Enterprise Minnesota Magazine - Summer 2019 by Enterprise Minnesota

Q&A TIM WALZ What manufacturers mean to ‘One Minnesota’

Helping Manufacturing Enterprises Grow Profitably SUMMER 2019

DOING MORE

WITH LESS Our annual survey shows that attention to productivity—through processes and people— will solve the worker shortage.

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SUMMER 2019

DOING MORE WITH LESS

Our annual survey shows that attention to productivity— through processes and people— will solve the worker shortage.

IT’S ABOUT BUILDING PARTNERSHIPS

WALZ ON ‘ONE MINNESOTA’

Bemidji counselors and school administrators have created a much-admired program to prepare students for careers that don’t necessarily require a four-year degree.

Legislator Tim Mahoney and Governor Tim Walz discuss the value of manufacturing jobs and what the government can do to help sustain them.

2 Stop Admiring the Problem It’s time to consider the long-term realities of the worker shortage. First reality: It’s not going away.

Lessons from the Real World

10 The ‘Cool Factor’

With no fear of job cuts Representative Barb Haley obfrom automation, Vector served the value of a tech degree Windows’ employees through the success of son, Joe. embrace their new robot.

40 The Great Convening Positive conversations among diverse stakeholders.

Visit the Enterprise Minnesota website for more details on what’s covered in the magazine at 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 enterpriseminnesota.org/subscribe. SUMMER 2019 ENTERPRISE MINNESOTA /

Stop Admiring the Problem It’s time to consider the long-term realities of the worker shortage. First reality: It’s not going away.

ocus groups have always constituted one of my favorite activities associated with the State of Manufacturing®, our annual survey of executives from Minnesota’s manufacturing companies. We’ve now conducted 159 of these groups over the 11 years since we first developed the survey project. I enjoy them because they give manufacturers a chance to assess the big picture context about their com-

Unlike an economic recession that can take us by surprise, the worker shortage is a challenge coming straight at us, and we know it. We don’t think it’s going to disrupt our economy, we know it will. panies and industries with the kind of astute candor that comes with guaranteed anonymity. Every year there are at least a couple conversations that provide original and thought-provoking insights. Here’s the one that stands out in 2019: In the midst of a long exchange about the deepening challenges of the thinning workforce—the cornerstone topic of every focus group—one participant startled his group by suggesting the worker shortage might represent a potential long-term market opportunity. The workforce shortage is a fact of life, he said. The way manufacturers apply innovation and creativity to 2

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address their employee issues, he said, could well differentiate their companies from competitors who are standing on the sidelines merely admiring the problem. It could be as important as adding a new product line or finding new major customers, he said. His insight at first summoned the memory of our very first round of State of Manufacturing focus groups in 2009. Participants at the time, you’ll recall, were still reeling from the sudden and unexpected crash of the U.S. economy. But to our surprise, those first focus groups were dominated by manufacturers who wanted to identify opportunities in a down market. They talked about finding potential acquisitions, seeking opportunities to retrain employees, examining new product lines, leaning up their processes, and solidifying sales relationships—all with an eye to position their companies to best take advantage of the market’s inevitable comeback. But that’s a false comparison. The worker shortage may ultimately have the effect of an economic recession, but it’s not going to bounce back. RealTime Talent, a research operation housed by the Minnesota Chamber of Commerce, predicts that the number of open jobs in Minnesota could increase from 60,000 to 200,000-plus within four years. That’s dire. The shortage of workers does not represent a temporary market condition. It is a matter of inalterable demographic realities. There just aren’t enough Bob Kill is president and CEO of Enterprise Minnesota.

Helping Manufacturing Enterprises Grow Profitably

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Creative Director Scott Buchschacher Copy Editor Catrin Thorman Writers Greg Langfield Linda Mathiasen Jim Pumarlo Maria Surma Manka Catrin Thorman Photographers Chap Achen Chris Morse Jeremy Petrick Paula Primeau 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 ldapra@enterpriseminnesota.org 612-455-4202 To advertise or sponsor an event chip.tangen@enterpriseminnesota.org 612-455-4225 Enterprise Minnesota, Inc. 2100 Summer St. NE, Suite 150 Minneapolis, MN 55413 612-373-2900 ©2019 Enterprise Minnesota ISSN#1060-8281. All rights reserved. Reproduction encouraged after obtaining permission from Enterprise Minnesota magazine. Enterprise Minnesota magazine is published by Enterprise Minnesota 2100 Summer St. NE, Suite 150, Minneapolis, MN 55413 POSTMASTER: Send address changes to Enterprise Minnesota 2100 Summer St. NE, Suite 150 Minneapolis, MN 55413

