For Anne M. Mulcahy, Leadership is About Learning

Xerox is a household name, and many people have a hard time listing other big players in the copier business. Ask anyone who doesn’t know, and he or she might assume 95-year-old Xerox is in the catbird seat, a near monopoly raking in money for shareholders.

In fact, the Stamford, Ct., company is going through tough times, a result of missed opportunities and growing competition from Cannon, Ricoh, Hewlett-Packard and others. While still the largest copier maker, the company lost $86 million in the quarter ended March 31, compared to a $220 million profit in the year-earlier period.

As Anne M. Mulcahy, the company’s president and chief operating officer, noted recently: “This has been a year in which leadership at Xerox [has been] challenged in many ways … We hit a wall. It has been pretty ugly.” Mulcahy spoke last month at the fifth annual Wharton Leadership Conference, sponsored by the Wharton Center for Human Resources and the Center for Leadership and Change Management. The daylong conference, held at The Inn at Penn, featured a series of speakers on developing leadership at corporations and in the military.

For Mulcahy, the leadership challenge is enormous. Xerox stock had tumbled to around $8 a share, from a high of $62 early in 1999, erasing all of the remarkable gains the company enjoyed in the 1990s. Discovering a series of accounting-rule violations involving what it termed “imprudent and improper” business practices in Mexico, the company was forced this spring to restate earnings for 1998, 1999 and 2000. In some cases, aggressive accounting had been used to improve the company’s short-term results at the expense of long-term results. The Securities and Exchange Commission is looking at the practices.

Because of these problems, the company delayed filing its annual report for the recently ended fiscal year. It is cutting 4,000 jobs and may sell as much as $4 billion in assets to reduce its more than $16 billion debt and avoid bankruptcy. On another front, some minority employees have sued the company, alleging discrimination.

Added to all this is the weakening economy. “There is a sense of unpredictability right now about the business climate,” Mulcahy told the audience of several hundred. “It’s about how quickly you can respond from the leadership perspective.”

Mulcahy, 48, has spent 25 years at Xerox, starting as a sales representative in 1976, several years after graduating from Marymount College in Tarrytown, NY. Much of her Xerox career was in human resources, but she is best known for leading the company’s push into the small-office and home-office businesses in the late 1990s, and for masterminding Xerox’s $925 million acquisition of Textronix Inc.’s color printing and imaging division early in 2000.

She was named president and COO in May 2000 after Chief Executive Officer Richard Thoman was forced to resign in the wake of a poorly engineered restructuring and a 60% stock-price decline. As president, she became one of the first women to run a $20 billion company, though Xerox is worth less that a third of that today. Mulcahy is widely expected to someday become CEO.

One of her top priorities, she says, is to push the company more aggressively into the color copier and printing business, and to integrate its equipment into the Internet.

Xerox has great expertise in sales and technology, and Mulcahy is working to remedy its weakness in marketing – a common problem in companies that enjoy monopolies in their early years, she noted. While founded to make photographic paper, the modern company evolved in the 1950s with its introduction of the famed 914 copier, the world’s first xerographic machine.

Xerox, she added, has never been especially good at managing its cash and putting it to the best use – a pattern she is trying to change.

Traditionally, Xerox had been a “sales driven, results oriented” company in which people with various specialties were kept separate from one another, Mulcahy said. But about 10 years ago, Xerox changed from a centrally organized and directed company to one that gives greater authority to managers further down the hierarchy. In its new incarnation, the company needed “engineers who knew about customers.

“It’s a values-based company. Leadership is really at the top of the list.” The company needed to develop new management skills and instituted training aimed at “getting leaders to understand what they didn’t know. It quickly became apparent that we needed people to want to learn.”

Today’s leaders, she said, must offer employees a “compelling vision” of the company’s direction; simple “command and control” is not enough.

She listed several basic leadership guidelines:

    • A good leader will recognize what she does not know and be willing to learn all the time.
    • A leader must believe in the values and principles she espouses and must “walk the talk” with total consistency.
    • A leader must have a clear vision of where she wants the company to go. Xerox, she said, had long had a good vision but had not acted forcefully to implement it.
    • A leader must give others power to make decisions.

Good managers, she said, recognize their own shortcomings and find others who are strong in those areas. To spur this process, Xerox encourages managers to constantly assess their own performance and to receive feedback from associates, both above them and below. Today, Xerox managers are involved in sweeping “360 degree” assessments from subordinates and superiors four times a year.

Twice a year, Mulcahy conducts four-day “chairman’s forums” with promising people with whom she otherwise would have little contact. In addition to business discussions, the forums include events such as Outward Bound-type experiences, designed to build personal relationships. Mulcahy said that there comes a point at which one’s strengths and weaknesses are relatively fixed. Her own strength is in operations, she said, and she finds others to shore up her weaknesses in strategic thinking.

In changing its leadership style, Xerox adopted “a much more selective approach” to determining who should get management training, she said, adding, however, that there is no easy formula for making leaders. During much of her career she avoided leadership-training courses, she said, noting that she found her first 360-degree feedback session far more valuable. “There is a lot of generic leadership training that I did not find helpful or useful,” she said.

Despite the company’s deep problems, Mulcahy believes the future is bright. “The good news is we actually have a turnaround plan that is working and is building value back into the company,” she concluded. She predicts the company will return to profitability in the second half of the year.

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