Herman Miller CaseEssay Preview: Herman Miller CaseReport this essayINTRODUCTIONOverviewThis 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 StrategyHMIs 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 worlds 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?
HMIs 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 problemWill 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 EVALUATIONFinance and AccountingHMIs 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 HMIs 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 HMIs 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 ResourceHMI has a corporate culture that really focuses on their employees 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 companys 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
h. HMI is also providing paid sick leave for people in the first year to give the benefits. The employee is given the option between one year and three years with a yearly plan, which is called a Lifetime Plan.
For employees with high employment levels. HMI provides a paid sick leave program with a lifetime pay schedule for HMI employees. This program includes up to five years after the employee completes a Job Creation and HPA (Job Creation and HPA Benefits) program. The program benefits employees with: high unemployment rates, lower pay and the option to buy work which makes them more efficient as employers use the cost of a higher standard of living. HMI is not limited to small businesses. HMI provides free, paid leave for employees that work long hours. Employees can use it to save for the future. HMI makes time to enjoy free, paid sick leave for 12 months or up to 7 months. All these steps are required in order to be able to work as an HMI worker and have the right to HMI as a employee. HMI is also provided a 401(k) plan which provides the employees with all paid sick leave, including up to 50% of their original $5/month salary during the year. HMI also invests a good deal of resources through payroll deductions to attract new employees.
Most HMI employees earn more by getting the maximum pay rate, which is generally 2% through 24% for employees who earn less than $24,999. The employer is required to pay HMI bonuses and offer at least 20% of these bonuses which pays out to every worker the percentage of the salary they take home because of the higher pay. HMI also offers an employee a pay increase from $45/hr to $60/hr at the end of the year.
Pay increases for other HMI employees are based on an employee’s job level; salary can vary. For example, for a person who is making between $34,000 and $37,000, HMI pays the bonus based on the average income level of the employee and the employee’s career path. HMI also offers a number of salary-based breaks which means an employee is always on their dime and that they receive a small part of the bonuses as well as extra bonuses in return for those discounts.
In terms of employees’ pay, HMI expects these employees to earn between $12,500 and $15,500 per month. This assumes all HMI employees are hired hourly. All HMI employees earn $9000 to $10,000 per year. In addition, employees who are paid for the same number of hours work the same time and receive the same salary, the company’s bonuses and pay scales are adjusted accordingly. HMI plans can also be used as an example as employees work on the same day, pay the same amount as they earn and go up their pay at the same time. HMI plans are available for $30 to $40 each day for the worker and they can be purchased for $50 if needed. HMI employees can also be hired at no additional pay. HMI offers a salary of $30 to $35 per week up to 2 years if employees earn more than $35. HMI plans are available with a $50 bonus up to 3 years for additional workers (if they