Xerox Corporation and Organizational Development - Essay Example

Organizational Development Running Head: XEROX CORPORATION Xerox Corporation and Organizational Development Beth Hilderman Webster Organizational Development- Xerox Corporation Organizational development is a method aimed at changing the attitudes, values and beliefs of the employees so that employees can improve the organization. It changes the direction of the organization towards improved problem solving, responsiveness, quality of work and effectiveness. It calls for futuristic vision, strategic planning, persistency in execution and quality management all ably supported by sound management abilities. For any business to thrive, there must be set goals, there must be objectives and there must be several strategies to adopt in order to achieve them. Strategies vary depending on what business, products or services, industry, location, machinery, labor and fund at the disposal of the business. In any organization, change is inevitable and the organization that thrives will always be the organization that anticipates change, is flexible and willing to adapt itself to change. Let us follow the organizational changes of Xerox Corporation that brought the company up from its fall and turned it around. Xerox Corporation is the world's largest document-management company. Headquartered in Stamford, Connecticut, the company is a pioneer of photocopying that its name has become so synonymous with the product that the term "Xerox machine" is often used to refer to xerographic duplicators produced by other companies. In addition, the term "Xeroxing" is quickly becoming synonymous with "copying." The company made its presence felt in 1959 with the introduction of the first one-piece, plain paper photocopier using the process of xerography (electro photography), the Xerox 914. The company opened a famous research center, the Xerox Palo Alto Research Center or Xerox PARC. Until the end of 1970, Xerox dominated the market with an amazing monopoly. Its market share was 90% and this led to a confidence about it surviving new competition in the market. By the 1980's Xerox's market share declined from 90 % to 43 % due to the competition from Ricoh, Sharp, Cannon, Kodak and IBM. Facing a downturn in office-equipment outlays, tougher rivals, an accounting scandal and management turnover, Xerox saw sales drop drastically. By the year 2000, Xerox's share price had fallen below $4, from a high of $64 a year earlier. In year 2001, Xerox experienced a net loss of $293 million. That was down 1% from the year before and 20% off its peak of $19.4 billion in 1998. [Xinxin, n.d, para 1.0] The basic reasons of failure for Xerox was not being able to anticipate and leverage the changes in the technology sector, lagging behind in developing products with digital technology and being overconfident in maintaining market share and brand loyalty. It failed to anticipate and strategize to face the emerging competition, was unable to offer customers lower priced products to counter the competition and was plagued by a lack of vision to scale to revolutionary digital age products using its strong presence. The organization was in desperate need for an OD intervention. When Anne Mulcahy, chairman and chief executive of Xerox, assumed responsibility in the year 2000, she had the unenviable task of turning around a company that was on the verge of bankruptcy. She realized that a massive organizational restructuring was in order if results needed to be achieved. Xerox's systems were studies and data was collected. The vision, the New Xerox Movement, was made to transform Xerox into a more cost-conscious, competitive, quality-control-based company contributing the first step encompassing the strategic change. Under her leadership, Xerox moved from losing $273 million in 2000 to earning $91 million in 2003. By last year, the company's profits had reached $859 million on sales of $15.7 billion. At the same time, its stock has risen, returning 75% over the last five years, compared with a loss of 6% for the Dow Jones Total Stock Market Index. Xerox, which was using the digital interface in its research center failed to see that it was the heartbeat of the future. It was one of the great fumbles of all time. In the 1970s, Xerox Corp.'s Palo Alto Research Center (PARC) developed the technologies that would drive the personal computer revolution. Xerox had the PC and networking businesses firmly hooked--but did not try to reel them in. It did not even patent PARC's innovations. Management was too preoccupied with aggressive competition from Japan in its core copier business. Instead, PARC's technologies became the foundations for such icons as Apple Computer Inc. and 3Com Corp. ["Xerox won't" 29 Sept. 1997] Xerox has now addressed this by reorganizing the developmental activities of their research centers into economically viable cost centers. Recognizing that researching futuristic technology and developing it is a great aid in its growth, Mulcahy spared her researchers from cuts even during their crisis. She charged her research centers; Xerox has four in North America and Europe, with devising ways to generate higher returns on their work. One new approach was marketing Xerox's research capabilities to other companies. Its Palo Alto, Calif., center, for example, receives funding from biotechnology companies and collaborates with them. "So we have partners who write out checks to have research done," she noted. ["Cow in the ditch" 14 Nov 2005]. Protecting research and development allowed Xerox to roll out a wealth of new offerings as its financial health improved. Today, about three-quarters of the company's revenue comes from products and services introduced in the last two years. "Our customers are voting with their checkbooks," Mulcahy pointed out. "We're growing share, and we're growing top-line revenue." ["Cow in the ditch" 14 Nov 2005] Sales rose for the first time since the year 2000. With the senior management busy with the internal war and power politics, there was no consolidation of skills at a lower management level and no focus or direction for the