Ursula Burns: An Historic Succession at Xerox

One female CEO will hand over the reins to another—a first for a major company. But Burns has her work cut out for her

By Nanette Byrnes and Roger O. Crockett

Ursula M. Burns isn't one to savor victory—even if it's being the first African American woman to lead a major U.S. corporation and the first female CEO to take the reins from another woman. Within days of being named chief executive of Xerox (XRX) she was on a plane to Europe. The mission: a 30-day tour to meet with staff outside the U.S., where Xerox has almost half its sales, and discuss ways to get customers buying again. "I think the celebration of her announcement ended about 60 seconds after the e-mail went out," says Clarke Murphy, a recruiter at Russell Reynolds.

Burns, 50, has a war to fight. Xerox, a brand so synonymous with copying that its name long ago became a verb, faces a brutal business outlook. Customers are buying less equipment. Prices keep dropping. Managers are curbing paper use for cost-saving and environmental reasons. While departing CEO Anne M. Mulcahy, 56, pulled the $17.6 billion-a-year copier giant from the brink of bankruptcy and restored profitability, her successor has much to do. Burns will find herself battling competitors with stronger balance sheets and more heft as the industry consolidates. The Norwalk (Conn.) company's sales dropped 18% in the first quarter, to $3.6 billion, producing a profit of only $49 million. The stock, trading at more than 14 a share in September, is now less than half that.

And yet expectations are high as Burns ascends to the CEO post. Executives inside and outside the company speak of her deep industry knowledge and technical prowess, as well as her frankness, sharp humor, and willingness to take risks. For many working mothers, it's inspiring to see Mulcahy, a mother of two grown sons, step down in favor of a woman who has a 16-year-old daughter and 20-year-old stepson—and was herself raised by a single mother in a New York City housing project. "This is a bases-loaded home run," says Noel M. Tichy, a professor at the University of Michigan Ross School of Business. "We now have something to share with our MBA females that we've never had." Adds Robert A. McDonald, chief operating officer of Procter & Gamble (PG) and a Xerox board member since 2005: "Ursula is a strong leader who has an unusual ability to understand the power of technology and innovation."

The excitement is understandable. Three decades after women flooded into professional jobs, the C-suite continues to be dominated by men. While women now make up 59.6% of the U.S. labor force, fewer than 16% of top corporate officers are female, according to Catalyst, an advocacy group that tracks women's advancement in the workplace. For minorities, the figures are even worse. Avon (AVP) CEO Andrea Jung became the first nonwhite woman to lead a major company in 1999. Frank D. Raines, former chief of Fannie Mae (FNM), became the first African American CEO of a top company the same year, though he later left amid an accounting scandal. By 2007, there were seven black men running major corporations. Since then, three have left. While other black women have run major divisions, Burns is the first to lead a large public company.

"CLASSIC NEW YORKER"

A mechanical engineer by training, Burns has a strong understanding of the business and its challenges. Like Mulcahy, she's a Xerox veteran. She came to the company as a summer intern in 1980, joining full-time a year later after completing her master's degree in engineering at Columbia University. Xerox was drifting at the time, having largely ignored the threat posed by Japanese copiers and new office printers, while failing to get innovative products to market. She took on roles of increasing responsibility, distinguishing herself as a quick study who could handle multiple tasks at once and wasn't afraid to flag a problem. "Ursula is your classic New Yorker," says Christa Carone, Xerox's vice-president for marketing and communications. "She's known for being very frank."

Reginald L. Brown Jr., CEO of consultancy Brown Technology Group, says many colleagues saw her as CEO material almost two decades ago. Brown began working with Burns in the late 1980s in Xerox's custom systems division, which helped clients switch from standard copier machines to ones that could be integrated with computer networks. When Burns was appointed special assistant to Wayland Hicks, then president of marketing and customer operations, in 1990, everyone knew she was on the fast track. "These were jobs in the company that division presidents put their best people in," says Brown. "Most of them were white males, so to have an African American female in such a position of power, you knew early on she had great potential." She later took on a similar role with then-CEO Paul A. Allaire. Appointed general manager in 1997 and vice-president for worldwide manufacturing two years later, Burns helped lead a push into color copying.

But the overall business continued to struggle. By the time Mulcahy took over as CEO in 2001, Xerox was in deep trouble. Customers had migrated from Xerox's stand-alone copiers to using cheaper desktop printers to get multiple copies of documents. Rivals such as Canon and Hewlett-Packard had stolen the lead in key product areas, and the company had pulled down almost its entire credit line as the business hemorrhaged money.

Early in Mulcahy's tenure, she forged a partnership with Burns. Over time, she entrusted her lieutenant with much of the day-to-day operations while she focused on improving customer service and Xerox's financial health. Mulcahy oversaw major moves such as shedding the desktop printer business while trying to get the balance sheet in shape.

