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Anne Mulcahy:
Leading XEROX through
the Perfect Storm (A)
Submitted By: Group 5
Contents
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
•
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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
•
•
•
•
•
•
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XEROX: History
• Xerox’s focus on its
• customers,
• value-based leadership and
• roots in the community
•
• Heavy Investment in R&D
• Research scientist dream job
• Palo Alto Research Center (PARC), 1970, Computer
Sec.
•
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XEROX: History
REINVENTION
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.
v
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REINVENTION
•
• In next 5 yrs, the nine division were reduced to four
and identification of absence of skills required for
• Market development
• Attracting customers
• Training Sales person
v
NEW STRATEGY
v
v Organized into four business division.
v
v Production Printing and Retail channels business
were two new division
v
v Each Division used latest technologies in networking,
color ink and digital processing
v
v XEROX desktop printing business in direct
competition with H-P
v
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NEW LEADER
v Late 1990’s investor expectation for XEROX ran high
v
v
v Board brought Richard Thoman as president
InvestorGet rid of slow
Expectation Highand cumbersome bureaucracy at XEROX
v
v
NEW STRATEGY
v Richard Thoman (CFO IBM) appointed as President.
v
v 4 Geographically oriented customer administration
consolidated into 3 customer business center
v
v Build service business through acquisition and buy
out partners stake in overseas joint ventures
v
v Fuji shares of Fuji Xerox
v
v Stock price went up from $30 to $ 60.
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NEW STRATEGY
v 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 OFChanges
§ Administration LEADERSHIP
led to
AGAIN
• Increased billing issues
• More complicated pricing plans
§ Sales team looking for new business, had to cut prices
sharply leading to decrease in profitable contacts
v External Issue
§ End of domination in production printing (Heidelberg, canon
etc)
Early 2000
§ Global financial crisis (ASIA to Latin America)
§ Market Shift towards less margin product
§
v
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ANNE MULCAHY
v Started in sales (10 yrs)
v Early 1980, promoted to Management,
charged with organizing a sales team
v Promoted to VP HR in 1992
v Joined Barry Rand (VP Worldwide Ops)
team in 1996
v Became Chief Staff Officer in 1997,
reporting directly to CEO, Allaire
v Not much interested in the role of Chief
Staff Officer so grabbed an
opportunity at GMO (Web & Retail
sales)
v
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ANNE MULCAHY
v Launched SOHO (Small office and home
office)
§ Venture in Desktop Printing
§ Competed with Industry Leader H-P
v Became COO in May, 2000
v 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
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ANNE MULCAHY
v Leadership traits of Mulcahy
§ Be informed
§ Be calm and confident
§ Provide clear direction
§ Develop an action plan
§ Leverage your supporters
v
v Initial plan
§ Save each dollar
§ Personal attention to customer
§ Incentive and benefits to sales team
v
v
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SURVIVAL?
• Liquidity crisis increased due to shrinking profits
•
• XEROX 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.”
v
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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
•
v
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Anne Mulcahy:
Leading XEROX through
the Perfect Storm (B)
THREE STRATEGIES
v Implement asset sales of ‘live wood’ and painful cost
cutting while continuing to fund R&D and field
sales and service
v
v Make deep cut in R&D, product development and field
sales and service in order to save the company
v
v Follow the recommendations of outside advisors to
file for Chapter 11
TURNAROUND STRATEGY
v 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
v Strategy focused on
§ Improved cash flow and profitability
§ Strengthening core strategy
§ Future focus on high-value, high-end
business
EXECUTING THE PLAN
XEROX:
Financial Conditions
FINANCIAL CONDITION
3rd QUARTER 2000
PROFITABILITY RATIO
SHARE PRICE MOMENT
PROBLEM
External Factors
•
1)
ASSET DISPOSITION
•
Goal:- To generate $2 to $4 bn in asset area
Option Revenue
1) Sell China and Hong Kong operation $550mn
to Fuji Xerox
2) Sell portion of Fuji Xerox to Fuji $1.3bn
Photo film
3) Outsource parts of manufacturing
operations
LEADERSHIP
A Leadership Story
v 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.
v 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.
v 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.
v
v And shouts down to the assembled group below…
v
•
“Wrong Way!”
v
•
(Story adapted from Stephen Covey (2004) “The Seven Habits
of Highly Effective People” Simon & Schuster).
v
•
“Management is doing things right, leadership is doing the
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
v The Art of Listening – Rather than
wasting time on putting out fire, find
out the source of fuel leakage
v Instinct – Create clear accountability
v Vision – Never forget real goals
v Research and Development – Keep
focusing on innovation
v Customer Focus – Even in bad times, talk
to customers
v Communication – Get people aligned
around a common set of objectives
Behavioral Leadership Theories :
Lewin Studies
Assume that there are distinctive styles
•
§
Behavioral Approach :
Michigan Study
High
High consideration High structure
( employee centered ) ( job centered )
and and
Low structure High consideration
( 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 ( job centered ) High
Fiedler ’ s Contingency Theory
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? 1 Task
Stro
Structure ng 2 Task
d Weak
Good 3 Task
Stro 4
Unstructu ng
red Weak Relationship
Sta 5 End
rt Stro
Structure ng Relationship
d Weak
Poor 6
Stro Relationship
Unstructu ng
red Weak 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
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
v The theory states that a leader's
behavior is contingent to the
satisfaction, motivation and
performance of his subordinates
v 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?
•
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?
v Strategic
§ Survival of company
v
v Organizational
v
v Interpersonal
§ People should not feel demotivated
§
Should the general manager make
key implementation decisions alone?
v Company was in a big trouble, where its survival was
at stake.
v
v All decisions and implementations had to be done
immediately.
v
v The number of stakeholders were huge.
v
v Thus decision should not be taken alone.
v
Turning Great Strategy into Great
Performance
v The strategy of the company should be
clearly stated in a simple way and
communicated to all the stakeholders
v As Xerox is going through a rough patch,
the turnaround strategy should be
based on real achievable goals keeping
into mind the core competencies
v Resource deployment should be
monitored regularly
v Mulcahy should continue motivating the
people so that they can work towards
saving the company
LOGO
Thank You !