Herman miller report ar final 3 28 w back cover

ANNUAL REPORT 2014-15

Our journey towards a better world around you

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FOR INDUSTRIAL FACILITY’S KIM COLIN, GOOD BUSINESS STARTSWITH GOOD DESIGN.

HOW CAN WE WORK BETTER? At a fundamental level, good business depends on a company’s ability to recognize good ideas, implement them, and grow their knowledge base. But where are ideas found, and how can a company capitalize on them effectively? It’s often imagined that good ideas are “somewhere out there,” not nearby. And there is certainly value in looking outside the company—to R & D, trade shows, news, competitors, or even crowdsourcing networks. But more often than not, good ideas come from within.

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Collaboration, the creative act of sharing knowledge and developing new ideas among individuals working together, is now understood to be the key component of getting to these good ideas. It is the accelerator that increases business process time and effectivity. At its most productive, it is a working method that gains strength in collective momentum through individual contribution. But collaborating is not linear, where one idea leads directly to another, improving as it goes along and gaining consensus. Instead, the process is unpredictable and spontaneous,

random, and a little chaotic. Imagine a swimming pool, where multiple ideas are floating and bobbing around, sometimes meeting each other, then pushing off, crossing the paths of other ideas, and carrying on. Let’s take this pool to represent the unbounded open office plan.

If an organization then adds swimming lanes to the pool, the new boundaries would appear to lend some efficiency. We could consider these lanes like a typical configuration of workstations. What had seemed like a chaotic world would now be superimposed with what looks like discipline. But this efficiency might be shortlived because the ideas in the pool are only as good as the lane they are in. They are bounded by a linear concept, rather than moving freely in the open pool.

For me, this analogy highlights one of the key dilemmas organizations face in locating and promoting internal knowledge networks and supporting idea generation: The environments—the actual places where work happens—are unfavorable to these critical activities. The office paradigm honed by corporate real estate and the industries that serve it is one in which every drop of value is extracted from every available square inch of space. And the environment itself, for reasons of ease for the facility—not for the people working in it—has become standardized and homogeneous. These kinds of offices may be quantitatively efficient on one level, but they are not qualitatively effective at another. Increasingly, organizations are becoming aware of these true costs.

More recently, schools have begun to experiment with alternative room layouts and to acknowledge the influence that spatial arrangement can have on creative development. When clusters of students sit together, and children of different strengths are grouped at common tables, teamwork, camaraderie, and participation are encouraged. In this arrangement, social contact can thrive and productive knowledge sharing takes place. This shift is significant because children who are comfortable working together can solve problems together and learn from each

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other at an accelerated rate—faster and more consistently than learning just from the teacher. Classrooms that have adopted such structures have seen improvements in engagement and confidence, with an overall effect of increased well-being.

These progressive schools foster social, collaborative skills because they know that individual minds prosper when there’s a common purpose, and that purpose comes naturally in an environment that encourages participation through clustering.

In this classroom analogy, one might also detect a fundamental shift in our attitudes about work. It is clear in comparing the two examples that they each have a different emphasis. In the former, it is to be educated—the didactic process. In the latter, it is to become educated—the communal outcome. There is significance in this. Organizations must ask themselves, is the point of work simply to do work?

For the dedicated, creative knowledge builders and leaders that organizations want and need, just doing work is no longer enough. For responsible and motivated people today, work is merely the side effect of having real purpose.

So, if good ideas are what organizations want, and collaboration elicits good ideas, it becomes clear that when the typical office floorplate is separated into workstations, private offices, and meeting spaces, people find it very difficult to create and act upon good thinking. Even for people who ostensibly work side by side, it can be difficult to share and engage. If we accept this truth, then we might begin to more honestly shape an atmosphere that encourages interaction between people. It might resemble constructive chaos.

But collaborating is not linear, where one idea leads directly to another, improving as it goes along and gaining consensus.

Instead, the process is unpredictable and spontaneous, random, and a little chaotic.

A CONCISE HISTORY OF THE EAMES SHELL CHAIR AND SOMETHING OF HOW THEY GET THE WAY THEY ARE TODAY

SHELL SHORTS Most subconscious opinions about a product are formed within the first 90 seconds of seeing it. What’s more, between 62 and WWcolor alone. Laura Guido-Clark, creative director of Materials for Herman Miller, is particularly fond of this statistic, taken from a study conducted by the Institute of Color Research, because not only does it validate her work at Herman Miller, it also reinforces Herman Miller’s overarching opinion that purposeful designs can facilitate productivity and pleasure. As Guido-Clark sees it, “We need to be leaders with color. We cannot underestimate how powerful a communication device it is.”

