HERMAN MILLER 1. Describe Herman Miller’s strategy. Is there evidence it has produced a competitive advantage and good financial performance? Explain. They focus on a growth strategy, through innovative products and production processes. Reinvention and renewal. They survived the Great Depression and multiple recessions, recovered from the dot-com bust and were able to continue expanding overseas. They adapted to save the company, by introducing new designs.
In 1996, Herman Miller began an aggressive drive to reinvent its operations and established a fruitful relationship with the Toyota Supplier Support Center. Unique to the office furniture industry, the relationship enabled the company to adopt and implement world-class, lean manufacturing processes based on the Toyota Production System principles. Through the Herman Miller Production System (HMPS), the company dramatically reduced manufacturing square footage and inventories, cut lead times for standard product from 8 weeks to as little as 10 days, and significantly grew sales and profitability.
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Another component of the HMPS lean initiative focuses on the company’s people and their development, complementing Herman Miller’s long history of employee participation. Herman Miller believes its success in achieving operational excellence depends on the motivation and thinking of its people to solve problems and drive improvement. -They focus more on high quality products that is why they were not dramatically hit by competition from overseas, also because they were already in some of these markets.
They’re manufacturing strategy limited fixed production costs by outsourcing component parts from strategic suppliers, which increased variable nature of its cost structure, which is their competitive advantage, which is reflected in their financial performance, from 2006-2010 their gross profit margin remained relatively constant. Top to bottom it works/ demonstrate their business in their own office. All employees are cross trained. Flexible manufacturing where a production line can do multiple jobs Both differentiation and low cost provider increase their margins . How have the company’s values shaped its strategy and approach to strategy execution? Provide illustrations of how these values are reflected in company policies. They treat all workers as individuals with special talent and potential. They respect all employees, which fuelled the quest to tap the diversity of gifts and skills held by all, in an environment where people felt comfortable taking risks. In 1950, developed a Scanlon Plan (productivity incentive plan), which reflects values, equity and justice for everyone in the company.
Employees felt empowered a new manager took his safety glasses off and an employee yelled at him to put his safety glasses back on. The company’s beliefs were also reinforced through the employee gift committee and environment quality action team, which distributed funds and other resources based on employee involvement. They became a responsible corporate citizen through minimizing their waste which was both environmentally friendly and cost-effective. Shared gains and pains. Top executives took 10% pay cuts consecutively to avoid letting staff go, received less than competing firms top executives, which shows their commitment to the “team”.
They have committees for sharing ideas on improvements and how to increase profitability. Even through project purple, one out 1000 companies would do that, increasing spending for the sake of tomorrow while cutting back to survive today, they worked as a team for a common goal, leadership and decision making was shared within the team and across the organization. Their values carried over to all functional areas of business. 3. What is your evaluation of HMI’s financial performance? How does its performance compare to prior years? the competition?
Their financial performance is not bad, considering they were able to recover from many recessions. From 2006-2010 their gross profit margin remained relatively constant, however during hard times when sales dropped by 19% in 08 and 09 current liabilities were a little higher than usual and net profit margins began falling from 7. 6% to 4. 17% and 2. 15% in 2010. Which the whole industry took a hit with external trends on the rise: telecommuting which decreased the need for office equipment for all employees, increase toward ergonomically correct office furniture, competition from overseas cost of raw materials.
Revenues are falling 4. Until 2003, HMI offered lifelong employment. How did this practice affect the company’s ability to staff the organization with managers and employees capable of executing the strategy? How did this practice build the organizational capabilities required for successful strategy execution? It enabled them to hire people that had talents and skills that match the needs and wants of the commercial enterprise, they redesigned benefit plans to be more portable, to decrease the cost of changing jobs for employees whose gifts and talents no longer matched customer needs.
Its bundled capabilities are yielding a sustainable competitive advantage, by retaining employees. 5. Do non-monetary incentives facilitate strategy execution at HMI? Explain. Yes, it becomes engrained in the employees, part of their values and beliefs. The concierge services’ goal is to provide employees with assistance and help to be successful balancing responsibilities—at work and home. 6. Describe the culture at HMI. Would you characterize HMI’s culture as healthy and largely supportive of good strategy execution? Explain. Yes as, Herman Miller instituted a formal program of participative management.
An organization of employee-owners, the company is committed to problem-solving design, uncompromising quality, and customer satisfaction. Herman Miller instituted an employee stock ownership program in 1983. To aid the decision-making process, Herman Miller uses a performance indicator, measurement, and compensation system called “Economic Value Added”. EVA is an internal measurement of operating and financial performance that is linked to incentive compensation for all employee-owners, allowing the company to shift its focus from budget performance to long-term continuous improvements and the creation of economic value.
The result is a highly motivated and business literate workforce that challenges convention and strives to create increasingly greater value for both customers and owners. Every month the company and all employees review performance in terms of EVA, which has proven to be a strong corollary to shareholder value. The responsibility of employee ownership requires capable people to meet high expectations. Herman Miller believes that inclusiveness is critical to the company’s success—today and for the future. 7. What recommendations would you make to Herman Miller’s CEO Brian Walker to improve the company’s current financial performance?
Does the company need to radically alter its strategy because of poor economic conditions? Should it improve its approach to implementing the strategy to reduce costs and improve efficiency? Explain. I would recommend maintaining the current strategy of being the most innovative company, however reduce costs and improve efficiency as they did to weather the storm in the previous recession. Open new market by providing products at a lower cost same quality though and target schools hospital and nursing homes.