For the management at a fair number of credit unions the current economic environment is one many never thought they'd see. Sure, they may have done some worst-case scenario planning as part of their annual due-diligence or participated in a doomsday exercise at one of the management institutes, but that was all make-believe, right?
In times like this it's wise to seek the wisdom of those who have gone before you. But for the most part, the generation of CU CEOs who had to manage through earlier dark days has retired. That means looking to Red-Number veterans outside credit unions, people such as Anne M. Mulcahy, the CEO of Xerox. Mulcahy took the reins at the same time the venerable U.S. brand was in copy-jam mode. In 1999-2000, Mulcahy described Xerox as "unraveling, very, very fast."
"We attempted an enormous amount of change too fast. While we were having this internal turmoil competition got a lot tougher. To say we had a lot of problems would be the understatement of all time."
Speaking at the recent BAI Retail Delivery Show, Mulcahy noted her remarks had been titled, "The Ultimate Turnaround." But she dismissed that description. "That's a little too grandiose for my thinking," she observed. "'Ultimate' implies finality, and the best turnarounds never end."
If there is a takeaway from Xerox for CUs to copy it is this, according to Mulcahy, who began as a field rep with Xerox before working her way to the corner office: "We learned the hard way that customers are the center of your business."
In May of 2000 Xerox had losses in the double-digits, cash reserves approaching zip, and debt of $19 billion. Key X employees, fearing a bankruptcy filing, were becoming ex-employees. Share prices were down by 50%.
Mulcahy said her "aces in the hole" were a loyal customer base who wanted Xerox to be successful and a committed workforce. "We spent a lot of time with customers and employees listening, which was a new art for us."
Xerox responded by selling non-core assets, cutting costs by $1 billion annually, and investing in technology. It lost $300 million in 2000; by 2006 it netted $1 billion. Today it has more than 1,000 Six Sigma black belts.
Not every constituency has embraced Mulcahy's decisions. Xerox plows $1.5 billion into R&D every year, despite "protests" it should slash that budget. "No one wanted to be responsible for saving us from bankruptcy if we were to face a technology drought down the road."
Today, she said, Xerox is benefiting from the R&D investment. "We were guided by two objectives. Creating value for customers and creating growth for Xerox-in that order."
Swap out a few of the words and add a few others to the quote that follows, and you'll have a description of why members look to credit unions-and often leave disappointed. "One of first things you learn is people are drowning in information. If you feel you are being deluged with information, you are. A lot of our customers feel they are being inundated with costs and want to know where they should invest. The bottom line is I think we're all awed by the complexity of technology and we're yearning for someone to make it simple."
Mulcahy offered these parables from what she called a "Bible of lessons learned to get an organization back on track."
1. Look before you leap. "I'm a 32-year veteran of Xerox. I think there is a tendency to think you know all the answers and to go fast. I got some good advice to slow down. I spent three months listening to the problems and one of the things I found out was...we were putting out fires but not addressing the fuel leaks."
2. You cannot communicate too much in a time of a crisis. "When things are bad you need to give people confidence things will get better. The message was always explain the problem, explain what we need to do to fix it, and then give people the choice to be a part of the solution or to go somewhere else.
3. Crisis enables you to do the things you should have been doing all along. "It gave us permission to be bold."
4. Get back to the basics. "The things that made you great in the first place are often the places to go to get back your strength."
5. Use good times to change. "When things are going well that is precisely the time when organizations can tolerate the most change."
6. Not all corporate culture is bad and not all change is good. "Our corporate culture was one of the great strengths of the company (although) we certainly needed to adapt and needed to change quicker."
7. Never forget the reason the company exists.
8. Surround yourself with a few good critics. "In the corner office things change. People around you want to please. If you're not careful you can lose touch and delude yourself. You have to encourage them to tell it like it is. It is the most incredible gift when you can find out about problems early."
Frank J. Diekmann can be reached at firstname.lastname@example.org.