Herman Miller — Role Model in Employee and Environmental Relations
Herman Miller, a Michigan-based manufacturer of office furniture, has long been recognized as a paragon of employee relations and environmentally sensitive policies. The company had been a high-price provider, and was able to absorb the costs of its generous policies, but found itself in an increasingly competitive market, and its "enlightened" approach to management began to seem like an albatross.
Background
Since its onset, the company maintained a paternal relationship with employees and offered generous profit-sharing and benefits packages long before they were fashionable. In their mind, this created a dedicated and loyal workforce that turned out high-quality products that could be sold at premium prices.
Line workers were paid well, and executive pay was in line - the CEO
S salary would be no more than 20 times the wage of a line worker, there was a participatory management style, and the company promoted from within whenever possible. As a result, there had never been any serious efforts to unionize the workplace.
There were also numerous examples of environmental practices: reducing landfill impact, controlling waste, recycling, careful handling of toxic materials, refusal to use exotic woods that could not be harvested in a sustainable manner, etc.
These practices perpetuated for decades, but the market became increasingly competitive in the 1990's, and competitors entered the market that sold high-quality merchandise at lower prices. Naturally, cost-cutting was proposed, and the obvious targets were the benefits lavished on employees and the costly environmentally-friendly operating practices.
Analysis
At the time, downsizing and cost-cutting were widespread practices and when it came to environmentalism, corporate practices were geared to do as little as possible, and at as little cost as possible, to avoid drawing media scrutiny.
Details are a little fuzzy here, but it's clear that the company downsized and restructured to become more competitive. The company downsized "empathetically", offering early retirement incentives, training and job-finding assistance, and other perks to help ease employees out. The company remained staunch in its environmental practices and found alternate methods to substitute and conserve. The company's profit margin thinned as a result, but the company remained profitable enough to weather adverse conditions, and after the slump had passed, the company remained more profitable than its competitors who took more drastic measures.
Lessons Learned
Primarily, that a firm has to adapt to changing market forces. Had the company refused to make any changes at all, it would have bankrupted itself, which would have done far more harm to far more people.
In adverse situations, altruism becomes dulled. A "good" company such as this will compromise, others will completely forge their good intentions.
Shareholder satisfaction is critical for executives, but bear in mind that market performance is only one source of satisfaction. A company such as HM, whose stock is often held long-term, it's easier to "sell" the idea of compromise to shareholders than it would be in a company held by short-term investors.
Drastic times do not always call for drastic measures. A company that accepts adverse conditions and takes steps to persevere, rather than attempting to grow and thrive in a down market, takes on less risk and will often find itself in a stronger position than competitors who took more risky moves to avoid the impact of adverse conditions.