Enterprise Minnesota Magazine - Summer 2016 by Enterprise Minnesota

WHAT DO STUDENTS THINK ABOUT THE SKILLS GAP?

Helping Manufacturing Enterprises Grow Profitably SUMMER 2016

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Manufacturers used the lessons of 2009 to retrench their companies against outside pressures

A whopping 95 percent of manufacturers who have a formal planning process expect increases in gross revenues and proﬁtability in the coming year. — 2015 State of Manufacturing® Enterprise Minnesota’s expert strategy consultants help manufacturing companies achieve operational excellence and proﬁtable growth.

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SUMMER 2016

READY FOR ANYTHING Manufacturers used the lessons of 2009 to retrench their companies against outside pressures.

WHAT DO STUDENTS THINK ABOUT THE SKILLS GAP?

PATHWAYS TO GROWTH

BAND OF BROTHERS

An ambitious demonstration project enables significant gains for participants.

Four Swanson brothers find big success with fan clutches in Perham.

We asked them.

2 The Students Speak This year’s survey takes questions about the skills gap directly to the next generation.

Better to Buy Than Rent

Movie Magic

The ‘Yucky’ Stuff

“One way to get capacity,” says CEO Anderson, “is simply to buy it.”

Blow Molded Specialties resolved its employee gap at its local theater.

HR professionals need peer exchanges to navigate their growing array of high stress responsibilities.

Visit the Enterprise Minnesota website for more details on what’s covered in the magazine at www.enterpriseminnesota.org.

Subscribe to The Weekly Report and Enterprise Minnesota® magazine today! Get updates on the people, companies, and trends that drive Minnesota’s manufacturing community. To subscribe, please visit www.enterpriseminnesota.org/subscribe. SUMMER 2016 ENTERPRISE MINNESOTA /

bob kill

The Students Speak This year’s survey takes questions about the skills gap directly to the next generation

elcome to the 2016 edition of the State of Manufacturing®, our eighth annual survey research project that charts what Minnesota’s manufacturers think about the challenges and opportunities facing their companies. As in other years, we interviewed a statistically balanced sample of 400 manufacturers all across Minnesota, supplemented by a series of focus groups.

This year we added an intriguing tweak to the focus groups. Speculation about the skills gap and other workforce-related issues typically dominate the focus groups’ attention: Where is the next generation? Why aren’t more students attracted to manufacturing? And what can manufacturers to do to fix this situation? So this year, instead of merely speculating, we thought we’d take the 2

/ ENTERPRISE MINNESOTA SUMMER 2016

question right to them. Three of this year’s 19 focus groups were composed exclusively of students currently enrolled in school programs that will lead them into manufacturing careers. It couldn’t have gone better. With the help of three very cooperative educational institutions, we impaneled groups at

So this year, instead of merely speculating about students’ interest in manufacturing, we thought we’d take the question right to them. Dunwoody College of Technology, Alexandria Technical and Community College, and Anoka Technical College— each representing a broad spectrum of the kinds of people who will be running the next generation of manufacturing companies. With surprising candor, the students confirmed some notions we brought in to the conversations. Educators and parents, for example, still need to be tutored about the satisfying career opportunities that can be found in modern manufacturing. “Your teachers stress for your whole life that you need to go to a four-year (school).” “We’re all told to go to college and become white collar office workers.” “There was a stigma attached…to guys who work in the metal shop.” On parents: “My mom (said) you’re just going to be a dirty welder.” What does she think now? “She’s seeing it a lot better but she’s matured also.” On their prospects: Not one of the full continued on page 6 Bob Kill is president and CEO of Enterprise Minnesota.

Helping Manufacturing Enterprises Grow Profitably Publisher Lynn K. Shelton

Custom Publishing By

Contributing Writers Kate Peterson Photographers Jeremy Petrick

Contacts To subscribe subscribe@enterpriseminnesota.org To change an address or renew ldapra@enterpriseminnesota.org For back issues ldapra@enterpriseminnesota.org For permission to copy lynn.shelton@enterpriseminnesota.org 612-455-4215 To make event reservations events@enterpriseminnesota.org 612-455-4239 For additional magazines and reprints contact Lynet DaPra at lynet.dapra@enterpriseminnesota.org 612-455-4202 To advertise or sponsor an event chip.tangen@enterpriseminnesota.org, 612-455-4225

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2016 SPONSORS

Platinum – Statewide Sponsors • • • • •

Bremer Bank Granite Equity Partners Gray Plant Mooty Marsh & McLennan Agency Minnesota Department of Employment and Economic Development (DEED) • Risdall • RSM

Gold – Allied Sponsors

• Blandin Foundation • Great River Energy • Southern Minnesota Initiative Foundation

Silver – Executive Focus Group Sponsors

• Alexandria Area Economic Development Commission • Alexandria Lakes Area Chamber of Commerce • Alexandria Technical & Community College • Anoka-Ramsey Community College • Anoka Technical College • Bremer Bank • Clow Stamping Company • Enterprise Minnesota Peer Councils (Monticello & Owatonna) • Gray Plant Mooty • Minnesota Precision Manufacturing Association (MPMA) • Pine Technical & Community College • Ridgewater College • Risdall • RSM • Saint Paul Port Authority

• Southern Minnesota Initiative Foundation (Mankato, Owatonna & Rochester) • W.P. & R.S. Mars Co.

Silver – Student Focus Group Sponsors • • • • • •

Alexandria Area Economic Development Commission Alexandria Lakes Area Chamber of Commerce Alexandria Technical & Community College Anoka-Ramsey Community College Anoka Technical College Dunwoody College of Technology

Bronze – Reception and Rollout Sponsors • • • • • • • • • • • • • • • • •

Absolute Quality Manufacturing Central Package & Display Crystal Distribution Inc. Delmar Company FAST Global Solutions G&A Partners GVL Poly HEADWATERS Search Mactech, Inc. Minnesota Agri-Growth Council Pequot Tool & Manufacturing, Inc. Productivity Inc. Rochester Community and Technical College Tolerance Masters Ultra Machining Company (UMC) USDA Rural Development Von Ruden Manufacturing, Inc.

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Better to Buy Than Rent “One way to get capacity,” says CEO Anderson,“is simply to buy it”

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t the outset of 2015, Dane fertilizer equipment for the agricultural Anderson was facing a challenge industry. in workforce capacity. “The skills of the existing employees Anderson is CEO of what in Windom, were a perfect overlay for was then WASP Manufacturing, a what we do,” Anderson says. “We needed Glenwood-based manufacturer of nonwelders, we needed painters, we needed powered ground support equipment for assemblers, and we needed fabrication the airline and the air cargo industry personnel. That’s a perfect skill set they and a manufacturer of conveyors for the parcel delivery industry. Based on sizzling revenues in those two target markets, WASP had notched an average annual growth of 25 percent in between 2012 and 2014 and would end up hitting 35 percent in 2015. Anderson, a CPA with almost four decades of experience in manufacturing management, knew that finding that capacity would greatly outstrip anything he could accomplish with job fairs or improving his relationships with local tech schools. He needed help now. His other alternative, he says, was to outsource work to other local ag producers that had production capacity in the down-market agriculture. “But the profitability of Dane Anderson, CEO of FAST Global Solutions outsourcing is greatly diminished because you have two profit margins,” Anderson says. In other words, outsourcing would have enabled already had.” WASP to keep up with demand, but not The combined companies—now make much money for their efforts. known as FAST Global Solutions—have But there was another alternative: grown to nearly 670 employees this year. “One way to get capacity” he concluded, The merger, which included 200,000 “is to simply buy it.” square feet of FAST facility space in both So last May, WASP solved its Windom and Mountain Lake, Minnesota, workforce challenge by acquiring one resulted in more than 500,000 square feet of the potential outsourcers—Windomof workspace spread across five facilities based FAST Manufacturing, a 26-year in Minnesota, Nebraska and Illinois. old producer of sprayers and liquid All told, as part of that acquisition

PHOTOGRAPH BY JEREMY PETRICK

Manufacturing Makes Minnesota Thrive

Anderson invested more than $12 million in large-format metal manufacturing equipment to provide increased capacity and faster order turnaround times. Among the new production machines are flat sheet lasers, robotic welders, a tube laser, machining centers, heavy press brakes, and a continuous motion, state-of-theart powder coat paint line. He says the shared technologies and machinery will increase capacity for both companies. “The verdict is that the acquisition did everything for us that we wanted it to do,” Anderson concludes. “We would not have been able to generate that capacity internally, slowly hiring additional personnel. We increased our capacity by two-thirds.” It also diversified his product portfolio by adding agriculture to ground handling and packaging. Anderson’s primary strategy now is more diversification: geographical, market, technology, and seasonality. He says greater attention to European markets will give the company greater stability in the face of market disruptions. “Sixty percent of our total markets in agriculture, the parcel conveyor, and the airline industry are outside of North America.” He expects additional acquisition opportunities to appear in the slowing ag market. He’s looking globally to add capacity in eastern Europe, to serve agricultural markets, which include million acre farms in Russia, Ukraine, Kazakhstan. “We also need capacity in eastern Europe to serve our conveyor markets. UPS, FedEx, DHL all have very large operations in Europe.” “We’d like to expand the level that we serve them in the Europe,” he says, adding that the company will consider acquiring a company in eastern Europe sometime in the next 18 months. “We’ll actually give ourselves a much better chance to grow. Given our goal of continuing to grow, geographic diversification is really required.”

