Hillenbrand Industries, Inc. History

Company History:

Hillenbrand Industries, Inc., is the largest manufacturer of caskets and hospital beds in the world, and also supplies a variety of health care equipment and funeral planning services. Teamwork and product innovation were key elements in the dynamic growth that brought company revenues to $1.45 billion by 1993. Hillenbrand is among the 300 largest industrial corporations in the United States.

"The first generation starts a company, the second builds it, and the third generation destroys it," recalled August (Gus) Hillenbrand, president and CEO of Hillenbrand Industries, in the Cincinnati Business Courier in 1993. A family friend had offered those words in jest to Hillenbrand when he was boy. "That has just stuck with me all my life ... and that's why we work so dang hard." Indeed, in the mid 1990s Hillenbrand was sustaining a legacy of success which his grandfather, John A. Hillenbrand, initiated in the late 1800s.

John A. Hillenbrand's father, a German immigrant and woodworker, settled in the German-speaking community of Cincinnati, Ohio, before the Civil War. He was soon drawn, however, to the enormous timber stocks of southeastern Indiana. Shortly after moving to Batesville, Indiana, in 1861, the 16-year-old Hillenbrand found himself orphaned with two infant sisters. Realizing that timberland was abundant and inexpensive in comparison to farmland, he abandoned his family's unprofitable farm and began purchasing small sections of woodland. He cut and sold the rich hardwood to the railroads for track ties, and then sold the cleared land to farmers.

Like his father, John A. Hillenbrand combined hard work and ingenuity to create several Hillenbrand family enterprises, including a general store. In 1906 Hillenbrand seized an opportunity to rescue the Batesville Casket Company, a local casket manufacturer, from bankruptcy. He employed German woodworkers, carvers, and cabinet makers to craft his high quality coffins, and used his business acumen to turn the company around. Steady coffin demand, a swelling population, and Hillenbrand's success at increasing his share of the regional casket market allowed the company to realize healthy profit growth throughout the early twentieth century.

Part of John A. Hillenbrand's unique recipe for success was close cooperation with his four talented sons. For example, John W., the eldest son, eventually assumed his father's role as president, and guided company expansion during the mid-twentieth century. George C. became the company's manufacturing genius. His numerous patents and his insistence on continuous product improvement made innovation a Hillenbrand hallmark. Daniel A., the youngest son, is credited with extending the company's reach nationally and, during the late twentieth century, globally.

William A., the second oldest son, vastly broadened the scope of the Hillenbrand operations into the health care field. In an attempt to start a furniture business, he founded the Hill-Rom Company in 1929, during the Great Depression. Determined to set himself apart from other furniture makers, William decided to enter the hospital market. He spent almost a full year visiting hospitals throughout the United States to determine how he could improve furniture in patient's rooms. The end result was his development of the first wood and metal hospital bed, which soon replaced the prevailing white tubular steel beds.

Hill-Rom, a division of Hillenbrand Industries, prospered along with the Batesville Casket Company during the 1930s, and especially during the post-World War II economic expansion in the United States. The company combined high-quality hardwoods, including cherry, mahogany, oak, and walnut, with expert craftsmanship and design to broaden its share of regional casket and hospital bed markets. Importantly, though, it was the companies' completely new product innovations that vaulted them past their competitors.

In 1940, for example, Hillenbrand pioneered the mass production of metal caskets, which became considerably less expensive to manufacture than traditional wooden coffins. The company eventually integrated stainless steel, bronze, and copper into its products. Metal caskets, many of which are warranted against corrosion for 75 years, grew to dominate U.S. coffin sales. By the 1990s, wood caskets represented only 15 percent of global industry sales.

Hillenbrand also led changes in the hospital furniture business. In 1950, for instance, Hill-Rom introduced the first electronically-controlled bed. A slew of advancements followed, such as beds that monitored patients, maternity beds, and special beds for burn victims. The company boasts that it has developed virtually every meaningful innovation in the hospital room furniture and equipment industry since World War II.

Besides high-quality materials and craftsmanship, inventiveness, and family cooperation, other important factors influenced Hillenbrand Industries' success. For example, the company prides itself on a heritage of fiscal responsibility. Prudent management allowed the Hillenbrand brothers to expand the company almost entirely from cash flow instead of debt. Even during the 1980s, when many other corporations were assuming large debt loads, Hillenbrand minimized its debt ratio. The Hillenbrand family retained a 60 percent ownership share of the corporation in 1993.