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Many factors go into determining color in a design and what it should communicate. Guido-Clark uses various methods to determine color palettes, one of which is a process she trademarked called “climatology.” Unlike traditional trend forecasting, “climatology” involves taking “temperature readings” of the current emotional, political, social, and economic environments and breaking them down into human values and emotions.

Once a collective desire is determined, a palette and materiality is created to evoke that emotion. For the color refresh of Herman Miller’s three most popular solid color lines, Ground Cloth, Resonance, and Crepe—textiles that are available on a number of Seating and Workspace products—the team wanted to create an optimistic palette of colors that felt expansive, celestial, and lighthearted. “People don’t switch on and off as much as we think,” she says, referring to the narrowing divide between work and home life and people’s desire to create spaces that universally reflect their desires. “People want to make a seamless connection.”

Once an intention is set, the process of coloring product becomes a lot like solving a puzzle. The team takes into account the workhorse neutrals and bestsellers, determines how colors might be affected by matte or gloss finishes, or how well it holds up against various materials such as laminates, plastics, and veneers, and then they systematically begin filling in the holes. Their ultimate goal is creating a palette that appeals to the senses.

After all, nearly 85 percent of consumers believe color accounts for more than half of their decision whether or not to purchase a product.

Capturing a sense of play in color is not only essential to appealing to consumers and the contract industry alike, it’s also very much a part of Herman Miller’s DNA, dating back to the work of Alexander Girard, the company’s Textile Director from 1952 to 1973. “Girard made adults feel like a part of them was awakened, the part that they’d been taught to keep down in order to work,” says GuidoClark. “We are at that same juncture right now where playfulness is valued. What I want to say is: There are no wrong colors.” The goal is to build enough layers into any given set of textile or product offerings so that, if a designer wants to build a palette exclusively in a family of reds, for example, or color-block with hues within the same value, they will have a number of options to choose from.

As Guido-Clark sees it, “It is about providing the freedom to explore and play.”

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COLOR PLAY Most subconscious opinions about a product are formed within the first 90 seconds of seeing it. What’s more, between 62 and 90 percent of those opinions are based on color alone. Laura Guido-Clark, creative director of Materials for Herman Miller, is particularly fond of this statistic, taken from a study conducted by the Institute of Color Research, because not only does it validate her work at Herman Miller, it also reinforces Herman Miller’s overarching opinion that purposeful designs can facilitate productivity and pleasure.

As Guido-Clark sees it, “We need to be leaders with color. We cannot underestimate how powerful a communication device it is.”

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Many factors go into determining color in a design and what it should communicate. Guido-Clark uses various methods to determine color palettes, one of which is a process she trademarked called “climatology.” Unlike traditional trend forecasting, “climatology” involves taking “temperature readings” of the current emotional, political, social, and economic environments and breaking them down into human values and emotions. Once a collective desire is determined, a palette and materiality is created to evoke that emotion.For the color refresh of Herman Miller’s three most popular solid color lines, Ground Cloth, Resonance, and Crepe—textiles that are available

on a number of Seating and Workspace products—the team wanted to create an optimistic palette of colors that felt expansive, celestial, and lighthearted. “People don’t switch on and off as much as we think,” she says, referring to the narrowing divide between work and home life and people’s desire to create spaces that universally reflect their desires. “People want to make a seamless connection.”

Once an intention is set, the process of coloring product becomes a lot like solving a puzzle. The team takes into account the workhorse neutrals and bestsellers, determines how colors might be affected by matte or gloss finishes, or how well it holds up against various materials such as laminates, plastics, and veneers, and then they systematically begin filling in the holes. Their ultimate goal is creating a palette that appeals to the senses.

After all, nearly 85 percent of consumers believe color accounts for more than half of their decision whether or not to purchase a product.

Capturing a sense of play in color is not only essential to appealing to consumers and the contract industry alike, it’s also very much a part of Herman Miller’s DNA, dating back to the work of Alexander Girard, the company’s Textile Director from 1952 to 1973. “Girard made adults feel like a part of them was awakened, the part that they’d been taught to keep down in order to work,” says GuidoClark. “We are at that same juncture right now where playfulness is valued. What I want to say is: There are no wrong colors.” The goal is to build enough layers into any given set of textile or product offerings so that, if a designer wants to build a palette exclusively in a family of reds, for example, or color-block with hues within the same value, they will have a number of options to choose from.

