In 1919, Herman Miller lent his son-in-law, Dirk Jan (D.J.) De Pree, a few thousand dollars to purchase a controlling interest in the Star Furniture Company, where D.J. was employed as a clerk. The company had been manufacturing traditionally styled home furniture for fifteen years, but D.J. refocused its strategy on making high-quality, high-margin office furniture, a change that almost immediately improved its financial performance. In 1923, D.J. renamed the now highly successful company in appreciation for his father-in-law’s generous demonstration of faith in his untested business acumen. The freshly named Herman Miller Company was then—and still is today—headquartered in Zeeland, Michigan, a frosty little town with no bars, no restaurants, no pool halls, and no movie theaters. Zeeland, like its nearby neighbor Holland (“a city of churches”), was settled by members of the Dutch Reformed Church, a morally strict, no-frills Calvinist religion to which the De Prees were fervent adherents. As it was with the families of J. C. Penney, James Lincoln, Milton Hershey, and John Eagan, deeply held religious convictions motivated D.J.—and later his sons Hugh and Max—to adopt the virtuous practices they would put into place at Herman Miller during the three-quarters of a century in which they led the company.
D.J., a part-time minister in his church, explained how his religious beliefs informed his business philosophy: “If you believe that all people are created equal under God, there are tremendous implications regarding how you manage them.”1 He thus set out during the workweek to put into practice what he preached on Sundays, a linking of the spiritual and the material that his son Max would later expand into a full-fledged philosophy of leadership he only half-jokingly called “theory fastball.” Max and that philosophy are the focus of this chapter—but, as he acknowledged, he owed it all to his dad, D. J. De Pree.
D.J.’s Legacy
There was never any doubt in the minds of Zeelanders that D.J. was a devoutly religious man; yet it would have been a mistake for them to have viewed him simply as pious and otherworldly. Once he’d gained control of the town’s furniture company, he quickly demonstrated his entrepreneurial skills, establishing a reputation as an able businessman with a knack for manufacturing fashionable, high-quality products that sophisticated urban business executives wanted for their offices—not just for their undeniable utility but equally as displays of good taste and conspicuous consumption. D.J. understood his own strength (management) and weakness (product design). To compensate for the latter, he realized he would need to “abandon himself to the wild ideas of others”—namely, the greatest furniture designers of the twentieth century. By promising the likes of George Nelson, Gilbert Rohde, Charles Eames, and Robert Propst a free hand in designing what Eames called “good goods,” D.J. lured them to backwater Michigan, where he protected them from the pesky managers, salespeople, and engineers who in the typical company want to “make little changes here and there” in the designs of applied artists.
In addition to abandoning himself to the ideas of those designers, D.J. did the same with the ideas of the workingmen and -women in his factory responsible for turning the designers’ ideas into shippable products. The Herman Miller Company was one of the first in America to adopt the Scanlon plan, a form of gainsharing in which employees are financially rewarded for their efforts and ideas to improve productivity and product quality. The plan was named after Joe Scanlon, a former steelworker and union leader who developed it while teaching at MIT’s business school. Scanlon’s ideas were based on his own workplace experiences and the teachings of Douglas McGregor, perhaps the most influential management thinker of the twentieth century and the scholar credited with creating a formal theory that encompasses many of the humanistic practices of our idealistic capitalists. In 1950, when one of Scanlon’s MIT graduate students, Carl (“Jack”) Frost, became a professor at Michigan State University (not far from Zeeland), D.J. hired him to design a managerial system for Herman Miller that would be every bit as forward-looking as the product designs of Eames and his peers. Frost organized Herman Miller employees into committees to identify ways to reduce costs, increase output, and improve quality. The system was different from Lincoln Electric’s piecework model, with one major exception: worker compensation was based on prenegotiated performance standards, and thus not subject to post hoc, or arbitrary, managerial evaluations. Thanks to Frost’s intervention, participatory management became the core of the human-centered organizational culture that evolved at Herman Miller over the next half century.