Manufacturing is key to Minnesota’s economy. It employs over 800,000 Minnesotans and generates $19.5 billion in payroll. To support this sector, we: ● Offer financial incentives. Nearly 80 percent of Job Creation Fund recipients are manufacturers. ● Provide regional analysts with expertise on the state’s regional economies. They provide training and labor market intelligence. ● Promote “Made in Minnesota,” our manufacturers’ supply chain database. It enables companies to find — and be found by — in-state suppliers. Job Creation Fund. Regional analysts. Made in Minnesota database. Call it a Minnesota manufacturing “thrive-fecta.”

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continued from page 2 time students doubted that good careers awaited their graduation (most already had received job offers); their only worry is about which one to choose. “I’m being trained for things I never even thought of.” On their schools: “If you’re willing to put in the work, they’ll make sure you learn.” “Teachers are willing to take the extra step…” “Everything we learn we will use every day on the job.” On what manufacturers can do: “Offer

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training. Offer internships…help with financial reimbursement.” The Dunwoody students embodied a broad spectrum, including women, military veterans, and college graduates. The Alexandria students were younger and eager, with a larger cohort of muchvaunted (and diminishing) farm kids. The makeup of the Anoka group differed a bit which in some ways made it more compelling. It consisted of already-working employees of local manufacturers who were attending twiceweekly afternoon training sessions on manufacturing basics. Many (not all) were looking for ways to improve and grow

professionally, although probably not through traditional paths. I encourage you to read the transcripts. Each in its own way is a fascinating read. You can pick up a book at one of our rollout events or by requesting one directly from us. Information can be found at www.enterpriseminnesota.org. All told, this was an interesting and valuable exercise, one that we’ll continue in the State of Manufacturing® 2017. Thanks. I say this every year because it is always true. The State of Manufacturing® would not succeed without the selfless collaboration of so many organizations and individuals. As always, we’re all grateful to our sponsors, whose financial backing helps us defray the considerable costs of the event and whose insights and ideas always contribute to a meaningful questionnaire and whose individual networks always plug us into a new set of thought leaders. Pollster Rob Autry has conducted the survey in each of the eight years. Rob, founder of Meeting Street Research, is one of America’s premier pollsters. We’ve drawn great credibility from his creativity, patience and keen analytic skills. And Tom Mason, our long-time consultant, has also been with us from the beginning. He has now conducted more than 120 State of Manufacturing focus groups over eight years. Tom, whose company produces Enterprise Minnesota magazine, also publishes the State of Manufacturing book, along with creative director Scott Buchschacher. A special thanks goes to Lynn Shelton, the director of marketing and communications at Enterprise Minnesota, who has managed the State of Manufacturing project since it was nothing more than a concept. It is impossible to overestimate the amount of effort that she and her staff—Lynet DaPra, Constance Fantin and Chris Morse—devote to quietly completing the detail-laden schedule of tasks that comprise the various elements of this project. Finally, I want to extend our sincerest thanks to all manufacturers who make this project possible: the executives who take time out of their busy days to talk to our pollster, the many people who participate (often year after year) in our focus groups, and those of you who will attend the many rollout events in which we present and discuss the results.

Signing Day South Central celebrates incoming class with National Technical Letter of Intent

In an effort to solidify the commitment of incoming students, South Central College hosted its first National Technical Letter of Intent Signing Day in February in two simultaneous events on the college’s Faribault and North Mankato campuses.

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About 75 students attended the ceremony between the two campuses, according to Marsha Danielson, senior associate to the president for global outreach and strategic partnerships at the college. The event was conducted in conjunction with the National Coalition of Certification Centers (NC3) which designed the event to emulate the NCAA’s National Signing Day for athletes who commit to play sports in college. It was designed to honor students who are entering a technical field and to celebrate strong technical careers. “It was an awesome event,” Danielson said. “We wanted to show students that their decision to attend North Central was every bit as important as students who choose four-year schools. “Students said they had no idea that so many people cared about their industry,” she added. Local business executives lined up behind each student as they signed. Event planners were also surprised at having to find language interpreters at the last minute to accommodate parents who did not speak English.

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The Next Generation Itasca area TeenWORKs career explorationprogram mock interviews 2015

The MHTA’s SciTechsperience program creates high quality internships at manufacturers statewide

Expanded opportunity. Resilient economies. More at www.ruralpulse.org

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Josh Kuledge, a mechanical and industrial engineering student at the University of Minnesota-Duluth (UMD) is one of hundreds of students over the past four years who have received scholarships through the SciTechsperience program at the Minnesota High Tech Association. His internship is with Talon Innovations, a Sauk Rapids-based precision machining and contract manufacturer that provides components to the semiconductor, medical, aerospace and general industrial markets. A fast growing company, it has grown from 62 to 200 employees in just three years.

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/ ENTERPRISE MINNESOTA SUMMER 2016

he SciTechsperience internship program, funded by the Department of Employment and Economic Development, is providing hands on experience to the next generation of manufacturers just when the industry is starting down a daunting skills gap. The program was created in 2011 by the Minnesota Science and Technology Authority, housed within DEED. Current funding will provide 450 matching grants over the next two years to small Minnesota companies offering paid internships in science, technology, engineering and math (STEM) industries. The grants, capped at $2,500, help employers cover 50 percent of an intern’s wages. In 2015, more than 900 students and 182 small companies applied to the SciTechsperience Internship Program, according to the MHTA. SciTechsperience connected 139 students to paid internships across the state. Twenty-eight percent of internships took place in Greater Minnesota

companies. Student applicants and interns came from a variety of higher education institutions with the largest share (45 percent) coming from the University of Minnesota system. For every $1.00 invested by the state in matching grants, $2.64 was paid in wages to interns by small and growing private companies. “We do get a fair number of repeat companies,” says Becky Siekmeier, the SciTechsperience internship program director, but we also get a lot of new companies every year as well. “We definitely bring people back and then we always bring on additional companies because we have to. We have to keep growing. “But,” she adds, “because we deal with a lot of smaller companies, some companies don’t come back because they get bought out by somebody else or they grow to be too large for the program. Either one of those scenarios is a positive result. That means the companies are growing.”

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To be eligible, students must be: • A Minnesota resident or attending college in Minnesota; • 18 years of age or older; • In good academic standing (2.50+ GPA); • A college junior or senior (at least 60 credits completed) or technical or community college student (at least 24 credits completed); • Currently enrolled in an accredited U.S. college and pursuing a qualifying science, technology, engineering or math degree; • Legally eligible to work in the U.S. Company eligibility includes: • For-profit companies with a physical presence in Minnesota; • Size limits are based on the number of employees worldwide. Companies located in the seven county metro area must have 150 employees or fewer; companies located in Greater Minnesota must have 250 employees or fewer; • Offer an internship that provides hands-on industry experience. Qualifying internships must enhance students’ educational experiences and offer insightful, practical, first-hand training that, when leveraged with their college education, would help them achieve full-time employment in their field of study after graduation; • Internships must have a focus on STEM. Ideal internships will include tasks such as analysis and problem solving; product development, design, testing, implementation and troubleshooting; research; and field or laboratory work. An August 2015 survey of participants conducted by MHTA found: • 83 percent of respondents are working in a STEM field of employment; • 86 percent of those working in STEM stayed in Minnesota; • 21 percent were still working at the company where they did their SciTechsperience internship; • 100 percent of respondents who are working said their SciTechsperience internship was instrumental in obtaining the position they have now.

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Movie Magic Blow Molded Specialties resolved its employee gap at its local theater

Doug Von Arb

Governing and Growing Companies in Greater Minnesota.

www.GraniteEquity.com 10

/ ENTERPRISE MINNESOTA SUMMER 2016

fellow member of the Foley Chamber of Commerce last year approached Doug Von Arb, president of Blow Molded Specialties, with an idea to help recruit employees. His idea? A 30-second video ad. His venue? Not the Internet. The local movie theater. Von Arb was willing to listen. Operating a $16 million plant with 90 employees in rural Foley, he was always scouring the area to find people. “It was difficult to find good folks,” he says. When he first arrived at Blow Molded in 2011, the company was using a temp-tohire model to recruit new employees, but “they just didn’t stick around,” he says. It was also too ambitious to think he’d find people with experience in blow molding, the process the company uses to make hydraulic tanks and fuel tanks for heavy industrial equipment and over-theroad trucks. He acknowledges that those people are rare. “We were looking for people with manufacturing experience who had worked in any kind of manufacturing— someone we knew would show up every day and would understand how manufacturing systems work.” He was always on the lookout for both entry-level people as well as some more experienced folks. “We’d hire whoever we can find,” he says.