The company attributes its past achievements to a strong work ethic and a cooperative relationship between management, labor, and the local community. Hillenbrand has poured millions of dollars into the local community, and in 1993 employed about 60 percent of Batesville's 4,500 residents. "If it weren't for the Hillenbrands, this wouldn't be the town that it is," remarked Mary Gauck, a 20-year Hillenbrand veteran, in the Cincinnati Business Courier. "We wouldn't have the YMCA, the swimming pool, or the library." In explaining his company's success, Gus Hillenbrand complemented Gauck's remark: "The work ethic [in Batesville] is phenomenal."

After serving as president of the Batesville Casket Company for seven years, Daniel took the reins from his eldest brother in 1971 when he became chairman of the board of Hillenbrand Industries. In an effort to continue his brother's successful leadership and to parlay the company's numerous competitive advantages into new achievements, Daniel sought to expand Hillenbrand's market presence.

Besides taking the company public in 1971, Daniel led the company into completely new arenas. The company purchased American Tourister, Inc., of Warren, Rhode Island, in 1978. American Tourister was a major U.S. luggage manufacturer with a reputation for producing high-quality, affordable goods. In 1984, Hillenbrand made Medeco Security Locks, Inc. of Salem, Virginia, the fourth company operating under its corporate umbrella. Medeco was a leading producer of high-performance locking devices and security systems.

In 1985, Hillenbrand entered the insurance business when it organized the Forethought Group, Inc. This group of companies was established to provide advance funeral planning services, in the form of insurance policies, through funeral homes. In a bid to increase its health care presence, Hillenbrand also purchased SSI Medical Services, Inc. of Charleston, South Carolina, in 1985. SSI was a leading provider of specialized therapeutic products and services. By 1994, SSI and Hill-Rom were being integrated under the Hill-Rom name.

Hillenbrand's diversification strategy began to pay off in the late 1970s and early 1980s. As revenues multiplied from about $60 million in 1970 to over $325 million in 1980, the company's net income surged from less than $10 million per year to $25 million. Moreover, by 1985 the company netted almost $35 million in income from about $440 million in sales.

Besides new lines of business, Hillenbrand's profit growth during the 1980s reflected the continued success of its core casket and hospital furniture segments. New products and manufacturing techniques allowed both Hill-Rom and Batesville Casket Company to achieve greater market dominance. Hill-Rom broadened its product line to include items such as infant warmers, special stretchers, and nurse communication systems. Its hospital bed offerings grew to encompass a variety of specialty devices, like critical care beds, sleep surfaces for ulcer patients, and birthing beds.

Like Hill-Rom, the Batesville Casket Company increased its offerings during the 1980s to include over 400 products sold to more than 16,000 funeral homes. By the end of that decade, the company was manufacturing caskets in several states, including Kentucky, Mississippi, New Hampshire, and Tennessee. Its Kentucky plant, which employed advanced robotics, was one of the world's most automated metal casket production facilities.

Hillenbrand also developed new marketing techniques during the 1970s and 1980s, emphasizing customer service and satisfaction. The company's sales pitch to prospective hospital furniture clients often entailed a trip to Batesville, a stay at a company farm and conference center, and product demonstrations between rounds of food and drink. Similarly, the company hosted thousands of funeral directors annually at its Batesville headquarters.

As Hillenbrand widened its scope, improved its products, and boosted marketing efforts during the 1970s and 1980s, it also benefitted from favorable demographic and economic trends. The number of annual deaths in the United States rose about 12 percent between 1970 and 1990, resulting in gradual growth in the combined demand for caskets and cremation products and services. Furthermore, U.S. expenditures on hospital beds and other medical equipment rose at a rate of roughly 15 percent per year throughout much of the 1970s and 1980s.

When Gus Hillenbrand replaced his uncle as president and CEO of Hillenbrand Industries in 1989, he presided over the culmination of 83 years of immense growth and prosperity. His grandfather's fledgling casket business had grown into a national corporation with six separate operating companies and nearly 10,000 employees. Hillenbrand's 1989 net income topped $71 million, as revenues vaulted past $870 million, up an extraordinary 98 percent since 1985. Furthermore, the Hillenbrand umbrella could boast dominance of over 90 percent of the entire U.S. hospital bed market and over 30 percent of the total casket business.

In addition to its business accomplishments, the Hillenbrand organization had also achieved success in its local community. Aside from donating money for various recreational and educational facilities and contributing the lion's share of Batesville's operating budget, Hillenbrand prided itself on emphasizing employee satisfaction and personal development. Indeed, the Hillenbrand family was credited locally with having a direct and positive impact on the lives of the Batesville citizenry.

