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Spencer Levy
In an extensive survey published late last year, the Global Workplace and Occupancy Insights Report for 2022 to 2023, CBRE, found that occupiers these days want their offices to talk back. That is, there's a rising desire for tech-enabled space and data to drive efficiency and productivity. On this episode, we'll talk about these findings, along with other trends in occupancy management and design, sitting down with the CEO of a company that's steeped in this new wave and has been helping create cutting-edge workplaces for 75 years.
Franco Bianchi
People go to the office for culture, go to the office to feel part of something bigger. And the way you design your office, which includes the furniture, becomes a tool to create those conditions.
Spencer Levy
That's Franco Bianchi, the Chief Executive Officer of Haworth, a private family owned business that was founded in 1948 by a former industrial arts teacher, G.W. Haworth. Franco moved from his native Bologna, Italy, in 2002 after Haworth acquired the Italian firm he previously worked for. Franco has served in his current role since 2005, and the company has grown into a $2.5 billion enterprise. Coming up, we head to Holland, Michigan, and the headquarters of a world leader in interior design and contract furnishings. A conversation about functionality, furniture, and the future of work. I'm Spencer Levy and that's right now on The Weekly Take.
Spencer Levy
Welcome to The Weekly Take, and I'm delighted to be sitting here today with Franco Bianchi, the CEO of Haworth; one of the largest furniture manufacturers in the world. Franco, thanks for joining the show.
Franco Bianchi
Well, thank you. Thank you for inviting me. It's going to be fun.
Spencer Levy
Absolutely. And Franco, why don't you tell our audience who you are and what you do?
Franco Bianchi
Okay well, Franco Bianchi, the CEO of Haworth, as you just said, the sum of the audience will be compromised by very small Italian accent. Because I'm from Italy. I born and raised there, lived 35 years in Italy, five years in Paris, and now since 20 years in the U.S. In little Holland, Michigan, the center of the world.
Spencer Levy
Absolutely the center of the world where we are today. So we've had a lot of shows, Franco, on the office and from a variety of angles – from a leasing angle, from an owner, from an occupier. But you have a very different angle, which is related to that, which is the furniture that goes into those offices. So how's it going? What have been some of Haworth's biggest challenges you've seen over the last couple of years?
Franco Bianchi
Yeah, let me frame a little bit of what Haworth is today.
Spencer Levy
Yes.
Franco Bianchi
Haworth in 2022, we just closed our books: $2.5 billion. We grew almost 30% compared to 2021. Two-thirds of our numbers are pretty much office – office, education, health care, the world of work. Work from home. So the world of work in general. I usually say to my folks and to clients: Work yesterday was the location – the office. Today, work is a verb. Since technology has really created the ability to work from anywhere. Now we have to interpret, really focus on the office. But what we continuously focus on is work, the action of work. And if you think about work that way, you find a lot of places where people do work, which creates a challenge on the office as a location, but opens out opportunities on work as a verb. Specifically on the office, we win when we are able to engage clients on what it means to create the best environment for people to want to be there – because they don't have to be there anymore to do their work – so to want to be there, and to do their best work. And I think, I believe, part of our growth has been the ability of interacting that way.
Spencer Levy
Give me some of the things you try to do to make people want to be there. And then we'll go on to the second question about the productivity angle.
Franco Bianchi
We have a lot of conversations around why people, particularly in a big city where mobility takes time, why people should dress up and go to a place called office taking 2 hours commute, going and back. And I love to tell you that buy Haworth furniture and everybody will be in the office is probably, but certainly the quality of the environment is an important part of it. People go to the office for culture, go to the office to feel part of something bigger, and the way you design your office, which includes the furniture, becomes a tool to create those conditions. Secondly, the environment is changing. Let me make one example: The conference room. The conference room is a large table with some fancy chairs around it, and that big table is there to do what we are doing right now, talking to each other, looking at each other. Well, today, office, no matter what business, as probably a large portion of the audience of that meeting coming from is getting in on the side. That big table often is kind of in the way. So the ability of engaging the client, to make changes in the office that make people more conducive to say, you know, I actually work better by being in the office than being from home, because many people from home work from their kitchen counter. Which after a few hours is not exactly the most ergonomic or the most satisfactory place to work. So creating the best environment where people want to be is clearly much bigger than the physical environment itself. What we can impact on, but has a lot to do with a physical environment is about safety, is about configuration, and product typology is about variety. And I think that we can impact that pretty significantly.
