Iowa Biz Cast with Jeff Lorenger, HNI Corporation - 03.19.25

Great, thanks Joe. Thanks for the introduction. Glad to be here on this blustery day in Iowa.

Yeah, right Joe. You are correct. This is a company that was founded — well, actually the three founders, Max Stanley, C.L. Hansen, and H. Wood Miller, started talking about founding a company in '45. And I think it was originally — there's some discrepancies, but we kind of acknowledged '47 as the founding. And the reason I relate back to '45 is because they wanted to found a company because they were worried about, at the time, the boys coming home from World War II, and they were going to need jobs. And so their intent was, we need to form a company so people will have a job. So they didn't even know what they were going to make, but they knew their goal was we need to provide jobs. And so it's an important story because it kind of talks about who we are and who we've been from the get-go, which is it was focused on people, the veterans that were coming home. They started their first name was called HON Industries, and they started with recipe boxes, little metal recipe boxes, and metal kitchen cabinets in the '50s. That's where the company started. Then they expanded into filing cabinets. That was the sole product for many years, is to file paper. And then they expanded further into core office furniture, and it just went from there. And then in the '80s, they got into the hearth market. They bought a business that was in Mount Pleasant, Iowa, also Iowa-based. The company had gotten into some trouble, and the CEO at the time, 50 years in the CEO chair, wasn't a founder but was basically one of the first employees hired, became longstanding CEO. He figured, it's a fireplace, it's a metal box. We make metal, we do metal boxes for filing, so let's get into fireplaces. So that's a little funny story. And today we're still in both businesses, office and fireplaces. And then we just kept expanding through the '80s. And in 2023, we made a large acquisition of a company in Indiana that is also in the office space. And you talk about where we're going to go. We still make file cabinets for paper, but as you well know, the digital age hit. And so what we try to do is we just continue to evolve and look at where the market's going, where our customers are going, what people are going to need. And part of what the Kimball acquisition did is bring us into two markets we've never been into, which is healthcare and hospitality. So that's really the founding. And I think it's important to note too that the company paid profit sharing before they ever paid dividends. And so when they made their first buck, they paid the profit sharing to the members before they started paying dividends to the shareholders. And to this day, we still pay profit sharing and dividends to both. So that's really who we are. And it's a great Iowa company, it's a great story. And we love being in Iowa, and we love the members. We were also called people members before that became kind of a term of art with some people or associates. There were never employees, they were members from the 1950s or '40s.

Yeah, well, there's a couple things. First, I'll stack on it before we get to the current, which is our manufacturing is made-to-order manufacturing, particularly in the office side. So we don't set up and run big runs of similar stuff. It's made to order because it's highly specified: fabrics, finishes, paint colors. And so if you think about that, you have to be pretty flexible, pretty versatile. Number one. Number two, you don't just set up a new line. You have to really do the work and engage the process because new products require new processes. And then you factor in some of the automation that needs to be feathered in, all while running your core business. So that's kind of how we operate. And then to your question around what's been going on, the office has been in a major disruption. COVID hit and everybody scattered for home. And one thing we did is we took that time to improve our business. That's what we worked on, worked to improve the business. Because when you're going 100 miles an hour, sometimes it's hard to make some of those improvements. So we always said, don't waste the crisis. Let's improve the business. And that's what we've been doing. So that's how we kind of dealt with it, and we actually made the business stronger even though the market demand was down. Now what's occurred since then is the market has started to come back to life. People started coming back into the office. It's geographically based to some extent, based on where you're located, size of business. The headline news is really the major metro center core cities, but there's a lot of activity that's going on in other places in the country. And so we've really just been engaging with customers. And it's changing. Individual work sometimes now will be done at home, but the bottom line is companies realized the ability to connect and create and have innovation takes people together. I just was reading an article last night, literally I thought about speaking to you today, and there was a guy at the University of Iowa named Craig Kletzing. He got the largest grant a few years ago from NASA to launch satellites, and in fact they're due to launch here shortly. He unfortunately passed away from cancer in the middle of the project. The whole article is about how the team came together. It's an incredible story. They had people from all over the country, and they did their work there, but they could not put these things together and get them to NASA to sign off on them in space without bringing people together. And so that's really what we're seeing with our customers and clients more and more, realizing that the competitive advantage of having their groups together in the office, structured in the right way in order to do the work as a team, is important. So that's really what we're doing. It's important to the value proposition. And that's the office side. On the fireplace side, to your point, you're right. The housing market, we're kind of a tale of two. Post-pandemic, housing went crazy in the pandemic while office was down. Now office is coming back and housing is kind of in the dumps with interest rates and affordability and whatnot. So we've done the same thing. We've used it to improve the business during this time, continue to invest in the business. That's one thing I would also say about HNI: we're in it for the long haul. We've been around 80 years. We are a publicly traded company, but our investors understand we take the long view. We invest for the long term. And we're starting to see positive signs, green shoots so to speak, with mortgage rates stabilizing. People want to buy houses, family formation, and the supply-demand is still a challenge, but the long-term prospects of housing we're bullish on. So that's what we're doing.

