Question 1

Outline the management control system at Xerox. What are the key elements that make the system work?

Management control system prior 1980

Xerox focused more on accuracy and rigid systems rather than listening to the customer’s need and preference. For them, their business activities have to operate according to their business plan. The controllers were the numbers people and there have been never sufficient data or analysis to support management decision. Xerox also did not take care of the employees’ welfare and neglect to the good ideas from them. Therefore, some good people left the company. The corporate reporting and planning process was very long and bureaucratic, with more detail than most managers could absorb. Even worse, the reporting formats were not consistent between divisions that lead to the difficulty for the management to make decisions and analyze data.

Management control system after 1980

David Kearns who was newly appointed as the chairman in 1982 was well aware of the problems faced by Xerox and hence developed a corporate revitalization plan called “Leadership through Quality” (LTQ). This plan emphasized on three major components which are; employee involvement, competitive benchmarking and the quality improvement process. Employee involvement as mentioned in LTQ is the problem solving process that uses quality circles, people empowerment, Ishikawa’s fish bone chart, and other tools. Competitive benchmarking is a standard for comparing internal performance to the best within the industry while the quality improvement process is more on reviewing and continuously improving all internal processes by following a process which focuses on meeting customer requirements.

Xerox as advised by Al Senter, developed Financial Executive Council (FEC) which consists of senior Corporate Finance staff and the chief financial officers of Xerox operating organizations. The goal of FEC is to improve the financial operations and obtain a greater involvement of Finance executive. The financial managers are involved in the decision making at operating units. A Xerox finance community formed an informal trust among each other in setting a standard reporting. The organization also began to divide into nine business divisions, supported by three geographic customer operations divisions. The primary focus for the management of Xerox was the business management level, which promoted more effective linkages between markets and technologies to satisfy the customers.

Key Elements

One of the key elements that made the systems above work was an open communication concept between top management and employees where employees can freely express their ideas and opinions. Active participation between management and finance division also contribute in the decision-making process by regarding the finance people as management sounding boards and have a very close relationship with them. Xerox also decided to take an initiative to develop their staff by providing training and more knowledgeable input. It is important in helping them gain a positive mindset to work hence increase their loyalty toward Xerox. In addition, Xerox also tried to be updated with the latest technology and combined finances, marketing and technology elements together to make clear the value added. Xerox used benchmarking concept where they established standards to improve internal performance by comparing theirs to other organizations that are considered the best in their own industry.

Question 2

What recent trends at Xerox do you see influencing the management control process?

The culture of Xerox that refused to change become a disadvantage to them after the original patent for the plain paper copier expired in 1970. It was such an invitation to potential competitors like IBM, Kodak, Canon, Minolta and others to enter the copy machine industry. Due to that situation, Xerox then realize that they need for changes because of the threat from the potential competitors. Xerox then, developed new quality strategies; corporate revitalization, globalization and reporting strategies in order to sustain their competition within the market.

Corporate Revitalization Strategy

Xerox developed a corporate revitalization plan called “Leadership through Quality” (LTQ). It was built upon the early work in competitive benchmarking and employee involvement. LTQ was the current trend at the time that influencing the management control process which focuses on three aspects which are; employee involvement, competitive benchmarking and quality improvement process.

Employee involvement is creating an environment in which people have an impact on decisions and actions that affect their jobs. For Xerox, it was a problem-solving process using quality circles, people empowerment, Ishikawa’s fish bone chart, and other tools to understand the cause and effect of problems.

Competitive benchmarking was used to compare Xerox’s product, process and performance to other organizations that are considered the best in their own industry. It was important as to find Xerox weaknesses.

Quality improvement process was the process of reviewing and continuously improving all internal process by following a process which focuses on meeting customer requirements and to provide the highest quality product at the best cost.

Globalization

Xerox had developed interconnection of international markets and penetrated the global market through joint venture. For example, Rank Xerox marketed and serviced document processing and related equipment in Europe, Africa, and parts of Asia for the business divisions. Also, in order to access Japan market, Xerox joint venture with Fuji Film Corporation in Japan. They developed, manufactured, marketed, and serviced Fuji Xerox document processing products in Japan and other territories in the Pacific Rim. Besides, separate arrangements also were made with South and Central American countries.

