The Cow in the Ditch: How Anne Mulcahy Rescued Xerox - Knowledge@Wharton

Excerpts from:

http://knowledge.wharton.upenn.edu/index.cfm?fa=viewfeature&id=1318


Mulcahy, whom Fortune this month named the second most powerful woman in business, nearly didn't have the chance to muse on Wall Street's impatience. When she became Xerox's chief executive in 2000, her company didn't look like it would live long enough to deliver any kind of profits again, whether quarterly or annual.

At the nadir of its troubles, Xerox's cash reserve dwindled to nearly $100 million -- almost nothing for a firm of its size -- while its debt ballooned to almost $19 billion. At the same time, it discovered accounting improprieties in its Mexican subsidiary, setting off a Securities and Exchange Commission investigation. Customers and employees began to fall away. And all this occurred against the backdrop of a weakening economy. "It was alarming how fast things began to unravel in late 1999 and 2000," she said. "We thought we had coined the term 'Perfect Storm.'"

A cold call to Warren Buffett didn't work as well. Buffett took the call and invited her to dinner in his hometown of Omaha. She flew to Nebraska, aiming to sound him out on investing in Xerox. Her chance came over dinner. When she finished her pitch, Buffett replied, "You know, I never invest in technology companies."

"So I decided we were going to do all of our [profit and loss statements] on a geographic basis. Is it appropriate in this day to have geographic P&Ls? I don't know, but I'll trade off organizational design for clarity and accountability any day of the week. I took out a lot of layers and think it was instrumental in improving performance."