Reference no: EM131732082

Herman Miller and Its Rain Forest Chairs In March 1990, Bill Foley, research manager for Herman Miller, Inc., began a routine evaluation of new woods to use in the firm’s signature piece—the $2,277 (the 1990 cost) Eames chair. The Eames chair is a distinctive office chair with a rosewood exterior finish and a leather seat, and was sold in the Sharper Image’s stores and catalog. At that time, the chair was made of two species of trees: rosewood and Honduran mahogany. Foley realized that Miller’s use of the tropical hardwoods was helping destroy rain forests. Foley banned the use of the woods in the chairs once existing supplies were exhausted. The Eames chair would no longer have its traditional rosewood finish. Foley’s decision prompted former CEO Richard H. Ruch to react: “That’s going to kill that [chair].”167 Effects on sales could not be quantified. Herman Miller, based in Zeeland, Michigan, and founded in 1923 by D. J. DePree, a devout Baptist, manufactures office furniture and partitions. The corporation follows a participatory-management tradition and takes environmentally friendly actions. The vice president of the Michigan Audubon Society noted that Miller has cut the trash it hauls to landfills by 90 percent since 1982: “Herman Miller has been doing a super job.”168 Herman Miller built an $11 million waste-to-energy heating and cooling plant. The plant saves $750,000 per year in fuel and landfill costs. In 1991, the company found a buyer for the 800,000 pounds of scrap fabric it had been dumping in landfills. A North Carolina firm shreds it for insulation for automobile roof linings and dashboards. Selling the scrap fabric saves Miller $50,000 per year in dumping fees. Herman Miller employees once used 800,000 styrofoam cups a year. But in 1991, the company passed out 5,000 mugs to its employees and banished styrofoam. The mugs carry the following admonition: “On spaceship earth there are no passengers ... only crew.” Styrofoam in packaging was also reduced 70 percent for a cost savings of $ 1.4 million. Herman Miller also spent $800,000 for two incinerators that burn 98 percent of the toxic solvents that escape from booths where wood is stained and varnished. These fur- naces exceeded the 1990 Clean Air Act requirements. It was likely that the incinerators would be obsolete within three years, when nontoxic products became available for stain- ing and finishing wood, but having the furnaces was “ethically correct,” former CEO Ruch said in response to questions from the board of directors.169 Herman Miller keeps pursuing environmentally safe processes, including finding a use for its sawdust byproduct. However, for the fiscal year ended May 31, 1991, its net profit had fallen 70 percent, from 1990 to $14 million on total sales of $878 million. In 1992, Herman Miller’s board hired J. Kermit Campbell as CEO. Mr. Campbell con- tinued in the Ruch tradition and wrote essays for employees on risk taking and for man- agers on “staying out of the way.” From 1992 to 1995, sales growth at Herman Miller was explosive, but as one analyst described it, “Expenses exploded.” Despite sales growth during this time, profits dropped 89 percent to a mere $4.3 million. Miller’s board, concerned about Campbell’s lack of expedience, announced Campbell’s resignation and began an aggressive program of downsizing. Between May and July 1995, 130 jobs were eliminated. Also in 1995, sales dropped from $879 to $804 million. The board promoted Michael Volkema, then 39 and head of Miller’s file cabinet division, to CEO.170 Volkema refocused Herman Miller’s name with a line of well-made, lower-priced office furniture, using a strategy and division called SQA (simple, quick, and affordable). The dealers for SQA work with customers to configure office furniture plans, and Miller ships all the pieces ordered in less than two weeks. Revenues in 1997 were $200 million, with record earnings of $78 million. In 1998, Miller acquired dealerships around the country and downsized from its then 1,500 employees.171 t the company. By 1999, Herman Miller was giving Steelcase, the country’s number one office furniture manufacturer, stiff competition, as it were, with its Aeron chair. The Aeron chair, which comes in hundreds of versions, has lumbar adjustments, varying types of arms, different upholstery colors, and a mesh back Its price is $765 to $1,190, and it is said to be capitalizing on its “Austin Powers-like” look. The chair has thirty-five patents and is the result of $35 million in R&D expenditures and cooperation with researchers at Michigan State, the University of Vermont, and Cornell who