Xerox's Dynamic Duo

Anne Mulcahy and Ursula Burns saved Xerox in a historic turnaround. Now they facd a different kind of challenge: sharing power and managing succession. Fortune goes behind the scenes.

By Betsy Morris

October 19, 2007

[continued, page 4]

The org chart did change to give Burns experience in new areas and Mulcahy more time to court big customers. Burns added marketing, strategy, global sales accounts, and human resources to her portfolio.

The real change, though, is that instead of dividing the workload by function, they divide the problems. So Burns is tackling the complex business of centralizing Xerox's IT business in Europe, freeing Mulcahy to spend more time with customers, such as closing a service deal with Fidelity. While Burns planned to keynote a trade show in India, Mulcahy was scheduled to host an event for CEO-level customers in Germany.

Mulcahy scoffs at the notion of mentoring Burns: "Me mentor Ursula?" She just laughs. "Hello. It's like, 'Ursula, here's another big problem. Fix it.'"

But she is definitely coaching. In meetings Mulcahy shoots veiled looks designed to signal Burns to listen instead of "letting my big mouth drive the discussion," says Burns with a laugh, because now she knows she can hijack a meeting if she's not careful. Mulcahy is pushing her to develop a poker face. After a meeting Mulcahy will tell her, "Ursula, they could read your face. You have to be careful. Sometimes it's not appropriate."

As her horoscope reminds her again one morning when we talk, "Patience is not one of my strengths." A voracious problem solver, she has found that outside the realm of manufacturing and production, the right answer to a problem "is only about 10% of the solution."

In sales, for instance, she muses, it's "Okay, Ursula. Fine. You've got it. And if you could do it all yourself, that would be the greatest solution in the world. But you can't. Anne has taught me that 90% is getting the rest of the organization to line up. Anne is a master at that. An absolute master."

They both have a tremendous loyalty to Xerox. Neither wants to work anywhere else.

"I have been talking to Anne about life after Xerox," says Michael Marks, who is both chairman of Xerox's major supplier, Flextronics, and also a senior advisor at the buyout firm KKR. "She can have any opportunity she wants." KKR chiefs Henry Kravis and George Roberts have been interested in meeting with her, he says. When Marks talked with her recently about another big CEO job, it turned out "she had zero interest," he says.

At some point, Mulcahy allows she might consider some kind of "public-private endeavor" to take on a big world problem. But she hasn't begun to think about that. "I've been pretty clear the only company I want to run is Xerox. This is where my head and my heart are."

Mulcahy won't be satisfied until she and Burns have been able to jump-start revenue. And there are still challenges ahead.

"If you had asked me would it take this long, I would have said no," she says. "We were focused on getting it right and not on the kinds of things that will drive the quick-growth spikes."

The document-management business Xerox built from scratch generated more than $1.6 billion in revenue in the first six months of this year, an 8% increase from last year. The strategy is to push into other burgeoning segments with proprietary products like Xerox's solid-color ink.

Still, it's a tough road. The gradual loss of its high-end black-and-white business as print shops transition to smaller machines and color continues to dampen revenue. And everything else gets tougher, with Canon and other rivals encroaching on color and now the possibility that low-cost inkjet technology could catch on in the office.

"This is a very crowded industry with a lot of players," says director McDonald. On top of that, the challenge at Xerox is, he says, "How do you build enough at the top end to offset the losses at the bottom end?" There are signs the strategies are working. In fact, revenue in the first half of 2007 grew 5%, to $8 billion.

These days, Mulcahy and Burns have forgotten the org chart and gotten back to business. So has everybody else. Firestone and Zimmerman and several other top managers were promoted to executive vice president. Mulcahy has noticed the tenor of some meetings changing as executives realize that Burns might not be as patient as she is. "They are figuring it out. It works."

She and Burns aren't thinking about succession for the time being. It's all about who's going to Europe, who's dealing with partner Fuji Xerox, who's handling the investor conference.

"I definitely want to lead this company," says Burns. "But I do not want to lead it until Anne doesn't want to." As long as the question is when, and not if—well, she's okay with that. "If that's all it's about, then this is the only place I would ever want to consider."

As for Mulcahy, the prospect of quitting has haunted her for years. She always meant to retire to spend more time with her kids. She always wished she'd had time to volunteer. Every time she bought a business suit, she would tell a colleague, "This is such a waste of money because I am going to be retiring soon." But she could never quite bring herself to do it.

Now, she says with a sigh, "The way I think about it is: I'm not leaving tomorrow. And I believe I will know enough not to stay too long."

For every successful CEO, it seems, this is the ultimate test of executive judgment, and it drives some of them to craziness. For Anne Mulcahy, the accidental CEO who inspired a workforce and imbued them with enough fervor to save their company, the hardest job of all may still be ahead—and that will be knowing when to turn off the copier and walk out the door.

1 | 2 | 3 | 4 <Previous Page