Under D.J.’s leadership, everything undertaken at Herman Miller was done with the intent of showing “respect for individuals”—whether the individual was a worker, designer, or user of its products. In describing D.J.’s legacy, his son Max often told a story about the death of a millwright who had labored diligently in a Herman Miller factory for many years. After the millwright’s funeral, D.J. visited the man’s home to pay condolences to his widow and family. As he was leaving, the grieving woman presented him with a printed collection of poetry her husband had composed over the years he had been employed in the plant. On reading the poems, D.J. discovered that the worker he had viewed simply as a skilled machinist was also an accomplished poet. D.J. then vowed to begin treating every Herman Miller employee as a whole person—that is, as an individual with unique talents deserving to be recognized, developed, and encouraged to use. Max wrote that the lesson he drew from D.J.’s story was, “When we think about leaders and the variety of gifts people bring to corporations and institutions, we see the art of leadership lies in polishing and liberating, and enabling those gifts.”2 In practical terms, that translated into career-long education and training for all Herman Miller employees.
It also meant sharing the wealth the company produced with everyone who had contributed to its making. In the 1970s D.J. and his eldest son, Hugh, established an employee stock ownership plan before they took the company public to raise capital needed to fund its growth. D.J. led that effort, even though he had technically “retired” in 1961, when he was succeeded by Hugh as Herman Miller’s chief executive. However, idle retirement was not a part of D.J.’s DNA, so he actively served as the company’s chairman (and later chairman emeritus) for three decades, coming into his office almost until the day he died at age ninety, and having lived to see Max become the third De Pree to head the company, after Hugh’s retirement.
Max’s Turn at the Helm
Everything D.J. and Hugh had initiated coalesced under Max’s leadership. By the late 1980s, Herman Miller was ranked ninth on Fortune’s annual America’s Most Admired Corporations list—quite a feat, considering that it placed only 457th when ranked by sales. Moreover, the company was highly profitable: between 1977 and 1987, its total average return to investors was over 27 percent annually, seventh highest on the Fortune 500.3 Throughout the 1980s, the company annually ranked high on the list of best places to work.4 Because Max De Pree was the CEO when the company earned all those kudos, he was regularly featured on the cover of business magazines, and hailed as one of America’s top corporate leaders.5
The company also won awards left and right for quality, product design, and the architecture of its facilities.6 It was perhaps best known for the artistic beauty of its innovative products: Herman Miller’s Eames lounge chair and Noguchi table found their way into the permanent collection of New York’s Museum of Modern Art; its Aeron and Ergon chairs introduced the science of ergonomics to the office place; and the company’s open-office cubicles became ubiquitous (if frequently unloved) in American businesses. Herman Miller’s enlightened practices were unique in its industry, although competitor Steelcase, located a stone’s throw away in Grand Rapids, also had a good record of product quality and working conditions. But Herman Miller was far and away the furniture industry’s leader in the amount it invested in research and development, and in dedication to the “human environmental design” its products and manufacturing facilities evidenced. In 1982 the Journal of the American Institute of Architects published a feature article on a Herman Miller plant, calling it “a splendid workplace” bathed in natural light and “designed and built with the individual worker in mind.”7
In 1989 De Pree wrote a remarkable little book, Leadership Is an Art, which became a surprising bestseller. The vocabulary Max employed in this book’s pages can appear more than a bit “soft” to those trained in the hardheaded dollars-and-cents business tradition, and off-putting to those not raised in fundamentalist Christian settings. He used spiritually laden words—love, warmth, beauty, and joy—and such biblical concepts as “stewardship” and “covenants.” He called his relationship with Herman Miller employees “covenantal” (as opposed to legal or contractual) because it was based on them being “volunteer” members of a community with shared values and goals, and he often communicated by way of parables and homilies—what he called “tribal story telling.”
