEROXUNSUSTAINABLE
turned to short term debt to shave interest
expenses

• The tactic of taking short term debt vehicles backfired

due to drying up of commercial paper market

• Standard & Poor cut the company’s bond rating to A-

and then to BBB, 1 step above junk

• Mulcahy publicly stated, “ The Business Model of Xerox

is Unsustainable.”
 Company Logo

SURVIVAL?
• Reuters reported rumors that Xerox was planning to
file for bankruptcy protection

Company chose not to comment on this

• Despite every setback, Mulcahy was firm on her

stance to save the company
 Company Logo

THE OCTOBER 23 MEETING

• Allaire, Mulcahy, and the executive team along with
key advisors attended the meeting

• Agenda – Discuss ways to generate cash, restructure

the business model, and invest for the future

• Opinions
– CFO Romeril: Cut dividend from 20 to 5 cents, saving $ 400 mn
per year
– External Advisors: File Chapter 11 bankruptcy
– Ursula Burns: Less chance of protecting Xerox’s R & D budget
and field sales force
 Company Logo

THE OCTOBER 23 MEETING

• According to chief strategist Jim Firestone, Xerox
faced “The Perfect Storm”.

• Suggested 3 options:
– Sell assets and cut costs, continue to fund R & D and field sales
and service, to save the brand Xerox
– Make deep cuts in R & D, product development, and field sales
and service
– Declare Chapter 11 bankruptcy and then come up with an
aggressive turnaround plan
 LOGO

Anne Mulcahy:
Leading XEROX through
the Perfect Storm (B)
THREE STRATEGIES
 Implement asset sales of ‘live wood’ and painful cost
cutting while continuing to fund R&D and field sales
and service

 Make deep cut in R&D, product development and field

sales and service in order to save the company

 Follow the recommendations of outside advisors to

file for Chapter 11
TURNAROUND STRATEGY

 Sale of Productive assets to generate

$2 -$4 billion in cash
 Sell China operations to Fuji Xerox
 Sell Portion of Fuji Xerox
 Sell equity stakes in its inkjet business
 Sell equity in PARC
 Sell Xerox financing division
TURNAROUND STRATEGY

 Cost Reductions
 Cut dividends
 Cut SGA by $600 million
 Cut $200 million in supply chain and manufacturing
cost.
 Eliminate world-wide service staff organization.
 Restructure R&D cost.
 Cut Infrastructure and overhead by $200 million
TURNAROUND STRATEGY

 Strategy focused on
 Improved cash flow and profitability
 Strengthening core strategy
 Future focus on high-value, high-end
business
EXECUTING THE PLAN

 Senior Management focused on

 Gaining alignment around goals
 Implementing a clearer decision-making
process
 Communicating to employees
 Stopped issuing statements if nothing concrete
to say
 Establish clear responsibilities and lines of
accountability
 Hired consulting firm to analyze their business
Securities and Exchange
Commission (SEC)
• Early 2001 announcement of cumulative $170
million in charges to correct accounting issues.
• Former employee sued Xerox for wrongful
termination.
• He also informed SEC that wrongful accounting
practices were being practiced throughout the
company.
• Failed to file its 2000 Annual report on time.
• Restatement of accounts from 1998 to 2000
• After second quarter of 2001, eliminated quarterly
dividend
• Fired KPMG as auditors and hired
PricewaterhouseCoopers.
THE BANKERS

 $7 Billion credit line was held by a

consortium of 58 banks.

 Fully Utilized the credit line, and only

a year left to renegotiate the
revolving credit line.

