The job of Chief Financial Officer at Xerox had been vacant for more than six months before IBM finance veteran Larry Zimmerman came out of retirement to help put the company back in good financial shape.
By the time Zimmerman took over as CFO in June, Xerox had been raked over the financial coals. In April, the Securities and Exchange Commission told the company that it would have to restate its earnings from the late 1990s because it had improperly booked revenue for leased equipment. The SEC hit Xerox with a $10 million fine and told the company that it would have to look at $3 billion in revenue from 1997 to 2000 for possible restatement.
Then, just as Zimmerman was settling in, Xerox announced that it was ready to restate its earnings as required by its April agreement with the SEC. But instead of $3 billion, it was looking at $6.4 billion in revenue that needed to be accounted for correctly, according to a Xerox spokesman. Of the $6.4 billion that was in question, Xerox ended up restating $1.9 billion in revenue for the years from 1997 to 2001.
Zimmerman, who spent more than 30 years watching the numbers at IBM, sees this job as an opportunity to help the once-proud Xerox get back on its financial feet — a chance to show that his fiscal conservatism and stick-to-it management style are the right way to run a company's finances. We asked him to describe the role of the CFO. He answered prudently.
Perseverance and resolve are 90% of the battle if you want to accomplish anything of worth. I'm kind of an old-school person. I view my role as chief financial officer as conservative. I believe in sticking to your knitting.
I don't define my goals for Xerox as being short or long. My role and goals don't change over time. I have a constant position and a constant strategy. My priority is to return this company to investment-grade status. We have to show sustained profitability.
Growth and control go hand in hand. In order to be successful, you have to have a process. Process should help a company grow; it shouldn't get in the way. The way to have great process is to get buy-in from your people. When process gets separated from people is when it goes wrong. The only thing required at Xerox is to have top management constantly reenforcing the process.
How do you make audits a positive experience instead of a police action? It's attitude. An audit should be about finding the holes and fixing them. It shouldn't be an indication of failure: It should be a cooperation between two groups. Ernst & Young auditors do our internal audits, and since I've been here, we've done 10 to 15 audits. There's been very little contention. If you concentrate on finding problems and fixing them, audits can be a good learning experience. If you're not adhering to the process, it can turn into something more disciplinary.
For me, joining Xerox was easy. You can come into a company and either feel lonely or feel comfortable. I feel comfortable here. What I found when I looked inside Xerox made me feel good. I saw a great brand name, a great history of technology, and a bunch of loyal, hard-working people. It was like joining an organization I had been in before. I knew it was not going to be this out-of-body experience.
When it comes to making decisions and trying to do the right thing, I trust my instincts and the people around me. As for people I admire or look to for guidance, I've said this before: Anne Mulcahy [Xerox's CEO] is the best leader you can find.
When a company goes through tough times, most people rise to the occasion. That's the feeling you have about this company. These are the most loyal people. They've chosen to be a part of Xerox. This is their company, and they're committed to it. Does your morale go down as an American when things go bad for this country?
I'd be shocked if MBA students didn't already have a case study on the Xerox turnaround. The first chapter has already been written. We have worked on the business and liquidity issues. Now it's about follow-through and execution.
A version of this article appeared in the October 2002 issue of Fast Company magazine.