So he was more than a little interested when he heard that for about $3,500, his ad would appear before every feature showing for an entire year at the Brickhouse Cinema, Foley’s local theater. He placed the ad and before long his “help wanted” issues disappeared. “It was absolutely a good investment,” Von Arb says. “We’re going to do it again next year.” “At the moment we are not hiring anyone,” Von Arb says, in part because business has recently slowed down “But we still want to continue to get our name out there. We don’t have any customers in the local area, but we want to make sure people know who we are. We’re going to grow. We’re going to start hiring again. We want those folks to know where we’re at. We need to get the word out that we are here and that you don’t have to drive very far to go to work.” An additional benefit to the ad-buy was helping to give his company better name ID in the community. “People didn’t know we existed,” Von Arb says. “I’d go to downtown Foley, and I’d ask people, ‘do you know where Blow Molded Specialty is?’ They’d never heard of it. ‘We’re in the industrial park in town,’ I’d say. They’d answer: ‘Foley has an industrial park?’”

Four Questions Doug Loon, president, Minnesota Chamber of Commerce

he Minnesota Chamber represents more than 2,300 Minnesota companies, 130 local chambers and 65 business trade associations at the Minnesota Legislature on a variety of issues that impact Minnesota’s economy. How did your longtime experience as a senior executive at the U.S. Chamber prepare you for heading up the Minnesota chamber? It’s a little different, but there are a lot of similarities, too. The obvious difference is that the Minnesota Chamber is very much focused on state policy, state initiatives and state programs. It is a comfortable place for me. I’ve been a student of the legislative process here on a personal level and a professional level. Having lived here 17 years, I’ve observed and participated in state issues. Things move pretty swiftly here, especially with the relatively short 2016 legislative session. Compared with Washington, that’s lightning fast. We believe we’ll contribute to getting some things done that will be positive for and improve Minnesota’s business climate. We’d like to reduce the statewide business property tax and increase investment in economic and physical infrastructure. The Minnesota Chamber and our local Chamber Federation partners recently released our inaugural Minnesota Business Benchmarks, a collection of key economic indicators that measure Minnesota’s competitiveness and the health of the state’s economy. The collective task of policymakers and business leaders is to build on the state’s strengths and minimize its weaknesses to make Minnesota ready for the future – ready for change and ready to grow. Similarities? Our memberships are similar. Our fundamental philosophies are very similar. Our issues, while different, parallel the broad mission of promoting

INNOVATIONS

a stronger economy and creating economic opportunity. The neat thing is that a lot of the same things that are unique about the State Chamber are also unique to the U.S. Chamber: We have relationships throughout the local chamber and trade association communities. We’re both organized to develop policy at the grassroots – beginning with our members, then advancing through our committees and on to our board of directors. Some manufacturers are increasingly astute about the need to interact with elected officials. What advice do you have for them? I speak about this frequently. It is important that legislators understand the nature of your business. First and foremost, invite your legislators into your business. Give them a tour; sit down and share your challenges with regulations and taxation. One of our board members told us about hosting eight legislators. He discovered that six had never stepped foot in a manufacturing plant. That alone represents a call to action to the business community, to chambers and to manufacturers to reach out to their elected officials. Legislators are curious by nature. They want to understand the economic building blocks of their local communities. Bring them into your business and demonstrate how effective you are in producing products, reaching customers, providing employment – all things that are important to their community. All legislators, regardless of their party affiliation, should be interested in understanding the needs and interests of manufacturers. What issue has surprised you most as you take over this position? The workforce challenge, the skills gap, the talent pipeline. MnSCU Chancellor Steven Rosenstone calls it the talent crisis. It’s partially a demographic challenge as more and

Doug Loon was named president of the Minnesota Chamber of Commerce last September. His career includes 20 years at the U.S. Chamber of Commerce, 17 of those in Minnesota where he managed the Midwest Region as well as the Chamber’s seven regional offices that provide political and grassroots outreach across the nation. He also spent 10 years in various senior staff positions in the United States Senate. He is married to State Representative Jenifer Loon, who represents Eden Prairie.

more Minnesotans are retiring and population growth is slowing. Our goal is to put educators in constant contact with the business community to better meet the needs of businesses today and in the future. We’ve launched a pilot project in Winona – the Business Education Networks – and are trying out a number of ideas on how to create more frequent conversations in a community that faces an extreme shortage of manufacturing workers. We plan to take those concepts to other communities through our chamber network. We also need to figure out ways to attract individuals to our state, and move them around our state, so we have a fresh and steady stream of workers to meet business needs. SUMMER 2016 ENTERPRISE MINNESOTA /

E X C L U S I V E

P O L L

READY Anything

FOR

Manufacturers used the lessons of 2009 to retrench their companies against outside

pressures

By Rob Autry 12

/ ENTERPRISE MINNESOTA SUMMER 2016

innesota’s manufacturers are feeling remarkable levels of across-the-board confidence in the financial prospects for their companies in 2016, while simultaneously revealing growing concern about the U.S. economy. For the third consecutive year, a whopping majority of manufacturing executives—90 percent—report confidence in the financial futures of their companies in 2016, one point higher than we saw in last year’s survey and the highest level we’ve seen in the eight years we’ve conducted the State of Manufacturing® survey. We interviewed 400 executives during the last two weeks of February and first week of March. Enterprise Minnesota supplemented this objective research by conducting 19 focus groups of manufacturers throughout Minnesota during roughly the same period. Manufacturers expressed amazing exuberance even as their confidence in the economy sits at its lowest levels since 2012. A near majority of manufacturing executives (48 percent) predicts the economy will remain flat, six percentage points higher that last year. Thirty-two percent believe we’re heading into a year of economic expansion, while the number of manufacturers who believe we’re heading into recession is at 15 percent, twice where it was two years ago. Significantly, nearly eight in ten of the respondents who believe the U.S. is recession bound think their companies are well positioned to handle it. Even among those who expect 2016 to be a flat economy, 26 percent expect their profitability to increase and 32 percent expect their gross revenues to increase.

Significantly, nearly eight in ten of the respondents who believe the U.S. is recession bound think their companies are well positioned to handle it.

SUMMER 2016 ENTERPRISE MINNESOTA /

One might speculate as well that manufacturers are still mindful of the scars and lessons learned in the unforeseen recession of 2008-09.

Notably, very few expect either of these key metrics to decrease. Thereâ&#x20AC;&#x2122;s a decent level of optimism even among those who think this is going to be a flat economy. But one might speculate as well that manufacturers are still mindful of the scars and lessons learned in the unforeseen recession of 2008-09. Almost 40 percent of manufacturers say their companies operate from a formal 14

/ ENTERPRISE MINNESOTA SUMMER 2016

strategic growth plan, almost exactly the same as last year. The highest rate of formal strategic growth plans is among companies with more than 50 employees (69 percent). Smaller companies are getting on board, however. Thirty-five percent of companies with 50 or fewer employees now operate from a plan, up five points from 2015. As we saw last year, companies that

operate from a strategic plan are more confident about their financial prospects than those that don’t. They are more confident in their company’s overall financial future (95 percent from 87 percent), more likely to expect increases in gross revenues (53 percent from 38 percent) and more likely to expect increases in profitability (43 percent from 32 percent).

KEY CONCERNS

The cost of health care coverage again tops the list of concerns faced by manufacturers (51 percent), followed by government policies and regulations (41 percent), attracting and retaining qualified workers (32 percent), and economic and global uncertainty (29 percent). Potential weaknesses in the economy and lower sales jumped nine points (to 32 percent) as a top challenge that might negatively impact future growth. Topping that factor, but diminishing in concern are “unfavorable business climate” (40 percent, down from 43 percent) and “rising health care and insurance costs” (34 percent, down from 41 percent).

THE WORKFORCE

Attracting workers remains a difficulty, although slightly less so than what we saw in last year’s survey (66 percent, down from 71 percent). Twenty-nine percent say it is “not difficult” to attract qualified candidates (down 26 percent from the recession-era high of 55 percent). Metro-based companies are less concerned by a shortage of qualified workers (63 percent, down from 70 percent), while Greater Minnesota firms retain last year’s urgency (71 percent, compared to 72 percent last year). Greater Minnesota concerns about the skills gap have declined for the third consecutive year (36 percent, down from a 2014 high of 43 percent). Metro companies remain consistent at 29 percent, up from 28 percent in both 2014 and 2015. Among companies that have difficulty attracting qualified candidates, most still say “applicants do not have the needed skills or education,” (52 percent, down from 62 percent), followed by “lack of applicants or interest” (42 percent, down from 48 percent). The lack-of-applicants challenge was markedly higher among Greater Minnesota companies (52 percent, 18 points higher than metro), while “needed skills” ranked equally between

metro and Greater Minnesota companies (53 percent, 52 percent). Other workforce-based concerns include: § Manufacturers’ greatest need continues to be employees with technical training and experience (38 percent, down from 39 percent) while the need for entrylevel employees has jumped five points to 30 percent.

§ The impact of retiring Baby Boomers is only a modest concern for manufacturers (28 percent expressing “significant” or “modest” impact, down from 29 percent), with larger firms expressing greater concern (44 percent). § Machine operators (32 percent) and assemblers (25 percent) top the demand of employee types in 2016, as in 2015. SUMMER 2016 ENTERPRISE MINNESOTA /

About the pollster Rob Autry, founder of Meeting Street Research, is one of the nationâ&#x20AC;&#x2122;s leading pollsters and research strategists. The Meeting Street Research team has 25 years of combined public opinion research experience and 2,000 research projects under its belt. He has conducted all eight State of Manufacturing surveys. Before founding Meeting Street, Autry was a partner at Public Opinion Strategies.