Yeah, look. First of all, we rally around our vision, which is pretty simple. We, as member owners — and we always use that — exist to enhance where people work, live, and gather. Sounds kind of highfalutin, but it's really pretty simple. We are in the office where you work, at the home where you live, and where you gather, whether it be hospitality. I got a train coming through right now, so everyone — hopefully locals will understand, have a track right outside the office. So that's it. It starts with the vision. And then we're guided by some core beliefs that have been around for this entire time. And that stuff is really what makes the culture. And so it's relentless focus on our customers, it's shared responsibility, shared rewards — that goes back to this profit sharing — it's fairness and respect, it's positive impact on the planet, integrity without compromise, and a community for everyone. And those are the ingredients in the core beliefs. And every day people work on living those beliefs out. And one of the things you mentioned is rapid continuous improvement. It's been around forever. It's ebbed and flowed. We've had periods where we've been strong at it, where we've kind of atrophied a bit, but it's always been in the DNA. And so what it really does is it engages people in a team effort to solve problems, and it becomes kind of the oxygen that the organization needs. And it's pretty cliche to say problems are opportunities. There's some version of that floating around almost everywhere, but we really, to our core, live that and believe it. And we admire a problem only in the sense that it gives us something to work on and to improve on. And so that's been with us from the beginning, and it really is another foundational way that we can live out our beliefs through this problem-solving approach. And I would just say that the members of HNI — people ask me this when I first started, I don't talk about it as much anymore, but it's like, what happens if somebody doesn't fit in? Well, that happens from time to time, but our culture is pretty strong and people generally opt in through that process. They see that process, they want to be here. So it doesn't happen very often. But when it does happen, it's not — we're a very Iowa-based, nice company. People just kind of move around you, they just kind of manage around and solve the problem. They don't really get too hung up about whether someone's getting it done or not. And then eventually someone just realizes, well geez, I better get in the game. So it kind of self-medicates. And I really like that about HNI. It's one of the things that attracted me to it, is just culturally it's about getting the work done, the job done, in a way that is pure, as opposed to a lot of pomp and circumstance.

You know, it's a good question. First of all, everybody, what I would say about that, Joe, is just everyone kind of has to know their business and their community. And there's nuances to every community and how people work. So what we do may work, may not work depending on where you're at. But first of all, I would tell you we have a strong internship program just as a base case. We have these other things too, but we hire roughly 100 interns every summer, 70% of which are based in Iowa, so a nice healthy number. And the other thing we try to do, we provide real work. It's to this — you're either on an RCI team, you're solving a real customer problem, maybe not on your own but as part of a team. And so that's what we try to do. And then we try to stay connected with those interns as they depart, go back to school, and we're doing more of assigning work to them if they want to make some money. And it's a good way to stay connected with them. So that's kind of foundational. And then we have apprenticeships. We are in manufacturing. We look at apprenticeships to kind of — we call earn as you learn — and bring people in that can work part-time, earn some money, and learn some of these skilled, high-tech, more automated manufacturing type jobs and see if it's for them. And so the apprenticeship program has been really strong for us. And then project-based learning. We do specific projects with various — even high schools, yeah, and colleges and community colleges — to assign a specific project with a specific timeline and a specific outcome. And that's another different way that we connect with people. They learn about us, we learn about them, and they can make some money. And it's just a really good way to get people exposed to what we do over here in Eastern Iowa. And then externships. We have had teachers. We generally try to have a teacher a semester or every summer, a couple teachers come in and work. And it's a great way for them to get exposure and then go back to the classroom and talk about their experience, which then can maybe feed to some of the other apprenticeships and things of that nature. So that's what we do. Again, I think we've had periods of time where it's been super successful and other times where it hasn't been. But what I would say is consistency in approach in all these programs and being there kind of through thick and thin and staying with the program is what's most important, both for our members internally and for those schools or community organizations that we're connected to.