As Guido-Clark sees it, “It is about providing the freedom to explore and play.”

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MANAGEMENT’S DISCUSSION AND ANALYSIS

EXCUTIVE OVERVIEW With all the cutbacks and personal sacrifices of so many people and their families in our fiscal year 2011, we took significant steps to make sure Herman Miller will emerge stronger than ever from the most recent economic down-turn. I believe we have come through the worst of it.

As I look back on the last year, I’m pleased that we were able to balance three things – the obligations we have to people who have invested in Herman Miller, keeping the talent we have, and investing in ways that broaden our markets. When we balance all of these things, we are making sure the Herman Miller community will thrive for years to come.

The core of our business continues to focus on serving the furniture needs of U.S. businesses. Over the past five years, however, we have made a deliberate and sustained effort to broaden our mix of customers and channels to market. We have pursued this direction through both internal development and acquisitions. The hard work and sacrifices of our employees enabled us to continue to invest in this long-term direction despite the recent challenging economic environment.

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In June, 2010, we acquired Nemschoff, a $90 million manufacturer of healthcare furniture. In April, 2011, we acquired Colebrook Bosson Saunders, a design leader in ergonomic work tools. As a result, today, nearly 50% of our sales are to hospitals, learning environments, individuals at home, and customers in locations outside the U.S. While this more diverse customer base did not enable us to avoid the negative effects of the global recession, we believe it will provide greater opportunities for recovery and growth.

Notwithstanding the difficult business conditions we faced this fiscal year, our commitment to forward investment and aggressive restructuring paid off in the form of solid financial results. We maintained a robust R&D program by investing $33 million in product development. Over the past four years, our spending in this area has averaged 2.2% of sales. In fiscal 2011, approximately 23% of total revenue was derived from sales of new products introduced over the past four years.

We were aggressive in our efforts to adjust costs in line with business levels, recognizing $17 million in restructuring expenses during the year. As a result, we remained profitable and generated $99 million in cash flow from operations. We also took steps to reduce balance sheet risk by paying down $75 million of outstanding debt and increasing the funded status of our employee retirement obligations.

We became the first company in our industry (and one of the first in the world) to fuel 100% of our facilities with renewable energy. This past year we made significant progress toward our 2020 vision of having zero impact on the environment, and while we still have progress to make, we can see the finish line.

Despite this and $46 million in cash used for acquisitions, we ended the fiscal year with $147 million in cash and investments.

These efforts and the resulting financial performance helped drive a 35% increase in our stock price during Throughout the downturn, the development of new products has remained a critical element of our business strategy.

At the Neocon tradeshow in Chicago in June, we introduced 18 new products and demonstrated in clear and visible ways that Herman Miller is on the march.

Among the most significant areas of change at this year’s show was Herman Miller for Healthcare. When you entered our new dedicated show space, it was clear that we are serious about servicing the needs of healing environments. We have a broad portfolio of capabilities to serve the entire hospital and a new innovation in a product called CompassTM, which was a highlight of the entire show.

And the teamwork between the folks of Herman Miller, Nemschoff, and Brandrud was remarkable.

The Combined Herman Miller and Geiger showroom demonstrated, once again, our ability to deliver innovative products that solve real problems and are simply beautiful. The introduction of new chairs and tables from Geiger shows we can still lead the industry with designs that delight, and our new workstation products proved we can deliver beauty and function better than anyone.

REVENUE BASE DIVERSIFIED 2010 U.S. OFFICE / GOVERNMENT INTERNATIONAL HEALTH, HOME AND EDUCATION REVENUE BASE DIVERSIFIED 2014

We formally launched the ThriveTM Portfolio of ergonomic tools and tables.

In doing so, we demonstrated that we can and will move quickly to find new areas to serve our traditional customers and dealers. And, our new tables and soft furnishings offered a clear demonstration that we intend to grow our presence in educational settings.

We hosted an invitation-only event to preview a new chair family we believe will set a new reference point for comfort, beauty and value. We plan to launch this chair at Orgatec in Europe this fall.

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Š 2014 Herman Miller, Inc., Zeeland, Michigan Printed in U.S.A. on recycled paper P.MS2850-1 Ž Herman Miller,

, Design Within Reach, Geiger, Maharam and Nemschoff

are among the trademarks of Herman Miller, Inc., and its subsidiaries All other trademarks are the property of their respective owners