Demand for both is higher among nonmetro manufacturers than metro manufacturers (34 percent to 30 percent for machine operators and 28 percent to 23 percent for assemblers). An overwhelming number (95 percent) of manufacturers expect the size of their workforce to stay the same (66 percent) or grow (29 percent) in the coming year, 16

/ ENTERPRISE MINNESOTA SUMMER 2016

with the greatest growth potential at companies with over 50 employees (50 percent). There continued to be overall growth in hiring over 2015, with 28 percent showing growth and 61 percent staying about the same, both exactly the same numbers as last year. Executives who predict static growth attribute it to automation and efficiency (29 percent) or â&#x20AC;&#x153;not expecting additional

business” (24 percent). Succession. Companies statewide feel fairly well prepared to handle the departure of managers or supervisors (73 percent) and skilled workers (75 percent), but show much greater concern about managing the departure of a CEO or owner (53 percent are well prepared). Institutional Collaboration. About one-third of companies (34%)—and 75% of companies with more than 50 employees—collaborate with local education institutions for workforce training or other programs. Wages. Sixty percent of companies statewide expect the average wages and benefits to increase over the next two years, while 36 percent expect the amount to stay about the same. Employee Development. About a third of manufacturers (32 percent) say they are currently involved in employee development or leadership training, including an overwhelming majority (75 percent) of companies with more than 50 employees. Most companies expect their investment in employee development to stay the same (72 percent). Just 20 percent say their companies maintain a formal structured leadership development program for supervisors and managers, the same percentage as 2015. This again is paced by companies with more than 50 employees (50 percent). Trade. The percentage of firms shipping more than ten percent of their product abroad is down for the second consecutive year at 15 percent, down eight percent from 2014. Metro firms lead the state in shipping more abroad with one out of five firms (19 percent) saying they ship more than ten percent of their product internationally, compared to 11 percent of non-metro firms. Moreover, those firms that do ship a significant portion of their product overseas are also more likely to say they expect to see increases in revenues (ship more than ten percent: 53% increase; ship 10 percent or less or none at all: 43%). Supply Chain Relationships. Fully 32 percent of manufacturers say they have gained new business from “home sourcing,” up from 26 percent in 2015. Companies with more than 50 percent lead the way at 46 percent. And, firms that have experienced “home sourcing” also tend to be more confident about the financial future of their firms (also more

likely to expect increases in revenue, profitability, and capital expenditures in the coming year). ISO. The survey data also suggests that companies are becoming aware of the significant changes emerging from the new ISO 9001:2015 standard. Twenty-three percent of manufacturers overall were “aware” of the changes, including half of companies with more

than 50 employees. Only 20 percent of executives whose companies employ 50 or fewer were aware. Similarly, 94 percent of the large companies aware of the changes said they were “prepared to meet the changes to the new standard.” Forty-two percent of smaller companies aware of the changes said they would “use outside help” to address the ISO changes. SUMMER 2016 ENTERPRISE MINNESOTA /

What Do Students Think About the

SkillsGap? We asked them.

/ ENTERPRISE MINNESOTA SUMMER 2016

EDITOR’S NOTE: To get a better sense of the skills gap from the perspective of the next generation of manufacturing workers, The State of Manufacturing® focus group research this year included three meetings with students at tech schools. We included Dunwoody, Alexandria Technical & Community College, and Anoka Technical & Community College. What follows is an edited transcript of those conversations. Why don’t students show more interest in manufacturing? • It was an easy A (in high school). Kids don’t look at it as a class to learn stuff. It’s just, “let’s go have some fun, play with the robotics, play with this machine, that machine.” You’ve got to tell them: this is what you could be doing with your life. This could make you a lot of money – because there’s a lot of money to be had. Coming out of the military, I knew that there was an industry for machining; I didn’t know a whole lot about robotics or things like that. When I got here (name) told me, “I could place you tomorrow.” It’s that easy. Kids need to know that.

all the time. I’m very familiar with a lot of the STEM programs that go to the high schools, but are the high schools equating that with metal fabrication? I know they talk a lot about the science aspect to it, the mathematics, the electronics, such like that, but are they also letting the students know that a huge part of this industry is also the people who are doing the metal work, doing the machining, doing the designing and doing that more physical side of it as well? That’s all part of that same bubble, so is there still kind of a stigma attached to people who want to get their hands dirty versus the people who are just doing designs and such? I don’t know if there is.

• I was in high school a longer time ago. When I was in high school, there was kind of a stigma attached. “Oh, those are the guys who work in the metal shop; those are the guys who go to the auto shop.” There was a stigma attached to the people who were crafts people, who were hands-on, who were going for the blue collar types of things and such. I’m not sure exactly what the state of that is now, today. I know that because of the incredible advancements in technology, younger people today are hands-on with that stuff

How helpful were teachers and counselors at getting students interested in manufacturing? • A lot of the teachers in high school said that four-year programs were the only way to go. But then I had an engineering teacher who said that there is a lot of money in the two-year programs and that you don’t have the cost of a four-year school. A lot of the kids from my high school were not into that stuff. They had to go to a four-year right away. They never really heard of the twoyear side of things, so that’s why I think

most of them went to four-year. • Same at my high school. It was everybody goes to a four-year school. It would seem to be that way. • That’s just what you hear. You have some people who just don’t go to college, but most of the others are off to a four-year school, universities and stuff. • Your teachers just stress that your whole life that you need to go to a fouryear because that’s the best education you can get. They don’t ever think about these places as much, except for our technology teachers. Obviously they stress going to these instead of a four-year because you don’t know what you’re getting into before you really get to a four-year. I think that this education is better in some aspects.

My parents were like, “You’re going to go to a two-year college? You’re going to do what?” They were very ... what’s the word I’m looking for? Traditional. They were like, “You’re going to become a doctor, you’re going to become a lawyer.” I’m like, “no.” • In society, we’re told to get an education. We’re all told to go to college and become white collar workers. • From elementary school all the way up to high school it was, “You need to go to college, you need to get an ofﬁce job, and that’s where the money is.” And some of us just can’t do ofﬁce jobs.

SUMMER 2016 ENTERPRISE MINNESOTA /

• Or we don’t want to. How much of it is mom and dad oriented? Mom and Dad think I haven’t succeeded unless my kid goes to a fouryear degree school. • I got that a lot. Between my parents and their siblings, there was a big sibling rivalry. My kids this or my kids that. In high school, I went for welding and metal fab through the tech college program and yeah, there was deﬁnitely a stigma for my mom for sure that, “Oh, you’re just going to be a dirty welder.” She’s seeing it a lot better now, but she’s matured also. • My parents were like, “You’re going to go to a two-year college? You’re going to do what?” They were very ... what’s the word I’m looking for? Traditional. They were like, “You’re going to become a doctor, you’re going to become a lawyer.” I’m like, “no.” • I came from the exact opposite end of it. My father was a stone cutter. He’d been a mechanic in the army, then he became a stone cutter, then he formed his own business. I was the one out of all the

brothers who wanted to go to college and they were not particularly supportive of that. It’s interesting now, years later and my father has passed away, but when I started here, my mother was still with us. The comment she made was, “Well, that’s an interesting compromise that you probably should have done the ﬁrst time, it would have made your dad happier.” Okay, you’re going to college, but it’s technical college. To your query, I think it completely depends on the kind of family you come from, what their demographic is. Have they been tradesmen and craftsmen? Have they been white collar or blue collar? Where did they grow up? I think that’s what’s going to inﬂuence a lot of it. • Back to the idea of how you communicate it to the high school kids, I think some of the parents then have to be educated, too. Just because they have that traditional viewpoint of you’ve got to go to a four-year college, get a degree and such like that, I think the kids seem to be getting a little bit more aware of what is practical to get. Maybe, it’s some of the parents, depending on the age group and such, who need to be shown, some of these four-

year degrees, it’s a wonderful thing, but they may or may not take you anywhere. Why don’t you look at some of the more technical things or the more vocational things? Teach them the value of that so that that can then be handed to the kids. • I have to agree with you. I mean, my dad didn’t even go to college, he just worked his way up in the printing industry. My mom went to a technical college. She’s a lab tech, has been for, I don’t even know how long, probably 40 years. My brother went to NEI for electronics, I think he said it was actually part of Dunwoody, a few years ago. That’s another reason I came here. My brother was part of it. My sister went to a technical college. She does hair for a living, she owned her own business for a while. It kind of runs in the family, a four-year isn’t necessary. You can make a good living coming to a two-year degree. What should manufacturers do differently to introduce students to their industry? • Be active in the schools. That’s what we’re getting to now with our mechatronic partnerships. Local companies sponsor it and then they contact students they would help sponsor. Then, the students and everyone else around them becomes aware of what they can really do with their education and where they can get it. • Did manufacturers visit your schools when you were deciding what to do after high school? • No. I’m not from around here. I’m from up north, but when I was in high school and I was a junior we took a tour of a local machine shop. That’s what got me interested. That was really cool just to see it ﬁrsthand in the work. I was blown away. • We had basically the same thing. I’m from Hutchinson. They have a 3M down there. They came into the high school every once in a while and allowed kids to go in and tour their plant. There are a couple other small businesses that are machine technology. In high school we got to go in and tour businesses like that and that was really good. Hutchinson Manufacturing, too. They do a lot of cool stuff. The other one is MITGI, Midwest Industrial Tools. That’s actually what got me into this. Both of my