100%. And it's another way, it's an intangible way that we help also support the community, which is important to us. But it's a two-way street. And it's not for everybody. But look, that's why I say sometimes we'll have years where we're busting at the seams and other times not so much. But it's like everything in business. Sometimes your business is up, sometimes it's down. But the consistent approach and the focus is what's important in this area for us.

Yeah, that's a great question. And in some respects, it hasn't changed, I don't believe. But it's someone who is curious, someone who is agile and open-minded, just has a lot of intuitive kind of curiosity about things. Because there is not a lot of set-in-place jobs anymore like there used to be. It's all team-based, it's projects, and go technology. So being open-minded, being curious, and then the ingredients that you always come back to, which is hard work and communication. I think communication is an area that we look for, whether it be verbal or written. It's hard to be really successful not being able to communicate. So that's really kind of what we look for. People who raise their hand for assignments. And I think that even in today's world, as things have evolved, that's even more important. I would say on the AI front, that's an interesting — I mean, it's crazy. It's a wild west. Our philosophy on AI is experimentation. Test and learn. Have some very structured scenarios where we're working on to see, okay, we think this will work, and then a lot of free-floating trial, just to have people who have what I said, curiosity and want to be involved, why don't you go try this or try whatever you want and come back and we'll have a round table and see if it worked. So we don't want to be too clinical about it at this point because things are so dynamic. So that's kind of been our approach on the AI front. And because it's going to continue to evolve, we've just tried to say, hey, we want to get some tangible outcomes, but we don't know what we don't know. I have many people that do know what I don't know. And what I am convicted in, though, is AI is not a substitute for creativity and the human side of things. And that's why these traits are so important. Because if you have those traits, you're going to be able to get the most out of AI, but yet you're going to need to do your part. And the human side of this is always going to be important. And so I think if you have critical thinking, in your RCI for instance, as I think about RCI, an RCI event is usually — in advance of an RCI, you pull data. You have to get the data so that you can set the goals and task the team and say, okay, here's what we're trying to do this week. Well, that's a classic case. AI maybe you can use AI to more structure the data, get it quicker, get it organized sooner. So that's a way AI can creep into the core RCI process. But yet you got to bring the people in and then work the process. So that's an example in our business how AI and yet the human and teamwork come together to enhance the process.

Well, look, I think it's just — we're in such an ecosystem. We always have them, but it's more important today than ever. The private-public partnerships, community support. We want to give back, and we want to support where we work, where we live, where we play. The ecosystem is so important, and it's now more than ever. And so we think that trying to improve — and we can't do everything — but pick a few key areas that are important to the community and important to our members. That's the other thing. Those two things should hopefully be connected. And a couple areas we focus on are health and wellness and education. Those are kind of the — we try to stay focused in those areas. And recently we've done some big contributions to a local new clinic in Muscatine, new sports complex in Muscatine. You mentioned education, we continue to do that for our members. We also support the universities. We've done projects with UNI and Iowa State. We're in discussions with Iowa right now for something. And so it's just the ecosystem in which we operate, and we want to be a contributor and a positive contributor to that because we clearly benefit from it as well, whether it be the members we employ, the recruiting we do, the services we take advantage of. So we always — it's been since the founding — we want to focus on where our members are at and add to the pie if we can. And so we started a charitable foundation in '85. There was a lot of work done before that, it was just more ad hoc. We tried to get more organized around it. And we meet formally with the foundation, and we take requests and we look at them and they try to fit the charter. Not all of them do. And plus, people like to engage. It's not for everybody, but it's for a lot of people. Our members like to engage in projects that are local. And it's a great thing. It's a key way to keep the cultural oxygen in the room as well. And it's fun to do. I mean, people enjoy it. It brings balance to your life as well and to what we do every day.

100%.

