The Merit Corporation I

THE MERIT CORPORATION
Part 1
Family-owned and -operated for three generations, the Merit Corporation manufactured and sold
children’s furniture. John Kirschner, Merit’s CEO and grandson of the company’s founder, was
actively involved with every aspect of the firm’s operations. Now, as he was considering early
retirement in the next few years, he began to think about his legacy for the future.
Merit’s headquarters and the biggest of its three manufacturing plants were located in an
industrial park 10 miles outside of Boston. Merit shared the large six-story building with several
small firms, having its corporate offices on the second and third floors. Employees began work
promptly at 8:30 a.m. and most left before 6:00 p.m. A devout family man, Kirschner firmly
believed that coming in early or leaving late were signs of ineffectiveness. He set the standard
himself, just as his father and grandfather had before him, pulling into the parking lot precisely at
8:30, and, with rare exception, pulling out before 6.
An advocate of “managing by committee,” Kirschner also emphasized development-

from-within and continuous technical and managerial education. Over the years, for example, he
had sent a number of his top people to Harvard’s Advanced Management Program. Merit took
pride in and was renowned for its generous employee benefits; indeed, many companies in the
area used Merit to benchmark their health and pension plans.
Turnover was generally low, and employee morale was high. In a departure from the
company’s philosophy and traditional practice, however, Kirschner had in recent years brought
in carefully selected middle managers from outside the firm and the industry. Some even had
MBAs.
Although Merit held a dominant position in the upscale juvenile furniture market, the
primary driver of its profits, Kirschner believed the company was increasingly vulnerable in one
area: new product design. Traditionally, temporary task forces had handled such work, with line
managers typically spending six months on a new product task force. This rotating system had
been in place since the company’s inception to ensure that all line managers gained experience in
this critical and creative arena. For Kirschner’s own first assignment at Merit, his father had
placed him on a new product development team.
Customers’ inclinations to buy high-end juvenile furniture fluctuated rather dramatically

depending on economic and demographic cycles. However, over the past 10 years, other changes
prompted a fresh assessment of the new product development process. Differentiation was a
critical factor in this business. Consumers were becoming ever more demanding about design,
quality, and safety, and responding to these concerns meant that product life cycles were
shortening. At the same time, manufacturers of household furniture were venturing into the
children’s market. Moreover, an increasing number of low-cost producers from emerging
economies placed tremendous pressure on costs. Consequently, sales had leveled off at
approximately $750 million.
To ensure the company’s continued success, Kirschner concluded that his legacy should
be a vital new products development (NPD) group. After giving the matter considerable thought
and briefly discussing it with his top managers, he decided that radical change was in order. He
would form a group of six to eight people with diverse and even unorthodox backgrounds to
work full time on coming up with viable new product ideas.
If he could find the right people and give them a good deal of encouragement, Kirschner
believed new product development would flourish. Thus, he sought to hire the kinds of people
who could give real impetus to this initiative and began to look for office space to house them.
Although no space was available at that time on the second or third floors, some was available on
the fourth. He felt it was important for the group to have an area of its own.

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THE MERIT CORPORATION

An advocate of “managing by committee,” Kirschner also emphasized development-

Customers’ inclinations to buy high-end juvenile furniture fluctuated rather dramatically

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