All the while, Tichy observes, Burns was the one who was "clearly running the majority of the business." With the company in crisis, she helped downsize the workforce by close to 40%, to 57,100 from 94,600. She spearheaded Xerox's move out of manufacturing, with Flextronics (FLEX) now making most of the actual copiers. Burns, who was named president in 2007, also identified some gaps in its offerings, filling them with lower-end products from Xerox or partners. That has given the company its largest product portfolio in history and allowed it to be more competitive in selling to small and midsize businesses. And she has proven adept at garnering the support of the board. "She understands the technology and can communicate it in a way that a director can understand it," says P&G's McDonald.

Another factor in Burns' rise has been the strength and depth of Xerox's commitment to diversity. One-third of Xerox's 3,819 executives are women and 22% are minorities. Employee affinity networks first sprang up in the late 1960s, and senior executives have long had responsibility for sponsoring them. Burns was a liaison to the Hispanic employees' caucus. "It was a system that allowed you to be recognized" at a time when women and minorities often weren't, notes Nina Smith, who moved up the ranks at Xerox at much the same time as Burns, eventually becoming chief marketing officer. She's now a senior vice-president at IT consultant Mitchell International.

Much of what Xerox does is now replicated in other companies: an Executive Diversity Council, leadership programs, and performance reviews that rate managers on their ability to recruit, mentor, and promote underrepresented groups. (If they don't hit the mark, their review, pay, and chances at promotion get dinged.) What has distinguished Xerox is less the outline of its programs than the actual makeup of its senior ranks. As Harvard Business School professor David A. Thomas observes: "You have a culture where having women and people of color as candidates for powerful jobs has been going on for two decades."

Now, Burns' toughest job will be restoring the company's top-line growth. Equipment sales were down 30% in the first quarter. And once fast-growing developing markets, which make up 15% of sales, have slowed to a crawl with demand in countries such as Russia off 33%. While analyst Richard Gardner of Citigroup Global Markets argues that the company's strength in color printing and recent acquisitions should help it rebuild, he expects a steep dip in sales this year, to $14.7 billion.

Xerox says its investment in innovative products will help it emerge from the recession stronger. But Gartner Group says it expects corporate purchases of copiers, printers, and other hardware to remain flat through 2012 while prices will continue to slide. And Fitch Ratings put Xerox's $9 billion in BBB-rated debt on a negative outlook after the first-quarter numbers came in. "Will they be able to make acquisitions?" asks Fitch analyst Nick N. Nilarp. "Or will they just continue very slow growth, if at all?"

In the short term, analysts hope Burns will focus on reviving sales in emerging markets while continuing to expand into higher-margin services at home. And Xerox needs to be more efficient to compete against aggressive and deep-pocketed competitors.

While Burns has much to do to rebuild Xerox's strength, she's aware of the significance of what she has already achieved. As president, she once told an audience at the YWCA in Cleveland: "I'm in this job because I believe I earned it through hard work and high performance. Did I get some opportunities early in my career because of my race and gender? Probably. ... I went to work for a company that was openly seeking to diversify its workforce. So, I imagine race and gender got the hiring guys' attention. And then the rest was really up to me."

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Want a Good Response Rate? Better Get Personal

The fundamentals of “trans-promotional marketing” – a new killer app in digital publishing

By Hakan Akbas

Today, most direct marketing takes the form of push marketing. It pushes email or print collateral out to the mailboxes of prospects who have not requested it. Rather than giving prospects a chance to reach out for a product or service that meets their needs, it is based on guesses about what customers want. It's no wonder over 95 percent of junk mail and email ends up in the wastebasket. Wouldn't it make more sense to invest in marketing campaigns that focus on actual expectations and requirements?

Push marketing has response rates of one or two percent at best because most people view unsolicited mail and email as intrusive. Just about everyone ignores junk mail and spam, even when it comes from their own financial institution. In short, over 95 percent of the effort, money, time and labor that go into such materials are wasted. Worse, it actually drives prospects away. Think of it as collateral damage.

What exactly is the problem with push marketing? It is based on the assumption that all customers have the same attributes and therefore will have the same banking needs. In today's market, nothing could be further from the truth.

So how can marketing be targeted better to address the consumer as an individual rather than part of an amorphous entity? A step in the right direction is to add the recipient's name to a direct mail piece. That alone can increase response rates by over 40 percent. But an even more effective way to target marketing communications is to base them on transactional data and personal customer information stored in the bank's database. This increases response rates by over 500 percent, even in a traditional direct mail campaign.

Consider the following personalized marketing communications tools as a way to increase response rates, boost sales and encourage customers to act.

