Incorporated: 1912 as Metal Office Furniture Company
Sales: $3.26 billion (1998)
Stock Exchanges: New York
Ticker Symbol: SCS
SICs: 2521 Wood Office Furniture; 2522 Office Furniture, Except Wood; 3429 Hardware, Not Elsewhere Classified
Known since 1984 as “The Office Environment Company,” Steelcase, Inc. is the world’s leading designer and manufacturer of office furniture. The company, launched in 1912 with a single product and 15 employees, supplies thousands of products worldwide produced in over 20 million square feet of manufacturing, shipping, and administrative facilities. A network of more than 650 independent dealers sells Steelcase metal and wood office furniture, systems furniture, seating, computer support furniture, desks, tables, credenzas, filing cabinets, and office lighting. The company also offers computer-assisted programs for those who plan, provide, and manage offices; office-worker public opinion surveys; and leasing programs.
According to Everybody’s Business: A Field Guide to the Leading 400 Companies,’ This company, more than any other, is responsible for the look of the modern office. Since 1968, they’ve been the industry leader, earning a reputation as the General Motors of the office furniture industry.” Steelcase’s sales figures confirm its leadership. At $3.26 billion in worldwide sales, of which some $2.76 billion is domestic, the company has more than twice the sales volume of its nearest competitor.
Origins in 1912
Steelcase was incorporated as the Metal Office Furniture Company on March 16, 1912, in Grand Rapids, Michigan. Although the new company had a novel idea—fabricating furniture from sheet metal—it received little notice in “The Furniture City,” which already had nearly 60 furniture manufacturers.
Peter M. Wege proposed the Metal Office Furniture Company to a group of investors. Wege had been a designer and executive at the Safe Cabinet Company and the General Fire-proofing Company, both in Ohio, and had received several patents for all or portions of sheet-metal structures he had designed. He was aware of the benefits of steel furniture. At the turn of the 20th century, mergers were leading to larger companies, larger office and administrative staffs, larger buildings, and an increased office furniture market. However, while new brick and steel construction techniques were making building exteriors less flammable and skyscrapers a reality, office interiors, cluttered with wooden furniture and other combustibles, were still being heated and lighted by open flame appliances. An added fire risk was the use of smoking materials; ashes dumped into the popular wicker wastebaskets caused many office fires. A fire in one of the higher structures was an inferno firefighters could not effectively battle.
Wege persuaded the investors, some of whom were with the Macey Furniture Company, that steel office furniture’s strength, durability, and fireproof qualities made sense. The Macey Company agreed to purchase and market all of the shelving, tables, files, and fireproof safes manufactured by the new company. Metal Office Furniture Company’s first officers were A.W. Hompe, president (also president of Macey Company); Peter M. Wege, vice-president and general manager; and Walter D. Idema, secretary-treasurer. Two years later, when the agreement with Macey was severed, Hompe stepped down, Wege became president and general manager, Fred W. Tobey became vice-president, and Idema remained secretary-treasurer. David D. Hunting joined Metal Office in 1914 to establish a marketing network. He became secretary in 1920, and the Wege-Idema-Hunting management team was set for the next three decades.
On August 7, 1912, the first filing cases and safes made by Metal Office were delivered to Macey sales outlets. By the end of the year, Metal Office had $13,000 in sales, and by the end of the first full year of operation, it had $76,000 in sales, an amount equal to the initial capitalization.
In 1914 Metal Office hit on an idea that solved the problem of carelessly flicked cigar and cigarette ashes: The Victor, a fireproof steel wastebasket. Touted for its strength and durability, the wastebasket could also be color coordinated with other furniture. Victor became an official trademark in 1918 and eventually became an expanded line of products. Metal Office had two other unusual products that enjoyed short-term popularity. The Liberty Bond Box was used for storing war bonds, while the Servidor was a double-doored product into which hotel guests put room service orders or clothes to be cared for. Service personnel tended to the guests’ needs from the hall side without disturbing them.
The concern over fire safety led to Metal Office’s first government contract and to its becoming a desk manufacturer. While businesses were slow to replace wooden furniture with the more expensive metal furniture, government architects specified it, citing the fire threat. David Hunting heard that metal furniture was to be used in the renovation of the 50-year-old Boston Customs House. Although Metal Office did not make desks, Hunting conferred with Wege and Idema and they agreed Metal Office should submit a bid. The bid was for 192 desks at $44 each. After the lowest bidder’s product was deemed unacceptable, Metal Office, as the next lowest bidder, was asked to send a sample of a desk for examination. Wege and Chris Sonne designed a desk, and a prototype was built to send to Washington the next week. Unlike the low bidder’s desk, which was held together by loose bolts, theirs had welds and crimped metal and did not come apart during shipping. Metal Office got the order and filled it in 90 days.
