Last updated on May 13th, 2019 at 02:33 pm
Your company’s profit margins are thinning. Your company’s technological equipment is aging. Your company’s employee health care costs are soaring. In response, do you cut back on business development expenditures and trim payroll? Do you defer investments in new equipment and try to get a few more miles out of the equipment you do have? Do you cut health care benefits for your employees? Those would be predictable and common responses to the challenges at hand. However, Quad/Graphics Inc.’s Harry and Thomas Quadracci did just the opposite in every case. They ramped up business development expenditures and maintained payroll advancements. They trashed their old equipment and invested in new technology, even as their competitors tightened their belts. They developed their own clinics to tend to the health and promote the wellness of their employees and families. And they posted record revenues in the process. Such bold, gutsy leadership typifies the Quadracci family and Quad/Graphics Inc., a printing company with more than $2 billion in annual revenues and 12,000 employees. The Quadraccis don’t think out of the box. Heck, they were never in the box to begin with. Although Harry passed away in July 2002, Thomas is carrying on as the chairman and chief executive officer of the printing company, and he is grooming his nephew, Joel Quadracci, Harry’s son, to be the next leader of the firm. In many ways, the Quad/Graphics headquarters in Sussex resembles a 1960s commune. Employees pay only a $5 co-pay to see their doctors right at the plant, which also includes a dental clinic, a daycare center, a fitness center, a boutique, an art gallery and an employee assistance center. Employees are owners of the company. They work flexible hours that accommodate their families. And they are prospering. Meanwhile, Thomas presides from an office with glass walls and wears the same uniform worn by the workers on the shop floor. The Quadracci leadership style is explored in detail in "Guts! Companies That Blow the Doors Off Business-As-Usual," a business book written by Kevin and Jackie Freiberg. Thomas recently discussed the bold corporate culture of Quad/Graphics with Small Business Times executive editor Steve Jagler. The following are excerpts from that interview.
SBT: Before we focus on the present and the future of Quad/Graphics, let’s back up for a moment. I’ve heard anecdotally from people who know you well that you and your brother, Harry, brought different skill sets to the table, in terms of your personalities and your strengths as corporate leaders. Bill Allen, the retiring editor of National Geographic magazine, was recalling at the Milwaukee Press Club dinner the other night that Harry once rode in with him on an elephant at a company celebration. That was Harry’s style. I understand you are more of a blocking-and-tackling kind of businessman. Does that sound like a reasonable description of the Quadracci leadership team?
Quadracci: "Ya, I think that’s quite true. When Harry was getting Quad/Graphics started, I was just getting out of the university … I came to work as one of the first 10 employees. Harry was president and was really the salesman for the company, the persona, a very dynamic guy. I focused on manufacturing and was the first plant manger, and as we grew and had more plants, I became vice president of manufacturing. So I got some patents and started Quad Tech. I was very much on the technical side of the business, and Harry was the salesman and the financial guy.
"We tried to develop a company that was a company run by the employees for the employees. And we’ve tried to continue that feeling with our employees today. You know, we’re an employee-owned company and family-controlled. We wanted a company that is a company without walls, where you wouldn’t have any division between labor and the managers of the company. We all as owners had a common mission, and as a result, there was a lot of trust that developed with the employees. We’ve tried very hard to continue on with that. Our company, we feel, is really built on trust."
SBT: The "Guts!" book very early on refers to Harry Quadracci’s management style as "management by walking away."
Quadracci: "Uh huh. That’s an illustration of that. When I talk to our employees, I try to make a distinction between what’s culture and what are our basic values. The trust is a basic value, and some of the cultural things that have grown up around that, like management by walking away, are illustrations of that basic value.
"We tried to make this a very family-centric business, because we’re all owners very concerned about our families. In fact, even today, more than 50 percent of our employees are related to another employee. So, we continue this feeling that we’re all in this together, and as the company succeeds, so do our families."
SBT: Can you cite specific human resource policies at the company that reflect that family-centric culture?
Quadracci: "From day one, we’ve had the best employee benefits of anyone in our industry. Our QuadMed Clinics, I don’t think anyone can hold a candle to it. Our company is very egalitarian. We believe all our employees put our pants on the same way. That’s why the CEO of the company wears the same uniform as the guy on the shipping dock. We don’t want to build any of these walls you see in other companies, where there’s a difference between the suits in the mezzanine and the people on the floor that are actually doing the work.
"We added flex hours years ago, because we wanted to create a level of lifestyle for employees. It’s very difficult when you have a business that operates 24-7. So, very early on, in the 1970s, we went to the three-day work week, pretty much company-wide. They get time off to be able to spend with their families."