/ ENTERPRISE MINNESOTA SUMMER 2016

I’d say it’s different than a four-year perspective because everything we learn we will use every day when we’re on the job. It gets you more interested and makes you pay attention, because you know you’ll have to use it. It’s not like just sitting in a lecture about something. brothers are there. One’s a foreman and one is the night manager. What they do is make medical supply equipment. The drills and then the pliers and stuff like that with the CNC machines. I thought that’d be cool to design them. • Offer training. That’s the ﬁrst thing that just popped into my head. If you’re a small company and you can’t necessarily maybe compete as far as wages or certain kinds of beneﬁts go, what else do you do to get the people who have the potential or who already have the skill sets? What can you

offer them that’s still going to make your bottom line doable? I would say right away, push that. Offer training. Offer internships through school, possibly even a little bit of ﬁnancial reimbursement for that. • I know there are a lot of companies that do it, in relation with Dunwoody, I’ve certainly looked into some of those. Get them early. Come in the ﬁrst semester, the second semester, that way you don’t have to pay them what you would have to pay someone who’s already graduated. Help them get through school, help them get

the training as it goes. That way, you’ve got somebody who, by the time they do graduate, has this wonderful skill set and if you’ve developed a great relationship with them already, they’re going to want to stick around. That’s what I would say to a small manufacturer who can’t just throw money at it. Get involved with them early in their education and help them develop that. • A lot of communities are sponsoring “explore manufacturing days” to expose students and their parents to manufacturing opportunities in their hometowns. Parents will see that manufacturing is not that dirty, dark place they thought it was. They see ﬁrsthand that manufacturing jobs are hightech, very sophisticated jobs now. • We did college tours, but what you’re talking about would have been very beneﬁcial. That way you get a taste for it. I don’t think people fully understand what

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is actually happening in manufacturing. Talking about it in high school, nobody really understood what I was talking about. My dad does it and my uncles and stuff, so I had some background in it, but it was very rare to ﬁnd other people who knew what I was talking about and were accepting it, kind of. • I’ll explain what I build at work or what I do. They’re like, “Oh, I didn’t even think of that.” People don’t even think of what needs to be made. They just don’t even notice it. • I think we have a problem with rural living. We’re not the culture that we used to be. There are not as many farmers. There are not communities or outposts, the way there used to be. Young people who are starting a career probably are not as likely to move to Alex, if there are no family activities, if there is no cultural center there. It’s just less likely to be appealing. What’s different about your education so far than you expected? • The support. • Absolutely. The support. From the surrounding areas. All the companies around here. They just built a building, but they’ve been supporting us for the last ten years almost. We always see them. Either every week or every other week there’s at least one person from a company coming into our shop talking to people and making sure that the stuff they gave us is working.

there’s such a gap after your ﬁrst two years. Your ﬁrst day here you’re working on what you’re going to be doing for possibly the rest of your life. • The gen eds they make us take here feel relevant to what we’re taking. We took public speaking and technical math and technical rating, so those things are some-

Advice? Be active in the schools. That’s what we’re getting to now with our mechatronic partnerships. Local companies sponsor it and then they contact students they would help sponsor. Then, the students and everyone else around them becomes aware of what they can really do with their education and where they can get it.

• Another thing I noticed too is all our instructors were out in the ﬁeld, so they know all the companies. They can help bring their knowledge and help us for further our career paths. I thought that was pretty cool. • I’d say it’s different than a four-year perspective because everything we learn we will use every day when we’re on the job. It gets you more interested and makes you pay attention, because you know you’ll have to use it. It’s not like just sitting in a lecture about something.

thing that we’re going to use instead of animal physiology. The classes were required for engineering at NDSU. I know it’s an important class, but it’s animal physiology.

• I went up to UND because I was going to ﬂy planes. But you have to take two years of gen ed classes. I was writing eight-page papers every two weeks about education. I know gen ed is important, but

This type of education and these types of careers may not be for everybody. Are there classmates who conclude this is not what I want to do? • I’ve noticed quite a few. We’ve lost

/ ENTERPRISE MINNESOTA SUMMER 2016

seven, maybe eight people. A lot of them were given a directive by their parents, we won’t keep funding your lifestyle unless you go to Dunwoody, my Alma Mater. It didn’t work out so great because they weren’t ready, because this is rigorous, because you’re just totally immersed in this. For me, it’s very foreign, but I think there have to be people encouraging, but then you have to have the tools to go look for the help you need. It’s still not handdelivered. They’re not going to give you a tutor and sit you down, strap you to a chair. • We’ve seen it in our semester, too. We’ve lost a good handful of folks. I think the biggest chunk was people just out of high school who weren’t ready. They weren’t ready and their parents were pushing them, you’ve got to do something. Get a job or go to school, one or the other. I think some of them came into it thinking it was going to be a lot easier than what it is. You get here and all of the sudden, you realize no this is not easy. There’s that hands-on aspect in the way it’s taught. • I’m still trying to play catch-up with some of the mathematics. It’s been a long time since I’ve done math and there’s a lot of it. You do have to have some brain power. Again, that whole stigma about trade school. It’s like, “Yeah, well you come and try to pass some of these tests that we take in trade school.” I hope you’re up on your advanced calc and trigonometry. This stuff is not easy and I think that’s what we run into, too. People come into this, whether they’re coming out of high school or coming out of the military or something like that that think, “Oh, I’ve already done that. It can’t be that tough.” Then, all of the sudden, two months in, they’re like, “Oh, my God!” • That’s me, high school Algebra 1 is as high as I went. I hadn’t done any math until I started here. It was a big culture shock. It was a struggle, but I made it through. I have good grades, but it was a lot of work. Even now, I will be going through things in class and I get the concept down just ﬁne, but the basic algebra is what I fail at. There’s an education gap. I mean, it was my fault, too. I was in high school and I was just

going to go make things. It was all going to be hands-on, I didn’t need that math. Now, I’m ﬁnding the errors of my ways. • I think what’s probably helped with you and certainly with me, too, is that at this school, in particular, the resources available to those of us who need to play a little catch-up are incredible. The teachers, the tutors, the access or the direction toward outside sources, I’ve seen it every week since I’ve been here. Teachers who are willing to go that extra step to help. The school is deﬁnitely designed for students to succeed. It’s not designed to weed them out or anything like that. It is designed, if you’re willing to do your part, to put the effort in, everybody here is going to help you. • Yeah, this environment is awesome for that. Like you said, they don’t hand it to you. You’ve got to do your part.

2016 State of Manufacturing® Greater Minnesota Rollouts DATE

TIME

May 5 (Thursday)

10 a.m. Winona

May 10 (Tuesday) May 12 (Thursday)

CITY

1 p.m. Pine City

10 a.m. Fergus Falls

LOCATION Southeast Technical College 1200 Storrs Pond Road Tandeski Center, Rooms 524/527 Winona, MN 55987 Pine Technical & Community College 900 4th St. SE, Auditorium Pine City, MN 55063 Bigwood Event Center 925 Western Avenue Fergus Falls, MN 56537

May 13 (Friday)

8:30 a.m. Owatonna

• If you’re willing to put in the work, they will see you through it and they’ll make sure you learn, not just you glazed through it. They’re not shufﬂing people through here. When you get done with a class here, you know stuff.

May 13 (Friday)

1 p.m. Rochester

• I had a really hard time when I was in my aerospace engineering start. It sucked, I was in a class with hundreds of people. You try to ask a question and they don’t even see you. I mean, me being tiny to begin with, you don’t get seen, you don’t get noticed. Here, every day, I have some sort of question to ask. I have hundreds of questions just to make sure I fully understand it. It’s just awesome, that one-to-one, teacher to student. You’re able to talk to your instructor. You’re not just a number or a grade. You’re an actual person. The instructor actually cares about you and your grade and how you’re doing. It’s a really awesome environment to be in.

May 18 (Wednesday)

8 a.m. Mankato

South Central College 1920 Lee Blvd., Heritage Hall No. Mankato, MN 56003

May 18 (Wednesday)

1 p.m. Albert Lea

Riverland Community College 2200 Riverland Dr., Room 124 Albert Lea, MN 56007

May 19 (Thursday)

9 a.m. Alexandria

Alexandria Technical & Community College 1601 Jefferson Street, Rooms 209/211 Alexandria, MN 56308

May 19 (Thursday)

2 p.m. Elk River

Elk River City Hall - Council Chambers 13065 Orono Parkway Elk River, MN 55330

May 20 (Friday)

9 a.m. Willmar

Ridgewater College 2101 15th Av. NW Student Services Building, Room A240 Willmar, MN 56201

• I couldn’t agree with that more. Coming to the open houses, I talked to (name) about small class size. You’re not going to go to the U of M, where like she just said, they have a hundred people in a class. If I have a question, I want it answered.

