Haworth Inc.

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Haworth Inc.

1 Haworth Ctr.
Holland, Michigan 49423
U.S.A.
(616) 393-3000
Fax: (616) 393-1570

Private Company
Founded: 1948
Employees: 5,000
Sales: $650 million
SICs: 2541 Wood Partitions & Fixtures; 2542 Partitions & Fixtures Except Wood; 2522 Office Furniture Except Wood

Haworth Inc. is the third largest manufacturer of office furniture in the United States, after Steelcase Inc. and Herman Miller, Inc. Named as one of the 100 Best Companies to Work For in 1992, the western Michigan-based company considers itself quality conscious and, above all, dedicated to its customers. Haworth is privately held by members of the Haworth family, and, competing in the $7 billion a year office furniture industry, the company has distinguished itself as a strong presence in the international market.

Haworth began as a hobby for its founder, Gerrard W. Haworth, a graduate of Western Michigan University and the University of Michigan, who began teaching industrial arts in a Holland, Michigan, high school in 1938. Hoping to eventually help finance college educations for his children, Haworth sought to supplement his income by beginning a part-time woodworking business out of his garage. Over the next ten years, his craftsmanship was recognized, and the number of orders he received for wood products grew.

Hoping to turn his passion for woodworking into a full-time profession, Haworth approached a local bank for a loan in 1948. However, having had no prior business experience, he was rejected as too great a risk. Undaunted, Haworth mortgaged his home and accepted a $10,000 loan from his father, and, once obtaining the money he needed to begin business, he quit his teaching position, purchased secondhand shop equipment, and founded Modern Products. During its first two years, the company employed six woodworkers at a small plant in Holland and received orders for a wide variety of products, but in 1951 Modern Products won a contract that would determine the course of its business.

That year Haworth was approached by an architect who had designed an office partition to be used at the new United Auto Workers union headquarters in Detroit. Haworth accepted the job of producing the partitions, and set about planning the prototype. Referred to as a “bank partition,” the product measured 66 inches high, consisting of 43 inches of wood and 12 inches at the top made of glass. The pre-built partitions were well received at the UAW headquarters, and, speculating that other companies might also be interested in them, Haworth decided to focus his business on their production.

Business boomed over the next ten years, growing 30 to 40 percent annually, sometimes more, and in 1959 Modern Products became a national manufacturing concern. In 1961 the company moved to larger facilities, and during this time, Haworth’s teenage son Richard began working at Modern Products, sweeping floors and operating some of the machinery. In 1964, having graduated from Western Michigan University with a Bachelor’s degree in business, Richard became an assistant sales manager at Modern Products, working at a plant in his hometown of Holland. Within two years he was promoted to vice president for research and development, but was soon obliged to leave the company for service in the U.S. Army. When Richard returned to Modern Products in 1969, his father relied on him to help develop a new type of office furniture product.

During the 1960s, competitor Herman Miller, Inc. of Zeeland, Michigan, had introduces the innovative Action Office System, consisting of movable panels, shelves, cabinets, and desktops that could be rearranged to create workstations and open spaces to accommodate a variety of floorplans. Richard countered with the development of a unique moveable panel insulated with carpeting in order to reduce noise and help ensure privacy. Modern Products began manufacturing these new panels in 1971, and the following year the company’s sales were estimated at $6 million.

Over the next few years Richard Haworth became increasingly interested in panel design. Christopher Palmeri, in an article in Forbes, stated that Richard’s colleagues remembered him “anonymously visiting competitors’ showrooms and taking their furniture apart” in order to learn more about panel construction. During this time he devised a method of installing electrical wiring inside panels that would exert a tremendous influence on the industry. Modern Products’s prewired panels, introduced and patented by Richard Haworth in 1975, could be easily snapped together and eliminated the client’s need to pay extra for electricians to wire office spaces. The new line of these panels, called Uni-Group, was a huge success, and that year sales increased sharply to around $10 million, while the number of people employed at Modern Products grew to 136.