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people to go around, and there won’t be any time soon. This year’s State of Manufacturing survey revealed at least some encouragement that manufacturers are looking to take charge of their situations. Some 60 percent of executives who say their inability to attract a sufficient number of employees makes growth “difficult,” say they intend to rely on improved productivity to navigate the worker shortage. On top of that, larger companies—defined as having revenues greater than $5 million—expect that advances in productivity will be as significant to their company’s growth as developing new products. That’s the good news. At the same time, a substantial number of manufacturers seem to be content in the hope that tomorrow will somehow take care of itself. Consider these findings: • Only 49 percent say their company uses a formal strategic plan for profitable growth. That’s down four points from our 2018 survey. • A full 32 percent say that “strategy is strictly the role of the CEO.” • Just 28 percent say they operate from one-to-three-year written plans “and all staff know their roles and actions to achieve the plan.” • 16 percent say their company “has some ideas but has not yet worked through what our primary focus is.” • 15 percent say they had a plan “but it needs to be further communicated with staff.” Only 23 percent say they have a structured leadership program for employees, but among those who do, only two percent describe their involvement as a “major investment.” I think this data gives us a good sense of the competitors from whom our focus group innovator expects to find market differentiation. While I believe strongly that manufacturers should take decisive, proactive measures to protect their own destinies, I also believe the solution to the workforce shortage represents a statewide challenge that demands a non-partisan statewide response. Unlike an economic recession that can take us by surprise, the worker shortage is a challenge coming straight at continued on page 8

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SKILLS GAP

Lessons from the Real World Representative Barb Haley observed the value of a tech degree through the success of son, Joe.

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Barb Haley, like many parents, tasked her son Joe with chores at an early age.

PHOTOGRAPH BY CHAP ACHEN

oe was diagnosed with dyslexia at age 4. Unknown to Joe and his family at that time, the reading disorder would have a clear impact on his post-secondary schooling and career path. Following his 2016 graduation from Red Wing High School, Joe received a two-year degree in robotics and engineering from Madison Area Technical College in Madison, Wisconsin. At age 21, he is approaching one year on the job at Hartfiel Automation in Eden Prairie. He is a liaison between the engineering and sales staffs, providing sales staff with pre- and post-sales support. He also works with customers on programming new automated systems. Joe’s challenges, as well as his exceptional skills, quickly became apparent in his high school studies. Joe says he liked engineering and math, but it was complicated. He didn’t see himself sitting in college classrooms for another four years. “I wouldn’t have made it. I would have been too stressed if it was all book learning. I wanted to build things.” At the same time, his mother Barb Haley says, “His spatial reasoning was off the charts. He could see everything in 3D and could tell you how it was put together.” The circumstances prompted mother and son to pursue starting an extracurricular FIRST Robotics Club during Joe’s sophomore year. The school district gave them its blessing but offered no financial support. Together, Barb and Joe raised $50,000 to get the program off the ground. The coach was a volunteer. “It started with my interest in workforce,” Barb says, who is currently serving her second term in the Minnesota House of Representatives.

The program met instant success on a variety of fronts: The students excelled at competitions, and they also connected with employers who provided financial support and mentors. At its core, the club provides real-world experience. Participants learn new skills and work as a team in an environment that strengthens an appreciation of the science and technology fields. They gain hands-on experience in all phases of the project from fundraising and marketing to designing and building. Problem-solving is a common thread. Leadership skills involve improving communication, confidence, and persistence. It’s the kind of training that Barb and Joe believe should be incorporated more broadly into high school curricula. Barb has used her time at the state Capitol to focus on the value of experiential learning and has explored ways to incorporate that into high school and post-secondary curricula. Her son agrees. “Classes must do a better job of connecting industry and education,” Joe says. “There’s still the stigma that the ‘smart students’ go on to college, while the others default to twoyear post-secondary programs.” Typical textbook classes have defined outcomes, Joe continues. Experiential learning is open-ended with students spending many hours in labs. “This is teaching the subject matter while learning it,” Barb says. Barb’s proudest legislative accomplishments at the Minnesota Legislature are the creation of workforce development scholarships and the youth skills training program, both of which Minnesota employers are the net beneficiary. Companies of all types and sizes across the state are increasingly challenged to find skilled workers, and the shortage is especially evident in technical skills. Beginning in fall 2018, up to 400 scholarships of $2,500 are awarded to new students enrolling at any Minnesota State college for an associate’s degree, diploma, or certificate program that prepares graduates for careers in high-demand sectors including advanced manufacturing, agriculture, health care services, and information technology. The youth skills training program at the Department of Labor and Industry supports the development and implementa-

tion of experiential learning opportunities for students 16 and older. These locally developed programs are implemented in cooperation with employers and schools. The programs include both classroom instruction and paid part-time employment. The schools in Goodhue County, Barb’s district, formed a collaborative and were one of five districts across the state to receive a pilot grant to develop a youth skills training program. “We need to fund it again,” Barb says. “Developing a skilled workforce is the biggest economic development issue for my district and the state.” Student skills must be matched with employer needs, she adds. Joe’s skills are in stark contrast to those of his parents, Barb and Tim, who both graduated from four-year colleges. “We can barely screw in a light bulb,” she jokes. “We have zero technical ability.” Joe quickly chimes in: “None.”

