Haworth CEO Franco Bianchi wants to go faster

0:03This is Business of Home. I'm your host, Dennis Scully. Every week I'll be speaking with leaders and innovators from all corners of the home industry. My guest this week is Franco Bianchi, the president and CEO of Hayworth. Hayworth began in the 1940s as a maker of office partitions and grew into a commercial furniture giant. But today, the company is also home to a robust portfolio of high-end design brands, including Janice AC, Voltrona Frau, Casina, Luminaire, Heller, and more. I spoke with Franco about what the American luxury landscape is missing out on, the company's slow and steady acquisition process, and why he wants Hayworth to go faster.

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2:27And now, on with the show. Before we dive in and talk about Hayworth and the many brands under that vast umbrella, I want to talk a little bit about your history with the company. You've been with the company for quite some time, came along as part of an acquisition that Hayworth made back in, I want to say, 1992. So tell me about that. Tell me about your arrival on the scene. So yes, I joined AWARTH in 1992. I was part of the team that sold an Italian company called Castelli, then one of the largest in Italy in furniture, to AWARTH. And I stayed a little after the transaction because I had made a lot of the promises around the future of the company that drove the acquisition.

3:20But when all the transaction details were completed, Hayworth asked me, because of my experience, to help them sort out the strategy that they had applied at the European level. And so I moved to the headquarter, then the European headquarter that was in Paris, to help sort out the many acquisitions that they had done. And so Dick Hayworth in 2002 asked me to come to the U.S. And three years into it, in 2005, he was the CEO. He said, okay, what if you become the CEO of Franco and I become the chairman? So in July 2005, I became CEO of Hayworth and I'm still around. Well, and did you have any idea at the time that you, I mean, you were first coming for three years and you thought you were going to go back home, right?

4:23I joke and sometimes I say that a temporary assignment sometimes is the most definitive way to think about your future. Like when DK World asked me, who do you, you know, famous, I have the good news and the bad news. The good news that I like to promote to you, the bad news that if you say yes, you're going to have to stay here quite a bit longer. I was really surprised. But again, I'm very glad that I accepted it. And I think it worked out pretty well for everybody. Let's tell people who may never have heard of Hayworth. It's a remarkable story in that here is an office partition company out of Michigan that grows into a company that, if I recall, did$2.7 billion in sales last year.

5:14and has a remarkable stable of luxury brands and is a huge player in both contract and residential. So tell me a little bit about the history. Yeah, maybe I said, so when I joined here, I always thought that this idea of office furniture was a very remarkable, very honestly successful, but also very unusual way to look at design and at the market. So this idea of, I'll call it a specialty product, you mentioned the workstation, the partition, the panel system. It's kind of an archetype that to a large degree only started in the U.S. And really, I mean, the way in Northern Europe was present in Asia, but really in the U.S.

6:05was kind of the way offices were designed, the way work was organized. And I always thought instead of the way it is, like the rule, that's the way it is, the office, I always thought it as an exception that over time we would have designed around people and not around utilities, you know, around facilities like a panel system is. And so I always thought that was a very, an opportunity of great strength that was driving great success in all the companies. But I always thought that we had to prepare to a market that would have evolved. I've never seen it as the end of the conversation. I always thought as almost like the beginning that that was the strength that we had to become something else, broader and bigger.

7:01Because I always thought that the company was not, you know, if you think about Office Furniture is a vertical application in the horizontal world of design, for lack of a better explanation. I always thought that we had to target this horizontal world and take care of all the vertical that allows that design around the people to become real. So day one, I thought that AWOL needed to broaden its offer, its knowledge, its way to reach with design every type of people in every moment of their life. And the beauty is that mindset allowed us to grow in the office. It allowed us to grow not only on what we call lifestyle, home, hospitality, cars, interior, yacht, etc., retail, but allowed us to grow faster in the office.

8:04And I think these diversification, so to speak, into this world of where the user really matters, where we design for the people, became a very strong asset to bring back into the office and to make our office team a lot more effective. And today, what is the share of the total business that is office and contract versus the share of lifestyle and residential? Yeah, you know that we are private, so we don't really tell a lot of stories. But let's say office is still a majority of our numbers. So the lifestyle is very meaningful, but there's certainly a minority, the smaller part of the pie, of the 2.7 billion pie.

8:56Well, and to your point, it sounds as if the lifestyle did a great deal to inform the office and the contract. That was a beauty. Yeah, what happened is, I would argue, what we always thought, that there's a lot of convergence between how people work, when people collaborate, problem solve, engage each other, formally or informally. They need archetypes, they need applications that are not to be similar from hospitality application. And vice versa, you know, in an hotel or at home, you need having a mindset that look at the world of design in space horizontally has actually been a very effective way to look at any business.