May 16 (Monday)

May 23 (Monday) May 24 (Tuesday)

10 a.m. Brainerd Lakes

10 a.m. Hibbing

1 p.m. Litchﬁeld

Owatonna Public Utilities 208 Walnut Av. S. Owatonna, MN 55060 Rochester Community & Technical College Heintz Center, Room HA 102 1926 College View Road East Rochester, MN 55904 Clow Stamping Company 23103 Highway 3 Merriﬁeld, MN 56465

Hibbing Technical & Community College 1515 East 25th Street, Room B212 Hibbing, MN 55746 Custom Products of Litchﬁeld, Inc. 1715 S. Sibley Av. Litchﬁeld, MN 55355

Addtional dates and locations to be announced.

SUMMER 2016 ENTERPRISE MINNESOTA /

Five-year anniversary

PATHWAYS

GROWTH TO

An ambitious demonstration project enables signiﬁcant gains for participants.

By Kate Peterson

ive years ago Enterprise Minnesota embarked on an ambitious program to give select manufacturers in the state the tools to achieve profitable growth by working with business advisors in areas from strategic planning and marketing to leadership development and process improvement. The Pathways to Business Growth program was funded by a $515,000 grant from the National Institute of Standards and Technology Manufacturing Extension Partnership (NIST/MEP). The one-of-a-kind national demonstration project explicitly targeted leading manufacturers, aiming to help them achieve measurable business growth. Organizations were selected because of solid leadership, forward thinking, and innovative cultures that emulated characteristics of an organization best positioned for growth. The goal of the program was to provide access to a broad breadth of integrated growth services, specifically intended to help organizations significantly improve earnings over two to

/ ENTERPRISE MINNESOTA SUMMER 2016

three years through a spectrum of services. “Pathways was a drink from the fire hose of our services,” explains Mary Connor, an Enterprise Minnesota business development consultant who worked with several companies through the Pathways Program. “We would team as a group, particularly on the growth side, to help companies realize their growth initiatives. We would feed them as much as they could digest. Some really took it on,” Connor says. Below are profiles of three companies that used the grant in particularly effective ways. PEQUOT TOOL: TRAINING Pequot Tool and Manufacturing took charge of its technical training years ago, effectively filling a gap left when secondary schools stopped providing technical education to students. The machining and fabrication company based in Pequot Lakes counts clients in a broad range of industries, from aerospace and gun and rifle

components, to retail electronic fixtures and medical equipment. Its 162 employees need these advanced technical skills to take advantage of growing market opportunities. Still, despite its expertise in training employees in technical skills, because of the company’s promote-from-within approach, it sought the help of Enterprise Minnesota to help develop leadership skills within its employee base. “As a company, we’re investing a lot of money into training, and we do that because we don’t have the trained technical people coming out of school anymore,” says Mark Shervey, the company’s president. “We’ve actually got an accredited apprenticeship program going on internally. So that’s basically our best avenue for bringing up the skill level of our people,” Shervey says. “What it doesn’t address are the soft skills and the supervision and the teamwork and things like that. The Pathways grant project was one that we looked at that gave us the opportunity to do

Maynard Akkerman, CEO & President, Akkerman.

that training.” Pequot Tool and Manufacturing’s steady growth over the years has made leadership training particularly critical. “Fifteen years ago we were under 50 employees,” says Shervey. “That’s a lot of growth, and lot of people have advanced to leadership positions. They’ve never held them before, so the Training Within Industry that we used, and quite a bit of our training with the Pathways grant was done with that process. It gave us the ability to get some common tools in these people’s toolbox, basically, on how to deal with employees, how to train.” Harry Larson, the Enterprise Minnesota business development consultant who worked with Pequot Tool and Manufacturing through the Pathways grant, says the company identified the need for building its leadership during early strategy development sessions. The Pathways grant helped the company undertake some lean training efforts, but centered primarily on Training Within Industry (TWI) sessions. SUMMER 2016 ENTERPRISE MINNESOTA /

“They were looking more for their leadership group than anything. They were looking at building their team and their supervisors and their higher employees, and enhancing their skills, so that’s the direction we went with them,” says Larson. “A lot of our folks were technical people who were moved into supervision, or lead positions,” says Shervey, noting that some employees went through the training simply to improve their ability to work in teams. “It’s not necessarily that they have to be leading, but they Karlo Goerges, CEO and Mark Shervey, president, Pequot Tool have to know how to be part of a team; that isn’t a skill that’s always prevalent.” Shervey admits it’s difficult to the company now, represents the fourth. measure the results of program with hard Cremer’s initial goal five years ago numbers, but says the effects are apparent was to double revenues in five years. nonetheless. “You definitely can see The strategic planning process Harmony people stepping up to the plate and doing a Enterprises embarked on helped the better job. It shows up in how they handle company double sales in just three conflicts and different kinds of things, years. During this time, the company how many times they have to go to their expanded its operations to provide more leadership and get help—it’s less,” he complete service to customers, including says. “They handle things themselves and maintenance and repair of all their waste do a good job of it. We’ve increased our management equipment; obtained ISO sales considerably, we’ve increased our certification to ensure more consistent workforce considerably and in my mind, processes in production, administration, we’ve done that with minimal pain.” sales and engineering; and created a process to provide ongoing engagement HARMONY ENTERPRISES: STRATEGY with employees. When Steve Cremer, president of Harmony When Cremer began the process, he Enterprises, first got involved with the knew the potential pitfalls of typical Pathways Grant program four years ago, his strategic planning efforts. “A lot of times, goals were clear. “We have a lot of really you all get together on a day, write down smart, talented people working for us, and these notes about what you’re going to we could see all kinds of opportunities do, and three weeks later you’re so busy out there. We didn’t want to be just a that the piece of paper is gone and those manufacturer trying to sell our equipment thoughts are gone,” he says. Admitting that based on price,” he explains. Using the has happened at Harmony Enterprises in resources provided by the Pathways grant, the past, Cremer didn’t want to repeat the Cremer and Harmony Enterprises undertook process. a thorough strategic planning initiative to The multistep exercise Harmony figure out “how to be the best we can really Enterprises undertook involved creating be and find those opportunities.” a team of employees to evaluate the With 78 employees, Harmony company’s core values and vision. “We Enterprises, which manufactures waste spent a lot of time—several months—just management equipment such as cardboard working on four things: our core values, balers, trash compactors and automated our strengths, our weaknesses and where recycling bins, is the largest employer in tiny we want to go,” Cremer says. Harmony, Minnesota. It’s a family owned The next step was to set aside a full day company; Cremer is in the third generation to present these findings to key company of owners, and his stepson, who works for stakeholders: employees, customers, 26

/ ENTERPRISE MINNESOTA SUMMER 2016

vendors and business advisors. Everyone who attended wrote out notes in reaction to the presentations, and the team went through the notes, more than 700 total, to develop areas of action. From that process came the idea to expand beyond just manufacturing into customer service, to embark on ISO certification, and to convert a 9,000 square foot building next to the manufacturing facility into a high quality early childhood learning center for the children of employees and others in the town of Harmony. Concerning ISO certification, Cremer says, “We always talk about quality being really important to us so after going through that quality one, we decided we really need to be ISO-certified not because our customers want it, but just because as an organization we want to make sure we are truly doing the best we can and being consistent in our quality.” Through the strategic planning process the company also considered customer service. “From that process we decided to see how we could change our customer service department from a cost center into a profit center,” Cremer says. The result: using a network of service providers around the country and world, Harmony Enterprises now provides technical, maintenance and repair services to companies for all of their waste management equipment, even those machines not produced by the company itself. The idea of creating the learning center next to the manufacturing facility came directly from the strategic planning process. “We are fortunate as we’ve been growing, to find a lot of younger people to come and work for us,” says Cremer. One issue those younger employees repeatedly identified as a concern was quality day care. But Cremer says there are sure to be others. “That generation of the 20-23 year olds thinks differently than me at 60 years old,” he says. “Engaging our employees is an ongoing thing.” Dick Pedersen, the Enterprise Minnesota business development consultant who worked with Harmony Enterprises through the Pathways grant, says Cremer is an ideal

leader for a process such as this. “Someone like Steve is willing to take some risks to get growth,” Pedersen says. “You normally don’t see a high growth company built around a CEO who is very conservative and wants to have a 95 percent probability before he makes an investment,” Pedersen says. “Steve is willing to make that investment and take that risk, and that’s why the company is growing.”

business and he continues to run it today. The company now employs about 70 people, and its equipment is sold around the world because of its quality and precision. Recently, for example, one of Akkerman’s customers used its remote controlled tunneling equipment to push a six foot concrete pipe three-eighths of a mile from one side of the Toronto airport to another, under an active runway and two taxiways. For years, Akkerman has been participating in Enterprise Minnesota’s Manufacturing Peer Council and professional business advisor group. “I think I’ve been, or my company’s been