Spencer Levy
Well you used the word ergonomically. And the world has changed from a sea of cube farms where people had uncomfortable chairs to one where they had desks that go up and down, that have chairs that have different functionality. Talk about ergonomics and how that impacts it.
Franco Bianchi
Let me say first of all this about why. It is about variety, you know. At home – you know, I keep comparing to home – at home you're going to have very few places to work from and not really a variety because you're not going to work likely from your bedroom. In the office, you have the ability as a company to showcase a very large variety of applications, we would say, which have different levels of privacy, different levels of sound absorption, different level of ergonomy, different levels of support, different levels of integration with technology, according to what you actually have to do. That variety is the power that I think is one of the elements that will bring people more to the office. Your point about height adjustable tables or ergonomic chairs, it's absolutely a good one. I can tell you we sell probably 70% of our desking now, height adjustable. A few years ago, height adjustable desks were a premium and where in order for users to have an adjustable desk they had to come with a medical ordinance, with a certificate. Today, the premium is moderate, number one, and number two has become standard. So that's a great point. Ergonomy is certainly a component.
Spencer Levy
And when we go to the concept of wanting – we talked about the variety is probably a key concept there – but when we go to the concept of productivity, it's a different concept. It's how do they do their best work in that? And so I told a funny story to Frank on the way down here of a meeting I did once in Tel Aviv, where the company showed me a video, they put me in these big, large comfy leather chairs and I fell asleep. Okay. First and only time I ever fell asleep in a meeting. It's not going to happen today, but it raises the point of being perfectly comfortable is not necessarily the best way for productivity. What do you think?
Franco Bianchi
Yeah, I think it's a great comment. In the short term, I truly say tailoring space through that variety. Tailoring spaces to the action to the task that you will perform is how to create best work. And it's a combination of every element that you have around you, the condition you have to feel safe to be productive. And I'm not talking about security, you know, safe – but like about the feeling that nobody, by example, is walking by you because you will not be concentrated or soundproof or sound absorption or, as I said, access to technology or privacy. Not having the right set for the right task is creating the best productivity.
Spencer Levy
When you're thinking about furniture and obviously a chair, it's an individual thing. But we're talking about something different now. We're talking about a collective thing where if one person comes back and they’re comfortable, that doesn't solve the issue. What solves the issue is everybody being comfortable. Talk about that because we're in a conference room right now, like most conference rooms, every chair here is the same. Are you seeing people mix it up?
Franco Bianchi
Yes, maybe not necessarily within the conference room, but like more and more, this idea of multiple applications is becoming a standard. I usually say there are two doors: A door is where you have figured out everything you, the client, you, the designer, you come in, you buy the chair. But there is a second door where you involve us on why - on the business goal that you have in mind, that culture that you want to foster and you make a spot out of that why of that problem. So we can actually, together with your designer, your property consultant, with the leadership of the company, we can be part of that conversation so we can help you dial-in the best variety to the best solution, the best sector or solution to achieve that goal.
Spencer Levy
You just mentioned bringing in the leadership of the company and the word culture comes right to me. The impact on culture is something that, you're the CEO here, you care deeply about. How does that impact furniture decisions?