Monthly or quarterly account statements may be regulatory requirements, but they can also double as a strategic communications vehicle to engage and connect with customers. Marketing that takes the form of in-context messaging in conjunction with traditional statements has several benefits. It saves money because the mailing serves a dual purpose. Also, customers usually open and read their statements. Moreover, marketing messages included with statements are based on factual information on the recipient's requirements and preferences as evident from the statement. Marketing monologues become conversations.

Similarly, billing and other notifications specific to customers can double as marketing vehicles. New loyalty programs and even partners' cross-selling offers are less likely to be discarded when they are personalized rather than sent out en masse to everyone. More progressive banks are even considering dynamic pricing, which can now be enabled by "the last mile" in personalized customer communication as a new source of revenue.

A few progressive organizations have already created personalized web portals for customers. These portals capture and store the customer's profile and are linked to a document publishing solution, allowing customers to request information on new products and services at the click of a button. Whether content includes travel offers, high net worth programs or financial planning tools, financial institutions can send the requested information as customized pieces based on the parameters established through the portal.

Some financial institutions have linked customer analytics and event management systems to create a personalized customer communication tool. Targeted communications are triggered by events such as account activity alerts, the customer's purchase of a home or life stage events.

A prerequisite for the success of such programs is an integrated customer communications technology platform that can do it all, from database management to the design of engaging paper documents and e-mail, to web publishing, to the creation of dynamic, personalized content for marketing messages.

One of the world's largest diversified financial services firms, with operations in more than 100 countries worldwide, avoids "collateral damage" by using technology for customer communications management. The company is using e-mail to distribute correspondence that cannot be realistically sent in paper format, such as alerts or reminders about e-statement availability. In addition, it uses e-mail to drive customers to the company's website for additional service needs to decrease the need for calls to the customer service center. It generates real-time email (delivered within 30 seconds) and just-in-time email (delivered within 15 minutes) for correspondence such as confirmation email or follow-up servicing correspondence related to customer service calls. Extensive use of email has helped increase the number of customer touch points and reduced customer service costs while monthly volumes went up from 40,000 print-only letters to more than 11 million letters for distribution via print and email. The company saved more than $20 million, reducing cost per correspondence by more than 95 percent.

Personalized marketing communications not only increase response rates, they build better customer relationships. It typically costs about $300 for a bank to acquire a new customer and attrition rates range from 10 to 40 percent. Since it takes about three years to recover the cost of acquiring a new customer, keeping customers through cross-selling and up-selling of more profitable and "sticky" products is critical. Personalized customer communications open the door for further communication and establish strong relationships with customers, making these approaches far more effective than anonymous push marketing. For example, 35-40 percent of all customer attrition is related to life stage events. By sending event-triggered communications, financial services organizations can leverage these changes in customers' lives.

In addition to a flexible technology infrastructure that drives personalized customer communications, there are other prerequisites for effective customer onboarding. The most successful loyalty building marketing programs are:

Relevant. They are founded upon a clear understanding of the targeted customer segment's demographics, attributes and past relationship with the bank, if any. Never assume all customers are the same. Pinpoint a relevant message that really meets their requirements.

Consistent. It's not just about acquiring customers, but also managing them through relationship building throughout the customer lifecycle. Keep messages consistent and consider the customer's satisfaction throughout the relationship, particularly with regard to life stages that might cause a switch in institutions.

Cost-effective. The challenge for marketing departments is to keep campaigns cost-effective and show ROI. Customer communications management platforms, tools and infrastructure are a worthwhile investment because they drive more effective, personalized messages to individual customers.

Push marketing drives customers away. Personalized, customized marketing pulls them in with products and services that meet their needs. Individually targeted messages sent with statements, notifications and other regular communications are less likely to join junk mail in the virtual or real wastebasket.

Xerox Names Burns Chief as Mulcahy Retires Early

It was clear that Anne was going to retire this year given the rumors that she may take a post with the Obama administration. Also, Ursula has been heavily pursued by headhunters for CEO posts given she would be the first African American CEO to head up a Fortune 100 company.

Anne took over following a disastrous succession attempt by Paul Allaire who had brought in Rick Thoman from IBM to be the next CEO. While Paul stayed on as chairman, Rick tried to unsuccessfully turn around the company by taking on too much too soon. He was later ousted by the same person who had brought him in. Anne was the best but not the most obvious choice at the time but later on everyone had agreed that she did a respectful job to save the company from bankruptcy. In my opinion the secret to her success stood with her brilliance with people skills and knowing the culture she had grew up with. I tend to think she would do great in politics unlike Carly Fiorina for example.

