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MANAGEMENT: THE BIG TEN

Jul 1, 1998 12:00 AM


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In asking successful printers how to improve the bottom line, they either joked, "What, give away our secrets?" or, "There is no secret--just hard work and common sense."

"I'm a great believer in execution," says David Gadbaw, president and COO of The John Henry Co. (Lansing, MI), which recently garnered a Gold award in the National Assn. of Printers & Lithographers (NAPL) Management Plus Awards program. "Twenty shops can all have 40-inch presses that are exactly alike. Some firms will do better with that same piece of iron than others. The difference isn't iron--it's execution."

What unites every successful printer is the ability to access good information in a quickly evolving industry, then act upon it. While some printers may hesitate to seek advice from industry peers, the ones moving ahead in today's market credit their edge precisely to duplicating what works for others, then finding ways to improve upon already proven methods.

"People are so overwhelmed by the day-to-day demands of their business they don't take the time to really look at what causes them to make or lose money," observes consultant Bob Rosen. "Sometimes it has to be staring them in the face."

Everyone struggles everyday to make their plant productive, suggests Rosen, "But the (profit leaders) enjoy a greater measure of success because of their clear and steady focus on the required results." In essence, they commit to achieving identified results and then cut themselves off from any other possibility.

Recent research by NAPL, examining the distinguishing habits of the industry's long-run leaders, confirms this mindset of not allowing a changing environment--whether it be from never-ending technological improvements, increasing competition or a faltering economy--to control company results.

"I really do think it all starts with that one decision," says Andrew Paparozzi, chief economist for NAPL, who worked with staff economist Paul Moravec in studying the practices of industry leaders. "Leaders did not get where they are by accident. There is a definite process and business philosophy that these industry leaders share. They weren't born with it. They developed it over time . . . and any printer can do the same with some dedication and patience."

In an effort to motivate printers to achieve bigger success with better control, we offer the following tips gathered from winning companies, as well as industry consultants who've helped spur higher profit margins for printers nationwide. Just remember that there really are no secrets--anyone can achieve the same results.

Create financial goals--a set of magic numbers--Successful managers continually evaluate results against the numbers, stresses Rosen. The idea is to make a list of numbers to predict or influence future results. These numbers come from valuing areas such as orders booked, shipments, sales projections, plant productivity and quoting activity.

"Printers need to have a few simple magic numbers that tell them what kind of day they had yesterday," the consultant explains. "One number comes from asking, 'What were our sales bookings yesterday--how many dollars of orders did we enter?' A second number is, 'How much chargeable work did I do in the plant yesterday?' " A third number is quoting activity, which represents an early warning sign of what's going to be happening four to five weeks out.

"Most printers don't have the faintest idea how to get this number because they get lots of different kinds of quotes--two different kinds of paper, five colors, six colors with coating, and so on," says Rosen. "All they really have to do is just create one value for each quote, then add up the value of all the quotes. At the end of the day you'll know what the value of prospective jobs might be. Don't worry about making a perfect guess, just make a good guess."

John E. Butler, a partner with the financial consulting firm Rubin, Brown, Gornstein & Co. LLP (St. Louis, MO), adds that printers often are delinquent in re-evaluating budgeted hourly rates. "It's an area in which printers fly by the seat of their pants and it has major implications on how jobs are priced, how salespeople are paid, how production is planned," says Butler. "If you haven't updated them in awhile, you could either not be charging enough or accepting jobs you shouldn't be doing."

Evaluate a customer's worth--While most clients are worth catering to, others deserve to be canned. They are simply more trouble than they're worth in what they cost in time, money and aggravation.

If the Pareto Principle says 80 percent of any company's business comes from 20 percent of its customers, the other customers shouldn't be taking 80 percent of the firm's time and effort. Or, as Butler puts it, "If you look at the customers you deal with, it always seems as if 20 percent of them give 80 percent of the headaches, and they aren't even necessarily your largest clients." One solution is to invest in a strong customer service organization, suggests industry consultant Lou Laurent. "A lot of companies scrimp in this area and that causes either production or salespeople to spend an inordinate amount of time handling customer situations that a customer service rep could address quickly."