Franco Bianchi
Yeah, I truly think that the quality of the environment is one tool in your hand as a leader to facilitate, to foster, to accelerate or decelerate the amount of communication, the amount of control, the amount of creativity, the amount of involvement of your team. And you can literally point out culture to space in a very scientific way. Companies that have a very strong collaborative culture would have environments that are meaningfully different than companies that they're very hierarchical, control-opriented, top-down culture. The level of their privacy will be different. Their approach to open office will be completely different. The amount of enclosed and even when they do conference room. They will do different conference room. The story goes that buying furniture cost exactly the same way. If you use that as a cute piece of furniture or if you use it as a tool to make your business better, tools to reinforce your culture. And I have a lot more fun when I'm in the room, I participate in this second goal.
Spencer Levy
And let's talk about the culture again. But now, in an international context about the differences in return to work in Asia and Europe and obviously there's different places that are going to return at different levels, but there are different cultures. And so if you're working for the same company and you're doing an office for them in Asia, Europe, the U.S., how might you change your thinking about furniture design?
Franco Bianchi
That's a great comment. Initially, it does change. I remember, you know, because I'm Italian, I moved here 20 years ago. Some clients 20 years ago were applying the same, – specifcally I would say some American clients – would take exactly the same footprint, often exactly the same product, and multiplied it around the world. Today, nobody is doing that. Today very much we find much more attention to the local culture and much more attention in tailoring spaces to the demand or the requirement sometimes of the countries, sometime of the office. So this balance between efficiency and effectiveness, you know, the pendulum was very much towards efficiency four years ago. Now the pendulum is very much towards effectiveness.
Spencer Levy
One of the things that we talk about in the office sector is this flight to quality, flight to new. And I've seen some of the highest fit-out costs I've ever seen over $600 a foot in some projects. So recognizing that we don't know where office is going to finally shake out in terms of how much office space people are going to want. Some people, they already want less, some people want more co-working space. But there are clearly a lot of people moving upmarket. Have you seen that and how has that impacted your furniture decisions?
Franco Bianchi
Someone very smart told me once that the world today is really moving towards two extremes. Clients are looking for the lowest cost provider, kind of the commodity paid like a commodity, or the highest premium luxury element. The problem is when you are in the middle. What I tell my people that premium is actually doesn't mean expensive. It doesn't need to be expensive. Premium is the value. If we play our cards right, premium is the value that we add to our product so that we pass to our clients. So the client appreciates that value and pays us a little more, and that could happen at the low price and it can happen at a very, very high price. Then the quality of the content, the originality of the piece, the uniqueness of the effort, guides the absolute price. But even in absolute price, the premium is not only if it's gold plated or not. Let me say, is - am I delivering something, you mentioned beauty, but could be value added, could be speed, because to different clients in different portions of the market, you will find different definitions of premium.
Spencer Levy
The importance of speed is certainly a characteristic and certainly – hopefully coming out of the pandemic now – certainly had some supply chain issues. Have you worked through them and how do you deal with the speed of getting the furniture into the space issue?
Franco Bianchi
You've just said it very well. The last two years the word speed has been really painful, obviously. Certainly, we have been challenged by supply chain complexity. One of the good things of the Hayworth world is that we don't have a lot of cross-continent purchasing. So in many cases we have done probably better than average. But fundamentally, we had a lot of supply chain instability. Largely driven out in our world by labor, by the complexity in flexing up and down labor. You know, we grew quite extensively and in 2022, we were challenged, many of our business, by the fact that we had the order but we didn't have all the labor all directly in our plant, to a lesser degree in our supply we didn't have all the labor to satisfy the demand. But anyway, so you certainly, mostly passed that and I truly believe that speed is part of this broad picture of consumerism. We are used to now, never, like before as a consumer, to have someone make it easy for us. This idea of I want it and I get it, so how can I want it in a clear, sustained and quick way? And how can I get it as quickly and maybe sometime if I don't like it, can I give it away as quickly? And that's – we all, you know, Haworth is, and I'm sure many others in our industry, we all are pushing that way. We all know what needs to be done. Now, the more tailored you are, the more that speed becomes even more complicated.
Spencer Levy
I've noticed in all industries there are concentrations of some of your good competitors here in the Grand Rapids area. It’s well known as headquarters of a lot of furniture companies.
