Quad/Graphics, Inc.

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Quad/Graphics, Inc.

W224 N3322 Duplainville Road
Pewaukee, Wisconsin 53072–4195
U.S.A.
(414) 246-9200
Web site: http://www.qg.com

Private Company
Incorporated: 1971
Employees: 9,500
Sales: $1 billion plus (1996)
SICs: 2752, Commercial Lithographic & Offset Printing; 2754, Commercial Gravure Printing

Quad/Graphics, Inc. is the largest privately owned printing company in the western hemisphere and the fifth largest printer in the United States behind R. R. Donnelly, Quebecor, World Color Press, and Banta Corporation. Among catalog printers, Quad/Graphics ranked second nationally in 1996 and among magazine printers it ranked fourth. With more than 900 customers, Quad/Graphics prints such major U.S. magazines as Time, Newsweek, U.S. News & World Report, People, Black Enterprise, Journal of the American Medical Association, and Popular Science as well as catalogs for such mail order companies as L. L. Bean and Lands’ End. It also prints books, newspaper inserts, newsstand cookbooks, direct mail materials, and fine art posters. In 1996, 46 percent of its work consisted of catalog printing, another 40 percent consisted of publication printing (such as magazines), and 14 percent consisted of other materials.

Besides its printing operations, Quad/Graphics offers a full gamut of press printing services from electronic and conventional imaging services, computer disk file conversion, typesetting and graphic design, copywriting and editing, art direction and artboard preparation, and printing production management. Other prepress services include studio photography, desktop publishing services, film stripping and final preparation, digitized data archiving, platemaking, gravure cylinder preparation, direct digital cylinder engraving, and direct-to-plate imaging.

Through such divisions as Duplainville Transport and Quad/Direct, Quad/Graphics offers such postprinting services as publication binding, distribution and transportation of finished pieces to newsstands and postal center, and direct mail publication mailing and mailing list services. In 1996 Quad/Graphics maintained 16 production facilities in Wisconsin, New York, and Georgia; 15 sales offices across the United States; and international facilities in the Netherlands, Japan, Singapore, Argentina, and Brazil.

“There Has To Be a Better Way”: 1906–1971

The origins of the Quad/Graphics printing empire stretch back to the arrival of the Quadracci family in the United States from Italy in 1906. Settling in southeastern Wisconsin, the Quadraccis ran a grocery store in Racine until, in 1930, 16-year-old Harry R. Quadracci founded the Standard Printing Company behind the store, first as a hobby and then, as the Great Depression worsened, as a source of extra income for the family. In 1934, Quadracci sold his press and print shop assets to another printer, William A. Krueger, with whom he founded W. A. Krueger Co. of Milwaukee, Wisconsin. Over the years the small two-man shop became one of the largest publicly held regional printing companies in the United States (by the mid-1990s it was part of the printing firm Ringier America, which was itself purchased by World Color Press in 1996).

Quadracci’s son Larry cut his entrepreneurial teeth early on by starting “Quad Photo,” a photography service for his family’s church, at age 14, and later, while in college, a canteen. After graduating from Columbia Law School, he joined the Krueger firm as a lawyer in 1962 and then worked his way up to vice-president and general manager by 1965. In 1970, following a bitter three-month strike, Krueger’s management acceded to the demands of its unionized work force, which left Larry Quadracci, who had been the company’s lead negotiator with the workers, disenchanted with the company’s adversarial relationship with its employees. Before the year was out Krueger and Quadracci had parted company.

After Quadracci’s plans to buy an existing company collapsed, in 1971 he formed a limited partnership tax shelter named Press Associates and joined with 11 other entrepreneurs to raise $250,000, which he used to obtain a $650,000 loan to buy a Baker-Perkins color printing press. He then leased the machine back to his newly formed company, which he christened Quad/Graphics, and took out a $35,000 second mortgage on his home, tapped the savings of some of his associates, and sold a 30 percent stake in his new company to raise more capital. With the new capital he bought an abandoned millwork factory in rural Pewaukee, Wisconsin, which became Quad/Graphics’ first plant and headquarters.