 Bankers petitioned to shut down the

R&D.
 LOGO

XEROX:
Financial Conditions
FINANCIAL CONDITION
3rd QUARTER 2000
PROFITABILITY RATIO
SHARE PRICE MOMENT
 PROBLEM

 Xerox' total debt is $17 billion,

including a $7 billion credit line

 $2.6 billion in debt comes due this

year

 Cash in hand only $1.7bn

FACTORS AFFECTING PROFIT

External Factors
1)The strength of the dollar against
European currencies.
2)High competition from Japanese rival
3)Y2k fear
4)Severe economic downturn in Brazil
ASSET DISPOSITION

Goal:- To generate $2 to $4 bn in asset area

Option Revenue
1) Sell China and Hong Kong operation to $550mn
Fuji Xerox
2) Sell portion of Fuji Xerox to Fuji Photo $1.3bn
film
3) Outsource parts of manufacturing
operations

4) Sell around engineering service business

5) Leverage asset of PARC by seeking Joint

Venture with non-competitive partners.
COST REDUCTION
Goal:- To reduce additional $1 billion in costs
Option Revenue

Cut dividend to 5 cents $ 400 Million

Cut infrastructure and $ 200 Million

overhead
Cut in supply chain and $ 200 Million
manufacturing costs
Cut SGA $600 Million

Narrow down research and

development investment
 LOGO

LEADERSHIP
A Leadership Story
 A group of workers and their leaders are set a task of clearing a road through a dense jungle on a
remote island to get to the coast where an estuary provides a perfect site for a port.
 The leaders organise the labour into efficient units and monitor the distribution and use of capital assets
– progress is excellent. The leaders continue to monitor and evaluate progress, making adjustments
along the way to ensure the progress is maintained and efficiency increased wherever possible.
 Then, one day amidst all the hustle and bustle and activity, one person climbs up a nearby tree. The
person surveys the scene from the top of the tree.

 And shouts down to the assembled group below…

“Wrong Way!”

(Story adapted from Stephen Covey (2004) “The Seven Habits of Highly Effective People” Simon &
Schuster).

“Management is doing things right, leadership is doing the right things”

(Warren Bennis and Peter Drucker)
Personal Characteristics of
an Excellent Leader
Anne Mulcahy was an excellent leader. This is because she had
following traits of a leader.

She had:
 A vision and purpose
 Clear goals
 Strong commitment
 An understanding of change
 Active listening skills
 Confidence to take risks

She was:
 Excellent communicator / listener
 Able to speak clearly and effectively
 Resourceful
 Realistic
 Personal Characteristics of an
Excellent Leader
 The Art of Listening – Rather than
wasting time on putting out fire, find out
the source of fuel leakage
 Instinct – Create clear accountability
 Vision – Never forget real goals
 Research and Development – Keep
focusing on innovation
 Customer Focus – Even in bad times, talk
to customers
 Communication – Get people aligned
around a common set of objectives
Behavioral Leadership Theories:
Lewin Studies
Assume that there are distinctive styles that effective
leaders use consistently, or, that good leadership is
rooted in behavior.
Basic Leadership Styles
Autocratic Style - the leader uses strong, directive, controlling actions to
enforce the rules, regulations, activities, & relationships; followers have little
discretionary influence
Democratic Style - the leader takes collaborative, reciprocal, interactive
actions with followers; followers have high degree of discretionary influence
Laissez-Faire Style - the leader fails to accept the responsibilities of the
position; creates chaos in the work environment

Anne Mulcahy used democratic style of leadership, as evident by her

way of decision making. Even in dire circumstances, she used to
consult every opinion.
 Behavioral Approach:
Michigan Study
High
High consideration High structure
(employee centered) (job centered)
and and
(employee centered)

Low structure High consideration

Consideration

(job centered) (employee centered)

3 2
4 1
Low consideration High structure
(employee centered) (job centered)
and and
Low structure Low consideration
(job centered) (employee centered)
Low

Initiating structure
Low High
(job centered)
 Fiedler’s Contingency
Theory
Fiedler’s Contingency Theory - classifies the favorableness of the leader’s situation.
Leader’s effectiveness is based on situational contingency which is based on 2
factors: Leadership Style and Situation Favorableness

 Least Preferred Coworker (LPC) - the person a leader has least preferred to work with
over his or her career.

 Task Structure - degree of clarity, or ambiguity, in the group’s work activities.

 Position Power - authority associated with the leader’s formal position in the
organization.

