January 2016 - Page 4 of 4 - Vision Office Interiors

The office furniture industry today faces a complex, challenging future.

Company executives must manage their operations amid increasing margin pressure and an influx of imported products and new regulations, all while running short on talent.

To navigate these challenges, industry leaders are turning to their strengths in new product development while implementing unique strategies to attract and retain talent.

MiBiz gathered a group of leaders in the furniture industry for a roundtable discussion to talk about how these challenges and solutions will impact their businesses in 2016. Participating in the conversation were:

– Bill Bundy, president of Trendway Corp.
– Ann Harten, vice president global human resources at Haworth Inc.
– Art Hasse, president and CEO of Kentwood Office Furniture Inc.
– Mark Lindquist, president of Rapid-Line Inc.
– Dave Rinard, director global environmental performance at Steelcase Inc.
– Bill Stough, president of Sustainable Research Group LLC

Here are some highlights of the discussion.

BUSINESS OPERATIONS

The Business Institutional Furniture Manufacturers Association (BIFMA) raised the issue of pressure from imports in its recent forecast. How will imports impact your business in 2016?

BUNDY: Imports have been a very interesting reality in our business. If you look at the BIFMA data, the U.S. produced value of office furniture in 1995 was about $9.5 billion. In 2014, and in 2014 dollars, the U.S. production value of office furniture was $9.5 billion. In 1995, imports from various parts of the world were $700 million. Today they’re topping $3 billion, up over 350 percent.

HASSE: We’re in the remanufacturing business, primarily of Herman Miller and Haworth systems, and 100 percent of those back in 1995 would have been locally produced. Today, there is a very significant portion of what we do that we import in containers in terms of parts, pieces and different items.

LINDQUIST: There was this massive wave of China, China, China until the longshoreman strike hit and all of a sudden the world changed. Finally, the element of risk came back into play. Everyone was enamored with the (imports), and now they’re not so enamored. It hasn’t slowed them down tremendously, but it has had them think twice about the risk involved of this process, certainly with regard to components.

HARTEN: Customers are starting to look for a collaborative space product that does not have to have the 20-year guarantee of staying power. … As you shift from the more private and assigned space to the more collaborative space, that collaborative space is viewed as something that should be updated on a regular basis. That opens up an opportunity for the lower-cost, potentially lower-quality product.
What does that do to durability standards?

RINARD: You talk about not just the quality standards, but let’s talk standards in general that we’re expected to meet domestically — whether it be quality, customer expectations around material chemistry and product off-gassing. The same customers that are demanding all of these high standards are the same customers who want the cheapest stuff they can get, and they don’t seem to be aware enough to realize the dichotomy that cheap gets you cheap.
With sustainability being championed by the office furniture industry, how do those products that don’t meet environmental standards impact the good actors?

STOUGH: I think the stakes are starting to rise on that very issue. There’s a brand new study from Harvard and their School of Public Health. They basically are saying that … your cognitive performance is 100 times different from a standard office space (compared to the) ultimate green (office space).

BUNDY: That’s a lot.

STOUGH: That’s a huge amount. If you think about a 2-percent performance increase company-wide, it’s millions of dollars. I understand what you’re saying about the margin squeeze, but more and more data is coming out saying that these cheap imports, maybe at some point, someone is going to realize that we can’t afford to have them in our facilities.

RINARD: I think we as major (manufacturers) in the industry will be impacted in many ways because face it, some of our supply chains go there. Nike is a good example where you, by default, become responsible for suppliers’ performance, and our brand reputations are incredibly important to us. We’re not going to let suppliers’ poor performance tarnish us. We’re going to have to build expectations into the supply chains we deal with.
How do you as manufacturers police and filter those regulations down to your supply chain partners?

HARTEN: Audit, audit and audit. (Suppliers) will sub-supply. So you have an agreement with one and the first runs are terrific and then six months later, all of a sudden you notice a quality issue. When you go back in to see what happened, there’s been a sub-supplier that’s been assigned your particular piece of business. … It’s about presence. Every visit, every handshake, every casual walk around the facility, you have to have savvy people who know what they are looking at.

RINARD: It’s a process that starts out with a qualification questionnaire that’s very broad — not just in terms of environmental performance but we’re also looking at it in terms of supply chain reliability and financial stability. There are a number of dimensions that have to be looked at to determine if someone is going to be an acceptable supplier. Particularly, as we’ve gotten more and more lean, you can’t afford disruptions. Then I think there becomes a relationship issue.
As a supplier, do you actively market the sustainability angle as part of your pitch to furniture makers?

LINDQUIST: You can’t. We’re kind of a mouse between two elephants. You’re not going to tell a steel mill that they’re going to do something. So you’re kind of out of luck on that.

