Q&A Tom Quadracci -- Rising to Challenges

From Quad/Graphics’ perspective, 2002 will be remembered as the most difficult in the company’s 31-year history.

In July alone, a storage facility collapse and fire at its Lomira, WI, plant claimed the life of a contracted worker and, weeks later, company founder Harry V. Quadracci died after drowning in a lake near his home. Such tragedies would bring lesser companies to their knees. But Quad/Graphics has demonstrated an industry model, a corporate ideology, that bears both witnessing and emulating.

Tom Quadracci, who succeeded his brother as president and CEO, has taken time out from his busy schedule to provide Printing Impressions with a rare and exclusive interview. He sheds light on how the printer was able to endure the events of 2002, as well as its future.

PI: How was the year 2002 for Quad/Graphics from a business standpoint?

Quadracci: Despite an industry-wide decline in advertising and print-run counts brought about by economic uncertainty, we have taken strategic measures over the last year to reduce unnecessary costs and streamline operations. As a result, we’ve been able to deflect much of the negative impact of the economy, maintaining our reputation for quality and service while remaining financially viable. In fact, in 2002, we will post our best earnings year ever, despite flat sales.

Several years ago we introduced our “20-20-20” cycle-time initiative—an initiative to reduce the time it takes to produce client jobs from start to finish by 20 percent each year, year after year. The initiative addresses total cycle time, extending upstream to clients and how they provide files to us, as well as downstream into delivery to the U.S. Postal Service or to a newsstand. The goal is to make the manufacturing process as seamless as possible.

Clients use the time saved to improve their businesses, whether it be modifying catalog product pricing, extending ad close dates, or refining creative and editorial. As far as the printing industry, the initiative enhances the value and long-term viability of print.

We’ve condensed cycle times by automating and integrating all aspects of our manufacturing process—from division to division and plant to plant, and with our clients. Throughout Quad/Graphics’ 31-year history, we have chosen to grow through focused, internal expansion, rather than through acquisition. As a result, our plants are identically equipped and identically run.

Truly, we are one company with one integrated technology platform sharing one seamless manufacturing process across our network of plants.

We’ve automated and integrated our operations with our Smartools, a series of online, real-time information management tools. Some tools facilitate interaction among our employees for the purpose of planning and producing clients jobs as quickly as possible; others simplify the exchange of information and files between clients and us. With Smartools, we can deliver better print quality in less time while lowering the cost of production.

PI: In which market segments did Quad/Graphics thrive this year? Which were most challenging?

Quadracci: Quad/Graphics is thriving in catalog and direct mail markets, thanks to our ability to provide one-to-one marketing solutions through personalization and selective binding and insertion. Essentially, we have become an extension of our clients’ marketing departments, offering customers a cost-effective platform for the mass production of customized mail pieces. Our clients win with perpetually advancing customization capabilities, but at a reasonable cost because of our highly productive equipment. For example, one cataloger realized a significant increase in response after introducing a personalized message and individualized offer on the cover. In fact, some test segments reported a response rate of 18 percent—proof positive of the power of our personalization capabilities.

We’ve also used our customization capabilities to save clients postage. For example, Quad/Graphics researched, designed and manufactured a machine that can, in the postpress process, selectively assemble multiple direct mail forms into thousands of combinations (up to 9,999), all in a single mailstream. By employing the machine, we can expedite delivery of mail and save on postage because we consolidate all mail pieces destined for the same geographic region, a presorting function that saves the U.S. Postal Service processing time and hastens in-home delivery. A direct mail marketer used this innovation to produce 6,000 customized versions of a mailing—all in a single mailstream—and saved in excess of $100,000 in postage.

While ad pages are down, publication work is up at Quad/Graphics. We just began production on National Geographic, the world’s most-recognized magazine title. This month, we begin printing

Sierra, the membership magazine of the Sierra Club, as well as a whole host of titles for Meredith, including Traditional Home, Country Home and Country Gardens. Also, in the first quarter of 2003, we’ll begin producing all of Smithsonian’s magazines, in addition to its catalog, as part of a new five-year contract valued in excess of $30 million. In July, we’ll produce one of the premier fashion magazines in the nation: In Style. The In Style contract is part of a larger Time Inc. agreement totaling $300 million.

