Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 3, 1993 TAG: 9212310131
SECTION: BUSINESS PAGE: E10 EDITION: METRO
SOURCE: STEFAN FATSIS ASSOCIATED PRESS
DATELINE: FAIRPORT, N.Y. LENGTH: Long
XEROX TRANSLATES BUZZWORDS INTO A RADICAL NEW STRUCTURE
You need a glossary to understand the lingo at Xerox Corp. these days.From the assembly line to the corner office, the talk is of "empowered" workers and "focus factories." The "organizational architecture" has shifted from "functional" to "customer-driven" in new divisions with "end-to-end" responsibility for products.
Other companies have adopted such buzzwords on an experimental basis, but Xerox has replaced its old corporate playbook with an extremely different structure intended to change how employees think and act.
While the bottom-line benefits of the change aren't yet clear, the overhaul under Chief Executive Officer Paul Allaire reflects how a big company unfettered by crisis can adapt to rapidly changing technology and competition.
In the last year, the $18 billion company that unveiled the first plain-paper copier in 1959 has eliminated layers of management. Its old structure made Xerox a classic American corporation in which the chairman and top executives made nearly all decisions.
"This is not an evolution, it's a revolution," said Colin O'Brien, who heads one of Xerox's nine new market-based divisions. "This company has been organized in this monolithic approach since 1959. It institutionalized the monolithic approach to management."
Ten years ago, Xerox was near collapse. Mired in bureaucracy, slow to market its cutting-edge ideas, the company saw Japanese competitors blow past it in the United States. Management and unions were bitter adversaries.
Several restructurings in the 1980s mended worker relations and improved quality, boosting Xerox's U.S. copier market share to 18 percent last year from 10 percent in 1985, says Dataquest Inc., a high-tech market information service. (Xerox remains second to Canon Inc., which has 27 percent.) Xerox earned $454 million in 1991, up 87 percent from the previous year.
Allaire said that wasn't enough. He wanted a complete make-over of the corporate culture.
Under the old pyramid with a chairman at the top and factory workers at the bottom, Xerox operations were grouped into four gigantic units based on function: manufacturing and development, research, marketing and finance.
Xerox's new divisions resemble independent businesses, incorporating nearly all functions. The company no longer has a president or a chief operating officer, replaced by a six-person corporate office headed by Allaire. Three separate geographical units sell and service all Xerox products.
The nine divisions - three each for the copier, printer, and software and services markets - have 23 business units, where most decisions are made about what machines to build, how to build them, where to get materials.
In the old hierarchy, orders descended from atop the pyramid, and decisions moved from the bottom up. Thick layers of management cultivated caution, slow decision-making and inefficiency.
"Before, setting priorities was a top-down process. Now we're turning that process completely upside down," Allaire said in a recent issue of the Harvard Business Review.
Xerox is based in Stamford, Conn., but evidence of the restructuring abounds in Monroe County, N.Y., on the shores of Lake Ontario, where the company employs 14,500 people.
At an office park in this Rochester suburb, division managers are retraining white-collar workers to focus on customer needs. At a 1,000-acre manufacturing facility in nearby Webster, union members are redesigning assembly line layouts and conferring with managers. At Xerox Square in downtown Rochester, sales executives are learning to communicate with the divisions.
When O'Brien arrived at Xerox a year ago after running his own defense electronics companies, he was eight levels removed from design engineers. Now he is no more than four away, thanks to the elimination of 73 managers in his division, part of 2,500 companywide cuts.
To create diverse teams within the divisions, Xerox is shifting scores of engineers into marketing, finance and other areas. Decision-making authority has been increased among designers and engineers, led by the business unit managers.
In the old Xerox, a simple decision like the color of the buttons on a copier would climb the hierarchy nearly to corporate headquarters. Now such decisions are made by the business units.
The new managers are people like Dan Cholish, a 28-year Xerox veteran who runs a business unit in Document Production Systems, a $2 billion division headed by O'Brien that makes high-volume business printers and copiers that cost up to $300,000 apiece.
Like the other 90 Xerox employees who interviewed for unit manager jobs, Cholish was one-dimensional: an engineer. In fact, there was such a dearth of multitalented managers that three of the nine division presidents were recruited from outside the company, and one-third of the company's top 40 executives have been with Xerox less than three years.
Cholish learned about marketing, finance, management and other disciplines, and now is concentrating on customer needs, not engineering marvels, once a cherished Xerox trait.
"I've probably visited more customers in the last six months than I had in the last six years on my old assignment," he said.
The new structure isn't fully established, and isn't universally accepted within Xerox, where many midlevel managers are said to be job-hunting.
The company still is searching for the best ways to leverage its size; while divisions are accountable for their own profit and loss, they must share engineering designs across the company, a difficult learning experience.
On the manufacturing side, Xerox needs to ensure that divisions don't monopolize cost-effective practices. Also, salespeople remain accountable to all divisions because Xerox isn't breaking up its sales force - so customers don't have to meet with two or three or nine Xerox representatives.
As technologies merge, products and even divisions could wind up competing with each other. Xerox's touted DocuTech digital copiers, which can be linked with personal computers, and DocuPrint high-speed printers both theoretically could suit a customer's needs. Which one will a sales representative push?
"Each of these business units is set up as a profit center," said Bryan Corrigan, a printer industry analyst with BIS Strategic Decisions in Norwell, Mass. "Each of these managers is competing for success."
Despite the potential problems, Xerox executives pledge to finish the restructuring and describe its benefits in long-range terms. Xerox is proud to be a model for the new corporation, saying it has received calls from scores of companies looking to retool.
"It's well-planned and is not being done under a crisis-management scenario," said O'Brien, who came to Xerox largely because of the restructuring. "I think we've got a good chance of pulling it off."