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Sunday, 19 January 2014 20:35

Retiring Steelcase CEO Hackett exits as company’s performance strengthens

Written by  Mark Sanchez and Joe Boomgaard
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Steelcase CEO Jim Hackett studied natural systems to get insight into how the company needed to evolve and restructure to better serve shareholders and meet the needs of end users. He led the office furniture maker through a culture change away from being a manufacturing-led company to one focused on user-centered design. “We always talked about how the company made product. We never talked about the end user,” he said. Steelcase CEO Jim Hackett studied natural systems to get insight into how the company needed to evolve and restructure to better serve shareholders and meet the needs of end users. He led the office furniture maker through a culture change away from being a manufacturing-led company to one focused on user-centered design. “We always talked about how the company made product. We never talked about the end user,” he said. PHOTO: Katy Batdorff

As he prepares to depart after serving 20 years as Steelcase Inc.’s chief executive, Jim Hackett is laying the groundwork for his next career stop.

At a relatively young 58 years old, he plans to remain in Grand Rapids and stay active in the business community. He’s undecided on exactly what he’ll do next, although becoming involved in mentoring entrepreneurs and young innovative companies is one possibility.

“That narrative is still being written,” Hackett said during an interview in his office at Steelcase’s 44th Street corporate headquarters in Grand Rapids.

Hackett, who’s been with the industry-leading Steelcase for 30 years and has served as CEO since 1994, steps down Feb. 28. Jim Keane, Steelcase’s chief operating officer and president and a 16-year veteran of the company, succeeds him.

As he looks to the future and what’s next, Hackett said he’s “not starting with how much money I can make” but “what’s really a challenge to me (and) what’s intellectually really interesting.”

He intends to follow the advice of peers and separate his next venture from his role as Steelcase CEO by a year or so to let “the crust of what you were kind of melt away.” Spending more time with family, particularly his granddaughters in North Carolina, are on the top of the list at the onset.

He’ll also continue to serve as a director at The Northwestern Mutual Life Insurance Co., Fifth Third Bancorp and Ford Motor Co., where he was named to the board last September. Serving as a corporate director, however, “is not going to be enough to keep me fully busy.”

“I have a lot of energy,” Hackett said. “There is an opportunity for some of the things that I excel at to be applied elsewhere.”

In Grand Rapids, he envisions his next venture as tapping global connections he’s developed over the years and bringing them to town — or something that fosters innovation from a big-picture perspective.

“I like working on really hard problems that have big implications and big payoffs, and with really smart people,” Hackett said. “Those components are the design of what I’m working on.”

One thing he won’t consider: running for public office. Hackett said he’s been asked, but has no interest in entering politics.

“I just don’t see myself doing that,” he said. “I don’t have any gifts relative to that.”

Whatever post-Steelcase venture he pursues, Birgit Klohs of The Right Place Inc., an economic development organization, welcomes his continued involvement locally. Hackett serves on The Right Place’s board.

“Jim is indeed a regional thought leader. He took the company through a very difficult time and helped steer it to where it is today,” said Klohs, CEO of The Right Place. “What’s always impressed me is that when he looks at an issue or a problem, he takes a very different angle than everyone else. When we would wrestle with something at The Right Place, it was often Jim who would say, ‘Have you looked at it this way?’ I hate the phrase, but he truly thinks outside of the box. He looks at issues from a totally different point of view. He looks at things differently than the norm.”

Klohs believes Hackett’s global network of business peers can become valuable to West Michigan. Those connections, she said, can bring greater insight, perspectives and opportunities to business leaders in the region.

“Given that Steelcase is a global company and that he’d be willing to make the introductions and expand the network in West Michigan and bring their ideas here, that’s a tremendous asset. It’s great that he plans to stay here and stay engaged,” she said. “Once you lose talent like that in a community, it’s gone forever. And people like Jim really help to improve the fabric of the community.”


Go out on the upswing

Three years in the planning, the leadership transition from Hackett to Keane comes as Steelcase and the overall office furniture industry continue to rebuild from the Great Recession. The deep downturn, the sector’s second in a decade, significantly cut industry shipments from $11.41 billion in 2007 to $7.84 billion in 2009. In 2009 alone, volumes plunged more than 29 percent.

As the industry sank, Steelcase’s sales dropped 33 percent over two years to $2.29 billion in the 2010 fiscal year from $3.42 billion in the 2008 fiscal year.

Most recently, Steelcase posted sales of $2.86 billion for the 2013 fiscal year. In December, the company reported that sales for the three-month period that ended Nov. 22 grew 7.9 percent to $784.4 million. For the present fourth quarter of its 2014 fiscal year, Steelcase projects sales of $760 million to $785 million, an increase of 5 percent to nearly 9 percent from the $721.4 million for the same period a year ago.

After steering Steelcase through the downturn and with the business on the upswing, Hackett said now was the time to retire from the company.

“When you do it for as long as I have, you have ups and downs. I never felt like I was going to leave on my own volition in the difficult times. I was challenged by that,” said Hackett, who decided in 2011 to depart by 2014.

“That’s not a healthy time to leave, when you’re in decline. There are two rules I gave myself. I wanted to do it when we were in an ascending position and we’re doing really well. The second thing is I wanted to do it when I committed to stay two or three years,” Hackett said. “We’re ascending now. We’re really in good shape, so it’s a good time to walk out.

“I cannot emphasize how healthy the company is.”

That wasn’t always the case under Hackett’s tenure.