That’s where theory fastball came into play. Max told a story about his brother-in-law, a famed major-league baseball pitcher, from whom he learned that every great pitcher needs a great catcher. The brother-in-law told Max that Sandy Koufax was such an intimidating presence on the mound that the very sound of his fastball made hitters timid—indeed, the only thing that could have slowed those pitches down was an incompetent catcher. Max saw the story as a parable about the interdependent relationship between leaders and followers: “In baseball and business, the needs of the team are best met when we meet the needs of individual persons. By conceiving a vision and pursuing it together, we can solve our problems of effectiveness and productivity.”8 From that premise, Max concluded that, at least sometimes, a titular leader needs to “play catcher” when employees are “pitching”—for example, by providing the resources his designers need to produce “good goods,” then limiting his role to supporting them in their self-directed efforts. Similarly, he understood that he needed to delegate the tasks of accounting, sales, manufacturing, marketing, and finance to people who were more knowledgeable than he on such matters, and not attempt to “manage” their efforts. In that fashion, he limited his role as leader of Herman Miller to the exercise of three tasks and responsibilities at the heart of theory fastball:
In sum, De Pree defined the art of leadership as “liberating people to do what is required of them in the most effective and humane way possible,” a practice he called “servant leadership.”
Theory Fastball Applied
All of that may sound a bit hokey and impractical. I was skeptical myself when, in the early 1980s, I first heard about De Pree’s unusual leadership philosophy. Deciding to discover for myself what was going on in Zeeland, I cold-called Max, and he graciously invited me to visit the company’s facilities and speak with the people employed in them, even offering to put me up for a night at Herman Miller’s conference center. After the visit I reported—a bit gushingly, as I now see—that I “was given carte blanche to go anywhere and to talk to anyone, managers and workers. The only problem was that I couldn’t tell one from the other! People who seemed to be production workers were engaged in solving the ‘managerial’ problems of improving productivity and quality. People who seemed to be managers had their sleeves rolled up and were working, side by side, with everybody else in an all-out effort to produce the best products in the most effective way.”10
I knew that Max had written, somewhat cryptically, “The measure of leadership is not the quality of the head, but the tone of the body. The signs of outstanding leadership appear primarily among the followers: Are the followers achieving their potential? Are they learning? Serving? Do they achieve the required results?” In Zeeland I saw how that translated into the practical world of manufacturing—and how the avuncular Max qualified as a great leader by his own measure.
I learned a lot more in Zeeland—for example, that the company’s Scanlon plan had provided bonuses averaging 10 percent of employee salaries between 1953 and 1983, and that in the 1980s, those bonuses more than paid for themselves: employee suggestions annually generated some $12 million in cost savings (about $3,000 per employee).11 All employees also participated in profit-sharing and stock-ownership plans (100 percent of regular employees who worked there for at least a year were granted company stock, and over 50 percent regularly purchased shares in addition to those that came as a benefit of employment).12 Richard Bennett, a Herman Miller middle manager in that era, explained the significance of extensive employee stock ownership: “As an owner, you approach your job in a different way, a more responsive way.”13 As Max said, “Around here the employees act as if they own the place.”14 And creating that attitude was the intent of the company’s bonus, profit-sharing, and stock-ownership plans:
Nothing is being given. Ownership is earned and paid for. The heart of it is profit-sharing, and there is no sharing if there are no profits. Risk and reward are connected logically and fairly. There is no smug condescension at play here. Rather, there is a certain morality in connecting shared accountability as employees with shared ownership. This lends a rightness and a permanence to the relationship of us to our work and to each other. . . . There are also some clear implications. There is risk personally and there is risk corporately. While it is great to work for gains, one also has to be ready for losses.15
It would be a mistake to minimize the impact of that risk on the company’s culture. Employees often mentioned that Herman Miller’s participative managerial processes generated much discussion and disagreement, and on occasion even conflict among employees with differing views. As one manager explained, “When I came to Herman Miller I felt I had an obligation to speak my mind on topics that I felt were important. It’s gotten me into a lot of trouble emotionally, you know, you put a heavy emotional commitment into [this] kind of thing because it’s your company.”16 After all, the Scanlon plan guaranteed only that every employee would have a say, not that all would have their own way. Indeed, because their own money was at risk when employees made decisions, the decision-making process was slow and often contentious, much as it was at Lincoln Electric. Of course, the company also offered a full menu of other employee benefits and perks—including day care, rehabilitation services, and college tuition reimbursement—but no alcohol, not even at the annual Christmas party.
