In the summer of 2001, Xerox was in serious trouble. The company whose name had become a verb for making copies was carrying roughly $17 billion in debt and had been losing money. The Securities and Exchange Commission was investigating accounting problems at its Mexico unit, customers were losing confidence, and at one low point the company's cash had dwindled to about $100 million. Inside and outside the company, people were openly discussing whether Xerox would survive.
The person handed the job was not the obvious choice. Anne Mulcahy had joined Xerox in 1976 as a field sales representative and spent about sixteen years in sales before moving into leadership roles, including running human resources. She had a degree in English and journalism, not finance. She became CEO on August 1, 2001, the first woman to lead the company. On the day her appointment was announced, the stock fell 15 percent. She later joked that it was “a real confidence builder.”
She did not pretend to be something she was not. She took a crash course in the company's finances, learning to read the balance sheet in detail, because there was no time to protect her pride. Then she faced the first big decision. Xerox was advised to seek protection from its creditors in bankruptcy court. Mulcahy was adamantly against it, and the company never filed. That choice meant the only way out was to earn its way out, and she set about doing exactly that.
She also refused to lead from behind a desk. In her first ninety days she traveled constantly, listening to employees and customers. She later said, “You have to talk to frontline employees,” and she warned against relying on information that had been filtered on its way up the chain. Customers told her Xerox had stopped being responsive. Employees told her they needed clear goals. A customer in Texas compared her to a farmer whose cow was stuck in a ditch: get the cow out, figure out how it got in there, and make sure it never happens again.
She worked the money problem personally, too. She called the head of Citigroup to keep bank credit in place. She flew to Omaha to ask Warren Buffett to invest. He said no, but he gave her advice she took to heart: in a crisis, focus on your customers and your employees. Xerox raised about $2.5 billion in cash, cut capital spending in half, reduced administrative costs by about a third, and sold off roughly $2.3 billion in businesses that did not fit its core.
The cuts were deep and painful. Xerox eliminated about 25,000 jobs during the restructuring and cut its annual expenses by about $1.7 billion. Mulcahy was honest with employees that hard times were coming, and she asked for total commitment from those who stayed. But she drew a firm line around one budget. Bankers and investors pushed her to cut research spending, which is often the easiest place to find money when a company is desperate. She refused. In her words, “We didn't take a dollar out of research and development.”
That refusal paid off. Within a few years, a large share of Xerox's equipment revenue was coming from products launched in the previous two years, including new color printing systems. Mulcahy also gave employees a picture of where they were headed. She and her team wrote an imaginary Wall Street Journal article, dated years in the future, describing what a recovered Xerox would look like. By 2005, by her own estimate, the company had achieved most of what the article described.
The results were substantial. Xerox returned to profit, cut its debt roughly in half, and in 2004 earned $859 million on about $15.7 billion in sales. Mulcahy was named CEO of the Year in 2008 by Chief Executive magazine, and she retired as CEO in 2009, handing the job to Ursula Burns. The story is not tidy. The accounting problems she inherited took years to resolve, tens of thousands of people lost their jobs, and Xerox found its later success hard to sustain as the printing business shrank.
Still, the core of what she did is clear, and it applies to anyone leading through trouble. When things are worst, many leaders retreat into conference rooms with lawyers and spreadsheets. The bad news feels too heavy to carry in front of people. Mulcahy did the opposite. She got on planes, sat with customers who were angry, stood in front of employees who were scared, and told them the truth. Her presence was part of the plan, not a break from it.
On Monday, look at where you are spending your time when things go wrong. Are you visible, or are you hiding behind email? Go stand where the problem is. Tell your people plainly how serious it is and what you are going to do. Then find your version of research and development, the one investment that builds your team's future, and protect it even when it would be easier to cut. Resist the easy exit when the hard road is still open.
A crisis does not wait for a leader who feels ready. It asks whether you will show up anyway, in the plant, on the phone, in front of the customer, and keep showing up until the cow is out of the ditch. Courage in a turnaround is rarely one dramatic speech. It is the decision, made again every morning, to be present and to keep going.