9:50because those big boundaries that maybe were there in the 80s and in the 90s are not there anymore. 2014, you're roughly nine years into your role as CEO. You make a major acquisition and acquire Pultrona Frau, and with that comes Casina and Cappellini and all of that. Tell me what the thinking was there. What was going on in 2014 that made you want to do that? So there are probably two drivers. One is we are out of the major financial crisis, 07, 08, 09, that really reset a lot of our industry. and we have expanded the Hayworth offer to most of the work environment, but we still have not really touched the world of ancillary, the world of design, but particularly of collaborative and hospitality and amenity environment.

10:52And so I think it's clearly the industry is reset. every company is asking, okay, how are we going to restart the growth path that is more sustainable and more effective? And we have, in this journey, in this mindset of designing an intersection of people and space, are looking for designers, external designers, that could help us design in that world and or companies to acquire to play a role in that world and bring that idea back into the office. With that in mind, in 2010, we signed a distribution agreement with Cappellini, Cassina, and Paltona for the Americas, believing that it's a need, and so we started distributing.

11:49And in 2014, you know, they happen to be owned by a private equity company. And the private equity company wants to, you know, sell. And so we become one of the potential suitor and we end up acquiring. So those great brands that we were distributing were all of a sudden available. And that really created what is today our lifestyle. You know, we made a lot of other acquisition after that. Yes. But that really created a real lifestyle. Interestingly, it was the same year that Noel purchased Holly Hunt. And it's unfortunate to see some of the challenges that that brand has been facing recently.

12:33And I want to talk to you about that. But I'm curious to the point of what was going on in 2014. Here's Noel making this, what I assume was a move that they needed to expand beyond office. It sounds like you were feeling the same way. These brands could inform what you were doing in the office space. But no doubt you were also thinking about diversifying and being in other markets. Yes? Yeah, I think also a few, I don't remember now, for a few months later or a year later, I believe Herman Miller acquired Design Within Reach. So I think it was pretty clear that we needed to, I would call it, expand our reach.

13:12We did it because we thought that by, and we still think, by being in lifestyle, we can be a better office provider. I feel sometimes that some of our competitors, I'm not talking about those two, but in general, are running away from the office world. We certainly, we made this acquisition not necessarily to diversify, but to make us better, almost for the opposite reason, to double down on office, like believing that the product, the design qualities to continue to be a leader in the office needed to be broader than they were in the past. And so we needed to surround ourselves with designers that had that different expertise and potentially we need to acquire companies that could give us that different expertise.

14:13Now, forever to overlay to our office strategy, not to create an alternative to our office strategy. That certainly was our intent and is still our intent. That's why I'm particularly proud that when we made those steps, we grew lifestyle, because lifestyle today, I mean, these are public numbers. It's certainly, you know, probably three times larger than it was at that time of the acquisition. But we made the office more successful. That is probably two times larger of the time when we made the acquisition. So our step was not done to run away from office, but to make our leadership in the office more sustainable, sustainable being effective over time and more customer relevant.

15:07I don't know if that makes sense. It does. And I appreciate you saying that because I think many people perceived, to your point, that Herman Miller at the time was buying DWR. Noel was buying Holly Hunt. The message in the market was, are they concerned about the long-term viability of office or are they imagining a slower growth rate in the office space? And then COVID came and we all imagined a slower growth rate in office. And frankly, it's been surprising that office has remained as strong as it has recently. And I'm curious about that and what you're seeing. I mean, COVID has presented a lot of challenges, no doubt.

15:52But actually, COVID in many ways made even more apparent how good some of our decisions were and how successful and resilient was the business that we had built, the strategy that we had created. So, you know, again, our office has grown and is growing and our lifestyle has grown. So, you know, if you think about the highest level, COVID in office has presented this challenge. Okay, we for right or wrong, I think wrong, for probably a year and a half, usually, we told everybody, not only that they had to stay at home, but also we told them that it was just fine, that work could have continued just fine without having them in the office.

16:44which honestly, I think it's a gross superficial message because I believe it's not true. It's maybe true for some profession, for some task. Right. But overall, I don't think it's true at all. And I don't say this because obviously I'm partial. Because I'm running a great big office furniture company. But honestly, I truly don't think it is true because I think people collaborate, problem solve, innovate a lot better when they spend a significant amount of time physically together. So after this time, then we told everybody, now you have to come. Why you have to come back? Because we say so. We have to treat people like adults and we have to create spaces that truly respond, that truly deliver that message of this environment is actually a lot better to do this task than staying at home in your PJ.