When it comes to bills, John Henry Co. regularly reviews accounts receivable to track and manage the customer base: "There is a cost of doing business," reasons Gadbaw. "If you can make only a small margin on someone and it takes forever to collect, you must say, 'Hey, we're better off taking those resources and putting them where there's better recovery.' "

Become closer with customers--Because today's graphic arts firms need to sell solutions that require understanding their customers' business processes, they need to pick clients' brains, getting them to share personal mindsets on key objectives and goals.

"Very close communication channels with customers have to be a way of life," stresses Steve Hayes of Omaha Printing Co. (Omaha, NE), which has averaged 25 percent growth for the past four years. "The way you separate yourself from the competition is by having a different personality. We try to be good listeners. We try to sit down with our larger clients for a business meeting on a monthly and/or quarterly basis to review what our business has been and then look at what they've got planned for the next month or quarter or year."

Cunningham Graphics International, Inc. (Jersey City, NJ), one of American printer's Top 50 Fastest Growing Printers, recently surveyed customers on all aspects of service and quality control as part of the firm's commitment to "partnering efforts."

"There's been a big emphasis on product quality and it is very important, but what's been overlooked, and is equally important, is soft service quality," says president Michael Cunningham. "It's things such as how much time does it take to answer the phone? How quickly do estimates get back to the client? How fast does the bill go out? Efficiencies in these areas make the clients' jobs easier, allowing them to make strategic decisions more rapidly, thereby saving money."

With new clients especially, Cunningham administers a technical audit in which a technology team actually reviews in-house operations and desktop publishing areas, checking print drivers, font libraries, software programs, hardware, etc. "Then we'll come back to clients with creative suggestions on how to do things better and smarter," the exec explains. "It's a win-win situation in that the better and smarter they present the files to us, the more effective and profitable it is to Cunningham Graphics."

Sell more to the same people--"Basically you're looking at getting more share of your customer rather than overall market share, says John Aslanian, president and COO of Quality House of Graphics (Long Island City, NY), giving the same winning strategy laid out in best-seller book, The One to One Future. "Many printers use a shotgun approach, spending money to chase down companies they don't even know if they want to do business with. Printers already have a gold mine of clients just sitting there. What it comes down to is identifying a known quantity."

Instead of selling services to whoever will buy them, sell more and higher-quality services to existing clients already identified as profitable, in turn earning more and more business over the lifetime of that customer's patronage.

As an extra measure aimed at winning loyalty, Quality House likes to throw in freebies. "Our competitors all yelled at us recently when they heard we were creating a database at no charge for one of our big clients," recalls Aslanian by way of example. "How can you afford to do that? Well, they give us a couple of millions of dollars of business--how can we afford not to? Many companies are just too busy competing on price to understand what's important."

Continually upgrade employee skills--With today's fast-paced technological changes, it is impossible to keep up without skilled workers. No amount of money thrown into the latest equipment will translate into profits if another investment isn't made in its operator. Simply, the better trained the employee, the higher the productivity and lower the costs.

"Even hiring the most educated people is not the answer; you have to keep investing to keep them current," asserts Gadbaw. Toward that end, The John Henry Co. not only pays for its employees' continued training, but splits the cost of the time, with half the class time counting as work hours. "When hiring people, we try to match aptitude with attitude," Gadbaw explains. "Do they want to learn? Are they willing to invest time into continued education? When you invest in a winning attitude, the payback is big time."

Thomas G. Mercier, president of Bloomington Offset Process, Inc. (Bloomington, IL), claims that the word gets out when a company is devoted to improving employees' marketability through upgraded skills, and the result is highly qualified, motivated people apply for jobs. "People want to be part of a winning team," he says, referring to the successes of BOPI, which had sales near $10 million last year and was a Gold award-winner in the NAPL program. "The people who are anxious to come into work every morning because they're excited about their jobs are the same ones who don't want to be stuck in one position at a company, but want to work somewhere they have the opportunity to go to the next level."

Empower employees through open-book management--If a company operates by the premise that workers perform better when they feel wanted and respected, this mindset must extend to making them perceive a stake in whatever they do. While this may require more time and effort by managers, the payback in productivity definitely pays off.

"In our industry we ask people to spend more hours at work than they do with their loved ones, and if we're going to ask them to do that, there has to be a trusting relationship," says Brian Gill, senior vice president of education and human relations at Printing Industries of America. "The success of any organization, bottom line, is based on the development of a trusting relationship between employer and employee."

This means nothing is held back, from sales performance to profit margins, returns on investments, spoilage figures, etc. Employees must be made to understand the dynamics of cost-effectiveness and how such factors as overtime affect the bottom line.