Central to Max’s philosophy was the universal ethical principle of respecting people, which on one level meant not being judgmental toward sinners, but more to the point, meant that Herman Miller hired people based solely on their skills and character, with no attention paid to their religion, political views, age, color, or gender. In the mid-1980s, the company hired Michelle Hunt, an African American from Washington, DC, to serve as its Vice President for People, at a time when Zeeland was lily-white, and the idea of a woman executive was almost as unthinkable as having a black neighbor. It was all part and parcel of recognizing people as individuals—a commitment graphically illustrated in the company’s 1985 annual report, whose first twenty-two pages were devoted to a spread of photos of 2,900 of its 3,265 employees, each depicted in ways reflecting their individual personalities and interests.
Hunt’s unusual title—VP for People—reflected Max’s belief in respecting the dignity of individuals: he abhorred the practice of thinking of employees as “human resources” and “human capital,” arguing that they were people and should be thought of, and treated, as such. Every individual, in his Christian view, had been created in the image of his or her Maker; thus, each was entitled to due respect and dignity. From that premise, he deduced that every human had been endowed with basic rights and that, since those rights derived from God, they could not be abridged or rescinded by mortals—including employers and bosses. Those unalienable rights included, in Max’s language, the rights to be needed, to be involved, to understand, to affect one’s own destiny, to be accountable, to make a commitment, and to appeal.17
It is instructive to see how meeting those rights played out in practice at Herman Miller. In the 1980s, a severe economic recession led to a precipitous drop in demand for the company’s products. The recession hit Herman Miller especially hard because so many of its high-end products were seen as luxury goods, and thus their purchase could readily be postponed. The consequence was a river of red ink in the company’s books. For the first time in decades, it was losing large sums. With no end to the recession in sight, executives at other manufacturing firms across America were laying off workers to stay afloat. But Max responded differently. Because he had committed the company to honoring the rights of its workers to be involved, be informed, be needed, and affect their own destiny, he and his top management team assembled the company’s workers to give them a thorough briefing on the company’s financial situation, along with an explanation of what that meant for its ability to pay bills, meet payroll, fund pensions and other benefits, and survive in the long term. The executives then presented a range of possible actions that might be taken to restore profitability, none of which was particularly attractive in the short term, and all with negative consequences for the company’s employees and owners.
The people in that room were, of course, both employees and owners, and they were accustomed to wearing both those hats. For many years, managerial and financial data had been routinely shared with them at the company’s regular monthly meetings. The workers had been known to use those occasions to aggressively query top management, demanding, for example, to know why the value of shares of “their” company had dropped a dollar or so.18 So when the employees were asked what actions they thought the company should take during the recession, they were prepared to deal with the challenge. After much discussion—some of it heated—a consensus emerged that there should be no layoffs. In order to preserve the company’s cherished sense of community and mutual respect, all employees agreed to be paid for a four-day workweek, and if the recession continued, they were willing to further share the sacrifice and go on a three-day paid week, all the while continuing to put in five days on the job. In addition, some production workers volunteered to hit the road as sales reps in geographical areas the company wasn’t currently serving, and others organized themselves into teams to develop lower-cost products that might open new markets and perhaps not be as vulnerable to changing economic conditions as the current line of furniture. Others volunteered to undertake deferred maintenance, and some worked on finding opportunities for cost reduction. As manager Marg Mojzak explained, “Herman Miller puts a lot of demands on employees, and the employees rise to the occasion.”19
Max’s “soft” philosophy was played out in hard terms in other ways, as well. At a time when executives in other companies were arranging golden parachutes for themselves, Herman Miller introduced “silver parachutes” for all employees with over two years of service. In the event of an unfriendly takeover leading to the termination of their employment, the plan offered a soft landing for a level of employees whose welfare most executives placed far below their own. Most radically, the company introduced the principle that its chief executive could not be paid more than twenty times the average wage of its line workers, doubtless the narrowest salary ratio among Fortune 500 companies.