The Lean Years: 1971–1979

In the midst of a national recession, Quadracci convinced key production personnel from Krueger to join him at Quad/Graphics, and in 1972 he brought his father aboard as chairman of the board. Although he had originally planned to print newspaper inserts, Quadracci discovered to his chagrin that he had overestimated the insert market and he turned to magazine and catalog work instead. He managed to pay back his investors’ initial outlay within two years, but Quad/Graphics struggled to stay afloat throughout the 1970s. Quadracci himself embarked on coast-to-coast sales trips to drum up business and, by accepting work that other printers would not do, Quad/Graphics gradually built up a network of customers, including Investor magazine of Wisconsin (its first customer) and similar small four-color magazines like Fishing Facts as well as catalogs/inserts for Mail Inc. Desperate for work to keep the company afloat, Quadracci also began printing adult men’s magazines, which grew to account for nearly a third of Quad/Graphics’ business in the early 1970s. Quadracci defended the practice by adopting the “airport rule,” in which any magazine that was displayed in airport newsstands was deemed main-stream enough to justify Quad/Graphics’ presstime. (By 1997 the company had ceased printing Penthouse and other men’s titles but still counted Playboy and a small number of more explicit magazines among its customers.)

The years 1972 through 1976 were particularly difficult for Quad/Graphics. Surviving such catastrophes as press breakdowns and expensive press rebuilds, however, by 1973 sales had climbed to $2.8 million and the work force had grown to 25. Quadracci founded Duplainville Transport (named after the street on which the company plant was located) in 1973 to provide distribution services and in the same year began adding new presses to his plant. In 1974 he added a saddle stitcher to enhance his production capabilities; hired his first customer service rep; and adopted a three-day, 12-hour-shift work week so his presses could run around the clock, seven days a week. In 1974 he implemented an employee stock ownership plan (ESOP), which over the years began to buy back the warrants his early incarnation, Press Associates, had issued to the company’s original investors. (By 1997, Quad/Graphics’ ESOP was the second largest shareholder of company stock after Quadracci himself.)

Despite the company’s continuing struggle to keep the presses running, Quadracci optimistically began investing in new plants and equipment to the tune of seven times his annual cash flow. In 1975, he opened sales offices in New York and Los Angeles, began performing his own platemaking in 1976, and raised employment to more than 100 the same year. The year 1976 was also the first in which Quadracci began requiring his delivery fleet to locate cargo to haul during their empty return trips. When his drivers asked him what kinds of loads they should haul, Quadracci replied, “How should I know?” The incident exemplified a key Quadracci management principle that came to be known as “Management by Walking Away” and established Quadracci’s budding reputation as a guru of modern management techniques. Quadracci was soon espousing such principles as “Respondepity” (the ability to respond to clients’ needs before they are even aware of them), “Active risk taking” (in which mistakes are not only tolerated but celebrated because they lead to innovation), and “Hunch-manship” (in which rigid corporate planning is replaced by bold, on-the-fly decision making).

With no major customers to stake its future on, however, Quad/Graphics’ prospects were still in doubt. In 1976, Quadracci fired his sales staff and flew to New York to market personally Quad/Graphics’ services to the big U.S. magazine publishers. He brought potential customers back to Pewaukee to show off his state-of-the-art machinery and used smoke-and-mirrors tactics to convince visitors that his often idle plant was running at full capacity. Quadracci’s hands-on approach worked, and in 1977 Newsweek agreed to give Quad/Graphics a try when its regular printer was unable to complete a press run. Quadracci made sure the magazine was printed perfectly, and by October 1978 Quad/Graphics was also binding a portion of each week’s Newsweek as it came off the presses. By giving Quad/Graphics the opportunity to demonstrate that it was a quality weekly printer and by supplying it with a steady stream of work Newsweek seemed to secure Quad/Graphics’ future. “From there on,” the company’s vice-president of finishing operations later said, “I felt we were going to make it.” For the next decade Quad/Graphics’ annual growth rate would climb as high as 40 percent—versus the industry’s average growth rate of ten percent—and year after year Quad/Graphics was named Newsweek’s “Printer of the Year.”

Company Perspectives:

“Ink is in our veins; ink is in our blood. It is our heritage, our mission and our business to be the very best at putting ink on paper. By making intelligent use of intelligent systems, we offer our best to our clients, whether we are printing on a press or putting virtual ink on the web of cyberspace.... Where do we go from here? We’ll tell you when we get there.”

Quadracci celebrated the company’s success by buying its fifth printing press in 1978 and in 1979 established the Quad/Tech division to manufacture computer-based press and bindery controls for the printing industry. Enterprise Graphics (later renamed Quad/Imaging) was also established to provide pre-press services. With Newsweek now on board, Quad/Graphics’ reputation spread quickly through the close community of the U.S. publishing industry.