Reporting

Since the Xerox reporting system experienced a very long and bureaucratic process, Xerox started to standardized reporting formats from monthly financial reporting to quarterly corporate reporting. The value of information had not changed but the number of indirect people involved in the process has decreased.

An informal reporting system had also evolved to an open discussion for a better understanding in business. Besides, Xerox can add value to the process and provide managers with valuable analysis and advice. The informal reporting normally was used as a complement to the formal reporting.

Xerox developed trust among controllers (financial managers) and exposed them to both financial and operational matter, so that they could contribute in the formulation of management decisions at the operating units which added more value to reporting process.

QUESTION 3

In your opinion, how important are organizational culture and individual personalities in the Xerox control process?

Organizational Culture

Every organization has its own unique style of working which will lead to a culture. This culture or also known as organizational culture has developed unintentionally from the beliefs, ideologies, principles and values shared by employees. This is similar to Xerox where organizational culture plays an important role in shaping the employees’ attitude. Organizational culture also controls the way employees behave among themselves as well as with people outside the organization. Goal congruence will also be achieved as the employees will think that the organization is their family and they will contribute as much as they can to the organization. Thus, their personal goal is now in line with the management goal.

Xerox used action-oriented culture to encourage employees to focus more on action rather than concepts. The employees are supposed to deliver the plan. This culture motivates employees to achieve outcomes and consistently produce results based on the plan. It will lead to operational excellence where Xerox can easily achieve their goals and less supervision is needed to monitor the employees.

Moreover, Xerox also emphasized on line-driven culture where employees are involved in all activities that contribute directly to organization’s output. In this culture, management would take employees’ suggestions into consideration. Based on this case, Xerox would gain benefits as the employees would be more creative in producing outputs.

Team-oriented culture had been installed among the employees by Xerox. This culture can be seen in Financial Executive Council (FEC) where the financial managers also contribute in the formulation of management decisions at the operating units. The FEC also became a group that adds more value to the management process. Team-oriented culture motivates employees to work together and produce good results. Teamwork in the workplace leads to better learning and healthy competition among employees. This is important to Xerox as better teamwork will lead to a faster goal attainment.

Apart from that, Xerox gave emphasis to empowerment culture among employees. Empowerment consists of giving training, skills and education to employees so that they can expand their knowledge and skills and thus contribute in greater ways. Xerox is constantly empowering the employees so that they would be fully-equipped in doing all sorts of tasks. It is important for Xerox to know the employees’ skills and qualification so that they can organize the employees based on their interests and expertise.

Open and honest communications are also being inculcated within employees. Employees can freely express their ideas and opinions to the management without having to worry about bureaucratic problem. The informal atmosphere and close working relationship is important as employees would perceive that their ideas were important for the organization. Hence, they will be motivated to work and reach the organizational goals.

Individual Personalities

The first person that contributed a lot to Xerox was Al Senter who had established Financial Executive Council (FEC). The FEC allowed the financial managers contributed more in the formulation of management decisions at the operating units. The FEC also moved from an accounting policy group to a group which added more value to the management process. It was used by executive management as a sounding board for policy and strategic consideration. It also actively promoted the building of trust in the Xerox finance community. The FEC also promoted an informal atmosphere where employees can freely exchange their ideas and opinions.

The second person who played an important role at Xerox was David Kearns. He introduced a corporate revitalization plan called “Leadership through Quality” (LTQ). This plan focused on three major components which were employee involvement, competitive benchmarking and quality improvement process. As a result from LTQ, Xerox had made improvements in the company operations. These were the results of LTQ; customer satisfaction levels increased in every market served by the company, revenue rose by 9% to a record $13.6 billion, profits increased by 23% to $599 million, return on assets improved by over 2 points to 14.6% and $1.1 billion in cash was generated.

QUESTION 4

How is Xerox today? Is there any changes?