Sure, sure. Well, it does vary a little bit depending where I'm at. If I'm home and I'm going to come in the office, I usually get up, I don't know, six o'clock, 5:30, 6 o'clock. Scroll through a little online stuff, go down, brew the coffee. I'm a coffee guy, so I do coffee. Little Wall Street scan at home, quick breakfast, and then I have about a 40-minute commute. So I usually hit CNBC a little bit, I do BBC a little bit, just catch some world, see what's going on in the world news. And that's really it. That's my routine. One thing I do is I organize. I'm kind of a list maker. So I will organize. I found in this role, prepping is always important to prep, but I can add more value and be more — have a higher quality day or week or month if I stay ahead of things and I'm not running by the seat of my pants. So what I try to do in the morning is say, okay, what do I have today? What do I have tomorrow? What do I have this week? So I can kind of scope out my time. And sometimes I carve out time at home. I'll schedule time at home, kind of like this whole thing, to make sure I don't get interrupted and get that done before I get to the office. And other times, just depends on the meeting schedule and whatnot. So that's really the routine. Coffee, a little bit of newspaper, and a little bit of work to make sure I understand that I'm not — I try not to act surprised when I walk in the meetings and say, I didn't know I was supposed to have this meeting. So a little organization for me goes a long way.

Yeah, look. I sift a lot of it out. But I'm part of our trade association, so I'll read that stuff. I read your stuff. I proved that earlier when we were chatting. I try to stay abreast of things that are impactful to us here in Iowa or in the industry. So I get weekly letters from various groups that I'll scan. Some of it I sift through. I don't do it every week. But it's really pick and choose. But I have more than enough to look at. So I generally look at a few industry pubs and then the national news. That's really kind of where I get my oxygen, so to speak. And then the nice thing about the commute is I can catch up there with the radio station, with satellite radio these days. You can be pretty tuned in going from and to work. You get a little decompression on the way home, but you still can pick up if you missed anything during the day if you were buried in meetings. That's what I generally try to scan the news channels to see if I missed anything.

It is.

Well, this is going to sound — if anybody goes and gets this book, they're going to think I may have lost my mind a little bit because it kind of looks like a kid's book. But it's called The Imagination Emporium. I picked it up at a conference. The guy spoke, a guy's name is Duncan Wardle, W-A-R-D-L-E. He's the former head of innovation and creativity at Disney. And his whole premise — it's not like any other business book that you would look at. His whole premise is imagination. And when we were kids, our imagination would — you'd imagine anything. And then as you go on in life, you get boxed in and you lose some of that, and it kind of dampens your ability to be creative. And it kind of goes through how you can break out of that and do different things the way they did at Disney to not constrain yourself in your imagination, in your creativity. And it's set up in a way with exercises and cartoon characters because it's Disney. And this guy — but it's fascinating to me. When you're talking to somebody and they come up with an idea, you say yes, and as opposed to I'm not sure or we've done that before, you just automatically say yes and then extend it, even if it's kind of a crazy idea, because you don't constrain yourself. So it's a different spin on innovation and creativity than I've ever seen in a lot of the business books. So I think it's hitting the mark for me. It's a very fun and engaging book.

There you go.

You know, I've got a list so long that I'm not caught up to, Joe. And I've got a bunch that I've watched that now are waiting for season. But I like The Diplomat. I liked Landman. And one of the more fun ones I just started again — I didn't realize it had got season 3 — started again, it's called The Wheel of Time. It's more of a fantasy. It's based on books by Robert Jordan. I read them when I was a kid, and Amazon picked it up. And it's a classic case of it's not near as good as the books, but it's a pretty interesting series if you've read the books. If you haven't, my wife's trying to watch with me, she's a bit lost. But there's a bunch of others. There's a lot of good stuff out there, a lot of good content out there depending on what your genre is. But those are — I like The Diplomat, Landman, and I'm doing The Wheel of Time.

Well, look, this is one person's opinion, but I'm a big believer right now in just trying to stay calm. There's a lot of stress in the system, and whether it's all your stakeholders, not the least of which are your members, your employees, for some. You just try to stay calm and control what you can control and focus on what you can control. And if history is your guide, if you got a track record, you can drive right through. And I think that's what I try to do. We all can get excited, and there's a lot of stressors in life, and chaos is kind of the new normal to some extent in the business world. But I just think the number one thing is stay calm and control what you can control. And that's a pretty good recipe no matter what's going on.

No, you know, look. I just think embrace change, whether it's professionally or personally. Change is all around us. It's like I said, it's the new normal. Embrace it. It's the world we live in, and it's not going away. So make it an opportunity. And I think glass half full kind of thing.

Great, thanks Joe. Appreciate it. Happy to do it. Bye.