Also that year the name of the company was changed to Haworth, Inc., and a new corporate headquarters was established in Holland. In 1976 G. W. Haworth stepped aside, becoming chairperson and naming his son president. Richard Haworth oversaw years of phenomenal growth at Haworth Inc. Not only did the office systems and furniture industry as a whole become more profitable in the 1980s, but Ha worth consistently grew at a rate more than two times the industry average. In 1980 Haworth set up a European division after reportedly spending nearly $30 million to acquire West German chair manufacturing company Comforto GmbH. By 1986 Haworth had become the country’s third largest office furniture manufacturer; its sales exceeded $300 million, and its staff of 2,600 was producing office chairs, filing cabinets, and fabrics, in addition to the popular panels. Three years later, the company opened a showroom in London and estimated that nearly ten percent of its sales were generated in foreign countries.

During its expansion, Haworth became involved in a legal dispute with industry giant Steelcase Inc., which would last nearly five years. Steelcase had begun marketing a panel similar to Haworth’s pre-wired panel in the late 1970s. Claiming that Steelcase had infringed on his patent, Richard Haworth sought compensation from the company in the early 1980s. Steelcase argued, however, that their pre-wired systems were developed by their own staff and brought into question Ha worth’s right to the patent. So in November 1985 Haworth filed a civil lawsuit against Steelcase. The case was tried in a Michigan court, and in May 1988 a U.S. District Court judge ruled in favor of Steel-case. However, in January 1989, the decision was overturned by the U.S. Court of Appeals, which found several errors in the Michigan court’s interpretation of the case and ruled that Haworth’s rights as patent holder had been infringed upon. Steelcase was subsequently refused an appeal to the U.S. Supreme Court, and analysts have speculated that Haworth may have won over $100 million from the company. Richard Haworth filed a similar suit against Herman Miller Inc. in 1992, declaring in Forbes that although litigation leads to bad will between the companies, “we believe we have to protect what we invest in.”

The late 1980s were a difficult time for the office systems industry. Aggressive discounting and the increased sale of used office equipment led to a “shakeout” of the industry’s smaller companies and to decreased earnings for Steelcase, Herman Miller, and Haworth. Nevertheless, Haworth continued to gain market share, and in 1990 it purchased the Mueller Furniture Company, a Holland-based manufacturer of wooden tables and chairs. In December of that year Industry Week magazine compared Haworth to an “overachieving younger sibling, who’s content not just to catch up, but to overtake big brother’s lead.”

During this time, Haworth’s unique corporate philosophy attracted attention in the business community. Referring to employees as “members,” Haworth espoused a participative management style, in which all members were required to spend one hour per week brainstorming ways in which Haworth could better serve the customer. During busy periods, the company paid members overtime for this one-hour commitment. Characterizing its approach as “customer-driven,” Haworth produced a creed for its members that, in the words of Richard Haworth, “put profit last on purpose because we believe profits are a result of doing the right thing, focusing on quality, our customers, and giving our employees freedom to do what’s right.”

In response to customer needs for a more open, interactive workspace than the panelled workstations provided, Haworth introduced new products in the 1990s. Conference tables were developed that could be easily rearranged to form circles, U-shapes, or individual tables, as were panels of lower heights made of transparent materials. Furthermore, Haworth made available adjustable-height work surfaces. The Trakker adjustable table, for example, contained a computer memory that could be programmed to adjust the table to as many as 19 different heights. The computer could be set to periodically remind users to adjust the table in order to lessen their chances of stress injuries.

Haworth’s vision for the 1990s included ambitious plans to increase its presence in the international market. In 1992 the company estimated that 22 percent of its revenues were generated in foreign countries, and, through a series of acquisitions and investments, it hoped to increase that figure to 50 percent by the year 2000. Haworth’s overseas companies remained locally managed, a practice that American management believes will help Haworth establish better relations globally. In 1993 Haworth became the first American company in its field to achieve ISO certification, having met the rigorous standards set by International Organization for Standards, in Geneva, Switzerland, established as a world-class business quality system.