Haworth CEO Thinks Worst Is Over

And while a 2 percent increase isn’t satisfactory under normal circumstances, Haworth Inc.’s 2004 sales do represent a reversal of a deep, three-year sales downturn that eroded 40 percent of peak sales volumes and set the stage for further improvements in 2005.

“It feels good compared to what we’ve been through and I’m certainly looking forward to a stronger year than last year,” Chairman and CEO Richard Haworth said. “It’s been a very, very difficult time and one I am glad is behind us.”

The family-owned Haworth Inc. recently announced 2004 global sales of $1.26 billion, a 2 percent increase over the $1.23 billion of 2003. Most of the increase came in the latter half of the year, when monthly sales volumes grew “significantly” from prior-year levels as the office furniture industry’s recovery took hold, Haworth said.

Now, like other office furniture makers that are experiencing higher year-to-year sales volumes as the industry recovers with an improving economy, Haworth Inc. is focusing on building momentum in 2005 and further implementing the changes made to the business and corporate strategy during the downturn.

Richard Haworth hopes the company’s 2005 sales can do “a bit better” than the current industry forecast of 8 percent growth.

“I dream of more and have to prepare for less,” said Haworth, who sees the office furniture industry taking years to fully recover the sales volumes that were lost during the downturn.

Haworth Inc.’s sales peaked at $2.06 billion in 2000, as the office furniture industry hit its zenith of $13.82 billion before falling hard and fast in subsequent years. Industry sales, after falling to $8.5 billion in 2003, are expected to rise to $8.91 billion for 2004, according to the trade group BIFMA.

The high growth rates experienced during the robust economic expansion of the 1990s overheated the industry and are a thing of the past, Haworth said. More moderate growth rates, he said, are the likely norm in the years ahead.

“We are a re-sized industry,” Haworth said. “The health of the industry is really good, if you look at what we were doing the last four years. I’m optimistic about the business and I think there’s a good future in it.”

That future is predicated on a “new” Haworth Inc. that in 2004 embarked on a re-defined corporate strategy. After undergoing a major overhaul amid the downturn to adjust to lower sales volumes and sharpen its focus, it is now geared toward a supplier of “adaptable workspaces” that produces furnishings, movable walls, raised flooring and cabling needs to create highly flexible office space that is easily reconfigured.

The strategy plays on the eco-friendly sustainable business practices and LEED design principles that corporations increasingly embrace.

The goal is to “deliver more value” to customers by offering them a broader array of products and services when they are planning office space and creating the workplace, said Franco Bianchi, chief operating officer of Haworth’s North American unit.

The strategy, launched toward the end of 2003, should come to fruition in 2005, he said.

“2005 will show how the strategy will pay off, hopefully. We are aligning better and better toward that goal.”

During 2004, Haworth Inc.’s North American contract furniture unit combined with Calgary-based Haworth SMED, a producer of movable walls acquired in 2000, and Interface AR in Kentwood, which makes cabling systems, to form Haworth North America. Bianchi, who previously oversaw market research, product design and development and worldwide marketing, finance and purchasing, was named the division’s COO.

The company also closed a major production facility in Jonesboro, Ark., consolidating the work in Michigan

While the plant closings and thousands of layoffs that took Haworth‘s global work force from 14,000 people to 9,000 over the last four years have been hard, the downturn and resulting restructurings has produced a “tighter” organization that’s better focused on core markets, operates far leaner than before and is more adept to change, Richard Haworth said.

Product development and production cycles are shorter than before and Haworth is better prepared to deal with the challenges of high raw materials costs, intense pricing pressures and fierce competition, he said.

Haworth, a 40-year industry veteran, said the downturn reinforced to him the need to act quickly and decisively during difficult times, while maintaining core values, to create a flexible organization that can change accordingly.

“Speed is important and you have to be willing to change,” he said. “I always thought I was open to change, but during the last four years I re-learned that.”    

Sales History

Here are Haworth Inc.’s annual global sales going back through the industry downturn:

2004: $1.26 billion

2003: $1.23 billion

2002: $1.32 billion

2001: $1.70 billion

2000: $2.06 billion