A Focus on Design in the 1920s
In 1921 Metal Office hired media consultant Jim Turner to convince the public that wooden office furniture was a thing of the past. Turner coined the name Steelcase to describe the indestructible quality of the furniture. Steelcase was officially registered as a trademark in August 1921. Because office furnishers never entirely gave up their perception that offices, and especially executive offices, should have wooden furniture, the company pursued ways to make metal furniture more attractive. It implemented spray-painting in 1924 to give furniture a smoother, more even coat and in 1928 developed a wood-graining process. Metal Office manufactured fashionable roll-top desks in oak and mahogany wood-grain on metal.
During the 1930s Metal Office produced some attention-getting furniture, including a futuristic, island-based desk displayed at the World’s Fair in Chicago. In 1937 the company collaborated with world-famous architect Frank Lloyd Wright to produce furniture for the “great workroom” for the offices of S.C. Johnson & Sons in Racine, Wisconsin.
Over the years, Metal Office/Steelcase won several more government contracts. During World War II, the brunt of the forced cutback in the use of steel by metal furniture manufacturers was tempered by the U.S. Navy’s order for “Shipboard Furniture.” The company had to recruit plant personnel to meet increased production and the loss of workers to the military. Many of the new employees were the mothers, wives, and sweethearts of soldiers.
A piece of Steelcase naval furniture was used for the historic signing of the surrender documents ending World War II. A mahogany table had been prepared on September 2,1945, for the signing by Japanese Foreign Minister Mamoru Shigemitsu and the Supreme Commander of the Allied Forces, General Douglas Mac Arthur, but the table was too small for the documents. The ceremony was completed on a Steelcase rectangular folding table from the crew’s mess, spread with a green tablecloth.
Metal Office utilized what it had learned in building furniture with interchangeable parts for ships when it introduced the first standard sizing of desks based on a 15-inch multiple in 1949. The Multiple 15 concept became an industry standard; it also served as the basis for other modular furniture developed by Steelcase.
A Name Change in 1954
In 1954 the Metal Office Furniture Company officially changed its name to Steelcase, Inc. Walter Idema thought the name change would eliminate confusion with the products of other metal furniture manufacturers. That same year, Steelcase became the first in the industry to offer office furniture in colors, announcing Sunshine Styling colors inspired by the twilight haze over the Arizona mountains: Desert Sage, Autumn Haze, and Blond Tan. The innovation was made possible by acrylic paints that made it easier for workers to change colors. In 1959 the company introduced Convertibles, auxiliary pieces with rigid steel frames and suspended cabinets and pedestals that permitted working arrangements to be individually designed to suit each worker, and Convertí walls, steel and glass panels attached at slotted posts, which could be wired for telephone or electrical connections.
At heart, Steelcase is a work effectiveness company. We help individuals and the organizations that employ them around the world to work more effectively.
In the 1960s Steelcase product engineers developed Chromattecs, a method devised to soften the mirror-like finish of traditional chrome. The resulting new line featured “matte-textured acrylics and classic personal fabrics.” In 1965 Steelcase established itself as the industry leader, achieving record sales volume for the United States and Canada. Mobiles, introduced in 1968, was the first product incorporating the concept of systems furniture. The line combined the features of Multiple 15, Sunshine Styling, and Convertibles to create more private workstations, completely furnished with desks, shelving, walls, and broadside dividers.
In 1971 Steelcase offered its first comprehensive systems furniture line, Movable Walls, and, in 1973, introduced the Series 9000 Systems Furniture line. The Designs in Wood line, introduced in 1972, addressed the negative perception of metal furniture. The furniture featured exterior hardwood paneling with drawer and pedestal interiors of steel. In 1975 Steelcase brought out the Sensor chair, the first office chair to sense and support the body’s movements according to the occupant’s height, weight, and preference.
In 1992, looking to a future relying increasingly on teamwork and wireless technology, Steelcase demonstrated Harbor, a prototype product of the office of the future, and Commons, a concept that used open space to quickly reconfigure into an ad hoc meeting area. The company also announced a partnership with Motorola, Inc. to develop wireless technology in office furniture.
Steelcase products, not surprisingly, have won numerous design awards, including the Distinguished Engineering Award from the Consulting Engineers Council of Michigan for an innovative steam-generating, waste-disposal system, and a national award from the President’s Council on Environmental Quality for a process that curbed pollutants in its painting process.
Direct descendants of Metal Office Furniture Company founders held many key executive positions in the successor firm, Steelcase, Inc. They included Robert Pew (who married the daughter of investor Henry Idema), chairman; his son, Robert Pew III, president of Steelcase North American operations; Peter Wege, vice-chairman; and William Crawford, president of a design subsidiary. Prior to 1994, only two Steelcase chief executives, Frank Merlotti and Jerry Myers, had not been descendants of the founders.