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Two of Barb’s proudest legislative accomplishments are the creation of workforce development scholarships and the youth skills training program. While Barb always was confident in her son’s skills (his engineering abilities), she wondered “what they would look like” in a career path. Now, she counsels her daughter Maria—a liberal arts major at Minnesota State University, Mankato— to make sure she also graduates with the marketable skills necessary for jobs in today’s economy. The experience with her son has motivated Barb for what she wants to do following her legislative career: work with high school students to help them find out what excites them and align their aptitude with hands-on learning experiences. “There are lots of different ways to learn,” she says. “We must look at all the learning components and help kids DO while they LEARN.” —Jim Pumarlo

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West Central Steel stocks a full range of carbon steel products from long products such as angles, beams, channels and rectangular tubing to flat products such as plates, floor plates, and sheets.

COMPANIES

Cutting Beyond the Edge West Central Steel copes with heavy demand by U.S. manufacturers, compounded by a trucking shortage and the imposition of steel tariffs.

eeping ahead of changes in the workforce and steel industry is inherent to the way West Central Steel does business. In its 60 years, the company has expanded its operations nine times—each time bringing in the latest equipment and technology. While many companies may be hesitant to expand, West Central Steel sees this as its edge in the manufacturing industry. The latest expansion was building an 85,000-square-foot plant on the northwest side of Willmar. It is equipped with a 1,100-ton press brake, which bends up to one-inch steel plates at 30 feet and performs multiple processes of drilling, tapping and machining for precision parts fabrication. Another machine installed in the plant is a structural 3D plasma machine that cuts steel beams for buildings and bumpers for trailer and truck manufacturers. Opened in spring 2018, this plant is responsible for the company’s innovative Growth Accelerating Program (GAP). “We realized the best way to help our customers was to give them the flexibility to focus on what they do best,” says Jeff Pattison, president of West Central Steel.

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“They told us that finding the people, capital, equipment and space was holding them back. Unable to grow fast enough on their own, our customers asked us to fill the gap by expanding our processing capabilities.” For many years, West Central Steel has provided its customers with kits or a package of parts labeled and ready for assembly. Hearing more customers could benefit, the agile company took its current precision parts processing model and introduced GAP. This new program takes the steel customers are already purchasing and pairs it with efficient and timely part production by doing value-added processing. Value-added tasks vary from cut to length, including miter cuts, bevels, slots, copes, holes, notches, counter boring and more, which constitutes a company’s parts production. West Central Steel’s GAP initiative looks to eliminate the percentage of labor that is consumed by capacity draining processes that are often done by hand, in multiple phases and on several different pieces of equipment. With its expansion, West Central Steel provides more precision parts, saving its customers up to 65

percent in labor time. “Our customers can concentrate on the manufacturing of their final product and let us replace a portion of or eliminate their in-house parts production completely,” explains Pattison. Being a “Just-in-Time” steel provider, company leaders keep abreast of what is happening in the market. In 2018, three factors were driving the availability of steel: There was a heavy demand by U.S. manufacturers that was compounded by a trucking shortage and steel tariffs, limiting the supply and increasing product expense. “We are always looking for new ways to refine what we do and give customers more options,” states Jeff Allinder, chief operations officer of West Central Steel. “We had to be innovative because of the healthy demand. As a steel service center, we worked hard to open different supply lines.” Through a combination of utilizing the Mississippi River and rail, new access points were established. “We ship five days a week, so it was vital we expanded our transit systems beyond trucking,” Allinder continues. Going forward, the company expects to see the steel and manufacturing markets tighten. Therefore, the ability to respond quickly and provide customers with costcutting services, such as precision parts processing, is critical to helping customers meet their commitments. “Our company’s goal is to always be one step ahead by going beyond the cutting edge of the industry with customer solutions,” says Pattison. —Linda Mathiasen