PI: What is the state of the publication market? Have you seen a rebound in magazine page counts?

Quadracci: The publication market is improving, but remains volatile given economic uncertainties. Some magazines are seeing a noticeable increase in ad pages; others are waiting for an improvement. For the time being, it’s wait and see for everyone.

PI: Has the storage facility collapse investigation produced any new information?

Quadracci: The investigation into the structure’s collapse is ongoing, with no firm time frame for completion. The two primary agencies involved with the investigation are the Wisconsin Department of Commerce and the Occupational Safety & Health Administration.

While we do not know when a report of findings will be issued, we are as anxious as anyone to find out the cause of the collapse, which, from all indications, is likely to have sparked the fire.

PI: What is the current status of the Lomira, WI, facility?

Quadracci: Our Lomira plant is in full production and has been since our employees returned to work within 48 hours of the collapse and fire. The fire didn’t damage any of our equipment; it only affected the storage facility.

In the days and weeks following the fire, we received many words of encouragement. Catalog client Cabela’s, for example, sent a sign within days of the event that read, “Great People Rise to Great Challenges.” We hung up the sign in the Lomira plant cafeteria for everyone to see. Truly, our employees met every challenge with professionalism and determination.

Many clients have called or written, amazed that we could reprint all the lost work—all 50 million pounds worth—and not miss a mailing beat. It was possible because we manage our business by process, not by individual location, which makes us more responsive to clients’ needs both under normal circumstances and in times of crisis.

PI: Will the damaged section be replaced?

Quadracci: The Lomira plant ASRS served an important function, storing large amounts of work in process, which we could easily retrieve using the automated features of the system. While discussions have been under way for a long-term solution to our work-in-process needs, we have no firm plans to rebuild at this time. We are waiting for the results of the investigation before making any decisions about how we will proceed.

PI: To what degree did the incident impact Quad/Graphics’ ability to deliver publications on time? How were you able to accommodate them?

Quadracci: Within hours of the collapse, we used our Smartools to generate a report—some 600 pages—that detailed the contents of the ASRS. Using this report, we prioritized the reprinting effort based on client mailing dates. Then, we used our nationwide network of plants to reprint the lost product, as well as the jobs that were running in the Lomira plant when it was shut down. (In three instances, clients capitalized on existing relationships with other printers to print work.)

We reproduced more than half of the lost work within the month of July. The teamwork among our network of plants, corporate-wide, was phenomenal, but not atypical. We are well known for our approach to servicing clients, taking whatever means necessary to get the job done on time and to our clients’ exacting standards of quality.

Our vendors displayed exemplary service, too. Paper companies, for example, immediately began working the weekend of July 12 to meet our needs, making capacity available to manufacture paper needed in the reprint effort. The week following the fire, our Lomira plant was receiving an average of 1,000 rolls of paper a day—some 23 million pounds total for the week.

I give special recognition to UPM-Kymmene, Stora Enso, International Paper, St. Mary’s and Madison for their superior efforts.

PI: Did Quad/Graphics have a disaster recovery plan in place?

Quadracci: Yes. As we demonstrated following this summer’s event at our Lomira facility, Quad/Graphics has a disaster recovery plan, a seamless system for shifting work among plants or to other vendors due to an unforeseen event. We’ve intentionally developed redundancy into our manufacturing and administrative systems to more effectively handle a shift in work. Backup systems are also in place to capture and replicate, in real time, relevant customer and production information that is entered throughout the company.

PI: What has the outpouring of sympathy been like in the wake of Harry’s passing?

Quadracci: Clients and employees have chosen to remember Harry in a variety of ways. Some have written poems or planted trees in the Holy Land. At a recent client event, the band Nik and The Nice Guys performed a special song, “Hats Off to Harry.” Catalog client Debbie and John Van Bourgondien named a tulip bulb in Harry’s honor (Harry’s Memory) and are registering it on the International Register of Tulips. And, of course, innumerable employees, clients and friends have made contributions to Harry’s memorial fund, which is being used to perpetually upgrade equipment, fund scholarships and train educators at the newly named Harry V. Quadracci Printing and Graphics Center (located on the Pewaukee, WI, campus of Waukesha County Technical College).

