When an HR Leader Takes Charge

By Nancy Davis Oct 13, 2010

SAN ANTONIO—Anne Mulcahy retired as chief executive officer of Xerox in 2009 amid mounting accolades for the international corporation’s dramatic turnaround after near-bankruptcy in 2000. Having served as the ailing technology company’s vice president of human resources on her way up the ladder, this deeply loyal long-term employee remains a role model for many in the HR profession. Mulcahy was warmly welcomed as she addressed attendees at the 2010 SHRM Strategy Conference on Oct. 7.

“It is an important time to be in human resources and understand the implications of what’s going on,” she reflected. “The Xerox turnaround was an incredible learning platform for leadership.”

Mulcahy now uses that leadership expertise as chair of the international philanthropy Save the Children.

She called her company’s financial crisis “the perfect storm,” featuring increasing debt, a dearth of cash and a lack of focus on customers. The Securities and Exchange Commission was investigating accounting irregularities. Employees were defecting. Shareholder value was cut in half overnight and continued to deteriorate.

Mulcahy went on a 90-day fly-by to listen to what employees and customers had to say about what was wrong. She identified:

  • Lost focus on customers’ experiences.
  • Technology perceived as too expensive and “over-engineered.”
  • A cost structure that was no longer competitive.

“We went to work and built a turnaround plan that was complex—but we talked about it in simple terms,” she said. “Employees needed to understand it and understand how they could contribute. We focused on cash generation. We were to become best in class, competitive, and do what we had to do from a cost perspective in the areas we were competing in. At the same time, we picked our bests and invested in the future by making investments upstream.”

By 2005, Xerox was making money again. “It’s extraordinary what you learn along the way,” she reflected. Her lessons included:

  • Stay “in touch with people who really know what’s happening.” Spend time with customers listening to feedback. Leaders must stay connected, she said.
  • Tell employees and customers where you are headed and what it’s going to be like when you get there. People need to know the truth—even when it’s bad, she said.
  • Tell a story relevant to all employees. “Bring the possibilities to life that we could shape a company they would want to be associated with,” she insisted.
  • Invest in long-term corporate health, and don’t make tradeoffs for the short term. Xerox, she said, was highly credited for not cutting research and development dollars, even when in debt.
  • Align words with actions. Be credible. The HR leader should be a trusted source of contributions and feedback, she said. HR managers should build trust and loyalty over time.
  • Create a path to “seamless” succession for chief executives. This should include training for pools of high-potential leaders.

“When people ask me how we move things so quickly—in a couple of years, turn a company around—I don’t have to think about it,” she concluded. “It was not brilliance or strategy or execution but the fact that our people believed. We aligned ourselves around goals and objectives. We had the power of the people behind them. We had alignment.”

Strategic Planning: Look for the Right Tools

In his keynote address Oct. 7, consultant Richard Horwath said his repertoire includes at least 40 tools that business executives can use in strategic planning.

The president of the Strategic Thinking Institute, who has worked with world-class organizations such as Abbott, Adidas and Pfizer, offered a handful of these tools to conference-goers.

Horwath said planning represents only one aspect of strategy: “Expecting new growth for your business without new ways of thinking is like a farmer to expect crops to grow without first planting seed,” he said.

And half of all leaders say strategic thinking—the ability to come up with insights that lead to new products, services or processes—is the skill managers most need to improve, said the author of Deep Dive (Greenleaf Book Group Press, 2009).

Horwath, a professor at Lake Forest Graduate School of Management in Chicago, divides strategy into three disciplines:

  • Acumen, or the “a-ha” that leads to insight.
  • Allocation, the ability to make trade-offs.
  • Action, the ability to stay focused on business.

He distinguishes between goals and objectives, “what we’re trying to achieve,” and strategies and tactics that explain “how we’re going to achieve them.

“We can define strategy as the intelligent allocation of limited resources through a unique system of activity,” he said.

A strategy needs to be examined through two lenses: The first should reveal how a company performs different activities than its competition; the second should reveal how the company performs the same activities in different ways than the competition.

He recommends that leaders use personal journals to help diagnose what’s going on in their businesses and develop “contextual radar” that picks up on four key areas: markets, customers, competition and the company. “Where is the value?” he asked. “Managers who get blindsided are those not doing this kind of thinking strategically. Discuss these four areas with your group and use these criteria as a foundation for developing good strategy.”

When it comes to allocation, Horwath insisted that great leaders must have the ability to say no. “Great companies make disciplined trade-offs,” he said. “What are the activities—reports, projects or tactics—that you should stop doing?” To drive revenue growth, reallocate resources from underperforming activities to promising ones.

He named five execution strategies that often trip leaders up:

  • Faulty strategy. “Garbage in, garbage out.”
  • Lack of resources.
  • Poor communication.
  • Weak accountability.
  • Lack of calibration.

“In many cases,” he said, “we go a year or two or longer without doing simple diagnostics of our businesses. Studies show 85 percent of senior leadership teams spend less than one hour a month discussing strategy, and 50 percent spend no time at all. Strategic planning is about involving people, not about getting together for a day and a half at a nice resort. Strategic planning is a dialogue. Use that to frame dialogues with other people in your HR group and other people in the organization on a more consistent basis,” Horwath said.

To fill the gap between a strategic plan in a binder and daily activities, he recommends a tool called an “activity system map” that identifies and explains three to five themes that differentiate the value of a company. Apple’s map, for instance, briefly defines the computer company’s approach to design, integration and convenience on a graphic poster for all to see and keep in mind.

“You, as HR leaders, are a company’s most important strategic partners,” he concluded. “Seize that opportunity.”

Nancy Davis is editor of HR Magazine.

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