Xerox's chief copies good practice not past mistakes

Sleeping on planes has become something of a habit for Xerox's charismatic chief executive and chairman, Ms Anne Mulcahy.

For the past year and a half, since landing the top job at the US copier giant, she has flown to almost every corner of the globe to rally staff morale and clinch deals in an effort to rescue Xerox from the brink of bankruptcy.

This deliberate "hands-on" approach seems to be working. Fresh from making a keynote address at the Cebit technology fair in German, Ms Mulcahy flew to Dublin last week to speak to 2,000 Xerox staff who work at the company's European hub in Ballycoolin, West Dublin. And, for the first time in a very long time, her message could be relatively upbeat.

Xerox is back in the black after several successive quarters of losses and a long-running Securities & Exchange Commission (SEC) investigation into the firm's historical accounting practices has been settled. So it is little wonder that Ms Mulcahy is beaming from ear to ear when we meet in the Merrion Hotel for an interview.

"We want to believe we have done the right things to grow the company and make it successful," says Ms Mulcahy, who has implemented a radical restructuring plan that cost 30,000 jobs, of which 500 were cut at Xerox's Dundalk facility.

"Everything has changed in the company. We are a very different company to what we were a few years ago. . . We are structurally different, we're focused, we are smaller and we are profitable."

Under Ms Mulcahy's leadership, Xerox has sold off certain non-core businesses and outsourced much of its basic manufacturing operations to more efficient contract manufacturers.

As a result, Xerox's European operations cut selling and administrative costs to €2 billion in 2001 from €2.5 billion a year earlier.

Addressing Xerox's bottom line has been a major theme of Ms Mulcahy's reign at Xerox, and the Republic's spiralling inflation rate has not escaped her notice.

"I think cost structures are always a challenge and it is something we have to continue to work on. Companies like Xerox have to be the best in the class in terms of the overall competitiveness, so that has to be an area of focus along with our government partners."

When asked directly about the Republic's inflation rate, Ms Mulcahy says "yes, it matters". In a reference that applies neatly to the current public sector benchmarking exercise being carried out by the Government, she says all sectors of the economy need to drive cost out of business, including the public sector.

"It is a never-ending journey. When you stop, that is the time you have to worry about losing competitiveness," she adds.

One of the biggest new costs facing business is the increasing amount of red tape required to do business in a much stricter regulatory environment. The challenge for businesses is not to lose focus on good leadership and business judgment, says Ms Mulcahy.

"This is where you could lose sight of the forest through the trees. . . I think we need to balance the amount of focus we put on the legislative side of this."

Xerox's regulatory difficulties, which included misstating almost $2 billion (€1.87 billion) in revenues over five years, are now behind the firm, says Ms Mulcahy, who negotiated a settlement with the SEC last year that saw Xerox pay a $10 million fine to the regulators.

Analysts believeXerox, best known for inventing the photocopier, is moving towards a more "solutions-focused strategy", similar to IBM's business model.

Ms Mulcahy dismisses the reference to following IBM but, in general, supports the thesis.

"I think we are moving to a services-and-solutions approach," she says. "We already have a large proportion of our business in outsourcing environments, where we take the responsibility for the document management in a lot of companies.

"We have approached this from the position that our customers need expertise in the documents space. Xerox has the ability to bring their document expertise to businesses, to help them become more efficient and really engage on hardware, software and consulting services."

The amount of money that businesses spend on managing documents is more than people realise, says Ms Mulcahy, who recently surprised Wall Street by announcing a fourth-quarter profit of $19 million on revenues of $4.25 billion.

To maximise growth, Xerox will focus on key areas such as colour copying, imaging technologies and new ways to manage content electronically.

To develop these technologies, Xerox has retained its spend on research and development, says Ms Mulcahy, who took the emotionally charged decision to incorporate its world-famous Palo Alto research centre soon after being appointed to the top job.

Incorporating the centre has enabled Xerox to develop a partnership approach towards research by inviting other firms to share the cost of development projects.

Ms Mulcahy's predecessor, former IBM executive Mr Rick Thoman, resigned, having failed to restyle the company in what most people consider a typical IBM solutions mould. So how did Ms Mulcahy succeed?

Analysts believe her position as a company insider with a 27-year history has helped. But Ms Mulcahy, who joined Xerox as a sales representative in 1976 and is married to another former Xerox lifer, doesn't agree.

"I don't think this is about being an insider or an outsider. But I do think, based upon what was required at Xerox, having the knowledge, the relationships and the expertise helped move the company quickly to a stronger position.

"Company cultures are powerful and you have to be able to bring them with you and that is the one thing that I believe is very important at Xerox. . . being able to draw upon that part of the culture, as we made tough decisions to make the company a great company again, was absolutely critical to the turnaround process."

Maintaining morale at Xerox, which has undergone major surgery during her tenure, has been one of her toughest tasks.

"One of the things I care most about at Xerox is the morale and motivation at the company. I think it is absolutely critical to being able to deliver results. People have to feel engaged, motivated and feel they are making a contribution to something that is important," says Ms Mulcahy.

"I spend the vast majority of my time with customers and employees, and there is nothing more important for any of us to do as leaders than communicate and engage with our two most important constituencies."

Ms Mulcahy, who was recently named the sixth most powerful women in the world by Fortune magazine, does not like to dwell on her femininity. But, as one of the few female chief executives of a Fortune 100 firm, it is a much talked about issue in the US.

But has Ms Mulcahy, a typically attractive Irish-American with blond hair and blue eyes, experienced sex discrimination

"I don't think a lot about it. The reality is probably, although I'm not sure I noticed," she says. "I choose not to look for it and actually be optimistic that if I am honest and straightforward and play straight then the rest of the world will too."

On the broader issue she is more sanguine. "Certainly the statistics are compelling. . . it is still majority male oriented. So from that perspective, one of the things about having a \ list is that we are still counting and stacking them."

Despite the upbeat message at Xerox, Ms Mulcahy does not rule out further job cuts, although she believes the firm has now "stabilised".

"Assuming we have made the right choices and we have the right strategy in place, and maybe a bit of luck from the economy, I think we are in the right position to manage the business in an 'as usual' mode."

Rather than big events management, it will make modest adjustments that are "more rule of the road" in the future, she adds.

But Ms Mulcahy is not betting on a swift economic upturn in the short term, in part because of the war against Iraq.

"I don't think war is ever good for an economy. So if I think about it from a business perspective it is obviously a challenging geopolitical environment to bedoing business in.

"But I also think uncertainty is probably one of the most difficult business conditions as well so, from that perspective, I think some level of decisiveness would probably help stabilise the economy."