The outpouring of sympathy has been overwhelming and extremely appreciated by members of my family, as well as the entire Quad/Graphics family. We have been both comforted and strengthened by everyone’s showing of support. Through shared stories, poems and music, we’ve learned the profound and positive effect Harry had on everyone with whom he came in contact. It’s been wonderful to hear these stories and to know that although he is gone, he is far from forgotten.

PI: Will his children in the business, Joel and Elizabeth, assume greater roles in the company?

Quadracci: Joel and Elizabeth serve key roles within the company and are fully committed to continuing in those roles as we embark on Chapter Two of our corporate history. Joel serves as our vice president of print sales, responsible for directing the overall sales activities of the company—a role he has fulfilled since 1999. Elizabeth is our manager of client marketing, responsible for coordinating all marketing events involving clients, such as trade shows and technical conferences. She also services several accounts from our New York City sales office, and is a member of Quad/Graphics’ Windhover Foundation board, which oversees corporate philanthropy.

PI: Can you describe the succession process and what have been the most difficult aspects to deal with on each front?

Quadracci: Quad/Graphics’ succession plan was clear: In the event of Harry’s death, I would assume the role of president and CEO.

The transition of leadership has been smooth. I have been a part of Quad/Graphics since its inception in 1971 and, therefore, am intimately familiar with the operations of the company and am well known among the company’s employees. For years, I have been involved in the company’s long-term strategic planning, including capital expenditure prioritization, and domestic and international expansions. I have been a member of the board of directors since 1995.

All of our vice presidents have long tenure with the company and are well prepared to carry forward our mission of enhancing client satisfaction while enhancing sales.

While serving as Quad/Graphics’ executive vice president, I also served as president of QTI, Quad/Graphics’ R&D division. In early August 2002, I appointed Karl Fritchen president of QTI. Karl is a 17-year veteran of the company and most recently served as QTI’s vice president of sales.

The only other management change has been an addition to Quad/Graphics’ board of directors. Betty Quadracci, Harry’s widow, was named to the board on October 11. Betty, a co-founder of Quad/Graphics, is also publisher of Milwaukee Magazine, which Quad/Graphics has owned since 1983, and president of Quad/Creative, a graphic design firm with offices in Milwaukee and New York City.

PI: How does your management style differ from Harry’s? Will you be putting your own unique stamp on the company?

Quadracci: Under my leadership, Quad/Graphics will remain much the same. Harry and I share the same values, approach to business management, and optimistic outlook for the company and industry. We will maintain our singular and widely celebrated corporate culture that encourages people to be more than they ever hoped to be.

We will also maintain our commitment to legendary customer service by staying focused on close, personal relationships. We will continue to develop leading-edge technology, as well as maintain the newest base of installed equipment in the industry. And, we will continue to grow our operations here in the United States and overseas as opportunities present themselves.

PI: Where does progress stand on your new Oklahoma City plant?

Quadracci: The plant, which is currently under construction, will debut operations next summer, serving magazine publishers, catalogers, retailers and others. Initially, the facility will measure 140,000 square feet (up from the 92,000 square feet previously released) and house two web offset presses, as well as finishing equipment.

In time, the facility will grow to be mega-sized, measuring one million square feet or more, and house advanced gravure press technology, too.

Like all of our facilities, our Oklahoma City plant will feature a manufacturing platform engineered for nimbleness. It will be equipped in such a way to rapidly adapt to changing client needs in terms of geo-demographics, targeted delivery and shortened concept to consumer cycles.

PI: Are there any new initiatives in store for 2003? What does the future hold for Quad/Graphics?

Quadracci: Harry favored the saying, “You ain’t seen nothing yet.” And I favor the saying, too. We have a sound management team supported by the best-trained, most talented work force in the industry. We are well equipped to handle whatever is on the horizon because change is all part of operating a business in a competitive marketplace.

Over the past few months, we’ve demonstrated that we can accept change, even when unexpectedly thrust upon us. We’ve also demonstrated that we can come together as a body of individuals and provide comfort to each other during our greatest hours of grief. Without question, we will remain together, ready for whatever changes come our way as we move forward fulfilling the dream Harry envisioned more than three decades ago.

Quad/Graphics is optimistic about the future of our company and our industry. Our confidence in the future is evident by expansion to Oklahoma City and adding new equipment to existing facilities to better meet the demands of our clients.

Photography by John Ehlers