Thriving in Adversity

The current economic climate has unfortunately made us a bit insensitive to words like bankruptcy, margin erosion, bad debts etc. More often than not, we frequent friends, colleagues, customers and partners who provide us with ever increasing experiences of such incidents almost daily.
And yet, there has never been a better time than now, to leverage who we stand for - our character and connect back to basics. To quote John McDonnell - former CEO of McDonnell Douglas, when that company was going through its struggles before eventually merging with Boeing. "Adversity introduces you to yourself," he said, reflecting upon what that struggle had brought for him.
Consider this company : This company was at No.423 in the Fortune 500 list in 1963 and rose to No. 21 by 1990. However, high costs translating into uncompetitive prices, catapulted this company all the way down, and by 2001, its stock price fell 92% in less than two years with multiple issues including cash flows, falling market position and SEC investigation. You guessed right - we are referring to Xerox.

When Anne Mulcahy who did not even make to the initial list of CEO candidates, was chosen as the CEO in 2001, the business world was very surprised. Anne was the first woman CEO in the company history. Added to this was the fact that her resume was not something that would excite Wall Street to stop the free fall of the Xerox scrip. Anne majored in English and journalism and joined Xerox soon after graduation. Quite predictably, on the day of the announcement, the stock tanked 15% .

When Anne took over at the helm in 2001, her advisers urged her to declare bankruptcy to clear off Xerox's $18M in debt. But she clearly refused, and instead chose a much more challenging goal - to make Xerox a great company once again. Anne was a clear Xerox loyalist who joined the company's sales force soon after graduating and rose through the ranks.

Since then, the transformation at Xerox is a much told story. But in summary, here's is something fundamental that made a big difference :

Facing Reality and providing transparency : When in crises, it is important to take the company key personnel to confidence, ensure they understand the real situation and seek their unequivocal commitment. This confidence sharing brings about better loyalty from them, and they are in a better position to act by taking well informed decisions. Anne personally met her top personnel and let them know how dire the situation was and asked them if they were prepared to commit. It is reported that a full 98 of the top 100 executives decided to stay, and a bulk of them are still with the company today.

Stick to basics : One should never lose focus of the customer even in adversity. A customer is the most important stakeholder for any company, and winning back customer confidence and focussing on client service is the most crucial step to survive through the crises. Anne's first priority was to win over Xerox's customers by focussing on their concerns and complaints. She stayed true to her value and loyalty and committed to her workforce that she would travel anywhere to save any customer for Xerox. Moreover Anne was never shy of new learning. Having spent 16 years in sales, she didnt refrain from admitting her limited finance knowledge, and asking a colleague to give her a crash course in finance. She says " There wasn't a lot of time for false pride."

Cut the flab : In tough times, it is more crucial than ever to get back to lean. However this has to be done very prudently. This is certainly not easy and one has to make hard choices. Anne refused to cut down on R&D expenses or field sales, but instead chose to make Xerox more lean by eliminating its bloated infrastructure in the form of pieces of Fuji Xerox and farming out manufacturing to Flextronics. She had to reportedly eliminate 28000 jobs and billions in expenses, but this was inevitable to make the company survive.

With losses of more than $300M in 2001, Xerox transformed itself and posted greater than $1B in profits in 2007. Xerox is now solidly profitable and transitioned into the digital world where it leads the global market for color imaging equipment.

In 2005, the Wall Street journal named Mulcahy "One of 50 women to watch in 2005" and Forbes Magazine ranked her at the sixth position among the Most Powerful Women in America. In 2008, she was selected by US News and World Report as one of America's Best Leaders.

Reacting to the pressure under crises is one thing, but taking balanced well informed decisions and implementing a well thought out plan is quite another. What matters end of the day, is how we leverage every situation to our advantage, and seek opportunity in every adversity.