Motivated in part by the prophetic jest of his childhood--that the third generation destroys a company--Gus Hillenbrand entered the 1990s determined to quash that Germanic myth. To boost sales in its casket division, for example, Hillenbrand initiated an aggressive campaign in the early 1990s to expand into its first line of cremation products and services. It also strove to elevate its presence in the African-American and Hispanic burial market.

To jump-start shipments in the slowing hospital furniture market, Hill-Rom focused on the development of niche products. One of the company's most notable achievements in 1993 was its introduction of the first voice-activated control system for hospital beds. Using a new high-tech attachment, a quadriplegic patient, for example, could operate the bed, call a nurse, adjust a television or radio, make a telephone call, or activate a light switch. The system was designed to pick up sounds from only one direction, and can be trained to respond only to the patient's voice.

In 1991 Hillenbrand acquired Block Medical, Inc., of Carlsbad, California, a leading manufacturer of infusion pumps. Block introduced a portable home infusion pump and was experiencing significant productivity gains under Hillenbrand management.

Perhaps Gus Hillenbrand's greatest aspiration was the globalization of Hillenbrand Industries. To continue the 16 percent revenue growth rate that the company had averaged since 1972, he believed that Hillenbrand would have to expand its international presence. In 1991, Hill-Rom acquired French manufacturer Le Courviour S.A., a leading European supplier of hospital beds and furniture. In 1993 Batesville Casket Company acquired leading casket producers in both Canada and Mexico, strengthening its dominance of the North American market, and in 1994 Hill-Rom bought L. & C. Arnold S.G., a major German hospital manufacturer.

Although burgeoning domestic markets and proliferating global opportunities boded well for the company, a few impediments threatened to slow Hillenbrand's momentous growth. Federal proposals for government intervention in the U.S. health care system, for example, meant that technological advancements in the Hill-Rom and SSI subsidiaries might require more extensive government approval before health care providers could purchase their equipment. In addition, the entrance of Michigan-based Stryker Corp. into the hospital bed market posed a potential threat to Hill-Rom's command of that segment.

Hillenbrand jettisoned its lagging American Tourister division in 1993, while its Medeco lock company benefitted from renewed consumer spending and concerns about crime during that year. Late in 1993, Hill-Rom became the target of a federal anti-trust probe. Noting its almost unequaled reputation for integrity, analysts suspected the charges were of little relevance.

Despite minor hindrances, Gus Hillenbrand's multi-faceted growth strategy successfully guided the corporation through the perilous early 1990s. Indeed, Hillenbrand's unprecedented growth and profitability between 1989 and 1993 seemed almost staggering, particularly in light of a relentless world economic recession that lingered into 1993. Sales jumped an impressive 13 percent in 1990 and 10 percent in 1991, to $1.08 billion, and 1991 net income jumped 18 percent, to more than $89 million. In 1992, moreover, net income rocketed 30 percent as sales ballooned to more than $1.30 billion. Explosive growth continued in 1993, as sales jumped 11 percent to $1.45 billion and net income soared 25 percent to $146 million. About 40 percent of the company's revenues came from its funeral-related subsidiaries, while the other 60 percent were derived from health care divisions.

As the company prepared to enter its ninth decade, management was focused on sustaining Hillenbrand's legacy of growth and profitability. Hillenbrand's corporate vision was based on four equally weighted and fundamental principles: niche market leadership, total customer satisfaction, continuous improvement, and individual worth. The company's strong equity position and market dominance added credence to these goals.

Principal Subsidiaries: Batesville Casket Company, Inc.; Block Medical, Inc.; The Forethought Group, Inc.; Hill-Rom Company, Inc.; Medeco Security Locks, Inc.

Further Reading:

• Boyer, Mike, "Hillenbrand Plans to Sell American Tourister," Cincinnati Enquirer, August 4, 1993; "Hill-Rom Aids Immobilized Patients," December 22, 1992.
• Faris, Charlene, "Batesville Casket Co.: The Nation's Largest Casket Manufacturer," Indiana Business, April 1993.
• "Hillenbrand Hospital-Bed Unit, German Company Link," Indianapolis Business Journal, June 28, 1993.
• Larking, Patrick, "Analysts Downplay Inquiry of Hill-Rom Co.," Cincinnati Post, October 19, 1993.
• Lundegaard, Karen M., "At Home with Hillenbrand," Cincinnati Business Courier, June 28, 1993.
• Song, Kyung M., "Indiana Hospital-Bed Maker Is Target of Probe," Louisville Courier-Journal, October 20, 1993.

Source: International Directory of Company Histories, Vol. 10. St. James Press, 1995.