17:42And this, to me, speaks to the purpose of our companies. You know, we exist, our office side exists to be a tool in the hands of our clients to make their spaces better, to increase their productivity, to make them, to tailor the space to their brand, to involve, to engage their employees, to give their best at work. That's why we exist. And that's what we should be held accountable for. And that's what I love to do, or I love to try to do. And I think when that is the bar, I believe the office environment has a lot of what you need to grow. Because even if I need a lesser real estate, I would even argue, in particular, If I now say that I need lesser real estate, I need a smarter, better design, more thoughtful office environment.

18:43And so every time people make a change, I think they need us. And I say they need us as an industry.

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19:35Well, another big acquisition that you make is Janice AC, a few years after Ronefraud. And that seems to have been very timely. Outdoor has grown considerably over the years. I'm curious your approach to making acquisitions. It seems as if particularly with Janice C. and even with Voltrona Frau, you very much left management teams in place and let them run their businesses to an extent. Tell me how you think about that because we're seeing today that many of the big acquisitions and many of the big roll-up concepts that people had aren't working as well as they had hoped. That doesn't seem to be the issue for you, and so I'm wondering what you're doing differently.

20:26We try to acquire businesses with a point of view. We spend a lot of time before acquiring with the target to describe what is going to work the day after. In fact, we spend so much time that sometimes the target doesn't like it. And we end up not buying because the other side says, no, I don't agree. I don't want to do that. And, you know, maybe also we are private. Maybe it's easier for us. I don't know. I don't know enough to be dangerous. But so then if we agree on the path forward, we had already enough time to understand the players on the other side. And there is much less of a need of change.

21:18By pre-engraging on the path, we also de facto measure and align with the leadership team. And so that then becomes the day after strategic plan. And everything tends to move more smoothly, more effectively, because we have an alignment day one and the target keeps, for the most part, a degree of autonomy that makes the leader, particularly the best leader, willing to reinvest and stay with us for the long term. And I think this kind of becomes a win-win-win. A win for the big A worth because we deliver the return that the shareholder respect. a win for the individual people because they are satisfied in what they do and a win for the minority shareholder that maybe stay and get an additional reward moving forward on whatever portion of dollars that they've left.

22:28So it becomes a, I mean, that doesn't work every time. Everybody has his own opportunities. But honestly, I think it works more than not. And we are very happy, very proud of the people that, you know, joined Hayworth and maintained their journey with us. I wonder, and I know you don't want to talk about the competition and everything that's going on with these other brands, but it is a fascinating time in that it does seem, Franco, and I wonder if you're looking to make acquisitions in a meaningful way. I mean, I referenced Holly Hunt earlier. Certainly looks like you could scoop up Holly Hunt for much less than perhaps people were thinking six months ago or a year ago.

23:18But it looks as if a great many brands are in play. B &B Italia has spun off Louis Paulson, and it looks like they want to break up that whole strategy. I don't know if B &B Italia is appealing to you. I don't know if there are other brands. But what do you think? Yeah. Yeah, you can appreciate it. I'm not going to make you a list of... Go ahead. Tell me your list. Tell me your list of all the ones you're thinking about. No, but I would say, I think we have, over the years, we have demonstrated that we can be a very effective caretaker. You want to say a very effective developer of brands that are steeped in design and they don't just look...

24:05They are not just kind of enjoying, I call it yesterday, how good of a design they have and not really looking forward. And the family is very committed to our business. The company is doing very well. And so we can do meaningful, significant acquisition. And as always, it takes two to tango, as you say. It's like, you know, the other company want to sell to us. I'm not sure that some of the list that you made that the parent company would really look forward to sell to Hayworth. You know, probably they don't want to sell. They would like to sell to everybody, but they won't. Well, exactly. And I wonder if that's why some of these deals haven't happened, right?

24:52Because they don't want you to be winning or they don't want you to be even more successful. And I wonder if that's what got in the way, perhaps, of some of these. I don't know. I don't know. I don't know. It's too simplistic. And I think we are successful. The beauty is that in our industry, there are a lot of other success. I think we do okay. But there are a lot of other successful businesses. But there's no doubt. We love what we do. I think we have demonstrated to take care of many of these brands very effectively. Most brands that we have acquired are now significantly larger. The managing team has been handsomely rewarded, had an opportunity to play a leadership role, the leadership role that they want to play.

25:41And we, you know, we collaborate. We are very present, but not at the risk of losing the individual leadership quality that we inherited from this team. So it works. And so I think you will see more things like that happening in the future. Yes. So you won't tell me today, but you will tell me that more acquisitions are coming. And part, listen, and part of the reason that more acquisitions are coming is that this recovery in the home industry and in the housing market has taken much longer than people had thought. Or another way of putting it is we perhaps underestimated how much pull forward there was in business from COVID, right?

