It’s been a while since
Joel Quadracci flew an airplane, but in leading Sussex-based
Quad/Graphics Inc. he still falls back on one of the lessons he learned while learning to fly.
Even on the longest runway, Quardracci pointed out, planes will go to the end of the runway for takeoff.
The message is simple. Once the plane starts rolling, the runway behind it is useless if something goes wrong.
Quadracci, chairman, president and chief executive officer of Quad, is used to dealing with challenges. The printing industry his been hit with disruption for more than a decade. Quad has had to evolve first by working to consolidate the industry and more recently by developing its marketing services offerings.
“We’ve typically been very sensitive as we see disruptive things come that we want to react very early and get ahead of it,” Quadracci said.
Last week, Quad
announced a series of actions it is taking to adapt to the economic slowdown created by the coronavirus response. Those actions include temporary furloughs for many employees, pay cuts for top executives, including 50% for Quadracci, suspending production at some plants, suspending its quarterly dividend and increasing its borrowing.
In an interview with BizTimes, Quadracci discussed the actions and how he's approached managing Quad during the coronavirus outbreak.
“You want to get ahead of things when you know that they’re going to be pretty serious, even if you don’t know the depth of it yet,” Quadracci said.
He said the company first started responding to the coronavirus outbreak in late February by suspending all international travel. Quad halted domestic travel not long after.
“That wasn’t just for the coronavirus, it was also to lock down on expenses,” Quadracci said.
He pointed out that most slowdowns are brought on a step at a time.
“In this case it’s like boom, it’s here, and people are cutting back business right and left. The pace at which things have changed has been really challenging for all businesses,” Quadracci said.
New challenges include a customer like Kohl’s calling to say it planned to close its stores the next day and so wouldn’t need marketing materials printed, but it also includes working with customers like Lowe’s to produce new in-store materials to help emphasize safety precautions for shoppers.
“What’s so different for everybody in business today is you go from 60 mph to zero so quick,” Quadracci said. “The world’s not used to that and so it really creates a challenge because you have to be on your toes and you have to be willing to pull big levers very quickly to sort of ramp down and make sure your business is successful through this.”
The big levers Quad has pulled include furloughs that in some cases will last up to 12 weeks, while others are implemented on a rolling basis depending on the employee’s role. Quadracci said he made it a point to tell employees the furloughs could last 12 weeks, instead of starting with a shorter period and having to extend it.
“We want to be fair and we want (employees) to plan for the worst,” he said. “We believe in not trying to soften things. We try just to be point blank and honest about it and communicate as it changes.”
“I don’t apologize for making the tough decisions, but I do explain why we’re doing them,” Quadracci added. “I said look, you don’t have to agree with it, you can be mad at me. Some people are supportive, but at the end of the day, my responsibility is to make sure the business survives and that (employees are) safe.”
Once the company began discussing furloughs, Quadracci said executives knew they would also need to take pay cuts. Other named executives saw a 35% pay cut. The cuts amount to around $1.3 million in annualized pay.
Even though the cuts were announced last week, Quadracci said they have been in place for several weeks, adding there’s a sense within the company that “everyone is in this together.”
“We have people volunteering to work on behalf of other people who need to be home for whatever reason,” he said. “It’s amazing how people start stepping up.”
Quad’s other actions included drawing around $140 million on its $800 million credit facility to increase its cash on hand. Even though many experts have highlighted the health of banks, Quadracci said it is better to have the additional security.
“Early on we said the proverbial run on the bank could happen and as a business you want to know you have some period of time you could operate with cash on the balance sheet,” he said. “At these interest rates, it’s a cheap insurance policy to draw down some of your line and pay the interest.”
Beyond the immediate actions, Quadracci said he’s thinking about what clients may not recover from the economic downturn. In the retail space, healthier companies like Kohl’s may be in a good position, but others could struggle.
“Even if the pandemic ended tomorrow, you’ve still got an economy that grinded to a halt and has to fire back up,” he said. “It’s not going to be a light switch, so plan for reality and don’t wait. Speed is of the essence. You can’t afford to have unused runway behind you that you can no longer use.”
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