Breakfast with BIFMA: The 2015 BIFMA Annual Membership Meeting

Once again members of BIFMA turned out in force for the annual membership meeting held at the Holiday Inn Mart Plaza across Orleans Street from the Merchandise Mart. Tom Reardon, executive director of BIFMA, called the meeting to order and introduced interim President of the Board, Dan Tuohy of Tuohy Furniture Corp. The Board elected Mr. Tuohy to complete the term of Lynn Utter, who left the industry at the beginning of the year.

In his remarks, Mr. Tuohy urged BIFMA members to find better ways to communicate the value workplace furnishings can bring to client companies through increased employee engagement and productivity. He said, “What we do as a business matters.” Mr. Tuohy exhorted members to find ways to show their customers that well designed and outfitted workspaces are an investment in a better bottom line and not merely an expense.

A significant amount of research aimed at making that case is circulating among design professionals and the manufacturing community. What we don’t know is the extent to which the research is reaching decision makers in client companies and whether they find it compelling.

Last year in conjunction with IIDA, the association published Design Leveraged, a special report: How smart companies unleash value from their workspaces. In his annual “State of the Association” speech, Mr. Reardon said that dissemination of that research is going well, and he announced the beginning of the next phase of research to complement it.

Mr. Reardon’s presentation also addressed efforts the industry association has made to help members understand and respond to the requirements of California’s Proposition 65, which mandates that manufacturers declare the presence of any harmful chemicals in their products. Prop 65, as it is widely known, contains requirements that are problematic because most manufacturers don’t know the exact chemical composition of all the materials used in all the parts of all the products they produce; in many cases, their suppliers face the same problem.

BIFMA has acted as the advocate for the industry in trying to come up with a rational labeling protocol. But the point of Mr. Reardon’s remarks is that the need for transparency in declaring the presence of any harmful substances is growing and is not going to go away. The urgency in dealing with Prop 65 requirements is that absent appropriate labeling, any product sold into California is a potential legal problem for the manufacturer.

BIFMA is the primary source of statistical data about the size and financial performance of the industry. Its statistical reports have been the go-to numbers for BIFMA members and others wishing to compare the performance of their companies to the industry as a whole and the office furniture industry with other industries and the overall economy. However, Mr. Reardon said they have been less comprehensive than they could have been because fewer than 50% of the members report their numbers. Since the biggest companies regularly and reliably participate, the data is statistically significant, but it could be better.

Here is how it works: companies report to BIFMA, which aggregates the numbers to the industry level, maintaining the anonymity of the companies reporting. At the meeting, Mr. Reardon announced an initiative to be led by Designer Pages president, Chris Taylor, to increase participation by all members in this important activity.

Mr. Taylor presented details of the revised statistical program to be completed by January 2016. Some of the changes include revising the product categories, trying to get better data on vertical markets and geographical areas, and improving analysis of the data overall.

The big change is moving from the current “carrot” program, where companies’ participation is encouraged in order to make the stats better, to a “stick” program wherein companies that don’t contribute their numbers won’t have access to the resulting stats. It’s going to be “pay to play.” It will be interesting to follow how well that works in a voluntary industry association.

Every year, the BIFMA Board and executive staff invite an economist to enliven the annual meeting with charts and graphs and macroeconomic vocabulary words. At the BIFMA Breakfast in 2007, Mitch Stapley, chief information officer at ClearArc Capital, predicted that conditions were right for a very nasty bubble burst. His rather dire warnings proved accurate. So he was invited back, in the hope that this time his prediction might be more positive; and it was.

According to Mr. Stapley, the macroeconomic environment for GDP and industry growth is “good but not great.” Non-residential construction is growing again and corporate balance sheets are fat with cash, in part because the U.S. Federal Reserve has pumped four trillion dollars into the world economic system since the darkest moments of the 2007 – 2008 crash. That policy of “Quantitative Easing” has paid off, but has recently ended. Interest rates are at historically low levels and the job market is growing once again.

So what’s not to like? Headwinds. This is a highly technical economic term meaning there are certain forces that work against the positive indicators. According to Mr. Stapley, even though the job market is growing again, employers are having trouble finding qualified workers as more and more jobs become more and more technical. Also, there is some residual hesitance to part with cash, at both the corporate and consumer level, as a sort of hangover from the crash. And finally, the business cycle is both lengthening and flattening. Translation: growth in the office furnishings industry will be slower than BIFMA/IHS have predicted.

Actually, it doesn’t take an advanced degree in economics to have figured that one out. I haven’t spoken to anybody in the industry who believed the 2016 forecast as generated by the BIFMA/HIS forecast model, i.e. order growth of 8.2% and shipments growth of 7.9%.

In 2014, industry orders grew 3.8% and shipments grew 4.5% over 2013, and most people I talk to are looking for about the same rate of growth both this year and next. As Mr. Stapley said, “Good, but not great.”

Forecast business levels notwithstanding, Byron Morton announced to nobody’s surprise that NeoCon 2015 was a smashing success. Improvements made by the NeoCon team with input from BIFMA members among others were implemented and noticeably improved the moving of people throughout the show, in elevator wait times and other logistical issues.

Mr. Morton’s remarks reflected the general mood of the show in being significantly upbeat. He made no reference whatever to the legendary (mythical?) number 40,000, which in itself made his remarks more credible. He did, however, hint at the sizeable investment Vornado has already made in improvements to the Merchandise Mart infrastructure and showed some renderings of a dramatic grand staircase to be constructed between the south entrance and the second floor.

Mr. Tuohy wrapped the session with a round of recognition and thanks to the all-volunteer BIFMA Board and reminded attendees to put the BIFMA Leadership Conference on their calendars: January 20 – 22, 2016, at the JW Marriot in Austin, Texas.