Postmaster General William Henderson once bragged to Harry Quadracci, the founder of Quad/Graphics, that the U.S. Postal Service had increased its productivity by 6 percent in the previous decade.
That’s nothing, Quadracci responded, Quad achieved a 6 percent productivity improvement every year.
I don’t think Harry Q was exaggerating. While the U.S. Postal Service whines about its annual rate increases being too small, publication printers like Quad have been enduring price reductions of roughly 3 percent or more per year for more than a decade, not to mention declining demand and inflationary pressures. They’ve had to improve productivity constantly just to survive.
Now it’s the postal service’s turn to try real productivity improvement. Facing multi-billion-dollar losses and declining demand, postal officials in August released a radical plan to downsize the workforce by about 30 percent in four years. After factoring in a switch to five-day delivery and adjusting for declining volumes, the USPS would need to achieve productivity improvements of—guess what?—about 6 percent annually during those four years if it is to get by with such a drastic reduction in the number of employees.
The reaction from publishers and other mail-dependent industries can generally be summarized as, “It’s about time!”
“The postal service, like all industries, will have to continue to find ways to do more with less,” Ellen Levine of Hearst Magazines recently told a Congressional hearing. “Magazine production has been revolutionized over the past years and decades, from the days of glue and line-by-line layout to the high-tech digital world in which we now operate. If our magazines were being produced today the way they were when they were launched, we’d probably be out of business.”
The Problems With “The Plan”
Quite true. But be careful what you wish for. If the postal service tries to carry out its plan, publishers are likely to be unhappy with the chaos that results.
Yes, the postal service is ripe for restructuring and cost reductions. In theory, the plan would keep the postal service solvent. But in reality, the proposal is overly optimistic regarding what the agency can achieve in a relatively short time.
Consider this cautionary statement from none other than Quad/Graphics in its latest quarterly earnings report, which refers to “decreased labor productivity associated with integration and restructuring activities related to hiring and training additional employees to prepare certain plants to receive transferred volumes from manufacturing facilities that were closed as part of the World Color Press integration.”
Radical restructuring can reduce costs, but it’s a messy process that causes temporary setbacks and reduced productivity—even for a company like Quad that had an extensive integration plan and is used to ratcheting up productivity. The lesson is doubly true for a generally dysfunctional organization like the postal service, which only in recent years has become religious about being more efficient.
Quad and the other surviving publication printers didn’t improve productivity by slashing head counts. They did it through investment—in larger presses, computer-to-plate technology, automated workflows, employee training, and a host of new methods and processes. Head-count reductions didn’t cause productivity gains, but instead were made possible by such gains.
Likewise, our industry’s paper suppliers have spent money to save money—by upgrading machines (and closing those that were no longer efficient), reducing energy consumption, using less-expensive materials, reducing waste and improving productivity. Otherwise, they would not have been able to survive, considering that the prices they charge are nearly identical to what they were a decade ago, even though input costs continue rising.
Implementing digital technologies and workflows required magazine publishers to make some investments up front, tolerate transition pain, and change organizational structures before the investments paid off.