Why was Xerox in trouble in the early 2000s? What do you believe were the root causes? In the early 2000’s Xerox was reported to have been facing bankruptcy after years of mismanagement, piles of debt, and mounting questions about its accounting practices
In December 2000, Xerox announced that it had exhausted a $7 billion line of credit, but that $1.4 billion in cash remained. By January 2001, it was rumored that Xerox had hired a bankruptcy advisor namely from the Blackstone Group. However, in an attempt to further hide their financial woes from the public, Xerox officials denied that rumor, stating that they called on Blackstone for financial advice and nothing more. Their financial struggles continued until Xerox Corporation did what no one expected it to do; the company survived a brush with bankruptcy under the direction of a new CEO, Anne Mulcahy, who had no prior experience heading a company although she had served in multiple areas of the company’s business before becoming CEO. In an interview with CNN she was quoted as saying: “although it wasn’t necessarily done with the intent of running the business, I found out that it was a pretty good set of skills and capabilities to have coming into the job.” Although it was believed that Xerox was in trouble in the early 2000’s due to its financial woes, I believe that competition stifled their copier sales. Prior to Ms. Mulcahy taking over, the company was guided by leaders that did not move with the changing time. Copiers were no longer just for copying. New technology such as scanning documents, printing documents from a computer and emailing documents were becoming more main stream. Personally, the company I worked for in the early 2000’s leased their copiers from Xerox. I found that their copiers were always breaking down. It seem just about every time I needed to make a copy I had to use another machine in another department. Xerox just had an old demeanor about them. They needed a fresh new image. Xerox tried to shed its copy machine image over recent years by introducing machines that both copy and print documents. In January 2008, the company made one of its biggest moves yet: doing away with its old “X” logo to adopt one that just says “xerox” and features an updated “x” to its side. Xerox didn’t make these changes lightly. Working with consulting group Interbrand, it interviewed approximately 5,000 people worldwide to learn what they associated the Xerox name with, and how those ideas could be conveyed in a new logo.
Identify at least one OB practice for each of the OB levels (individual, group and organizational) that Mulcahy used to begin to turn Xerox around.
Individual:
Mulcahy knew that the company had powerful employees who were not motivated when she took over. She believed that among other key businesses changes, motivating employees at Xerox was a key way to pull the company back from the brink of failure. One of her guiding principles was a belief that in order to achieve customer satisfaction, employees must be treated as key stakeholders and become interested and motivated in their work. Mulcahy not only saw the company through this difficult time but also was able to create a stronger and more focused company.
The Xerox Board could have gone on the outside to choose a new CEO. Instead they selected Mulcahy. What do you think are the pluses and minuses of selecting an insider to be CEO? Some of the pluses of selecting an insider, such as Mulcahy, to be CEO is the ability of hiring a highly committed and customer-focused employee that already have a personal stake in the success of the business. Internal recruitment also helps promote greater opportunities within for employees’ career advancement and promotion both at a vertical and horizontal level, which leads to increased morale and higher levels of employee engagement by retaining and growing talented employees who might otherwise leave the organization. Further by hiring from within, you reduce the risk of selecting an inappropriate candidate since you are the inside candidate would have demonstrated experience and capability as oppose to someone “telling you” what their capabilities are. There is also the benefit of lower costs and time required in locating an employee since you do not have to pay an outside recruitment agency to locate a candidate or place an advertisement. You can save even further since an insider does not require long orientation programs and formal training as the insider already has a feel and understanding of the company culture, core values, and commitment to service. Some minuses may be that it limits the number of potential applicants for a job as external candidates might be better suited/qualified for a position and hence the company may become resistant to change, but in turn by recruiting from outside, new perspectives and attitudes can be brought in. Additionally, when you hire from within, it leaves a vacancy for which you now have to fill. This may take time and depending on the needs of the business, this may cost the company in revenue and other expenses. There are even chances that the existing staff may feel they have the automatic right to be promoted, whether or not they are competent and also internal recruitment may cause some resentment amongst candidates not appointed. In Xerox’s case hiring an insider such as Mulcahy seem to have been a step in the right direction.