Brian Walker: Lessons from crises and recovery

The chair reserved for the president and CEO at Herman Miller, a successful and innovative office furniture maker, must have appeared comfortable when Brian Walker took the helm in 2000, but it soon became a hot seat. After the business furniture industry collapsed in 2001, Walker orchestrated the rebuilding of the company. Now leaner than before, Herman Miller has expanded its global footprint and has refocused on green issues without relinquishing its leadership as a design innovator. The W. P. Carey School of Business honored Walker recently as the Dean's Council of 100 Executive of the Year.

As the president and CEO of a 6,500-person company, Brian Walker likens himself to the director of a jazz band. "My job is to get people to understand the theme, to get the tempo going, then stand back and watch them perform. It isn't really about the conductor, but about the individual musicians who make the music beautiful," he explained. Nice imagery for a Milan-based couture line, a luxury automobile maker, even a self-consciously intelli-chic magazine like Vanity Fair.

But Walker, 44, helms Herman Miller Inc., the Michigan office furniture company that helped introduce the beige work cubicle in the late '60s. Founded as a home furniture maker that reproduced European styles, Herman Miller soon migrated into designing office furniture known for its functionally elegant design. Over the years, its operations, sales offices, dealers and licensees have spread through more than 40 countries.

Record of innovation

Walker, like Herman Miller itself, is full of surprises. Just named the "24th Annual Dean's Council Executive of the Year" by the W. P. Carey School of Business, Walker is a certified public accountant formerly with Arthur Andersen. He joined the innovative furniture maker in 1988, and was chief financial officer before being promoted to president of North American operations in 2000. Promotions to chief operating officer and chief executive officer followed.

Adam Goodman, president of Phoenix-based Goodmans Interior Structures, told an anecdote characterizing Herman Miller's success at eliminating almost all its landfill waste. Goodman's family-owned business has partnered with Herman Miller on projects spanning 30 years. Beyond the money-making collaboration, they share a like-minded commitment to corporate stewardship focused on green initiatives.

"As recently as 1991, Herman Miller was generating 41 million pounds of waste into landfills. Since then, capacity has increased, sales have increased, and the waste they now send to landfills is down to 5.2 million pounds," he explained. "Let me paint a picture of what that really means. There is a Herman Miller factory in Michigan I've been to — it's large, huge, probably a couple hundred thousand square feet — where they make work surfaces and panels and chairs. And behind this giant factory is one dumpster, probably about the size of the dumpster behind your office right now."

Environmentalism isn't the only public arena Herman Miller participates in; the company is also involved in economic development projects in western Michigan, its home turf, where the sole business tax was recently repealed, creating uncertainty as to what might replace it. As a result, companies interested in relocating there but looking for a tax cut go elsewhere, creating a "brain drain" that could hurt his company's future, Walker said. Getting a start on addressing that issue, he's established a design center locally.

Emerging from industry collapse

Walker has successfully shepherded the 75-year-old company through what were arguably its most perilous times, triggered by the industry's collapse in 2001. By then, Herman Miller was a $2.3 billion company "with a global footprint. It had become a hub for all kinds of talent, including ergonomists and researchers, back surgeons and futurists as well as designers," Walker said. He was flying high, at the helm of a solid firm with a fine future.

But by year-end, the office furniture market imploded, with overall sales tumbling from approximately $11 billion to $6 billion, he noted. Herman Miller sales dropped 40 percent over the next two years. "This was a very defining moment. Our first order of business was to ensure the survival of the business, but we also wanted to make sure that the changes we made were not temporary, were not just knee-jerk reactions. We wanted lasting change," Walker continued.

Bottom line: Walker closed four manufacturing sites representing 30 percent of the company's square footage, ferreted out redundant processes that had built up during the fat years and slashed 5,000 jobs, or 40 percent of the Herman Miller workforce. "In retrospect, we made the right decisions, because in the past three years we've grown from not quite $1.3 billion in sales to nearly $2 billion currently.

We're still not back to our peak, but we're close," he noted, which is impressive given that almost the same sales are now produced by a much-reduced workforce. That's partly because Walker and his executive team decided against cutting research and development during the lean years. In fact, that's when they began looking for new products and services to expand Herman Miller's offering.

Lessons from crises and recovery

Walker distilled five lessons from the company's crisis and recovery. First, accept that economic growth is moving from the west to the east. Herman Miller customers increasingly are relocating operations in that direction, especially Asia, and the company must provide services there as needed or lose their business. Company honchos are looking for additional opportunities overseas, too.

For instance, Herman Miller recently opened a manufacturing plant in China — but customers are Chinese concerns seeking high-end products, not cheap knockoffs destined for export to the U.S. The lower labor costs available overseas are less of an issue because Herman Miller's business model "is much more like Dell than GM. It's primarily about design and innovation.

We design components and own those processes to make products; it's more about supply chain than heavy manufacturing," Walker said. Second, the workforce is increasingly mobile, roving between customer sites, telecommuting and working in traditional offices. Example: Walker said an IBM executive recently told him that 50 percent of employees "never go into an IBM facility."

This changes their need for office furniture in specific settings, like a home office. Third, the emerging "playlist generation" of iPod-using youth want more choice. They download exactly which songs they like, rather than buying the prepackaged CD, and Nike allows them to design their own shoes online. This tells Walker they will want more choices in office furniture functionality, too.

"The next generation is going to expect the right to edit our product offering … we will no longer be able to just define what customers get," he added. Fourth is the sustainability movement, which Walker predicts will be a growing focus for corporation, thanks to customer and public pressure. They'll spend their money on products made with recyclable materials, in energy-efficient factories that produce little landfill waste.

Example: check out the headlines on this month's crop of magazines. Walker says a surprising range will include a "green headline." Fifth is the convergence and diffusion of technology. Example: Walker used to carry a laptop computer, wireless telephone and iPod. The three "are now becoming one, and our customers expect the same from us. How does this chair integrate with other technological tools that you have? We'll respond with good designs," he noted.

One such converged product debuted last year — Herman Miller's Convia Programmable Infrastructure, an electronic system that allows companies to reconfigure a room or building with new light, telephone and other wiring needs. Forget about knocking through walls, stringing new cable, repositioning heating/cooling thermostats or even unscrewing a switch plate to move it to a new spot. With Convia, the space is electronically "wired" once, and later changes easily made by pointing a wand at fixtures and outlets.

Bottom Line:

• Fortune magazine ranked Herman Miller as the "Most Admired" company in its industry as well as a member of the "Top Ten Most Innovative" companies during its annual survey measuring the reputation of America's corporations. Published in its March 19, 2007 issue, the survey also gave Herman Miller high scores for people management, social responsibility and product/service quality.
• During a 2002-2004 restructuring, Walker closed four manufacturing sites representing 30 percent of the company's square footage, ferreted out redundant processes that had built up during the fat years and slashed 5,000 jobs, or 40 percent of the Herman Miller workforce.
• Three years later, still running with an almost-halved workforce, Herman Miller sales are just under $2 billion annually, close to the pre-downturn high.