"Telling your people what the company needs to do to be profitable keeps them thinking about what they personally are doing," says Butler. "They need to understand how they fit in. Also, they need to understand the challenges owners have to deal with on a day-to-day basis.

Look for the outsider's perspective--When people who haven't been stuck with the same printing paradigms for years interact with those firmly entrenched in the industry, they often create new solutions and devise fresh methods. These "outsiders" even address matters often overlooked in a company's own business plan.

"We try to involve people from different backgrounds in more and more of our decision-making because that's where we've seen some of our best ideas come from in areas of cost-savings and making things more efficient--it's really an ongoing education process," testifies Dave Moored, general manager of Flashes Publishers Inc. (Allegan, MI), a 64-year-old web printer with its roots in publishing. Because the long-respected company has a number of weekly shoppers and produces grocery store circulars for several big grocery store chains, explains Moored, "having some people on my staff who have a grocery background has helped us understand the industry better. One of our senior account representatives, for example, has a background in food purchasing so he has a good relationship with the local grocers."

Reduce costs by eliminating waste--An important part of running any business is knowing what the costs are and then controlling them very carefully on an ongoing basis. "Out of all the bad habits that are going to hurt you, being wasteful is definitely one of the biggest," says James Duffy, president of Alonzo Printing Co., Inc. (Hayward, CA), which expects sales to reach $12 million this year. "My definition of waste is anything we don't sell. One thing my company does to help control quantities and eliminate overprints is to use scales to weigh our product as it's printed, which is something a lot of people don't do. Our dream finish is with just the count the customer wants."

Butler says a byproduct of the thriving economy has been printers becoming more lax about controlling overhead expenses. "There's probably quite a few things my customers are buying now that they would not be buying if the economy were worse. Well, now is the time for us to start re-examinging spending habits. It's wise to tighten the belt a little now, so your company doesn't have to tighten it a lot later."

Plan before buying--While it's true printers who want to stay competitive can't wait as long anymore to make purchasing decisions or take chances in new technology, there is still no guarantee a fancy new piece of equipment will even pay for itself, let alone reap new profits. Taking well-informed, calculated risks means first carefully analyzing and evaluating how the technology will fit in.

"Before you spend $1 million or $100,000 on technology, make sure you can keep it running long enough to make it worthwhile," says Butler. "Some printers buy machinery because they think they're going to get into that line of work or do more with it."

By incorporating new equipment inappropriately, companies can't relay to their clients all the advantages the technologiesoffer, says Butler. By closely examining what existing clients are buying, a firm can determine the profitability of obtaining the equipment necessary to serve the customer better. Conversely, says Butler, "If you have an expensive machine you only use once a month on a particular customer, maybe you should get rid of it and contract with someone else."

Be a student of business management--Success is not determined by company size or demographics, assures NAPL economist Moravec, but by how well top executives have developed their skills to manage change.

"With the (long-run) leaders we've been talking about, we have no doubt these people would be as successful in any industry as they are in the printing industry," he asserts. "Part of it has to do with their ability to anticipate changes and focus only on what changes will best serve their clients." Honing this skill means learning from their own experiences, good and bad, and the experiences of others.

Donald K. Roseman, president of Acorn Press (Lancaster, PA), testifies to the benefits of attending a non-industry peer group of 12 CEOs, called The Executive Committee, on a monthly basis.

"It's all about bringing in a broad spectrum of ideas, examples," says Roseman, who started as a one-man shop in 1956 and now manages 118 employees. "If you look at the most successful MBA programs, it's all example-based learning: 'Here's how someone got into a problem and then how did they get themselves out?' Your learn from whether they did or didn't do it correctly."

Moravec says the key is to be dedicated to building a broad knowledge base inside and outside the industry, but at the same time be "very, very critical" of all input received.

In addition to non-industry peer groups, Moravec recommends joining non-industry specific groups such as marketing and trade associations and management seminars. In order to anticipate customer/ market needs, visit customers' trade shows, conferences and strategic sessions. "All this information is then translated into a clearly articulated, highly devised strategic plan to be followed to the letter," he says. Successful execution means making sure even the smallest task undertaken by the company directly relates to and supports that plan.

"It's not just the difference between having a plan and not having one, which a lot of printers don't, but it's about having everyone dedicated to a formal strategy that really identifies how to set yourself apart."