Confronting Reality About Margins --Dickeson
It's a People Problem
Either the lower three-quarters of commercial firms have too many people for the value they're adding or they're paying each person employed far too much. There's a 9.5 percent to 10 percent difference of value-added in personal compensation between the two groups!
That, good buddies, is where the difference really comes home to roost. That's the reality we must really confront in commercial printing. Pricing you can forget. Compensation for people, including all the benefits that go with the people, is where the truth lies hidden.
But, pricing is the great secret, isn't it? No. Pricing is way, way overplayed. It's compensation, materials waste and personal relationships in selling that are the keys to success in commercial printing. We're wasting far too much time and effort arriving at a price—budgeted hourly rates and all that malarkey. We must look for ways to reduce the number of people we're using to convert materials to finished product, from top to bottom of our businesses. That's a fundamental change we must make in our operating models.
Maybe that requires a hard look at specialization rather than a policy of being a printer of "all things for all people as long as it's printing." Gulp! That would be a radical change in business plan for lots of firms, wouldn't it?
Let's take a hard look at those printers in the upper 25 percent. Do they tend to be specialists? Who knows? We must find out. It's doubtful if any of our big, top-five firms in printing qualify as being in that top 25 percent group of operating profits. Am I wrong? Look at published financial statements where available.
Look at the merger firm specialists. Top quarter of all commercial printers? Very, very doubtful, isn't it? Well, then, just who are those in the upper quarter? What are they doing? How did they become successful operating at 10 percent value-added, less compensation?