Frank Merlotti, who came up through the manufacturing ranks, was credited with changing how the company approached the process of product development and production. The World Class Manufacturing (WCM) plan implemented during his tenure had five principles: quality, faster throughput, elimination of waste, product group focus, and employee involvement or empowerment. The plan was put into practice at the $111 million Corporate Development Center opened in 1989. The pyramid-shaped facility had ten laboratories, giving it the most comprehensive research capability in the office furniture industry. It also provided an interdisciplinary creative environment where designers, engineers, marketers, and others worked in neighborhoods focused on the development of a particular product.
A Bumpy Ride in the Early 1990s
Steelcase’s status as a privately held company was threatened in 1992, when an estimated one million shares of the rarely traded stock passed to the brokerage firm of Robert W. Baird & Co. from the estate of an heiress of one of the founding families. Baird sold the shares to outsiders, including one buyer who accumulated 30,000 shares and distributed them to allies in an attempt to force Steelcase to go public. The descendants of the founders joined ranks and used a reverse stock split to force the outsiders to sell their Steelcase stock back to the company.
Following a 20-year boom in office furniture sales propelled by an increasing number of office jobs, Steelcase was experiencing flat sales in the early 1990s because of a recession and widespread corporate downsizing. Although Steelcase had to make cutbacks and short-term layoffs, it was determined to avoid the fate of the automakers. The company embarked on aggressive product development, broadened its overseas base, and continued to keep the needs of its employees and dealers a priority, while striving to cut administrative and manufacturing costs.
These changes were largely due to the efforts of President and CEO Jerry Myers, who had been running Steelcase since 1990. Myers, an outsider to the family-held company, had no furniture industry experience prior to joining Steelcase. As Myers attempted to implement his vision of a leaner, more internationally competitive company, he began to encounter resistance in both the manufacturing shop and the boardroom. Steelcase, like most western Michigan furniture companies, was not unionized, but treated its employees much like family, rewarding them with profit sharing and a strong benefits package. The Grand Rapids furniture manufacturing community was shocked when in 1993 many Steelcase employees began meeting with organizers from unions such as the Teamsters and the United Auto Workers. Employees cited changing work rules, reduced benefits, and several years of low profit sharing checks as motivating factors. Members of the company’s founding families were also becoming increasingly frustrated with the direction Myers was taking Steelcase, as well as the company’s lackluster earnings figures. Steelcase announced its first annual loss in history for the fiscal year ending in February 1994, and in July Myers was asked to resign by the board of directors.
His replacement was James Hackett, who had been with the company in several executive capacities, notably as president of the Turnstone subsidiary, a successful lower-priced furniture line that had been introduced in September 1993. Hackett’s approach was to take Steelcase “back to basics,” though a number of Myers’s cost-cutting and international expansion initiatives were left in place. Earnings were back on track by the end of the next fiscal year, with 1996’s totals the strongest since 1991. U.S. sales were $2.16 billion, with total worldwide sales standing at $2.6 billion.
A major setback for Steelcase occurred at the end of 1996, when the company was ordered to pay archrival Haworth $211.5 million to settle an 11-year-old patent infringement lawsuit. While many companies would be crippled or wiped out by such a ruling, Steelcase was doing so well that it was still able to record a small profit for the year.
After 86 years of private ownership, the company finally went public in 1998. In February over 12 million shares were offered on the New York Stock Exchange, sold by John Hunting and Peter Wege, descendants of the company’s founders. Both planned to use their proceeds to fund charitable trusts. The stock offering only represented ten percent of the total shares, the rest remaining in family hands.
The stock entered the market at $28 per share, but its value had dropped by more than $10 by year-end; the large number of shares still in family control was cited as one reason for the disappointing showing. Another was the fact that Steelcase was having a slow year, with its estimate of a three percent annual sales increase less than half the eight percent industry average. Analysts attributed this to purchasing cutbacks at Fortune 500 companies, the global economic downturn, and a relatively stagnant product mix. Steelcase’s major product introduction for 1998 had been the Pathways integrated office architecture package. Pathways was eight years and $150 million in development, and the company stood firmly behind it as the office design standard of the future. However, it was not catching on as rapidly as had been hoped.
As Steelcase neared the millennium, it remained the number one manufacturer of office furniture in the world. Although it had gone public, the company was still firmly under the control of the heirs of its founding fathers. Following several turbulent years in the early 1990s, the company had gotten back on track for future growth with the introduction of its Pathways system and an ongoing program of international expansion.
Steelcase Canada, Ltd.; Metropolitan Furniture Corp.; Brayton International, Inc.; DesignTex Fabrics Inc.; Office Details, Inc.; Wigand Corporation; Steelcase Strafor S.A. (50%; France); Att-wood Corporation; Steelcase Financial Services, Inc.; Revest Inc.
Steelcase U.S.; Steelcase Design Partnership; Steelcase International; Steelcase Furniture Management Coalition; Steelcase Wood Furniture; Turnstone.
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—Doris Morris Maxfield
—updated by Frank Uhle