CASE ANALYSIS

Presented By:

ANIRUDDHA DEY

MONALISA DE

SOURABH KUMAR SAHA

Introduction• 1938: Chester Carlson, a part-time inventor, made the

first xerographic image . He spent years trying to sell his

invention without success (to IBM, General Electric etc)

• 1944: Battelle, contracted with Carlson to refine his new

process, which Carlson called "electrophotography."

• 1947:The Haloid Company ,approached Battelle and

obtained a license to develop and market a copying

machine based on Carlson's technology.

• 1948-58:Haloid coined the word "Xerox" for the new

copiers.

• 1959: Came out with First photocopier,

• 1961: The company became Xerox Corporation

Loopholes In the 1980’s

1. Ignored new entrants like Canon, HP, Ricoh

2. Operating cost was high

3. Products of relatively inferior quality compared to

its competitors

4. Return on assets came down to less than 8% .

5. Market share in copier came down sharply from

86% in 1974 to just 17% in 1984

Measures taken

1. Launching a program referred to as ‘Leadership

through Quality’

2. Management layers were cut

3. Greater authority delegated to lower levels

4. Employees were allowed to participate in decision

making

Xerox improved in the 1990’s

• Allaire succeeded as the new CEO in 1990, and embarked on a major restructuring program

• In 1992 Xerox entered into various tie-ups with Dell Computer Corporation and Microsoft

• Company announced a major restructuring program including a 10% reduction in the workforce

• In 1993 Xerox announced a company wide initiative to reduce costs drastically and improve productivity

Improvement by reducing costs• It indicated that it would reduce the worldwide

workforce by more than 10,000

• This restructuring program achieved cost savings of $ 770 million in 1996

• In 1998 Xerox announced another round of worldwide restructuring, including elimination of 9000 jobs through VRS, layoffs and closing of various facilities

• This program included cutting costs by $ 1 billion, sale of $ 2-4 billion worth of assets

• In the same year, Thoman replaced Allaire as the CEO though Allaire continued as chairman

Xerox starts to decline by year 2000• Despite these restructuring efforts, poor market

conditions resulted in the company reporting a loss of $ 257 million in 2000

• In August 2000,Paul Allaire, Chairman of the leading document management company Xerox, fired the company’s CEO Rick Thoman

Positive culture – ‘envy of the corporate world’

• Attracted quality people and rewarded well

• Employee participation

Change in work culture

• HR executives left the company

• No employee voice

• Dissatisfaction with top leadership

• Promotion according to favoritism and politics

• Patronizing sales force instead of enhancing

customer service

• Lapses in fiscal control

Change in Work Culture of XEROX Corporation

Thoman’s Leadership

1. Focused on industry targets instead of individual

clients leading to reduction in commissions of

sales force

2. Communication with the customers and

employees

3. Failure in implementation of reorganization plan

4. Sales staff attrition increased to 100%

5. Company failed in training the sales rep for the

transition

6. Announcement of large scale lay-offs in

installments of 12000 and 4500

7. Failed to take the employees into confidence

Allaire and Thoman

1. Allaire’s constant interference in Xerox’s affair

2. Did not ‘let go’ of company’s control even after

Thoman was appointed as the CEO

3. Allaire’s ‘in-circle’ against Thoman

4. Problem of accountability and performance

After Thoman

1. Anne M. Mulcahy – President & COO

2. Allaire – CEO

3. Mulcahy emphasized on the retention programs to

arrest the high attrition rates

4. Offer training and education via e-learning

5. Bankruptcy avoided by timely credit from GE

Capital

6. Fall in revenues attributed to economic meltdown

and higher effective income tax rate

OUSTER OF THOMAN – JUSTIFIED OR NOT?

Justified ouster

• August 2000, CEO Rick Thoman fired by Chaiman Paul Allaire

• Massive decline - Loss of $ 20 billion in market value

• Thoman took on too much, too soon

• Decision to reorganize Xerox's sales force led to catastrophe

• Salespeople used to lucrative commissions would have to accept delayed gratification, returning to clients time and again to sell digital solutions

• He called for a one-year transition period for training and relocation

• The transition year was a mess - In the middle, Thoman reassigned the executive carrying it out

• Later, discovered his instructions regarding the top-tier salespeople were not followed - all were reassigned

• Chaos when plan became operational in January 2000

• Reps lost their accounts & customers started voting with their pocketbooks (They didn't think about the interests of their customers)

• Customers jumped ship and salespeople left at twice the regular rate

• Training issues

• Morale and Layoffs - he cut jobs in two waves; first about 12,000, then another 4,500

• Knew the cuts would be painful, but he wasn't prepared for the uproar! - unprecedented opposition from various parties concerned

• Failed to take into confidence the employees of Xerox for his plans

• As the CEO for IBM's PC Company, he had been through an even bigger downsizing.

• But morale at IBM remained high among the survivors as they saw the company stabilize. They understood that their jobs and the future of the company depended on it!

• The difference is that at IBM, workers saw the light at the end of the tunnel

• You can lay people off if the survivors think it will be a better world in the future. If all they see is hopelessness, morale will collapse!

OUSTER NOT JUSTIFIED• Thoman quickly identified several lapses

• As per Thoman, in the Xerox culture, everyone worries about keeping people, especially the sales force, happy

• Happiness in a failing company is an oxymoron!

• To Thoman, the real issues were accountability and performance.

• At Xerox, Managers put the interests of the sales force ahead of the company, neglecting competitive realities to prop up sales commissions!

• Thoman had approved the sales reorganization only after endorsement by a committee of senior executives

• Thoman too tried to communicate with employees during his tenure

• Did a number of traditional things - talking to customers, going to sales meetings and meeting with employees all over the company

• Also initiated new types of communications, including opening a web site, reading hundreds of e-mails that went to that site and often responding to individuals

• Also did quarterly voice-mails to all employees. I received credit while I was doing it, but that all seemingly vanished when I went out the door!

• Some say that a CEO needs at least two years to revitalize a faltering company - All Allaire gave Thoman was 13 months!

• Execution was marred by infighting, friction and political maneuvering

• Mulchay, Buehler and other executives in Allaire’s ‘In Circle’ threatening to resign unless Thoman was removed

• Thoman knew what he wanted to do but when he tried to implement changes, Allaire undercut him

• Allaire’s constant interference in company’s affairs – was not able to let go of the company’s control!

Final Thoughts

1. Everything done by the ‘inner circle’ of

Allaire

2. A change in the mind set is needed

3. Acceptance of new thoughts

4. Need to curb the attrition rates

5. Better communication with the employees

6. Emphasis on customer service

Thank You