RINARD: That is really true. There is not a special brand of Steelcase steel or Trendway steel. We all use the same stuff, and our whole industry is a rounding error to the steel industry. We have no leverage. If you look at all of our raw materials, our entire industry doesn’t have that leverage.
LEGISLATION

Do you expect any disruptions as a result of the upcoming presidential election?

HARTEN: Are we going to have a lift or a downturn next year as people are waiting? An election year always has one or the other. Are people going to be incredibly cautious because they’re concerned about who is going to be in office and hold their investments, or are they going to move forward?

LINDQUIST: Forty of the last 44 elections, the economy always goes up that year, typically in the last six months when the party in power stimulates the economy a little bit to try to get their candidates elected. So you can bank on the later half of the year being good for a short period of time. Now when you look at 2017, it could be very scary.

BUNDY: What is the disapproval of Congress — something like 80 percent? When it’s that high, something starts to set in, and it’s apathy. It doesn’t matter, they’re going to remain dysfunctional.
On the state level, is there anything in particular that you’d like to see Gov. Rick Snyder champion in 2016?

HARTEN: For those who are on an hourly wage, there is no place to live. … We’ve all just experienced it in the summer of discontent of 2015. It seems like the water raised for everyone, including the auto (suppliers), and we all started trading people. … We’re going to need people and we are going to need places for them to live. If I could ask Governor Snyder to work with businesses, (it would be) to figure out how to create places for people to live, close to where we are. There’s a proximity of life to work that is very important to them, and we need spaces for them in affordable housing for people to want to come.

BUNDY: I think we could do some things like bring the manufacturers of chair casters back to the U.S. It’s injection molding and assembly. … There are trades like woodworking that if we want to bring it back, we’re in trouble because the skilled trades have gone away.

RINARD: There was a study done that showed the single most-effective return on investment to grow prosperity and jobs was funding in the education sector. If you grow college degrees, then they said you create innovation economies, and it builds into skilled trades and trickles through the system.
TALENT

What are some ways the business community or state legislators can make up for the talent gap?

HARTEN: A light rail system between the major areas.

BUNDY: We’re hiring people through (Holland-based) 70×7 Life Recovery staffing. They’re working with felons who have served their time to bring them back (to the workforce). We have 10 to 12 of them and these people are some of the most grateful.

HASSE: We have several employees who have come from the prison system. Several have also come from Goodwill. The Goodwill people do much to help those people prepare to go to work. Once they’re there, we have greater success with them than we do with the temporary agency people.

RINARD: I’ve heard anecdotally that in the community, companies were having trouble hiring employees to work the 10-hour shift, and their constraint was that they had a second job they had to get to, because the first one wasn’t paying them enough to live on.

HARTEN: We’ve introduced new shifts into our programs. We have weekend shifts, part-time shifts and seasonal shifts. In Michigan, because agriculture is in our top three (industries), there are plenty of workers who can’t work from November to April so they’re willing to come in as seasonals. That’s a non-traditional approach for us.

LINDQUIST: The state has a fundamental problem. Something like 82 percent of the University of Michigan graduates leave the state. With that kind of vacuum being created, we can’t get there from here unless something changes.
What can manufacturers do to help keep those graduates in the state?

HARTEN: We take time to have our junior high and high school kids come through on tours and we show them this amazing thing called manufacturing. We take them into some of the areas where we have our highly technical products and we give them a peek at our design work.

LINDQUIST: You have to get the parents involved. The parents are so negative on manufacturing, so they steer the kids away from it. The school system pushes them to college, and the parents push them to some kind of clean industry or clean job.

RINARD: I went to, at the time, one of the wealthiest high schools in the state: little old Godwin High School. We were the school that GM and Lear paid the taxes on. We had the most amazing auto shop, wood shop, machine shop in this incredible facility. Most of that is all gone.
CONSUMER TASTES
Many experts have described sitting as the new smoking. How is the wellness movement impacting your business and how do you expect it to drive design in the future?

RINARD: The whole wellness movement is definitely a trend worth watching. I think it’s this whole idea of mind, body and soul — if you want to think about it in that holistic way — has been (on) a little bit of the pendulum moving. You’ve probably all experienced this where there was this time where no one had a space, everyone was mobile and nobody should have a space. I would describe that as pounding a square peg through the round hole, where (now) you’re seeing a shift backward where people do need private space. They need collaborative space. It’s what you’d call a variety of place.

HASSE: I think the key is balance. As you said, the pendulum has swung to the more open plan, lower-height workstations and that kind of thing. Then all of sudden the noise level and distraction level was driving people nuts, and there was nowhere to go for privacy. The whole worker thing has changed so dramatically and people are trying to optimize the real estate at the same time and have less real estate per person.
With more open spaces, obviously, the overall floor plan of workstations has shrunk. How has that impacted your business?

HARTEN: With collaborative spaces, we are outfitting the same number of offices for far less revenue because of the things you’ve outlined.