26:30I think we can all agree that years worth of business was done during COVID that might have taken, I don't know, five years future sales away. I can't tell. How do you think about that? Yeah, honestly, I think you're absolutely right. I don't know if we understand it, but certainly many companies, I think we are still a post-COVID where there's no doubt. If I redo my home, I'm not going to redo it again three years later. Or very few people would redo it again three years later. So there is no doubt. But I also think there is a second element. I think our clients are getting smarter. So I think it's also more difficult to reach them.

27:16And they are smarter. The market is more transparent. Value needs to be charged with a real value exchange. Are we really adding the value that our client is asked to pay for? How are our products? Do they have the content? Part from the great experience, the fluff around it, what I buy as the level of quality, originality, design intent that I'm expecting. I think the client has also become more sophisticated, is becoming more sophisticated by the day. The market has become more transparent. And as you just said, there has been some degree of pull ahead in terms of market needs, which has made the world, particularly of residential, a little more complicated than it was certainly during COVID.

28:19And that is putting pressure and is clearly showing, maybe better than before, the winners and the losers or the one that made the right decision and the one that maybe thought a lot about short-term, you know, milked the situation and didn't quite invest. Well, and we're always waiting. We think in this country we're always waiting for interest rates to come lower and for housing to get easier, but that doesn't look like it's going to be happening anytime soon. Is that something you spend a lot of time thinking about yourself? Do you care what happens with interest rates? Do you care what happens?

28:59I mean, let's say this. Let's say this. I mean, we clearly keep an eye on what's going on, but honestly, I don't. I always thought that, you know, the good old, you know, I'm not inventing anything by saying you have to control what you can control. And I focus on what I can control. I cannot control the environment. I try, you know, we all know that as an entrepreneur, you have to adjust to your environment and define a strategy that fits. And maybe in this being private also helps, you know, play the long game. You know, today we have multiple platforms. You know, our car interior platform has grown very effectively.

29:40Our, you know, residential platform has grown very effectively. Our hospitality. So the beauty is we have enough variety that we can adjust to the different market strengths that by definition are going to be different according to external reason. You know, interest rate being one of them. Sure, sure, sure. And your car interior business has grown. Do you get to have a Ferrari? Peltrona Frou doing the interiors for all the Ferraris? I don't know. Do they give you? I don't know. I would love to own a Ferrari, but I don't. Okay. Well, we'll get that on record, and I'm sure we can fix that. I'm sure we can fix that issue.

30:27But another acquisition that you've made much more recently is Heller. And with Heller, it seemed to be part acquisition and part acqua hire because you wanted to bring John Edelman on board. And much of our audience knows John Edelman from Edelman Leather, his family business, but then, of course, his great success with DWR and just the great energy and insight that he brings to the business. and it seems as if he's got a new great big role within your organization. Tell me about it and tell me what you were thinking in making that acquisition and that hire. Yeah, this is a good example of what I was telling you before.

31:15So there's a brand, a great brand, American brand that clearly covers a niche, but I believe a small opportunity for growth that happened to be owned by a small but mighty team led by a very smart guy, obviously John Edelman. And again, we could not have made that acquisition if we had not an alignment in terms of opportunity for the brand and for him and his team. And I think that's where I'd say most of our agreement are built on a brand strategy, but also on a leadership team strategy. And, you know, we just made the acquisition. And I hope that even, I trust that even after a few months, John appreciates the opportunity to work with his team, with his group, because I found, you know, he's continuing to provide creative leadership into Heller and make sure that the brand continues to grow.

32:30But clearly, his value can be played out even in a bigger way. And that's why you mentioned this great opportunity on our lifestyle brand to help several of these brands grow in the American market, hopefully much faster and in a much more relevant way than they were before, thanks to his leadership quality and his knowledge of the market and his personal, let's say, brand. That is certainly very significant. And that's very much, I would say, just one example of the many. You know, I think, I do believe we don't buy stuff. We also buy stuff, but we try to create, to connect what we buy with a kind of turbocharging the quality of the people.

33:21and the opportunity for the people or for some selected people that come with the stuff. Because the stuff without the people is really not worth much. And that's kind of my view. Yeah, no, it's a great point. And now you've helped me to understand that much better. How you think about acquiring the management and the team that's really built the business is just as valuable, if not more valuable, than just the stuff. To get your point, maybe to play with your words, we know we can acquire the company. But we cannot acquire the people. And if the people are smart, we try to buy good businesses, which really means that the leadership team is made of smart people.