Franco Bianchi
I don't know who they are.
Spencer Levy
We don't know who they are. But there's also in manufacturing, in North Carolina as another example. But this clustering thing helps everybody. It creates an ecosystem where you have the ability to leverage off of others. Do you agree with that?
Franco Bianchi
No, absolutely. Absolutely, there's no doubt there's actually, to your point, it is economics 101 that you see it in almost around the world, even in Italian residential design, the residential industry is clustered, though certainly in a very large cluster in Milan. And there's no doubt office furniture, the cluster in West Michigan is very powerful and we have great competitors and I still don't remember the name, but we have great competitors around here.
Spencer Levy
That's great. So let's now talk about the convergence of technology and furniture. We talked about the simple technology of raising and lowering of a desk, but any other examples of how you've integrated technology into your furniture decisions?
Franco Bianchi
This is a great, actually a great question. The impact of technology is very powerful, but actually the way I see it, not that much in the product itself. Technology’s really changed the way that we specify our product, that we facilitate the action of pre-purchase and purchase has facilitated our relationship with our dealers and the amount of information that we can exchange has facilitated the transparency that our dealers have of our manufacturing and sourcing activities. When you get to the product and technology moves at the speed and furniture moves at a much lower speed. So I believe that you have to be careful to integrate too much. So we have to be aware of technology when we design our product. Our product will always be, and more and more is hosted in an environment or has to contribute to create an environment. A work has to contribute to facilitate a work task where technology will be a profound player. But that's very different than, say, that our product needs to significantly change with embedded technology. Because I love to tell you that our clients change the environment at the same speed that they change their PC or their video, their monitor. Unfortunately, they keep our furniture, you know, ten years, twenty years, and they change their monitor every two. So if I embed it, that becomes a problem.
Spencer Levy
Well, we're sitting here in a conference room now with a video screen next to us. We're seeing different advancements in video technology. I've even seen holograms where people are, like, physically sitting next to you virtually. And these are the things that are coming and not saying that your furniture needs to have a hologram.
Franco Bianchi
That’s exactly right. No, but that's exactly right. In the past you had like - from the simple example of cable management and data management are a standard across multiple furniture applications. In the past, the cable management were fundamentally only in panels and well today they have to be everywhere, including lounges. A place to charge your phone and typical example needs to be a lot more ubiquitous today than it was yesterday. So that outlet can not only be in the panel as we usually reported, but needs to be everywhere. Environment needs to be designed, your point about the Princess Leia hologram in Star Wars so we have to create the environment that allowed your point to create that. That put their workers in the best condition to experience that technology. That, as I said, is dramatic as dramatically obviously entered in the space.
Spencer Levy
And yes, the Internet of things.
Franco Bianchi
Right.
Spencer Levy
You mentioned the power cords, and I'm sitting here with power cords all over this desk, but people are looking at utilization and are you creating things that can help people measure that?
Franco Bianchi
Yeah, exactly. We actually partnered with a couple of companies too, because clients pick the technology often as part of their building management system. They're not going to pick a technology that Haworth invents. So we partner with multiple technologies that, for example, embed sensors in furniture and sensors in seating so they can, as you perfectly said it, they can literally know who is there. Or we partnered with companies that allow you to know what is the occupancy is or partner with technology that allows you to reserve your space and reserving your workstation. You can reserve a locker where you're going to put your stuff in a kind of co-working-like or a non-assigned environment in terms of office.
Spencer Levy
You mentioned that you team up with a lot of software and other companies to measure things. Tell us in a little bit more detail what kind of data you're being asked to try to measure and how are you going about doing it?