BUNDY: It wasn’t that many years ago where you could sell a workstation for $4,000. Today, a pretty rich workstation is $1,500. So you think about what we had to do, and that’s led to diversification to a lot of this lounge furniture and acquisitions for fabric companies. It’s pretty amazing.

HASSE: We had our two-day planning meeting yesterday, and I kicked it off by explaining that we’re manufacturing workstations for 80-percent off, where we used to sell for 65-percent off. We used to be 67-inch-high panels, now we’re 48 or 54 (inches). So the dollars per person of what customers are buying is down dramatically, which is why there is that margin challenge.
Are you adding value back in with technology and power integration?

HARTEN: Certainly. Getting power out to the middle of the floor is becoming one of the biggest challenges for our customers.

BUNDY: The integration of technology into the walls of furniture — I hear a lot of people saying be careful with that because the technology that you integrate today will be obsolete in three months.

HARTEN: We look at how you connect, then those connections are what we will update. Right now, you have USB and regular power and those things may morph and change, but you’re not building to a specific device. It’s the only way to succeed.
If there was one major disruptor for the office furniture industry in 2016, what would it be?

LINDQUIST: $40 a barrel of oil is a blessing and a problem at the same time. It’s a pretty major disruption right now.

RINARD: China’s economy softening has created some really interesting things in my little piece of the world. The value of steel to be recycled and the commodity market has tanked to a point where corrugated is very difficult to get recycled.

HARTEN: I wonder if corporate and office security is going to become an issue that somehow might impact what we do. It is on the minds of our members and customers. What is it that they are now going to want or is there anything that our industry will be able to provide? I don’t think we’re hearing it yet, but because we’ve had seven (terrorist attacks) this year and other (incidents), I’m wondering whether or not it’s going to start becoming a bigger thing.

Companies are redesigning their facilities to reflect how each generation of employees works, with the result being greater collaboration and improved productivity.

With four generations currently in the work environment – traditionalists, baby-boomers, Gen X, and millennials — never have designers of these environments been forced to look at so many different variables to create an effective workplace that meets the needs of every potential end-user. Each of these four generations of stakeholders has different ideas on what is important in order to accomplish its work.

How do designers create spaces that are successful for each of these variables? By rethinking the way people work in a space and how they interact with each other, we can start to develop new ways for the generations to work together.

Workplaces are moving away from an overabundance of traditional conference rooms and toward flexible ‘think tank’ spaces that bear names like idea room or collaboration space.

Knowledge-Based Work Environments
Hierarchical organizational structures are becoming less and less appropriate. Such environments are likely to be inefficient, inflexible, and costly. As the majority of work carried out in facilities moves away from hierarchical organizational structures and toward a knowledge transaction, we shift focus from tangible assets to human capital and intangible assets such as R&D, marketing, HR, and innovation management.

Work is becoming increasingly knowledge-based because the speed and volume of work required cannot reasonably be accommodated in traditional, sequentially managed work applications. This has implications for the workplace. Work environments are designed to support knowledge transfer and connect communities of people and independent workers. Technology will play an even greater role, supporting mobility and virtual working, while the individual office building becomes just one part of an organization’s overall working platform.

Communication – Improving Performance
Think of an office not as real estate but as a communication tool. Strategy, features, and value become more important than cost and efficiency. Technology is becoming the cheapest component of work and people the most expensive. Human beings are social, needing contacts to provide a sense of purpose and worth. Face-to-face interactions are by far the most important activity in an office. Chance encounters and unplanned interactions between knowledge workers, both inside and outside the organization, improve performance.

We’ve learned that spaces can be designed to produce specific performance outcomes — productivity in one space and increased innovation in another, or both in the same space but at different times. By referencing company strategic goals such as total sales or number of new-product launches, we can demonstrate a workspace’s effect on the bottom line and then design that space to improve it. This will lead to profound changes in how we build our future workspaces.

Educational Work Environments
Given the choice, people will choose workspaces that support their digital style while giving them access to new knowledge, exposing them to different kinds of expertise, and accelerating their learning. Three key elements of successful communication are exploration (interacting with people in many other social groups), engagement (interacting with people within your social group), and energy (interacting with more people overall). Spaces can be designed to favor exploration or engagement or energy to achieve certain outcomes. The challenge is balancing a facilities requirement for both communication and concentration, and devising spaces that can respond to and encourage the highly complex process of social interaction at work.

Managers might be tempted to simply build big social spaces and expect great results, but it’s not that simple. Business strategies provide business priorities, and office design concepts based on these priorities can have a dynamic impact on performance. One must have an understanding of what facilities are trying to achieve (higher productivity? more creativity?) before changing a space.