SBT: The mindset behind that approach … Is it that if the employees feel a sense of ownership, they will be better employees and do a better job to serve your customers? I don’t want to put words in your mouth, but …
Quadracci: "You know, that’s part of it. Self-actualization. Unless people feel they have the opportunity to excel in a business and be all they can be, they’re always going to feel like something’s missing."
SBT: Starting Quad Med … That took
a lot of guts.
Quadracci: "It was started as a division of Quad to serve the needs of the employees. The whole philosophy is to treat our employees, not just when they get sick, but more based on the wellness program. When one of our employees goes to see one of our physicians, the physician doesn’t just have the average of seven minutes to see each patient in the clinic. They spend a considerable amount of time with our employees.
"We have clinics right at the plant. We have a 20,000-square-foot, state-of-the-art clinic. And we have our own dental clinics. The employees who go to our clinics, everything is 100 percent paid for, except for a $5 per visit co-pay, which gives them a little bit of skin in the game."
SBT: Five bucks? I’d say that’s an affordable skin. With the rising costs of employee health care, I can envision our readers reading this and saying, "How are they doing that?"
Quadracci: "Because as health care continues to go up at 25 to 28 percent per year, our health care costs are not going up anywhere near that. We track our costs by employee, and it is significantly less than the average employees in business elsewhere."
SBT: And you’re offering this QuadMed model to other companies, aren’t you?
Quadracci: "We have a program where we will go in and set up a clinic on the company’s premises. For instance, we do that for Briggs & Stratton (Corp.) and Rockwell (Automation Inc.). So, we’ll staff the clinic and run the wellness program for the clients."
SBT: Is that providing another source of revenue for Quad/Graphics?
Quadracci: "It does, yes."
SBT: Are those the only two, Rockwell
Quadracci: "No. I’m not sure we’ve completed with Miller (Brewing Co.), but Miller was interested. It’s gaining some interest nationally. We’ve had a lot inquiries from around the world of companies interested in franchising this."
SBT: It’s branded, so it’s QuadMed at the other companies?
SBT: So, could this be a little growth industry on the side for Quad/Graphics?
Quadracci: "It could be. Our core business is ink and paper. But the business model (of QuadMed) is so interesting that there may be a business in teaching and passing on information on how this works and getting some revenues from the intellectual properties, because this is extremely effective in keeping our employees healthy, keeping health care costs down and keeping our employees on the job."
SBT: Forgive me, but this is almost a utopian concept. You go to work at Quad, and they’re going to pay you well, they’re going to take care of you and your family’s health care, they’re going to give you flex time to be with your family. Right after work, you can stop and see your doctor …
Quadracci: "And the pharmacy is right on site, too."
SBT: Do you ever get CEOs from other companies scratching their heads and saying, "How or why are you doing all of this? You’re giving away the store." Do they ever ask questions like that?
Quadracci: "A lot of CEOs that come through, I think, would like to do this. But Quad has a unique culture that allows us to do this. I think in a lot of companies, it might be difficult to start an in-house health care facility because you don’t have the level of trust like we do here at Quad. People would be wondering, ‘OK, now what are they doing with my medical information, and how is that going to affect me?’ A lot of CEOs that come through shake their head, but then it becomes apparent that our culture is so unique."
SBT: Remarkable. To the concept of guts. You started Quad Tech.
Quadracci: "QuadTech is our electronics division that we started where we saw a need for technology in the printing industry, and we decided we would go out and develop some of these controls ourselves. It’s really grown into the largest company of its type in our industry. They’ll do about $120 million in sales of printing technology around the world. They sell equipment into 85 different companies. In fact, I’m headed to China (see accompanying story)."
SBT: Certainly, with the constant upheaval of technology, where it becomes outdated and useless so quickly, there must be times when you invest in a technology and it becomes the beta cam, the losing bet. What is the company’s philosophy for staying ahead of the technological curve and making sure you’re investing in the right technology?
Quadracci: "It’s like computers. You’ve got to jump in, because they keep changing so quickly. You know, I tell our employees, we take a Ronald Reagan approach to competition in the printing industry. You remember when Ronald Reagan was trying to bring down the ‘evil empire,’ his approach was to outspend the bastards. Well, at Quad/Graphics, we put about 17 percent of our revenue dollars back into the business in new equipment, in new technology, where our competition, the large printers, typically put about 5 percent back of their revenues back into technology."
SBT: So, you zig where others zag.
Quadracci: "Yes. We continue to invest heavily in the platform, heavily in the technology, and because of this 17-to-5 percent discrepancy, our level of technology is really diverging. We’re installing four new presses on the floor right now. Between 2004 and 2005, we’ll spend over a half-a-billion dollars in new technology.