Franco Bianchi
Yeah, it's actually broadly it's all about presence, about occupancy. But there are a lot more conversations from the most basic. You know, there's a lot of storage. If you ever open the storage and discover that nobody's storing anything anymore and what you store is actually normally not work related stuff. Am I designing this space intelligently? Am I buying the right stuff? Should I have less storage? More storage? And to store what? Do I have the right real estate? Do I have too much real estate? Because when you do observation, physical observation or data driven observation, I discover that 70% of my space is never utilized. And so maybe I can save real estate. These are more qualitative than quantitative applications. Some conference room are not used anymore, up to what I like the most, engagement, where we are at the table often with a design firm collecting all these data: the data that come from the center, the data they come from occupancy, the data that come from observation. And we bring our research in, we bring our workplace artists together with the architect, the designer, and the facility manager, and the real estate team together and together design that future of the office that is not the future is the office is the future of work for that specific client that as that specific culture in that specific location. And when we are there, we move mountains.
Spencer Levy
So inflation, we talk a little bit about the big picture, right? Costs – stuff costs more, labor costs more. And I'm sure many of your furniture assignments are years in the making. How are you dealing with that when you see this massive cost increase in your-your product.
Franco Bianchi
In the two-thirds of offices, we had a couple of interesting years where you said it very well. We work in a B2B environment. Many of us have mid-term contracts, so we have to work harder and to explain to many of our clients why we needed not just a little more but a lot more. I think our industry increased price multiple times in the last 24 months. Costs are significantly higher than 2019. Labor, within all those cost, labor is a constant and inflation of labor is still growing and it is not slowing down. There is basically very little to no unemployment and this puts a lot of pressure on labor and there has been clearly a flight of knowledge workers. So you want to keep your best, you want to pay them and and I want to keep my best.
Spencer Levy
So we talked earlier about ergonomics and that to me is a synonym or certainly a category of wellness, which is a part of ESG; environmental, social, governance, that sort of thing. Tell us how the materials you use and the supply chain length, and other factors play into ESG in the furniture business.
Franco Bianchi
First of all, I actually think that a sliver particularly of the office furniture manufacturer was ahead of the pack in focusing very early on - on LEED, on environmental, on eliminating red label material. So I would say, honestly, I'm not here to talk about every one of my competitors, but I would say a client, an occupier, would find in our industry the average is actually pretty good considering other industries. Within Hayworth specifically, I became CEO in 2005. The very first thing that I did, you know, we are private. We don't really announce any details of the company. The only number that we share once a year is our top line. As I told you, last year $2.5 billion. That's the only number you're going to see at Haworth. At the same time, since 2005, Haworth takes a very transparent, deliberate approach in analyzing how much water we consume, you know, everywhere, how much fuel, and gas, etc., and driving this idea of a journey to decarbonization that we started in 2005 – we continue in a very deliberate way. You know, you go if you have time to, you know, maybe you're going to fall asleep, don't sit on a super comfortable chair. But we issue our CSR reporting once a year with a lot of details and you will see the journey we are in.
Spencer Levy
So can I ask you like a fun question, if I can? What are some of the fun things that you've installed? The funniest, not funniest, but the most interesting thing you might have installed, but something that was like the thing in ‘05 that just doesn't work today?
Franco Bianchi
Well, let me step back. First, the industry has redefined today probably started in their mid-sixties when open plan, you know, the panel system was invented and probably didn't change that much fundamentally until probably ten years ago. I think we have seen more change in the last ten years than we have seen in the previous fifty. And I don't think I'm off. So then in this journey, we have seen what every company has to look for a unique piece of furniture, a way from that panel environment, from their cubicle. And so within that logic, I've seen like armoire that opens up and looks like a workstation. I've seen an armoire that you open up and look like there are beds in it. I've seen a workstation with literally a bed that you can pull out and sleep in it. So I've seen I would say odd ways – you know, there's always odd when it doesn't work but they say odd ways – to create something uniquely and different.
Spencer Levy
So we just talked about how the change in the furniture business last ten years, maybe more than the last 50. Let's look at the next ten years. Where's the furniture business going?