Additionally, Herman Miller demonstrated concern for the environment by becoming an early leader in energy and water conservation and waste recycling. It also was known for its excellent relationships with its dealers, suppliers, and customers, offering the latter a five-year guarantee on its products, as opposed to the one-year industry standard. Most impressive was the degree to which Herman Miller’s values-based culture was embraced throughout the company’s ranks, even at the blue-collar level. For example, in 1984, a recently retired production worker confessed to a reporter that whenever people asked where she had been employed, she would answer proudly “Herman Miller,” then carry on with details about how wonderful the company was. Her husband would interrupt and say, “They only asked you where you worked, you don’t have to sell them the company.”20 But she wasn’t the company’s only “salesperson.” In 1988, a group of my MBA students visited Herman Miller’s West Coast facility, where furniture was reassembled for delivery to its California customers. The students came back amazed to have found the same culture in that remote outpost that I had found in Zeeland. One student reported: “I talked to one manual worker who sounded exactly like Max does in his book.”
A Shockingly Bad, and Surprising, End
In 1989 the Herman Miller Company was highly profitable, netting $47 million on $765 million in sales; known as a great place to work; renowned for high ethical standards; admired for the quality and design of its products; and exalted for its socially responsible behavior. Furthermore, its future looked brighter than ever. Max turned sixty-five that year, and decided the moment was propitious for him to step down and pass leadership of the company on to its first non–De Pree CEO. The company’s board chose Richard Rauch, a thirty-three-year Herman Miller employee, to be Max’s successor. He was reluctant to accept the post; nonetheless, he was the obvious choice, favored by his fellow vice presidents for the job, and “an absolute believer” in the company’s values and practices.
Alas, Rauch turned out to be ill-suited for the role of chief executive, a fact that he himself had suspected. Within a year, he asked the board to accept his resignation. The board then worked with the company’s management to draw up an exacting list of sixteen characteristics they were seeking in a new CEO, including proven leadership ability; being in sync with Herman Miller values and culture; being a skilled delegator outstanding at selecting, nurturing, and assigning top-quality talent; and commitment to participative management, employee ownership, and the Scanlon plan. They then launched a national search, ultimately selecting an individual who seemed ideal on paper and had said all the right things to those who interviewed him.
Once on the job, the new CEO started off on the right foot—but it soon became apparent to the company’s close-knit top management team that their new leader was, if anything, less well equipped for the position than his predecessor. He was uncomfortable with the company’s values-based culture, unable to work with the executive team, and out of his depth dealing with the complexities of managing international design and manufacturing operations. Moreover, the new CEO had inherited a problem that had gone relatively unnoticed during Max’s tenure: the company’s rapid growth had outpaced its ability to manage it. When Max assumed the leadership of Herman Miller, it had been basically a medium-sized family-run business with organizational systems and structures appropriate to its relatively limited scale of operations. But quite suddenly it had become a major Fortune 500 company with extensive and complex international operations, and was now within the purview of Wall Street investors, who were paying increasing attention to its short-term profitability. When economic conditions then turned bad, the new CEO undertook a series of actions intended to deal with declining profit margins. Unfortunately, those steps were aligned less with the company’s values than with practices in traditionally managed corporations.