workforce. This lack of structure resulted in loss of direction in the company and affected the employee morale. Xerox Corp consolidated 36 administrative centers into three back in 1999 in a massive effort to recover millions in cost savings. Nevertheless, the move came just as Xerox was also reorganizing its sales division. The simultaneous upheaval in two key units' unleashed chaos across the company's billing system. Customers received invoices quoting prices they had never agreed to or detailing equipment they had never ordered. Worse, the mistakes took months to sort out, prompting some long-time customers to defect. This merely added insult to an already injured company. The company also tried to position itself as a solution provider rather than a supplier without sufficient research and this ineffective transition from selling high-tech products to selling high-tech solutions and services resulted in losing the direction of the company. The reorganization was ill timed and Xerox under Mr. Thoman's leadership reshuffled and lost its focus due to conservative management style and board irresponsibility, with many employees defecting when they could. Mulcahy realized that these half-baked reorganizations were of no use. Xerox's biggest weakness was its financial situation, and specifically the heavy debt and the low profitability due to its model of leasing rather than selling outright. Mulcahy and her team hammered out a plan that first focused on cash generation, since the company needed cash to survive. As a cost-cutting measure, they intervened in the human resources area and revamped the structure. Due to the layoffs, employment has dropped under her from about 80,000 to 58,000. The intervention into the corporate structure streamlined it and zeroed in on markets where Xerox had a competitive advantage and thus creating more opportunities for profitable growth. A structural change is the reorganizing-redesigning of an organization's departmentalization, coordination, span of control, reporting relationships, or centralization of decision-making was undertaken. Each geographical location was made into a profit and loss center and accountability was made a priority. Mulcahy and her team also managed to halve the company's debt and double its equity. Profits are increasing, and Xerox is throwing off a healthy amount of cash. In addition, the organizational culture in the Xerox workplace was that the employees' morale was down and they were unwilling to give an honest feedback. Xerox has made a cultural change by creating a new set of "heroes". These "heroes" were individuals and teams that were publicly congratulated whenever their behavior reflected Xerox's new values of quality, teamwork, and customer focus. Mulcahy addressed the lack of transparency in the reorganization too and set about an environment where employees were not afraid to air their opinions and suggestions. "Executives must create a workplace where workers feel secure in giving honest, constructive feedback. And you can never depend on filtering information up through the company," she added. "You have to talk to frontline employees." ["Cow in the ditch" 14 Nov 2005] Technological intervention has improved Xerox's compensation plans and reengineered appraisal systems. This has proved beneficial in increasing employee morale and given them a company culture to identify with and grow, and with a shared vision, they are ready to take on the responsibility. Xerox also understood that piecemeal restructuring would not deliver the results it wanted. Hence, a Total quality management program aimed at maximizing customer satisfaction through continuous improvements was launched. It was based on the principle, "Leadership through Quality" program. Under this program, employees were accountable for the progress of the shared vision. The new employee goals are the heart of the program, not just achieving the quality goals. This also served to recognize and compensate the employees as a team performance or individual performer. The following year the company's Business Products and Systems division was one of the only two recipients of the 1989 Baldrige Award. Xerox has come a long way in a short time. It has learned from its past mistakes and is ready to compete in the futuristic markets. Anne Mulcahy was aptly named the second most powerful woman in business by Fortune magazine in November 2005. The company's single-mindedness in the efficient organizational restructuring has served to add value, enhance its image and made it more productive. The strategic interventions at the appropriate time and specific area have served to deliver better prospects to the loyal shareholders. Sources Bounds, Greg and Yorks, Lyle and Adams, Mel and Ranney, Gipsie beyond Total Quality Management McGraw-Hill 1994 Dessler, Gary. Human Resource Management Ed.8 New Jersey: Prentice Hall, 2000. Malcolm Baldrige National Quality Award 1989 Winner 27 Aug 2001 retrieved 25 Dec 2005 from NIST website http://www.quality.nist.gov/Xerox_89.htm Harvard Business Review. Knowledge Management Boston: Harvard Business School Press, 1998 Haschak, Paul G Corporate Statements. Jefferson: McFarland & Company, Inc. Publishers, 1998. How Xerox got up to Speed retrieved 25 Dec 2005 from Business Week website: http://www.businessweek.com/magazine/content/04_18/b3881605.htm Pfeffer, Jeffrey and Robert I. Sutton. The Know-Doing Gap Boston: Harvard Business School Press, 2000 The Cow in the Ditch: How Anne Mulcahy Rescued Xerox 16 Nov 2005 retrieved 25 Dec 2005 from Knowledge@Wharton website: http://knowledge.wharton.upenn.edu/index.cfmfa=viewArticle&id=1318&specialId=41 The Xerox Corporation retrieved 25 Dec 2005 from Geocities.com website: http://www.geocities.com/TimesSquare/1848/xerox.html Viljoen, John and Dann, Susan Strategic Management 4th Edition Prentice Hall Xerox won't duplicate past errors 29 Sept 2005 retrieved 25 Dec 2005 from Business Week website: http://www.businessweek.com/1997/39/b3546109.htm Xinxin Case Study: Xerox Corporation n.d retrieved 25 Dec 2005 from n.d Boraid.com website: http://www.boraid.com/english/eList.aspid=50 Read More