"We talk about equipment in two different ways. We talk about equipment having a mechanical life – a printing press will run for 30 years. And we talk about equipment that has an economic life. So, at what point does new technology make it worthwhile to change that machine out, even if there’s a lot of mechanical life left in it? We have to have the discipline and invest in new technology when the older equipment has reached the end of its economic life, not its mechanical life."
SBT: So, once it’s paid for, it’s put out to pasture?
Quadracci: "Our primary goal is to sell those presses overseas. Some of them stay in the country, and we sell them to our competitors. But we also use them as investments. In fact, we are now the largest commercial printer in Brazil."
SBT: Getting back to where we started. What has the company done to compensate for Harry’s passing away, to compensate for his charm, his charisma? I see you’ve appointed his son, Joel, as president of the printing division.
Quadracci: "Harry’s passing away was very difficult for us. In many ways, Harry was the persona of Quad/Graphics. It says a lot about the company that Harry built that our culture is so strong, that even with the loss of our leader, we have been able to perform as well as we have. In fact, we’ve had record years every year since Harry passed away. It’s been difficult to compensate for that. As I said at the beginning of our conversation, I’m more of a manufacturing guy than a salesperson. We established some regional vice presidents to help me out in the sales mode while I was acting as president, but now we have Joel, who is president of the printing division, and he has a sales background. He was the vice president of sales."
SBT: Does Joel have some of those same skills his father had?
Quadracci: "Joel has some very good sales skills. He’s very good at it. And he has a very good manufacturing background. He came up through our administrative training program and understands the business. It’s great to have someone like that working on the day-to-day operations."
Chairman and CEO, Quad/Graphics Inc.
Education: B.S. degree in biology and psychology, Regis University in Denver; also attended Stanford University’s School of Chemistry.
Family: Wife, Susan; and two sons, Mario, who is assistant editor at Milwaukee Magazine, which is owned by Quad/Graphics, and David, who is a facilities automation engineer at Quad/Graphics.
Company annual revenue: $2 billion
Guts: Quad has the discipline to invest 17 percent of its revenues annually on technology, even if its current equipment is not outdated. The company developed QuadMed, which provides on-site health care to its employees, who pay only $5 per visit to the doctor’s office. The Quad headquarters in Sussex also includes an employee dental clinic, a daycare center, a fitness center, an art gallery and a boutique. The company’s corporate culture is driven by employee ownership and the belief that workers who feel a sense of ownership will be more devoted to the firm.
China will be the next frontier for Quad/Graphics Inc.
Thomas Quadracci, chairman and chief executive officer of Quad/Graphics Inc., recently departed for China, where he is hoping to lay the groundwork for the firm’s entry into that country.
"China is a very interesting developing market. China is No. 2 in the importation of printing equipment in the world, behind only the United States, so that can give you some idea of how the printing industry is growing there," Quadracci said.
"The market is really underdeveloped. There are many printing companies in China, but they’re very small and very inefficient. So, I think we look at it as a business opportunity. That’s one of the reasons I’m going there, to talk to some people who could be good partners for us in China."
Because the Quad/Graphics corporate culture is so different than that of other American companies, let alone Chinese companies, Quad is likely to try to reach the Sino market by forming alliances with established Chinese firms, rather than acquiring other companies or trying to reach the market on its own.
"That’s been our strategy. We don’t feel that we’re qualified to just go into another country. We don’t know the culture. We don’t know the business market. So, what we do is look for some good partners, where we can provide some used equipment that is still very good equipment, but perhaps doesn’t fit the U.S. market anymore," Quadracci said.
"We can provide the education and training. We are technology leaders, so we can transfer a lot of technology know-how to our partner. This has worked very well for us in other parts of the world," he said. "I’ve been looking at the Chinese market for about six years now, and haven’t found it to be the right time just yet. But things have changed now, in terms of licensing and getting the proper approvals. So, now might be the right time to do it."
Quad/Graphics began its international foray in 1996, when it established a joint venture by purchasing a substantial interest in Anselmo L. Morvillo S.A. in Buenos Aries, Argentina. The joint venture is now one of the largest independent commercial printers in South America.
Quad/Graphics followed up the next year by launching a joint venture in Sao Paulo, Brazil, with Plural Editora e Grafica.
In 1998, Quad/Graphics established a joint venture in Warsaw, Poland, with Proszynski I S-ka.
"It’s a little bit of guts. We don’t look at investments in printing plants in kind of the safe areas of the world. So, part of our strategy is not to go into the developed markets like (western) Europe. We like to be a little more gutsy than that. We like to focus on the developing markets, where there’s the most upside potential," Quadracci said.
"Our strategy is not to manufacture in China or Brazil or Poland and export back to the United States," he said. "Our strategy would be to print for the developing Chinese market. I think there are tremendous opportunities there. And of course, India will be next."
By Steve Jagler, of SBT
May 27, 2005, Small Business Times, Milwaukee, WI