Franco Bianchi
Yeah, I think it's very interesting. So I truly think that the office will look even more and more like this kind of flexible variety, like a high performance hospitality area. People will go to the office not because they have to, but because we're going to create a good reason for them to go there. I believe, as I said, variety will be the key word and the quality. You mentioned before this flight to quality on buildings. I believe that will also be a flight to quality on space because if not, your people will not join. And it will not be just enough to give them the tiki bar or the alcohol at every hour of the day solution. People will look for more and for better. I think flexibility is kind of interesting. We were talking before about business models. I would love for a client to take us up on this idea why we buy furniture, Why I cannot rent you furniture and take it back at the end? It would be better for the environment, would be simpler for you as a client. Why We cannot flexibilize a long term investment and I think is possible. I think our industry is designed for it. And certainly here was the as program today to do it. But honestly, I don't have any takers, so very, very few takers. So I believe we are at the beginning of a big change.
Spencer Levy
Well, there's the concept of rent the runway. You can rent clothing if you want to go rent the runways where I see there is a market or the challenge, of course, is on the back end. What's the resale? What's the re-rent value of a chair unless there's something super unique about that chair?
Franco Bianchi
Yeah, to your point, obviously it’s not like a car. When the used furniture market at cents on a dollar, not like maybe a car, used car. But I believe that if we design product with a true circle economy mindset that we're going to create a secondary market where - we see it today still there and mostly out of Europe, but we have some client that are actually purposely asking us to buy used furniture from us, or they ask us a portion of the buy - being on second hand, you know, perfectly ergonomic, usable, guaranteed product, but not actually virgin, so to speak. I like to think of it as a trend that is going to start then and become more meaningful.
Spencer Levy
So this is a little bit of a side note, but in the backyard of my house where I grew up in, we have three seats from the old Yankee Stadium just sitting there, right. And why do we get them? Because they're three seats from the old Yankee Stadium, right? So there are certain types of furniture and that's technically furniture that has value beyond its functionality.
Franco Bianchi
This is a different conversation but in our residential – to stay with your parallel of the Yankee Stadium – one of our companies, it happens to be Italian, we make products that we say we basically sell for life. So we sell to you a very expensive couch, which is made by hand. And, 10 years out, 15 years out, we have your daughter that wants to fix it, to send us the couch and we clean it up and we refurbish it and send you back. And you will have 200 years from now our couch. Because we sell you a product, but we have embedded in our business model a way to take care of it as long as you want it. And I think it's about eliminating waste. Before recycle, there is reduce and reuse. And I don't like that much reduce because I'm in business. But reuse, I believe is a great opportunity.
Spencer Levy
Great, so any final thoughts, Franco?
Franco Bianchi
I truly think I'm an optimist. The way I say the industry has never changed so much – a moment of a little shake up like, you know, certainly we had in the last couple of years and I believe 23 with industry will probably be a little shake up – a great moment of discontinuation is where I believe great opportunities are formed. So I'm very excited. We certainly have the optimism. I hope that doesn't look like crazy. But I'm very optimistic that moments of change are great business opportunities. Certainly that's how Haworth is approaching today.
Spencer Levy
Great. Well on behalf of The Weekly Take, I want to thank Franco Bianchi, the CEO of Haworth, one of the largest furniture manufacturers in the world, coming to you straight from Holland, Michigan. Franco, thank you so much for joining the show.
Franco Bianchi
Thank you. Thank you.
Spencer Levy
For more, please visit our website: CBRE.com/TheWeeklyTake. We’ll furnish you with links to the research we touched on during the show, namely CBRE’s 2022-2023 Global Workplace and Occupancy Insights Report. You can also look for other insights related to office construction, including CBRE’s Global Fit-Out Cost Guide for 2023, which was the subject of last week's show. If you missed it, you'll find a link to that as well. Once again, our website is CBRE.com/TheWeeklyTake, and archived episodes can also be found on Apple Podcasts, Spotify and other podcasting platforms. Join us again next week for a power topic, literally: an episode on the energy industry and its impact on real estate. For now, we hope you'll share the show and also subscribe, rate, and review The Weekly Take wherever you listen. Thanks for joining us. I'm Spencer Levy. Be smart. Be safe. Be well.
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