Herman Miller Case

INTRODUCTION

Overview

This case study from may 30th 2012 deals with Herman Miller Inc. (HMI), an American company that produces innovative high-end office equipment. They operate globally, but their base is in Sealant Michigan with plants in Georgia, Wisconsin, United Kingdom and Ningboh, China. They are a very successful company with annual revenues of over $1.6 billion. Their success is built on their innovative, economy friendly and employee supportive strategy.

Management Strategy

HMI's mission is to make profit by creating high quality furniture that is fit to its customers needs and by offering a good and healthy work environment for employees. Their vision is to become the world's largest international producer of office equipment and home furniture. The generic strategy HMI uses is broad differentiation with related diversification and their complementary strategies are offensive as in their first-mover advantage, the employee stock contract, the HMPS method and their accessories team, one defense move being their social contract. They do not have any strategic alliances nor important mergers or acquisitions. However, HMI uses outsourcing for component parts. Integration?

HMI's financial objectives include a continued focus on funding R&D as well as monetary incentives for the employees. Further, HMI is also continually focused on increasing their market share.

Their strategic objectives are to maintain their well-established culture and to maximize efficiency and effectiveness through their work ethics. Through this phenomenon of well-organized structures and culture, their executive strategy of people believing in the product as well as their management has proven to work.

Key problem

Will the strategies that have made HMI an outstanding and award winning company continued to provide it with the ability to reinvent and renew itself?

ANALYSIS AND EVALUATION

Finance and Accounting

HMI's advantages include keeping a relatively conservative financial management mindset (Table 1), successfully funding R&D throughout the recession period from 2007-2009, and funding other initiatives such as The Accessories Team to advance operations and monetary incentives for employees to enhance overall company morale (i.e. profit sharing plan, stock purchase plan, benefits). Many other non-monetary incentives are offered to the employees of HMI including: employee retreat, birth/adoption HMI rocking chairs, concierge services, flexible schedules, and on-site health and wellness services. Another advantage would be executive pay being cut in 2009, symbolizing very understanding and dedicated leaders.

The first of HMI's disadvantages would be their poor financial leveraging performance throughout the recession. Their debt-to-equity ratio rose from 1.18 in 2006 to an astonishing 47.66 in 2008. Although rebounding some, this number is still rather large. Dividends per share were cut by approximately 70% and capital expenditures were reduced to 0 in 2009. Profits from non-North American countries also decreased from 2007 to 2008. With HMI's market share being approximately 10.8% combined with the trends such as less demand for bulk office supplies sales, HMI is still financially sound due to these trends impacting low-cost office furniture producers more so than high-quality.

Human Resource

HMI has a corporate culture that really focuses on their employee's well-being. HMI is able to do this by setting up different levels of incentives. The first level of incentives is introduced when HMI does well. Employees receive bonuses and such when the HMI does well for the year. When an employee first starts working at HMI, they are enrolled in a profit sharing program. In this program they receive stocks based on the company's financial performance. HMI also offers an employee stock purchase plan, where an employee through payroll deductions can buy stock at a 15% discount. HMI also gave a bonus for economic value added at the end of the year. The next level of incentives deals with retaining employees. The voluntary turnover at HMI is projected to be less than 2%. Employees are offered a 401(k) plan that the company will match 50% of

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