Socked by sagging advertising revenue, printing giant R.R. Donnelley & Sons Co. is reorganizing its core printing businesses under new leadership, company officials said Wednesday.
Donnelley is taking the heart of its company, its main publishing units, and placing them under company veteran Ronald Daly, 54. Daly will head the new consolidated business, R.R. Donnelley Print Solutions, and report directly to William Davis, Donnelley’s chairman, president and chief executive officer.
“We are not realigning just to realign,” Daly said. “We are realigning five of our business units in order to create” efficiencies among businesses. Such efficiencies, he said, might include using one computer system across all units.
Donnelley is the world’s third-largest publisher. This year it has issued two profit warnings and eliminated 5 percent of its workforce. Two weeks ago, it reported second-quarter profit of $6.1 million, or 5 cents a share, down 89 percent from $56.3 million, or 46 cents a share, a year earlier.
A huge chunk of the earnings drop was attributed to a $32.2 million after tax-charge to cover the costs of recently announced plant closings and staff reductions.
Daly’s domain will include the company’s Book Publishing Services, Core Commercial Print, Specialized Publishing Services, and domestic and international Telecommunications businesses.
These units publish books, magazines such as Time and Martha Stewart Living, catalogs, advertising inserts, alumni and regional magazines, and telephone books.
James Schrager, a professor of strategic management at the University of Chicago Graduate School of Business, was somewhat skeptical of Donnelley’s new plan.
“Larger is generally not better,” Schrager said. “I would rather have a small, focused team than a large, central bureaucratic group.”
Schrager cited the example of Honda, which revolutionized the automobile industry when it decided to put 50 people to the task of designing an automobile, rather than 500 people, which was then the industry standard.
“We knew that 50 people would be cheaper than 500,” Schrager said. “We didn’t know that they would also be faster and better at designing the cars.”
“The lesson of the ’80s is that separate stand-alone companies do better,” Schrager said. Still, Schrager suggested that Donnelley’s new structure might work if the units retained enough autonomy to stay close to their customers.
“Five hundred people can’t be close to the customer,” Schrager said.
But Daly sees the restructuring as an opportunity to inculcate values across the board within Donnelley. He said the company was introducing the Six Sigma method of quality control and the use of high-level mathematics in the manufacturing process.
“We are striving to become a manufacturing company, rather than a craft-oriented company,” Daly said. “The businesses have relatively common manufacturing platforms. But they’ve been operating autonomously. We are a 137-year-old company. Now we are shaking up the mix.”
Shares in Donnelley closed Wednesday at $29.88 on the New York Stock Exchange, down 14 cents.
Daly is a South Side native who began his career at Donnelley as an apprentice proofreader out of high school. He has since worked in every high-tech business that Donnelley has launched. In the 1970s he attended night school while working at Donnelley, receiving his bachelor’s degree from Governors State University and his master’s in business administration from Loyola University.