“Theory Q”: 1980–1989

Quadracci’s disenchantment with the hostility between labor and management during his years at W. A. Krueger as well as his reliance on his employees’ team work and inventiveness during Quad/Graphics’ early years produced an egalitarian, nonhierarchical corporate culture that came to be known as “Theory Q.” Newly hired employees were often only high school graduates but though they started at low hourly rates ($7.50 in 1996) they could advance more quickly than in union print shops. Quadracci fostered a family atmosphere in which there were no time clocks, any employee could E-mail Quadracci at any time and get an answer within a day, and Quadracci himself was visible to most workers through a glass-enclosed office situated next to the press floor in the heart of the plant. The company’s “family feeling” also had a literal side: by 1996, 58 percent of Quad/Graphic employees could claim some familial relation to another employee.

A key component of Quadracci’s business philosophy was that work should be fun. Company holiday parties revolved around song-and-dance revues featuring “The World Famous Singing Vice-Presidents” and such themes as “The H.M.S. Printafore.” Quadracci had tons of sand shipped in for a Christmas party with a beach theme, he was known to appear at corporate parties riding an elephant or dressed as a drum major or a clown, and the company maintained a 40-acre nature preserve replete with baseball diamonds, volleyball and basket-ball courts, and an archery range.

Quad/Graphics’ Pewaukee facility came to be known as “Quad/World,” a self-contained corporate community in which by the 1990s employees worked a three-day, 36-hour work week, received free health care and on-site child care, and owned shares in the company’s current profits and future growth. The Quad/Education division (formed in 1983) offered employees technical, leadership, and personal development classes; Quad/Cuisine operated cafeterias and sold take-home food; Quad/Med Clinic (opened in 1991) and Quad/Care provided the company’s in-house medical services and child care centers, respectively; Quad/Temps offered a part-time, on-call employee pool; Quad/Travel (formed in 1990) booked employees’ business and personal trips; and Quad/Pop provided employees and visitors with a bottomless supply of free popcorn.

Beneath the carnival touches, however, lay a thorough commitment to maintaining Quad/Graphics’ leadership in the printing industry. By keeping his firm private and building it through bank credit rather than public stock offerings, Quadracci kept Quad/Graphics free from the threat of acquisition, enabling him to focus corporate capital on upgrading plant and equipment—a necessity in an industry in which new technology became obsolete almost overnight. Quadracci saw that four-color offset lithography, for example, was replacing the traditional one- or two-color letterpress (which used cast metal plates to apply ink directly to the paper), offering substantial improvements in printing speed and quality. As Quadracci later explained, “We thought we had as much chance as the established companies to get business if we had the latest technology. We didn’t have old presses to phase out and write off.” By 1985, Quad/Graphics had grown big enough and established a strong enough credit rating to be able to turn to the private placement market for capital. By selling subordinated notes to General Electric’s Pension Trust it now had a semipermanent source for financing equipment purchases and building expansions. As a result, the average age of its presses was only five to six years, compared to the ten-year average for the printing industry as a whole.

Moreover, by eschewing such standard corporate practices as establishing budgets and long-term planning, Quadracci kept Quad/Graphics nimble, able to shift resources quickly to exploit new printing industry trends. “No planning allowed” was Quadracci’s rule: “If you start planning, you blind yourself to opportunity.” Quadracci’s prescient understanding of the growing importance of the computer in the printing industry convinced him that the traditional budgeting and forecasting process would soon be rendered obsolete by the up-to-the-minute status reports made possible by computer technology.

In the early 1980s, Quad/Graphics held its first CAMP/Quad (for Catalog And Magazine Production) to educate clients in the latest printing technologies, and by the mid-1990s CAMP/Quad had trained more than 3,000 industry professionals. In 1982, Quadracci broke ground on a new plant in Sussex, Wisconsin, to augment the now crowded Pewaukee plant and founded Quad/Graphics’ ink manufacturing division (Chemical Research/Technology) and Quad/Tech, its division for designilng and manufacturing microprocessor-based press and bindery controls for the printing industry. In 1983 American Printer magazine named Quad/Graphics to its Top 100-Plus Printers list, and in 1984 the company was named as one of the “100 Best Companies To Work for in America” in a popular book of the same name. In 1985 Quad/Graphics opened a new plant in Saratoga Springs, New York, and a year later—with sales topping $154 million—it unveiled its first gravure press in its Lomira, Wisconsin plant (purchased in 1984) and brought its first multimailer machine on line.