AKKERMAN: PROCESS IMPROVEMENT Maynard Akkerman doesn’t recall a time when he wasn’t involved in his family business, Brownsdale-based Akkerman. “I remember as a small child watching and working with my dad in the shop,” he says. In the 1960s Akkerman’s father, a construction contractor, used conventional digging methods—backhoes and front end loaders, for example—to complete projects that involved installing pipes or other utility lines. When he had a project that required going under a highway or a railroad, he would hire a national company that specialize in the type of work. However, the technology they utilized was poor. That’s when his father began developing his own equipment for boring and tunneling. After ten years of perfecting the technology with his construction company, his accountant recommended that his father manufacture and sell the equipment to other contractors. That’s when, in 1973, the manufacturing arm of Steve Cremer, president, Harmony Enterprises his dad’s business was born. When Akkerman finished high school, he went to work in his father’s construction company, involved with it for about fifteen years, which specialized in projects that required right from the inception of it,” says the proprietary tunneling equipment the Akkerman. “I would just say overall, manufacturing side of the business made. in general, it’s been a great tool for my For 14 years Akkerman worked throughout company and myself personally, not the seven state region and Canada doing having any formal education in running pipe jacking and tunneling work. When a company. I’ve grown as a professional not out in the field, he worked in the immensely just listening to other company manufacturing plant. owners, their philosophies, their thoughts, In 1987 Akkerman’s parents offered him the speakers, and some of the projects the opportunity to buy either the construction we’ve been involved in.” business or the manufacturing business; Through the Manufacturing Peer Akkerman chose the manufacturing Council, Akkerman learned about the

Pathways grant. Dick Pedersen, who has worked with Akkerman over the years through the peer group and other Enterprise Minnesota projects, thought Akkerman and his company would be a perfect fit for Pathways. “He is so willing to listen to the ideas and suggestions of others,” says Pedersen of Akkerman. Through the grant, Akkerman completed a strategic planning process which in turn led to improved quality and consistency through various process improvements. “We’ve never had a formal product development process. It was like ‘Hey, one of the customers was asking me if we could do this. Should we do that? Okay, let’s do this,’” Akkerman says. The new process is more thoughtful. “We’re sitting down and weighing everything, what the market potential could be, if it’s something we could actually build efficiently here, all of those things,” Akkerman says. In addition, a Pathwayssupported analysis led Akkerman to seek ISO certification. The analysis showed the company doing well in all areas but documentation and repeatability, which were weaker elements of the business. “We decided to embark on the ISO process not because our customers were asking for it, but because we recognized we needed more consistency,” Akkerman says, adding, “My son, who has a civil engineering background and had recently hired on, could see the need for more discipline and the Pathways analysis confirmed that and led us to ISO certification.” While the new process is a change for the company leadership, Pedersen says it fits with what he has come to expect from Akkerman, who has consistently shown his willingness to consider new approaches. “He might have an idea of something that might work, or something to try, and then bounce it off his peers. With that kind of motivation, thoughtfulness and openness, you end up making better decisions quicker,” Pedersen says. “That’s the kind of openness it takes to grow a company.” SUMMER 2016 ENTERPRISE MINNESOTA /

Four Swanson brothers ﬁnd big success with fan clutches in Perham.

t was no fun two decades ago when Keith Swanson’s Twin Cities-based sales company was fired from its job selling fan clutches. But that event propelled Swanson and his family into creating two strong, growing manufacturing companies based together in Perham, Minn. The family’s Kit Masters Inc. makes fan clutch parts kits, new fan clutches and remanufactured fan clutches, and employs 55. Swan Machine Inc. employs 90 and makes parts for a growing list of industrial clients. Keith died suddenly in 2006, but his four sons have led companies to new heights. Darrin Swanson is president and chief executive officer for both companies and runs the companies with his three brothers —Craig, manufacturing and engineering;

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Brian, sales; and Trent, customer service and marketing.

SELLER TO MAKER

Keith Swanson grew up on a farm near Perham, a town of about 3,000 in Otter Tail County. After graduating from Perham High School in 1964, he and his high school sweetheart, Trudy, were married in 1966. They moved to the Twin Cities where Keith first worked in a Standard Oil station and then bought one of his own gas stations in 1971—Keith’s Standard at 40th Street and Central Avenue in Columbia Heights, Minn. The station employed one full-time and 10 part-time employees. But in the early 1970s the station started losing money. His full-service station had to compete with stations that were going to self-serve, and Standard Oil dictated his

pricing. By the mid-1970s, he was recruited into a sales job by a salesman who called on his station. He worked for Marathon Sales Inc., which serviced the automotive and heavy duty industries. Trudy says it wasn’t long before he wanted to own his own business again. In 1980, Keith started his own sales business called Heavy Duty Midwest Inc., which shifted into the truck part business. Keith traveled seven states and sold such things as exhaust systems, backup alarms, lighting systems and the like. His biggest item was fan clutches—part kits, new fan clutches and re-manufactured clutches— made by a major manufacturer in the Upper Midwest. Fan clutches turn a fan on and off when extra air flow is needed to take heat away from engine coolant, running through the radiator.

The brothers Swanson: Trent (customer service and marketing), Darrin (president and CEO), and Craig (manufacturing and engineering). Fourth brother Brian (sales) is not shown.

ALL IN THE FAMILY

Sales became strong enough that Keith brought three of his sons into the business —Brian in 1992, Darrin in 1994, and Trent in 1995. All three were in sales and they were the only employees. (The oldest son, Craig, was an engineer for a metal food can manufacturer in Wisconsin then, and was not yet involved.) Prior to joining Heavy Duty Midwest, Brian had been in the Army. Darrin had worked for a printing company that printed and manufactured check blanks. Trent had worked in the food and entertainment industries. On Dec. 22, 1995, the manufacturer they were selling fan clutches for handed their company a pink slip, explaining that they’d sold enough units and the company wanted to hire its own internal sales staff. The Swansons weren’t offered sales positions, but Darrin says they wouldn’t have taken a job with the manufacturer anyway because Heavy Duty Midwest was representing other goods from a dozen other manufacturers. “Essentially, we were fired,” he says.

PHOTOGRAPHS BY JEREMY PETRICK

TECHNICAL SALES

With 80 percent of their revenue source suddenly gone, the Swansons worked to make a living. Brian went to a company to sell forklifts. Trent became an auto finance man for a car dealership. Trudy, who had been a volunteer in a Roman Catholic church, became its paid religious education director. Keith, then 50, and Darrin, 26, stayed with Heavy Duty Machine, initially working to sell their smaller product lines. One day in January 1996, Keith turned to Darrin to say, “I’m tired of working for a manufacturer. I want to be a manufacturer.” “I was young and naive,” Darrin says. “I said, ‘Dad, whatever you want to do. Let’s go for it.’ Our best friend at the time was ignorance because we didn’t know how hard it would be. We had a dream in mind, and we decided, let’s go for the dream and everything else would go together.” Keith incorporated Kit Masters Inc. on May 9, 1996.

BETTER AND FASTER

Step one was to design fan clutch parts kits, and to make some parts. Neither of the Swansons had an engineering degree but they knew a secret SUMMER 2016 ENTERPRISE MINNESOTA /

Employees at Kit Masters and Swan Machine, Inc.

about fan clutches —fans were getting bigger and were redesigned to move more air. The clutches were absorbing more “torque” and were wearing out faster than they used to — twice as fast. They hired a contract engineer to design parts they had made by a die cut company. They designed a box system to send out “kit” pieces. First, Trudy remembers, they assembled fan clutch part kits in their garage. “I was shaking my head, actually,” Trudy says. “I said, ‘Are you serious?!’” Friends from church and the trucking industry shared advice in finance and manufacturing. They converted a basement bedroom which became a makeshift manufacturing space, while the garage became a warehouse. Family photos show the Swansons backing up trucks through the shrubs and loading parts through the bedroom windows. “The whole neighborhood was cheering us on, hoping we’d do well,” Trudy recalls. “One of the funniest things was that we’d put out a big piece of cardboard at the end of the driveway—a sign to let the UPS truck know they had something to pick up.” Keith went on the road to sell while Darrin, who was married and lived nearby, stayed in Blaine to assemble kits and handle engineering details. “My wife and I would put in a movie and have a ‘bagging party,’ creating kits,” Darrin recalls. 30

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Without a research budget, the Swansons relied on friends in the trucking business to “live-test” their parts. Eventually, the business outgrew the basement and the garage.

RAMSEY TO PERHAM

Eventually, Mom wanted her house back, Darrin says. In 2000, Keith and Darrin moved their fledgling manufacturing company into a 1,300-square-foot rented industrial space in Ramsey, Minn., a northwest suburb of Minneapolis. The company hired brother Craig in 2000, brother Brian re-joined in 2002, and Trent came back in 2003. The Swansons marketed the part kits and both new and remanufactured clutches– re-mans–as “Gold Top” kits, with a distinctive trademarked color. With all three brothers home, they went looking for a location to build a new plant. They were heavily connected socially in the Minneapolis area but eventually settled on Keith and Trudy’s hometown area in Perham, where the family had relatives and vacation history. “The community really embraced us,” Darrin recalls. “There weren’t any particular incentives. Mostly there was a business philosophy and a strong, rural work ethic.” In 2004, the Swansons built a new, 16,000-square-foot building on the east side of Perham. At the same time, they

established Swan Machine Inc., a precision machining company. Initially it made parts for Kit Masters, but they planned to do custom work for other manufacturers. They built another 12,000 square foot expansion a year later. On Jan. 2, 2006, Keith died of complications due to a vascular disease.