Shortly after Steelcase went through an initial public offering in February 1998 and the company hit global sales of $3.24 billion for the fiscal year as the industry rose to new heights, Hackett saw difficulty ahead. Steelcase was a highly vertical company that did most of its production in-house.


Ushering in a design-led culture

As the new millennium approached, Hackett concluded that the company needed major changes. He set Steelcase on a course that embraced lean manufacturing principles and placed the emphasis on design, rather than its manufacturing acumen, to keep up with an increasingly technology-driven society that was rapidly altering how office workers do their jobs.

Steelcase’s business model at the time, with its manufacturing capacity, was unsustainable, he said.

“I realized that we didn’t have the configuration right to compete. I stood and stared out the window and I saw this industrial complex, and it hit me that it couldn’t continue in a bastion strength,” Hackett said. “The hardest thing was to try and make it a design-led culture. We were a manufacturing-led culture.”

Just as that journey began, the U.S. economy began to decline. It fell even harder following the Sept. 11, 2001 attacks that pushed the U.S. economy into a nosedive and the office furniture industry over a cliff.

The industry, after peaking at $13.2 billion in shipments in 2000, fell into a steep three-year decline before bottoming out at $8.50 billion in 2003.

During the same period, Steelcase’s global sales declined from a peak of $4.04 billion in the 2001 fiscal year to $2.34 billion in the 2004 fiscal year.

But the focus on changing Steelcase’s culture continued.

“When times get tough, you didn’t see (their commitment to) design get cut,” said John Berry, executive director of Design West Michigan. “It’s been terrific to see Jim lead Steelcase to being a more user-centered design company. It not only speaks to the importance of the role of design and the practice of it, but it’s evident in the actions he’s taken. His focus on design has shown in the new product development results.”


Change brings ‘human toll’

Hackett recalls the period in the early 2000s as his “darkest moment” as he sought to navigate a corporation that needed to restructure and reduce complexity through the toughest downturn the industry had ever experienced. The period saw Steelcase execute a series of plant closing and job cuts, actions that it had never had to take in the past.

The plant closings generated plenty of sharp criticism directed toward the company and its CEO, both locally and from brokerage analysts who complained that Steelcase was moving too slowly on the restructuring.

Steelcase employed about 21,500 people globally in February 2001. As of February 2013 and the end of its fiscal year, the company’s workforce stood at 10,400, according to an annual financial report filed with federal securities regulators.

The reductions in the workforce stemmed not just from the downsizing and plant closures resulting from lower sales, but from lean manufacturing processes that require far fewer people to produce products.

As he recalled the period, Hackett spoke of the “human toll” of the restructuring and of making difficult business decisions that were needed to restructure the company, both for long-term viability and to steer it through the downturn. Although he knew what he had to do, he still felt as though he was letting down the people who were losing their jobs.

As managers made decisions about job cuts, he personally went through each list of names of people who were to lose their jobs. One was a good friend from college. Another was a relative of the “family dynasty” at Steelcase, whom he personally visited at his home to tell him he was losing his job.

“He was very sedate about it, but his wife was very irritated with me. She said, ‘You’re in charge of this whole thing. You can just stop this with the snap of your fingers,’” Hackett said. “I tried to explain to her why that wasn’t true … what I had to do and why, and how much he mattered to me.

“When I walked out of their house, it was really awful. I said, ‘I hate business.’”

 

Maintaining the fitness to survive

Hackett said he got through the “crushing part” of the restructuring by reading not about business, but about natural systems and “the way things in nature deal with Darwinian kinds of things.”

“It gave me confidence (about) that natural order of things (and) far be it for my ego to interrupt it, and it would be worse to ignore it,” said Hackett, who told his board to expect to see two types of headlines during the restructuring.

The one on the front page would tell the story of how Steelcase “is in deep crap.” The other, on the business page, would say “thank goodness they’re restructuring.”

Steelcase today is far fitter to compete in a global economy and is even hiring again, Hackett said. He speaks often now about the need to maintain that “fitness” to keep up with an ever-evolving marketplace, as well as about having a deeper design culture versus the past, when “we always talked about how the company made product.”

“We never talked about the end user,” he said. “Now, if you were to go around without me, I hope you would hear this: ‘There’s an obsession with detail.’ That was kind of a cultural breakthrough for us.”

One recent product that breaks with the prior mold is the Gesture chair that Steelcase introduced at NeoCon last June. Gesture readily adjusts to how people work today with their mobile technology, laptops, smartphones and tablets. The chair also was the first product designed across all global markets for Steelcase, rather than introducing it in North America or Europe first and then adapting it for other markets.

Steelcase’s design and marketing team today “is really the best we’ve had in my tenure in the company,” Hackett said.

“I think Jim has truly helped to raise and maintain the quality of design in West Michigan when you look at the facilities they’ve designed and developed under his leadership, when you look at their growth in design development and their connections in design learning that they did with IDEO, and their support of design education,” said Berry of Design West Michigan. “When you have a company like Steelcase that is really interested in helping design be understood at the K-12 level, at Kendall College and other places, it’s really evidence they understand the importance of design.”

The new design focus coincides with what Hackett and others see as an opportunity for the industry to design and produce the kind of workspaces needed for today’s office workers who are far more collaborative and equipped with mobile technologies that allow them to work from virtually anywhere.

“We are at the doorstep of large demand again unlike any time when I was CEO,” Hackett said. “There’s a lot of opportunity for companies to alter and update their space. They are just out of date.

“If I have any reticence about going, it’s that opportunity. I love seeing that kind of potential and then (figuring out) how we get a big share of it.”

Read 6736 times Last modified on Sunday, 19 January 2014 21:34

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