Today Xerox stock sits at about the same level as back in August 2001. Revenues have not changed either. The company relentlessly cut its way to survival considering it had 79,000 employees back then vs about 57,000 now, which in turn boosted profitability and cash flows. It is ironic that after eight years since Rick Thoman Xerox still faces the exactly same problem unfortunately during one of the worse financial crises of our lifetime: To become strategically relevant to customers again to start thriving as a healthy growth company. Time will tell if a Xerox life-timer will be able to pull it off.

Xerox Names Burns Chief as Mulcahy Retires Early

Anne Mulcahy, who led a turnaround that revived Xerox Corp. when it was near bankruptcy, said she will take early retirement as chief executive, handing the job to her lieutenant, Ursula Burns.

Ms. Burns, who like Ms. Mulcahy has spent decades climbing the ranks at Xerox, will become the first African-American woman to head a Fortune 500 company, according to research group Catalyst Inc.

Ms. Burns faces a challenge in the current recession of cutting costs fast enough to regain profitability. Longer term, the company has the task of increasing its market share against larger competitors like Canon Inc. and Hewlett-Packard Co. in the slow-growing, mature markets of office and commercial printing.

Ms. Mulcahy will remain Xerox's chairman. The change, set for July 1, was announced before Xerox's annual shareholder meeting Thursday.

The 56-year-old Ms. Mulcahy didn't discuss her reasons for retiring now. She had signaled Xerox's succession plans two years ago when she named Ms. Burns, now 50, as president. The copier and printer company, based in Norwalk, Conn., declined to make either executive available.

The two executives had agreed more than a year ago that Xerox's 2009 annual meeting would be an appropriate time for the transition to be announced, according to a person close to Ms. Burns.

Ms. Burns has been considered by recruiters as a potential CEO for other companies, including Archer Daniels Midland Co. and Sunoco Inc., according to people familiar with the situation. But she had made it clear she preferred to stay at Xerox.

Ms. Mulcahy said in a prepared statement: "The decision to move on is made easy only in the fact that Ursula Burns is so well positioned to take Xerox to the next level." A Xerox spokesman said Ms. Mulcahy, who is a board member at Citigroup Inc. and Target Corp., plans to remain an active chairman.

Ms. Burns, who grew up in public housing in New York, worked as an intern at Xerox before getting a master's in engineering at Columbia University.

Voluble and fast talking, she ran some of Xerox's biggest operations in Rochester, N.Y., earlier this decade and negotiated cost cutting and outsourcing deals with labor unions that resulted in thousands of layoffs. She has recently led Xerox's development operation.

Ms. Burns vaulted into management after being plucked from the engineering department to serve as special assistant to Xerox's former chief executive, Paul Allaire.

She has a reputation for pushing hard to make the company move faster and for making the company's famous research labs focus more directly on products to help the bottom line.

"Most companies have one woman who might be a possibility to become CEO," said Ilene Lang, president of Catalyst, a non-profit that promotes the advancement of women in business. Xerox "has a range of them."

Ms. Lang said Xerox had women on its board years before most companies, and has an unusual number of women in senior positions in key operations such as sales and manufacturing.

Over her 33-year career at the company, Ms. Mulcahy rose into the executive ranks after starting at Xerox in sales. She was little known when she was named president in May 2000, when Xerox removed her predecessor in the midst of a financial crisis. She took over as CEO in August 2001.

At the time, Xerox's copiers were being hammered by desktop printers and Japanese rivals. An emerging accounting scandal was about to engulf Xerox in a Securities and Exchange Commission investigation, resulting in restated earnings and a huge fine.

During Ms. Mulcahy's first year as president, crushing debt forced the company to take emergency bank loans and sell Asian assets to raise cash.

Since then, Xerox has pared its debt, rebuilt its product line and established a large business selling high-end printers to commercial print shops. It generates about $1 billion in cash a year, and has resumed paying dividends and repurchasing stock.

"It has the best product line and the best strategy and distribution in the industry," said Shannon Cross, an imaging-industry analyst at Cross Research.

Ms. Mulcahy's tenure hasn't been an unalloyed success. Xerox stock, around $20 when she became president, fell below $5 several times in her first three years before rallying. It plummeted last year as the world-wide recession took hold and closed Thursday at $6.82, down eight cents, on the New York Stock Exchange.

Developing markets such as Russia, which had been growing fast, have been hit hard by the global credit crunch. The company started a round of layoffs late last year. To capture business from rivals, Xerox is banking on such innovations as its recently unveiled solid-ink printer-copier devices for the office, which slash the cost of printing in color.

The company's stock-market value is little changed from when Ms. Mulcahy took over as CEO in 2001. Despite several asset sales and acquisitions, revenue growth has been hard to come by: Revenue was $17.6 billion last year, well below the record $19.45 billion of 1998.

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