How do you correct a massive, sinking corporate ship? What do you do when the carmine ink runs to hundreds of millions of dollars, when your costs are out of command, when key executives are sprinting for the lifeboats, and when your aggressive accounting comes under regulatory scrutiny? How practice y'all act when your cash reserves drib low enough to spark talk of bankruptcy?

Y'all change everything fast — merely not too fast.

When Anne M. Mulcahy was appointed president and COO of Xerox Corp. on May xi, 2000, she leaped into a whirling, fierce organizational vortex. Richard Thoman, hired by Xerox chairman Paul Allaire from IBM a yr before to accept charge of the iconic copier maker, had only been fired later on presiding over a $9 billion loss in the company's market place value. And the Xerox lath had afterwards reinstalled Allaire as CEO.

More than to the bespeak, Xerox'south core businesses were in slaughterhouse. The company had completely misjudged the potential of compact desktop-figurer printers from rivals like Hewlett-Packard to grab marketplace share. Sales were evaporating — and Thoman's botched reorganization of his sales team had created defoliation and discord.

Mulcahy was a popular Xerox veteran who about recently had led the company'due south $6 billion general markets operations, following a variety of sales jobs and a stint as senior vice president responsible for communications, authorities relations, and human resources. Over the course of her 25-year career with the company, she had earned enough of internal credibility. She and Allaire gear up to fixing the bilious company. Just over the next ix months, things only got worse. Xerox'due south loss for 2000 totaled $384 one thousand thousand, and past Jan 2001, its greenbacks had dropped to perilously low levels. Its stock had also sunk to $5, from a high of $64. Almost unbelievably for this legendary company, analysts began speculating about bankruptcy.

At present, about a year after Mulcahy's appointment, the bankruptcy talk has stopped. Xerox has slashed expenses, exited businesses, sold off assets, and cut thousands of jobs. Mulcahy and Allaire predict that the company will be profitable again in the second half of the twelvemonth; its stock price has rebounded to around $ten.

In June, Mulcahy spoke with Fast Visitor about her harrowing start year as Xerox's president and COO and about the chore of changing a big company fast — but not besides fast.

Your predecessor, Rick Thoman, was criticized for trying to change Xerox too fast. At a time when everyone seems to aspire to speed, that's a fascinating criticism. As a leader, how do yous judge an organization's capacity for speed? How fast can Xerox change?

Y'all tin can motility a company likewise fast — just yous tin can create a bigger problem by moving it likewise slowly. Finding the correct "clock speed" for change is all nigh judgment, about knowing what you can reach and who you need to accomplish it. And it's virtually really understanding the implications of what you lot're implementing.

I await at Xerox and think that nosotros've changed more than in the past 12 months than in all the 25 years I've been here. We've taken on the most dramatic modify I tin can imagine. We've appear a $one billion price restructuring. We've already reduced our cost base of operations past $600 million, eliminated 7,000 jobs, and are outsourcing some of our manufacturing. There's nix we oasis't touched in this company in the past 12 months to position information technology for a better time to come.

Doing all that has required judgment and leadership. You lot accept to know: Do you have a team in identify that can pull off that amount of change? Exercise they empathize the company'southward civilization well enough to use it to facilitate modify? Implementing change successfully is near understanding how to get 88,000 people going in the aforementioned direction — which is what you lot need to get change that sticks. It's much more about judgment and experience than it is almost sheer pace.

If the perceived urgency is greater, you tin can move an organization faster, right? If a company can go 50 MPH when business is adept, maybe it can go 65 MPH when in that location's a crunch.

Crisis definitely helps you push modify. That'southward why information technology'southward and then important to be relatively aggressive in a brusk period of fourth dimension. That's why nosotros had to be ahead of the curve in all aspects of this turnaround plan — so we didn't lose the momentum that comes when people believe that the company and their jobs are at take a chance.

So, in terms of organizational change, two years agone, we couldn't have done what nosotros've washed in the past yr. Just crisis merely creates context: Leaders still take to make effective modify themselves. I recently had to announce the closure of the small office-dwelling house role business. It'due south a ane,500 people business, and it'south a business organisation I ran for two years — so I know the people, and I had no good news for them: Nosotros had to lay off 300 of them.

But, I was amazed at the reaction nosotros got. While it was painful for employees, they clearly understood the rationale for the determination, and equally tough as information technology was, they knew that it was right. They understood that we know the business and that nosotros were handling things as sensitively equally possible. And I retrieve that makes a difference.