I have found considerable disagreement among former Herman Miller employees about the details of what occurred at the company under the new CEO’s leadership. However, several informants told me that, not long after the executive had assumed office, company morale ebbed to an all-time low, and several key employees decided to leave in search of greener pastures. The turmoil that followed led to declining productivity, sales, and profitability. The CEO—unsure how to respond to the looming crisis—hired a compensation consultant, who in effect assumed the role of co–chief executive. After a quick study of the situation, she gave the CEO what turned out to be poor advice, concluding that the most effective way to quickly cut costs was to fire a large number of long-term executives and managers who, she felt, had grown stale in their jobs. Claiming that they had become unproductive because too little had been demanded of them in terms of bottom-line performance, she advised the CEO to replace many of the company’s top management team, which he agreed to do—but only on the condition that she did the actual firing! In the first round of firing, she axed a number of key individuals who, between them, averaged twenty-eight years of experience with the firm. She did those mass firings by voice mail, then assembled all headquarters-based employees in the company’s auditorium, where she summarily announced that many more would soon follow. When she made good on that promise, the upshot was an almost immediate rupture of the bonds of trust that the De Prees had nurtured over decades. What had taken so long to create was rapidly lost, and the essence of the company’s culture became critically imperiled. The board’s subsequent decision to remove the CEO came too late. The damage had been done.
In hindsight, it seems that the Herman Miller board, despite its stated commitment to finding a chief executive who would be a perfect fit with the company’s unique character, had failed in their due diligence, overlooking the candidates’ lack of relevant leadership experience. Moreover, they had never interviewed anyone who had worked with the new executive, or for him. Had they done so, they might have learned that he was uncomfortable with team leadership, chronically indecisive, and, when he did act, had often displayed questionable judgment.
Max then retired from the board; he would be the last De Pree to work in what had been a family business for seven decades. Over the years, the family had been gradually selling its holdings in the company, and by then they were no longer majority shareholders. With no De Prees on the Herman Miller board, and having lost control of its ownership, Max and his family no longer had any influence over the company’s direction.
Herman Miller Today
Some two decades and two subsequent CEOs later, by 2016 Herman Miller appeared to have regained at least some of the cultural features that had made it great in the 1980s. In 2015 it won awards for its human rights and conservation efforts, and it continues to place strong emphasis on reducing its environmental impact. In 2000 it had become one of the first companies to issue a sustainability report, and since announced the goal of achieving zero levels of air emissions, water use in manufacturing, and hazardous waste by 2020. The company has recently diversified with the acquisition of furniture retailer Design within Reach (the chain’s staff are not treated as Herman Miller employees). In 2015 it was profitable on nearly $2 billion in sales. Although most employees are no longer shareholders, and the Scanlon plan is no longer used, the company does offer profit sharing and excellent employee benefits. But the word from Zeeland is that the company is “not the way it used to be,” and working there now is “just a job.” Its absence from current lists of best places to work seems to confirm those judgements.
Shortly before his ninetieth birthday, I called Max to ask him why he thought the company’s culture had proved unsustainable. He found it understandably difficult to discuss the bad decisions made in choosing his successors—choices he had had a hand in making, and for which he acknowledged personal responsibility. He was neither critical of the company’s current leadership nor surprised that many of the practices he had pioneered were no longer in place. Managing the Scanlon plan was extremely difficult, he explained; maintaining intimate relationships with workers is hard and time-consuming; and it is far from easy for the nominal boss of a company to continually share power and financial information with employees. He suggested that those were the reasons why so many executives decide enlightened leadership isn’t worth the extra effort.
Eventually, he concluded, all companies “lose their souls.” As he saw it, that regrettable phenomenon is the result of what he called “organizational entropy.” As with the laws of nature, he believed organizational practices, even the most virtuous and successful ones, inevitably deteriorate over time. He reminded me that, in 1989, he had called attention to that process, writing that people in large organizations “often fail to see the signs of entropy” around them—dark tensions among key people; leaders who seek to control rather than to liberate; pressures of day-to-day operations that push aside concern for vision and ethics; a growing orientation toward the dry rules taught in business schools, as opposed to a values orientation that takes into account such things as contribution, spirit, excellence, beauty, and joy; an urge to establish ratios and quantify both history and visions of the future; and leaders who rely on organization manuals and structures instead of people.21
I went back to his book, where I discovered that he also had written that the most important thing he personally needed to work on as a leader was “the interception of entropy.” While he did so many other things so well, like many leaders cited in this book, he failed at that important task.