specialize in ergonomics. The seat features a sort of spine imprimatur. That is, the chair almost con- forms to its user’s spine.172 Since 2002, Herman Miller has been named one of the “Sustainable Business 20,” which is a list of the top twenty stocks of companies with strong environmental initia- tives as well as good financial performance. The list is compiled by Progressive Investor, a publication of SustainableBusiness.com. In announcing the list, https://www.sustainable business.com said, “Our goal is to create a list that showcases public companies that, over the past year, have made substantial progress in either greening their internal opera- tions or growing a business based on an important green technology.”173 For the past nine years, Herman Miller has been named to the Dow Jones Sustainability World Index, and for six years has received a perfect score on the Human Rights Index, a mea- sure of treatment of employees in factories located in other countries. For the fiscal year ended June 30, 2010, Herman Miller’s earnings had declined 19 percent. It is working to expand its product base to include home furnishing. Despite the earnings setback, Herman Miller continued its focus on sustainability. One of its cor- porate goals is zero pounds of waste by 2020. Known as its “Perfect Vision” strategy, the company had pledged also to have zero emissions, zero hazardous waste, zero landfill, zero process water use, and 100 percent green energy use. Currently the company is at 27 percent renewable energy use for its offices and production. Despite the earnings struggles, the recognition the company receives is remarkable. The company consistently appears in CRO magazine’s “100 Best Corporate Citizens” and has been named twenty-four times by Fortune magazine as one of the United States’s “Most Admired” companies as well as one of the “Top 100 Companies to Work For” for a decade. In 2008, it was consistently ranked as one of the top twenty safest companies in the United States because of its low workplace injury rate for its employees. By 2011, the earnings picture had changed. Herman’s Miller’s NASDAQ listing found its shares climbing due to its acquisitions of fabric companies and its expansion into fur- niture for health care facilities and home furnishings. Despite a sagging economy, Herman Miller’s sales were up 11 percent for the first quarter of 2013, something attrib- uted to the company’s strong international presence. Experts attribute its strong interna- tional sales to its reputation for sustainable products and operations. Herman Miller has changed significantly since its 1968 invention of the office cubicle, a design that has now fallen out of favor. Its evolution into new fields, new products, and sustainability has resulted in increasing sales and profits. Herman Miller’s recruiting page includes the following:174 You can make a salary making furniture. Or you can make a difference. Or you can work at Herman Miller and make both. Speak up, solve problems, lead others, and be an owner. All while giving back to the com- munity and caring for a better world. Join us and make your mark.  Speak Up People who speak up and share ideas make for a strong business. Embracing good ideas and sharing the rewards with everyone is one way we stand apart. Solve Problems We use design to do that. You don’t have to be a “designer” to make things better—for customers, for the communities we do business in, and for a better world. Lead Envision the future and help others reach their potential. Sometimes you’ll lead and other times follow. We believe everyone does both, depending on the problem to be solved. Own At Herman Miller everyone can be a shareholder. But more so, you’ll be a stakeholder, because we’re all challenged to design solutions and make decisions that improve our community, our business, and our world.

1. Evaluate Foley’s decision on changing the Eames chair woods. Consider the moral standards at issue for various stakeholders.

2. Is it troublesome that Miller’s profits were off when Foley made the decision?

3. Is Herman Miller bluffing with “green marketing”? Would Albert Carr (Reading 2.3) support Herman Miller’s actions for different reasons?

4. Why would Herman Miller decide to buy equipment that exceeded the 1990 Clean Air Act standards when it would not be needed in three years?

5. In 2010, sales earnings were down for the company, but Herman Miller retained its sustainability focus. Despite advice from shareholders and experts, the company refused to cut costs by eliminating some of its green programs. Did the sustainability focus help the company with its sales and profits?