People understood that we had worked every pick and that the decision wasn't just a wing-by-night i. Now nosotros have people signed up to help make change happen, instead of having a real fight on our hands.

History and relationships aid when you accept to deliver tough decisions. It helped that I knew every office of the company, and every full general manager around the world, when it came to winning the alignment that'southward required to do tough things.

Good relationships tell you lot what'southward possible, what's culturally permissible.

Admittedly. You have to listen. You lot don't back off from tough things, simply y'all take to know where to stop and take a time out to make certain that you're not doing stupid things. You lot have to permit for various opinions then make some balanced judgments about what you can do.

Leading change is also virtually reducing the risk in your implementation programme. Part of Xerox'southward trouble in the past was that nosotros didn't have the execution plans to reduce the company's adventure given the amount of change we were facing. Information technology's a lesson I learned as I watched some of the things that oasis't worked for the company.

I've really tried to be diligent virtually the precision of our execution plans, which are hard work to practice well. We're now in the process of totally restructuring our manufacturing operations. We're outsourcing our function manufacturing and resizing our remaining operations in dramatic ways. We're reducing square footage past 80% and maintaining only the things we exercise really well.

In advance, nosotros spent vi months doing a deep, competitive assessment with a disquisitional view of where nosotros could retain expertise, competency, and competitiveness. We had to acknowledge where we were disadvantaged, and where we could find partners who had capabilities that we could never hope to replicate. We had to have consensus on what we didn't practice well.

There was enormous force per unit area to do all this as quickly as possible. But I believe that when it comes to the critical parts of your value chain, you lot accept to be damned conscientious. We will not do it before we take the all-time possible solution. We have announced that we will do something, but not what — and we're taking our time getting there.

The flip side of urgency is that you lot operate in a fishbowl, with every twitch of your face field of study to estimation.

I'thou not terribly astute in terms of delivering messages that are contrary to what I experience in my gut or what I'grand passionate about. At that place are times when you tin can't share as much every bit you desire to; yous accept to hold back and be stoic — and that'southward difficult. It's stressful having to play a role for your employees when you lot know sure things that they don't.

Information technology's been a difficult time for Xerox publicly. It's been painful to sentinel the visitor go through the difficulties it has and to receive the negative press information technology has, sometimes unfairly. Xerox is a big brand proper name, and in that location's been a lot of coverage of the story's negative aspects, rather than coverage of any light at the end of the tunnel.

It'south a challenge for us to manage the news. Our 88,000 employees can read about a bankruptcy crisis within hours of its being printed. Whether in that location'due south whatsoever legitimacy or not, you've of a sudden got a big problem. You need to address those things quickly, so you don't lose people's hearts and minds.

How did you handle those reports of defalcation?

People need to hear things personally to gain confidence in the company and its direction. During the offset few months of my chore, I lived on planes. I spoke to thousands and thousands of employees. During one three-week period, Paul Allaire and I reached nearly 60,000 of our 88,000 employees, either live, by phone bridges, or in massive boondocks meetings.

In the early on days, we made sure that we were highly visible and in constant communication. It was pretty wearing, but if people empathize your leadership manner and you earn credibility, you get permission to accept a lot of actions. People say, "I'1000 okay with that considering I saw her, I heard her. I'm confident it can work considering of her leadership." When you lot're in a state of affairs like ours, that confidence dramatically affects your ability to pull off modify.

Exercise you withal accept permission? For how much longer?

My goal is to never lose it. I desire to have an environment that allows us to keep pushing the visitor, to be better and more competitive.

Simply it'due south not practical to keep upwards the level of intensity we've had for the by year. The turning signal for united states of america is the return to profitability. Nosotros'll continue with cost restructuring, and we'll finish disposing assets. And we'll continue to engage employees in "turnaround talk," keeping them abreast of progress and enlisting their back up throughout the remainder of this year. Afterward that, "the turnaround" may not be the mantra for moving forward. Merely I think that we'll exist positioned to create a new Xerox with new rules and an operating style that will allow a much greater level of intensity than in the past.

If you stop using the discussion "turnaround," y'all'll have to detect a new mantra.

[Laughing] Yeah, I expect forward to that.

Keith H. Hammonds (khammonds@fastcompany.com) is a Fast Company senior editor.