Creating spaces that can be flexible for both collaboration and focus allows for less real estate to be utilized. If certain amenities and adaptive technology are located close to areas of collaboration, it allows these spaces to shift in use. Variety in location, as well as amenities, provides users with a choice in ways to collaborate and what they need to interact with others. After all, the true value of a collaboration space is in the connections between humans. The space itself should serve as a conduit for these conversations.

Contemporary Office Environments
Office space is not just an amortized asset but also a strategic tool for growth. Office utilization may peak at 42 percent on any given day. By past logic, the best way to manage cost per square foot is to remove “wasted” square feet. But experience reveals that investments in redesigning space for interactions over efficiency can increase communication and collaboration, resulting in increased business performance.

New space standards and planning principles reduce the number of enclosed offices, increase open office areas, and accommodate easy reconfiguration for evolving workplace needs. Typical floors have interior offices and meeting rooms with glass fronts, providing access to daylight for all occupants.

Recruiting & Retaining the Best of the Best
Staff turnover is costly. Replacing a mid-level manager costs an estimated 50 percent of salary. Employee well-being isn’t simply about work environments with better ergonomics or more comfort. Today’s workplace can and should be a place where people actually leave healthier. This has become challenging as knowledge work has evolved.

Thanks to new technology and a global marketplace, work is more project-based, much faster paced, and often a 24/7 endeavor. High stress levels are prevalent and associated with knowledge work today. We communicate and collaborate constantly. It’s hard to unplug.

Well-being actually involves many aspects of organizational culture, from making sure people understand what their job is and have sense of purpose, to providing the right space, tools, and resources to be successful. Research shows that successful organizations support their employees with a holistic approach to mental, physical, and emotional well-being. It lowers absenteeism and results in fewer medical claims providing substantial cost savings. It will also pay off in terms of organizational performance; well-being is now woven into the culture of organizations through multiple activities led by both management and employees.

LEED — Doing What’s Right for Employees and the Planet
LEED strategies also play an important part in employee wellness. Sustainable attributes, such as harvesting natural light, play a key role in today’s interior design space planning efforts. Additional measures that balance a company’s environmental footprint include low-flow plumbing fixtures, occupancy sensors, and high-efficiency light sources, all of which reduce a company’s power consumption. Sustainable design features include an emphasis on durable, environmentally friendly furniture and finishes.

Current strategies in office design support an organization’s mission of understanding and predicting changes in the earth’s environment. Current trends reduce office impact on the environment as well as physically embodying man’s relationship to nature. Conscientious clients and employees are known to seek out and support corporate policies promoting sustainable strategies targeting net-zero energy use. These policies help to define the corporate culture and, in turn, the corporate brand.

Design is literally breaking down the walls to traditional office space by incorporating more glass and transparent materials into conference or meeting spaces. Letting in more light into areas meant for thought and action helps employees concentrate and stay alert.

Corporate Branding — More Important Now than Ever Before
Technology has not only slashed the costs of the production of goods, but also expanded the scope for innovation, leading to an explosion in the choices open to consumers. Value increasingly lies not in the product itself but in innovation, design, marketing, responsiveness, and after-sales support. Today, due to the effects of globalization and improvements in manufacturing, it has become harder for firms to differentiate their offerings on these terms alone.

Companies now must have a corporate brand. When a large proportion of the value of a company depends on branding, it becomes necessary to take every opportunity to communicate messages about values. This is what not only attracts and retains loyal customers but loyal employees as well. Interior design can communicate this global branding through showcasing corporate identity and culture.

A company’s brand and culture can be found throughout a facility, whether through the color of the walls or the style of furniture. Through design, we can apply subtle elements that might not scream company branding but, when combined, all of these small touch-points create a cohesive environment that is all about the brand.

Future Work Environments
Office buildings are no longer the sole locations for knowledge work. In fact, it has been suggested that two thirds of knowledge work now happens outside the office. Consequently, no matter how precisely we design office space to create opportunities for communication, the design is incomplete if it doesn’t take into account digital work and collaboration that is independent of space and time.

The office of the future will most likely include highly networked, shared, multipurpose spaces that redefine boundaries between companies and improve everyone’s performance. This will require new design and management principles. It will also transform HR, IT, and facilities management from support functions to facilitators. But if companies can change their spaces to reflect how people work, performance improvement will follow.

Every generation is affected by the evolving workplace. While each generation has different needs and opinions of what matters, each generation can agree that workplace design and functionality is an important factor.

Employers are dealing with an increasingly hard task of implementing workplace innovations that meet the needs of all four generations while still maintaining an effective and profitable workplace. With employees likely being the largest investment by business owners, many are willing to incorporate changes to maintain morale and provide a workplace that helps develop an innovative and engaged group of employees. These innovations can also bridge the gap between generations by creating an environment that allows workers to share experiences and concepts to develop ideas.

Manufacturers rely on new products, talent development strategies to navigate industry challenges

Current Trends in Employee Work Environments