 Leader-Member Relations – quality of interpersonal relationships among a leader and

group members
 Contingency Leadership Model

Situat
Question 1 Question 2 Question 3 Appropria

ion
Are leader- Is the task Is position te
member structured or power strong Style
relations good unstructured or weak?
or poor? ? Stro 1 Task
Structure ng
d Wea 2 Task
Good k
Stro 3 Task
Unstruct ng
ured Wea 4
Sta k End
rt Stro Relationship
Structure ng
d Wea 5
Poor k
Stro Relationship
Unstruct ng
ured Wea 6
k
Relationship
7 Either
8 Task
 Hersey-Blanchard Situational
Leadership Model
Leader’s concern with task
Low High
SOURCE: Adapted from P. Hersey and K. H.
Blanchard, Management of Organizational
Behavior: Utilizing Human Resources, 3rd ed.
(Upper Saddle River, N.J.: Prentice-Hall,
1977),170.

High
Leader’s
concern
with
relationship
Low

Mature Willing/Able Unwilling/able Willing/unable Unwilling/unable Immature

Employees Employees
4 3 2 1
Developments in
Leadership Theory

As a
transactional leader,
I use formal rewards
& punishments.

As a
transformational leader,
I inspire and excite
followers to high levels
of performance.
Evans and House Path Goal
Theory
 The theory states that a leader's
behavior is contingent to the
satisfaction, motivation and
performance of his subordinates
 Identifies 4 types of leader behaviors:
 Directive Path Goal Clarifying
 Achievement Oriented
 Participative
 Supportive
 Leadership

“Good leaders don’t ask more than their constituents

can give, but they often ask–and get–more than their
constituents intended to give or thought it was
possible to give.”
John W. Gardner,
Excellence, 1984
 LOGO

STRATEGY
IMPLEMENTATION
Q1)What strategy is the general
manager trying to achieve?

• Strategy for sustainability

– Helped prioritize activities which looked at long term
effects rather than short term gains.

• Implement asset sales of ‘live wood’ and painful cost

cutting while continuing to fund R&D and field sales
and service.
– Sale of Productive assets to generate $2 -$4 billion in
cash
– Cut $200 million in supply chain and manufacturing
cost.
– Cut dividends, Restructure R&D and service staff.
Q2)Which functional policies need
to be implemented?
• Marketing
– Service staff and sales staff

• Manufacturing
– Reduce costs
– Stream line R&D
– Focus on high end high value products

• Finance
– Sell assets and equity in profitable ventures to generate
cash
– Reduce dividends.
What management systems and organization
processes needs to be implemented?

• Making people aware of the situation at hand.

• Made people publicly accountable for results and
established realistic goals.
• Encouraged senior management to engage each
other directly.
• Gave full support to sales staff.
• Offered generous development and training benefits.
• Started “Customer Officer of the Day” initiative at
corporate headquarters on a monthly basis.
• Focus on remanufacturing.
What misfits exist in the
company?
• Not all the stakeholders were aware how big and
serious the situation was.

• Did not plan for the competition in time i.e. strategy

did not change.

• Reorganized sales force from geographic focus to

industry focus.
– Led to disgruntled staff.
– Unhappy customers.
– Loss of big clients.
What are strategic, organizational
and Interpersonal considerations?
 Strategic
 Survival of company

 Organizational

 Interpersonal
 People should not feel demotivated
Should the general manager make
key implementation decisions alone?
 Company was in a big trouble, where its survival was
at stake.

 All decisions and implementations had to be done

immediately.

 The number of stakeholders were huge.

 Thus decision should not be taken alone.

Turning Great Strategy into Great
Performance
 The strategy of the company should be
clearly stated in a simple way and
communicated to all the stakeholders
 As Xerox is going through a rough patch,
the turnaround strategy should be based
on real achievable goals keeping into
mind the core competencies
 Resource deployment should be
monitored regularly
 Mulcahy should continue motivating the
people so that they can work towards
saving the company
LOGO