When it began printing People magazine in 1987, Quad/Graphics had become the world’s largest printer of newsweekly magazines, with more than 3,100 employees and sales of $226 million. In 1988, it launched Quad/Tech Europe and broke ground on its High Tech Centre in Sussex. In 1989 Quadracci acquired W. R. Bean & Son of Thomaston, Georgia, established CB Graphics (now Quad/Sheetfed), and began offering customers in-house mailing list management services initially under the name of Quad/List Management, then later Quad/Data Services. Despite a national recession, layoffs, and the threat of bankruptcy if it failed to find a buyer for its lagging Quad/Marketing subsidiary (it eventually did), by the late 1980s company sales were surpassing $375 million and employment had topped the 4,500 mark. Within a year Lithoweek magazine was posing the rhetorical question, “Quad/Graphics: The Best Printer in the World or What?”

Growth in the 1990s

Quadracci’s pursuit of business growth and cutting-edge printing technology continued in the 1990s. In 1990, Quad/Graphics established its Quad/Photo division, which began providing digital photography services in 1994; in the early 1990s the company became one of the first U.S. printers to use Heidelberg Harris press technology; and in 1993 it became the first North American printer to acquire a high-speed Ferag drum stitcher. By 1991, Quad/Graphics had become the ninth largest printer in the United States and was operating 43 web offset presses, five gravure presses, 38 saddle stitchers, and 11 perfect binders. By 1996 Quad/Graphics was operating no fewer than 70 presses in eight locations.

The company also continued to expand geographically. In 1993 it broke ground for its Automated Storage and Retrieval System facility in Sussex; began construction of a new plant in The Rock, Georgia, in 1994; and the same year purchased a vacant manufacturing facility in West Allis, Wisconsin, to expand further its production capacity. In 1995 it broke ground on another new plant in Martinsburg, West Virginia (opened in 1997); purchased a vacated printing plant in New Berlin, Wisconsin; and broke ground for an employee housing project near its Lomira plant. In 1996 it also announced its first joint venture with an international printer by buying a substantial portion of Anselmo L. Morvillo S.A. of Argentina, reflecting Quadracci’s strategy to build a global network of locally managed printing firms that were jointly owned by Quad/Graphics and its local partners. In 1997 it followed this with an agreement to print catalogs through Brazilian printer Plural Editora e Grafica and pursued ventures with printing firms in China and India. In early 1997 Quadracci announced the ninth expansion project for its Sussex, Wisconsin, headquarters facility and a $50 million expansion for its Saratoga Springs, New York, plant so that Time Inc. could print more of its weekly magazines with Quad/Graphics.

By 1993 Quad/Graphics was printing more than 400 publications and catalogs (100 million magazines a month) and sales had spiraled to more than $703 million, representing ten straight years of double-digit growth. By this time, all Quad/Graphics management as well as entry-level pressmen were sporting identical blue shirts with Quad/Graphics logos on their arms in an effort to instill a team atomosphere. In May 1994, the company established a company record when it stitched more than 912,000 copies of Newsweek in a single day. In 1996 it complemented its magazine/catalog niche by adding hardcover book binding to its capabilities and in November of that year it began printing its first multicolor hardcover and softcover books.

Quadracci’s “stay nimble” management strategy, meanwhile, was permitting the company to ride the revolutionary changes afoot in the application of computerized and digital technologies to the printing process. By the early 1990s off-the-shelf software packages were enabling anyone with a computer to do many of the prepress functions traditionally performed by specialized typesetting and printing firms. By 1997, for example, more than half the companies in the U.S. printing industry either owned or used computerized prepress, color scanner, and image-setting technology, and the majority of U.S. printers had some customers who were now delivering their printing jobs to the printer stored on computer disks. The days of creating film prior to printing appeared to be numbered. Quad/Graphics had anticipated the rapid growth in this so-called computer-to-plate technology as early as 1990 when it bought Orbis Graphic Arts facility in Anaheim, California, later renamed Anaheim Imaging. By 1994, Quad/Graphics’ Quad/Imaging division had per-formed its first live direct-digital-to-plate run, and in 1994–95 Quad/Imaging satellites were operating in Boston, Minneapolis, and New York. Sales broke the billion dollar mark in 1995, and in 1996–1997 Quad/Graphics launched a World Wide Web site, printed Sports Illustrated’s daily Olympic Games magazine, upgraded its printing facilities to take on tabloid newspaper and magazine printing, and entered the fulfillment business through its Quad/Data Services division.