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"Don't Waste a Second of Your Time Listening to Wall Street"

A lot of CEOs have spent the last year barely hanging on. Some businesses have not succeeded, but others are edging back from the brink. They're hoping that with a little more time, and a little more luck, they'll make it.

Anne Mulcahy
Source: xerox.com
Anne Mulcahy

Anne Mulcahy knows how they feel.

Mulcahy is the long-time chairman of Xerox and, up until July, the CEO.

She became chief executive of the company in August 2001, when Xerox had around $18 billion in debt and only $100 million in cash.

She was pressured to declare bankruptcy.

The SEC was investigating the company for accounting shenanigans. There was not a "Buy" recommendation to be found on the street, and the media wrote the copier company off as dead.

As many of you probably know, the story didn't end that way.

Mulcahy and her team worked very hard to turn Xerox around into a leaner, more responsive company. Ignoring advice to cut spending on R&D, her team insisted on building up the technology pipeline. "To survive bankruptcy only to face a technology drought three years down the road was not a scenario we wanted to face." She eventually returned the company to profitability, and Mulcahy says two-thirds of Xerox's revenues come from technologies released in the last 24 months.

But she wasn't sure any of that would happen back in 2001. She was thrust into a job she never sought and had to learn very quickly.

This week I hosted an event at Cal Tech where Mulcahy talked about managing through a crisis.

Here are a few of her stories:

As Xerox was bleeding cash, Mulcahy landed a meeting with Warren Buffett.

She was hoping he'd invest in the company, so she flew to Omaha and gave him her best pitch. His response? "Well, as you know I don't invest in technology." Great, she thought. Buffett then gave her something which may be more valuable than his money: his advice. "Don't waste a minute of your time listening to Wall Street," he told her. Ignore the analysts, the bankers, the media. "Talk to the people who are going to provide solutions." First, that meant employees. Second, that meant customers. Mulcahy says she spent three months trotting the globe listening to what customers wanted, and talking them into sticking with Xerox. She met with top managers individually and convinced most to stay.

Mulcahy believes some people still think she probably should have declared bankruptcy at Xerox, but she strongly believed in avoiding that at all costs.

"Name me one company which has come out of bankruptcy and been anything near what it was before." She was loyal to Xerox, an insider who'd been with the company since 1976, not an outside turnaround specialist. Bankruptcy would "crush the company". However, to avoid default, she needed 58 banks to sign off reworking $7 billion in debt. After a lot of cajoling, 57 banks signed on. Bank #58 wouldn't budge. It didn't look good. Mulcahy says someone told her, "This is when you need power...find the most powerful person you know in banking." She called up Sandy Weill, CEO of Citigroup at the time. "I didn't know him, but I called him." Weill was part of the 57 other banks, and he agreed to meet with her. Mulcahy says she explained to him that if Citi ever wanted to get its money back, Bank #58 would have to be on board. Could Weill help? On the car ride back to her office, Mulcahy says she got a call from her CFO. "The deal is done."

Perhaps the lowest point during the crisis was in April, 2002, as Mulcahy returned home from Japan to learn that the SEC was charging the company with illegally pumping numbers.

Xerox settled with a $10 million fine, at the time the largest fine ever against a public company. "I felt bad for the employees who would read this and have to explain it to their family and friends," Mulcahy says. Alone in her office, the phone suddenly rang. Without thinking, she picked it up. On the line was former CEO David Kearns, who screamed in her ear, "Have you seen the news?" Yes, she told him. "Do you believe it?" "No." "Good," was Kearns' answer, according to Mulcahy. He added, "In two years the stories will be all good. Don't believe them, either."

This week, people in the audience at Cal Tech asked Mulcahy to describe good leadership. "I prefer to call it 'followership'," she said. It's important to be the kind of leader with a vision worth following. She also talked about her struggles with the emphasis the media always seems to put on her being a woman. She didn't care for it at first, but now accepts it (though she was a little surprised at all the attention the company received when Mulcahy handed off power last summer to another woman, Ursula Burns. "I just didn't think it would be such a big story." "Really??" I responded).

Finally, one of the most interesting pieces of advice Mulcahy gave is that parents shouldn't be so obsessed with grooming their kids for any particular career.

With four brothers in her household, "There was no career counseling," Mulcahy jokes. She went to school and received a BA in English. Her parents wanted to know, "When are you moving out?" Mulcahy took a field sales position at Xerox in 1976 "because I needed a job." She had no idea that 25 years later, she'd be CEO. Her message—don't have a narrow focus, you may miss out on some amazing opportunities.

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