The introduction of Leadership Through Quality (LTQ) strategy by the former CEOs of Xerox has led to a great impact on the business world. Xerox has managed to survive in the ever changing business environment with a lot of competitors in their way. But it doesn’t mean that Xerox has been freed from what they call being a victim of financial crisis. In year 2000, when Anne Mulcahy, now former of Xerox Corporation has taken in charge of that Company, Xerox is doomed for bankruptcy. Xerox was chased by its creditors with debt amounting to $18 billion. There was no way but to declare bankruptcy in the eyes of the shareholders, but Mulcahy always knew that turning a company into bankruptcy was never an answer to run away from those debt. Mulcahy who has none whatsoever experience in the accounting world joined Xerox’s sales force right after graduating from college knew that the Company is ill performed. She managed to gather all the 100 top executives of Xerox and inspire them to commit in changing Xerox culture and bringing back its glory.

There were many suggestions that Mulcahy received to reduce Xerox’s debt, such as eliminating some of the R&D project. But she refused, instead, focusing on selling part of Xerox family such as Fuji Xerox. What she quote is that “Companies always disappear because they were unable to reinvent themselves”. Meaning that research and development department is the essential part of the Company which they should never ignore even if it cost them a fortune. Now 3 years after becoming the CEO of Xerox, Mulcahy has introduce a new strategy which can make Xerox into better customer oriented company. The so called new strategy is the Lean Six Sigma. A combination of tools and processes of two industry recognized management methodologies which is Lean and Six Sigma. The objective is to create higher level of customers’ satisfaction, quality and productivity improvement. Through Lean Six Sigma the employee’s in charge able to identify projects based on value creation and economic profit impact. The process start with the top management selecting project and setting its prioritization which they will assess the project based on their potential business impact and estimated effort. Then, they will choose a potential sponsor to fund the project and a suitable candidate to put in charge of the operation, basically known as the Black Belt. Black Belt is responsible to identify the solution and define business problem using the DMAIC which stands for, define, measure, analyze, improve and control. This strategy is still implying customer as its core value. As Mulcahy did was she flew to one of Xerox customers and asked them in what ways that Xerox can improve its services.

After 6 years reigning over Xerox and restoring its reputation, Anne Mulcahy stepped down and passes the legacy to her successor Ursula Burns. Burns who continues the path of Anne Mulcahy as the CEO of Xerox thinks that Xerox still need to evolve in order to stay in the competition. She focuses on business Process Outsourcing (BPO). She turns Xerox into outsourcing company which offers services from financial, Human Resources and management service. She said it helps for other company to stay focus on basically their main business activities. For example, while providing copying services to Procter & Gamble (P&G), Xerox advised the company to consolidate all of its scanning, printing and faxing activities. This proves to be efficient in terms of cutting the cost and reducing the energy usage. Furthermore, the acquisition of Affiliated Company Software (ACS) has further expanded the business diverse of Xerox. This is because ACS itself has developed BPO in many industries such as retail and consumer, shipping, logistics, transportation and the energy industry.

What Burns changed in Xerox does not just end in the Business Process Outsourcing. She also looks into matter the Lean Six Sigma strategy that was brought by former CEO. Feeling that now the Company has expand further they need to become more agile and more accurate in term of making decision and choosing the right project. Thus, the birth of the Lean Six Sigma 2.0 emerged which is the improved version of the original Lean Six Sigma. LSS 2.0 involved the employees in all positions. The method or procedures has been cute short and simple enabling all employees can understand the system. They still focus on customer’s feedback, but also taken into account the opinion of their suppliers and partners in term of identifying any opportunities and weakness. There is no more complicated training of Black Belts; rather it is using a viral, train-the-trainer approach. This helps reduce time spend on training new employee, as they send a group of employees to learn about the new develop tool called Qwiksolver which later the group will train other employees. Qwiksolver has been proven to be the best tool in Lean Six Sigma 2.0 to solve problems in the easiest and quickest way possible by penetrating to the heart of DMAIC process with just answering 5 questions.