ANNUAL GROWTH

Trudy served as board chairman while her sons regrouped. “The economy was starting to slow down in 2006, and a lot of people were repairing trucks rather than buying new,” she remembers. “That helped our business flourish.” There are more than 2,000 styles of fan clutches, but the engine of growth for Kit Masters kits was that they were designed to fit them all. Kit Masters has truck makers Peterbilt, Freightliner, Navistar and Volvo, as well as engine manufacturers Caterpillar, Cummins or Detroit. “The engine of our growth was that we removed all of the obstacles for customers to do business with us,” Darrin says. “We made it easy with things like a pre-paid freight policy, and a core return policy. We innovated ways to support our customers through training and promotion.” In 2012 the company became the sole distributor of heavy-duty after-market fan clutches made by BorgWarner, Inc., a global auto parts supplier and original

equipment manufacturer. They also served the specialty fan clutch market for light- and medium-duty trucks and the bus markets. They expanded their marketing footprint into Canada, Mexico, the Caribbean Islands, South Africa, Russia and Ukraine. Since its inception, Kit Masters has grown in double-digit amounts in every year except 2013. That year the company received state and national recognition from the Small Business Administration. In 2014 they completed a 32,000-squarefoot addition, and established a second manufacturing location in Grand Rapids, Minn.

BETTER THAN NEW

Remanufactured parts have been a good fit in a time when mechanical expertise is in short supply. With a Kit Master remanufactured clutch, the installer needs only to put it in place and tighten the belts that drive it—a 15-minute job. The company strives to make its clutches better than new. Darrin says standard new fan clutches withstand 2,000 inch-pounds of torque. The Swansons made their Gold Tops to withstand 5,000 inch-pounds of torque, without slipping. “Our kit has the highest torque in the industry,” Darrin says, adding that this advantage is protected by a patent. Kit Masters has a strong emphasis on service and delivery performance. They emphasize adequate inventories and quick turnaround and a manufacturing process that allows them to same-day ship 97 percent of their products. The company created 12 independent warehouses throughout the US and Canada to service the market closer to where failures might occur. One new innovation came in 2015 when Kit Masters implemented a training truck—a vehicle equipped with all of the products to educate a distributor, customer or fleet. The training truck is staffed by two “Master Trainers” who zigzag across the country, educating customers on the fan clutch industry.

MACHINES FOR HIRE

Sister company Swan Machine has also flourished. The machine company started with a single CNC (computer numerical control) machine. “We had the idea of starting a machine shop, but we Swansons didn’t have any machining experience,” Darrin says. Their

first machinist employee was a fresh year into a five-year plan.” graduate from nearby Alexandria Technical The company will grow through new and Community College who had won products he declines to reveal, except to say national student competitions. that some are “related to fan clutches, some Today Swan Machine has grown to out of the fan clutch industry.” more than 30 machines, capable of serving Beyond the business accomplishments a variety of industries. Their highest measured by the bottom line, Darrin capacities are in vertical milling, horizontal says one of his greatest satisfactions is to milling, Swiss turning, and multi-task stand with his brothers in a business that machining. Those include single turret their father envisioned, and the thought is and dual-turret machines. “Some of the repeated. tolerances we can hold would be like As fast as the businesses have grown, slicing the thickness of a piece of paper Darrin speculates that their father would more than 40 times,” Darrin says. have doubled it from where they are today. The Swan Machine craftsmen and “He was an aggressive growth guy,” he their machines are busy with Kit Masters says of his dad. “I wish he could have seen 45 percent of the time, so 55 percent the result of all the hard work of building of the capacity is available for client the building, and where we’re at today.” companies. They’re always looking for “We’re just a bunch of brothers who more customers, and they don’t expect that to change. Machinist Dave Fiedler. Swan Machine makes parts for multiple gun manufacturers, including for the famous AR-15 platform of firearms which is made by several manufacturers. They make parts for paint spray equipment, electronics housings, semi-trailers, and for agricultural equipment, among others. “I don’t want to be judged by our current capacity but by our willingness to grow,” Darrin says. In 2005, the company bought the fan clutch line of had a dad with a big drive,” Craig says, Bendix, Inc., in Akron, Ohio, describing the company’s success. “We which yielded dies, patents and molds, wanted to make a living and we didn’t but no employees. In 2010 they bought know you couldn’t do this.” Custom Metal Works of Fargo, ND, which Brian says the company succeeds by yielded one machinist. In 2014, they empathizing with customers. “When we bought Advanced Machine Solutions of see someone with a problem, we want Bemidji, Minn. AMS personnel migrated to understand it, and we want to solve first to Perham, and then to a second it,” Brian says. Sometimes the problems manufacturing location they established in are about reliability, sometimes about Grand Rapids, Minn., to get into a different supply chain issues, pricing, education or labor pool. That company brought two relationship issues. machinists. Darrin says the brothers hold together INEVITABLE GROWTH —strengthened with their mother’s support The companies have grown by doubleas “glue” —and are stronger together than digits every year since their inception. Most they would be apart. They work together years the growth in total sales for the two well and think creatively together. businesses is 12 to 25 percent, and only in “If this business would ever go to hell, 2013 did they dip to single digits. and we wanted to start a new business, “We have a plan to double our business there are no other people I’d rather be in in five years or less,” Darrin says, declining business with than my three brothers,” to specify a revenue figure. “We’re one Darrin says. SUMMER 2016 ENTERPRISE MINNESOTA /

Final Word

The ‘Yucky’ Stuff HR professionals need peer exchanges to navigate their growing array of high stress responsibilities.

everal years ago, Janelle Wunderlich was a guest at our Manufacturing CEO Peer Council meeting in Alexandria. Janelle is an HR executive at Bayer Built Woodworks, a 470-person shop in Belgrade. Her boss invited her to be part of a conversation of the ever-changing terrain of the Affordable Care Act. After the meeting she cornered Rick Kvasager, one of our business development consultants, and asked, “Why don’t we have one of these for HR?” It didn’t take long for that idea to get legs. Today, the Alexandria Manufacturing HR Peer Council has developed into a best practices model of what a group like that should be—so much so that we’re developing others, and the next one is being organized in Mankato. Enterprise Minnesota’s manufacturing peer councils each convene one day each month for a combination of topical presen-

HR departments have to deal with a wide and fluid array of high tension responsibilities. Just think of it, on a normal day they deal with everything related to people: skills development, relationships, employee relations, and communications. tations and open-ended conversation. In this way, members function as an advisory board for the others. Membership is by group invitation only, which fosters a high level of trust, conﬁdence and respect among members. It also ensures that council members have a similar level of “business sophistication.” Each day’s meeting is organized and facilitated by Enterprise Minnesota business advisors. 32

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Lynn Shelton is director of marketing and communications at Enterprise Minnesota.

It makes perfect sense that HR executives should get together to compare notes. For one thing, HR professionals don’t usually have a lot of other folks with similar responsibilities that they can regularly interact with at their companies. For another, the HR departments have to deal with a wide and ﬂuid array of high tension responsibilities. Just think of it, on a normal day they deal with everything related to people: skills development, relationships, employee relations, and communications. Then there are things like health care, compliance and regulations. Worried about the skills gap? Talk to HR. Wondering how health insurance will affect a company’s bottom line? Ask HR. What about the future of ACA? Guess who. “It tends to be a stopping point for yucky stuff that other people don’t want to deal with,” acknowledges Gary Christianson, HR manager at ITW Heartland in Alexandria and an original member of

that peer council. Gary’s not complaining. He’s quick to point out that there are a lot of rewards in HR. “You do it because you want to help people.” Gary sees the value of manufacturing peer councils. “Typically, if you run into something you haven’t dealt with before, somebody is going to know the answer. Secondly, there is a lot of reward in being the person who does have the answer. Sometimes the best way to know that you know is if you can teach others.” Pat Voyles, the Enterprise Minnesota business growth consultant who leads the Alexandria Manufacturing HR Peer Council, also leads a couple CEO groups. She says they are similar, “but with a different twist. Basically the HR peer councils focus on talent development, talent management, and acquisition all in support of the strategic vision of the company. The CEOs focus on how are we going to execute our strategies? How are we going to grow our business? What are the challenges we have with regulations? They are a little bit different.” Christianson encourages other HR professionals to form peer councils. “You develop a real bond. There are opportunities to discuss things outside of that meeting. It also doesn’t hurt to talk with someone outside your company. You may have some other HR people within your company, but you are getting advice from folks who have no skin in the game.” He also respects the bond that comes with having a trusted group of allies. “Things said there are going to stay there,” he says. “There are conﬁdential things shared. We have to trust the group. That is going to allow the dialog to be more valuable.” Janelle Wunderlich sums it up like this: “If you are in a leadership position, whether HR or other management position, you are able to have peers you can reach out to, especially at a higher level. It helps meeting with other high level professionals that you can always count on and bounce ideas off of.”

You looked into energy-saving programs and rebates from Minnesota Energy Resources. That simple move led to high-efficiency equipment upgrades, which saved the company energy and money. High-five for you.

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