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BusinessWeek: January 11, 1993 |
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Top of the News
SITTING TIGHT,BUT NOT RESTING EASY Knoll Chief Executive Maurice Sardi leads a company famous for museum-quality furniture designs. But one of Sardi's proudest creations in his two years at Knoll Group is a moose--or rather a three-inch lucite block festooned with an image of a smiling moose. The totem, Sardi says, gives the 4,300 employees at the global furniture group "diplomatic immunity." They plunk the creature, representing their gripes, on a conference table as a signal to their superiors that they have a problem that needs working out. With the whimsical moose leading the way, Sardi hopes to unite four diverse companies into a unified Knoll Group. But the company is slipping away from him. The reason: Under pressure from its creditors and investors, Knoll's parent, Westinghouse Electric Corp., announced plans in November to sell the furniture group. Then, citing the depressed furniture market, Westinghouse decided to hang on to the $574 million Knoll for as long as two years. It's also shutting down the corporate cash pipeline into the company. That spells trouble for Sardi. While competitors in the glutted furniture industry gleefully whisper rumors of Knoll's demise, Sardi must persuade clients to enter into long-term, multimillion-dollar contracts. It's a tough sell. Even Knoll admirer Carolyn Hendrie, an architect at ADD Inc., a Cambridge (Mass.) design firm, says she's feeling skittish about recommending Knoll to her clients. "There are other quality products out there," she notes. Somehow, Knoll's vaunted sales force must assure clients that they can count on continued service and maintenance. "You're always worried about spare parts," says Patti Andritz, facilities manager at ICF Kaiser Engineers in Pittsburgh. Pessimistic about Knoll's prospects, Andritz earlier this year switched to Steelcase Inc. furniture. Knoll's fortunes have dimmed in tandem with real estate's (chart). Few new office buildings are going up. The office migration from the cities to the suburbs seems spent for the moment. And free-spending architects and interior designers have given way to cost-conscious facilities managers. The net result for furniture makers: overcapacity, smaller markets, and tighter margins. Industry leader Steelcase announced layoffs in December. Sardi expects Knoll to lose $10 million to $15 million in 1992. `CLAMORING.' Westinghouse's timing could hardly have been worse. In 1989 and 1990, when the $22 billion industry was set to tumble, management was "clamoring for growth," Sardi recalls. A Westinghouse executive vice-president at the time, he embarked on a buying spree. Within eight months he spent $401 million on furniture makers Shaw-Walker in Michigan, Reff in Toronto, and Knoll International. Sardi's challenge was to merge the three acquisitions with Westinghouse's own small furniture business. He had to cut duplicate lines--and closed six factories in the process. Then, he spent millions weaving together manufacturing operations, retooling plants in Toronto and in Muskegon, Mich., and consolidating chair-building in Knoll's sprawling East Greenville (Pa.) plant. Westinghouse headquarters, despite its own troubled finances, "gave me everything I asked for," Sardi says. But Sardi still had to meld four disparate corporate cultures. And that's where the moose came in. He hired a horde of consultants, one of whom inspired him to try "moose management." He got Jim Davis of Garfield the Cat fame to draw the moose. Later, he engaged public-relations shop Burson-Marsteller Inc. to render the story of Knoll into a cartoon video, a medieval fairy tale called The Legend of the Perfect Work Place. Not everyone likes Sardi's moose and movie. "He could have spent that money making a new chair," grumbles one former Westinghouse executive. Sardi admits that the moose and the video cost "big money" but says they're needed to bring the companies together. If the moose actually boosts morale, Sardi will need a whole herd. Half of his top managers have left in the past six months. Now, Sardi must keep his sales force from defecting. "They're absolutely vital," says a former Knoll employee. If they go, Westinghouse may not be able to wait for the best possible price. | |
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