CELEBRATION

Tiny Custom Turning Achieves ISO Certification

PHOTOGRAPHS BY CHRIS MORSE

Custom Turning, Inc., a full-service CNC lathe production facility in Monticello, achieved its ISO 9001:2015 certification at a celebration attended by staff of Enterprise Minnesota. Part of the celebration included the fact that the company started its ISO journey with only two employees, founders Ken Schaff and Lloyd Campbell. Schaff credits the management discipline with the fact that the company has grown enough to add five employees and expects to add three to four more over the next couple of years. Above: Lloyd Campbell and Ken Schaff with Bob Kill, Enterprise Minnesotaâ&#x20AC;&#x2122;s president and CEO. Below (left to right): Stacy Morse, representing Congressman Tom Emmer; Drew Halunen, representing Senator Amy Klobuchar; Bob Kill, president and CEO, Enterprise Minnesota; Charles Sutton, representing Senator Tina Smith; Ken Schaff, Custom Turning; Lloyd Campbell, Custom Turning; John Connelly, vice president of consulting, Enterprise Minnesota; Senator Bruce D. Anderson; Dawn Loberg, business development consultant, Enterprise Minnesota; Patricia Pearson, business growth consultant, Enterprise Minnesota; and Kim Matz, secretary, Custom Turning.

SUMMER 2019 ENTERPRISE MINNESOTA /

continued from page 3 us, and we know it. We don’t think it’s going to disrupt our economy, we know it will. I don’t believe there is a magic bullet solution to this issue statewide, but I do know that the states that actively coordinate strategies to limit the potential economic harm will find themselves at an economic advantage over those that don’t. Communities, educators, and business leaders must work on this with policymakers, too. We would all do well to learn the problem-solving lessons from forwardlooking communities like Bemidji, Brainerd, and Alexandria (among others) who have created hometown coalitions that are going to serve them well in the future. * * * And now we have some people to thank for making this State of Manufacturing project such a success. I say this every year because it is always true. The State of Manufacturing would not succeed without the selfless collaboration of so many

The shortage of workers does not represent a temporary market condition. It is a matter of inalterable demographic realities. There just aren’t enough people to go around, and there won’t be any time soon. organizations and individuals. As always, we’re grateful to our sponsors, whose financial backing helps us defray the considerable costs of the overall project, 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 11 years. Rob, the founder of Meeting Street Research,

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is one of America’s premier pollsters. We draw credibility from his creativity, patience, and keen analytic skills. And Tom Mason, our long-time consultant, has also been with us from the beginning. Tom also produces Enterprise Minnesota magazine, along with creative director Scott Buchschacher. Special thanks go to Lynn Shelton, vice president of marketing at Enterprise Minnesota, who has directed the State of Manufacturing project since it was nothing more than a concept. Lynn’s team manages this major undertaking with the utmost of professionalism, integrity and passion for excellence. Kudos go to Lynet DaPra, Constance Fantin, Chris Morse and Chip Tangen. Finally, I want to again extend sincere thanks to the manufacturers 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 who will attend the regional events where we present and discuss the results.

continued from page 40 relationships between manufacturers and their local elected officials. Legislators and others frequently tell us they always appreciated their manufacturing constituents but weren’t always sure why. We’ve used the State of Manufacturing to initiate and lead more than 300 legislative tours of manufacturing companies. Elected officials are almost always impressed, sometimes awestruck, by how most manufacturing facilities have evolved into sophisticated, efficient operations whose products are frequently sold on world markets. What’s more, the survey data has opened the eyes of legislators through

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It’s great how the State of Manufacturing has created and nurtured overwhelmingly successful relationships between manufacturers and their local elected officials. our broad public distribution of the data and through the public testimony of Bob Kill, our president and CEO. Bob has even testified before Congress about the results of our survey, which shows firsthand how taxes, regulations, energy policy and employment laws can directly constrain manufacturers from growing profitably. I’m not suggesting in any way that the State of Manufacturing has rescued the image of manufacturers or inspired their leaders to become aggressive advocates of their own cause. That has been a natural development accomplished by forward-thinking manufacturers on their own. But we do think the State of Manufacturing helps by providing a venue where the manufacturing community can annually gather around credible, serious data that in part celebrates the accomplishments of their industry and identifies challenges that it must overcome.

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PRODUCTIVITY

The ‘Cool Factor’ With no fear of job cuts from automation, Vector Windows’ employees embrace their new robot.

ong before the current worker shortage began to undermine all manufacturers’ plans to grow profitably, Vector Windows had signaled how people would play a role in its strategic growth alongside its new productivity-enhancing robot. The Fergus Falls-based manufacturer of vinyl windows and doors foreshadowed its early appreciation for the power of people shortly after Jeff Ackerson arrived as the company’s new president and CEO in 2007. He earned a B.S. degree in mechanical engineering from North Dakota State University and an MBA from Drake University. In his previous role at Pella Windows and Doors, Ackerson worked in design engineering, manufacturing engineering, and oversaw the company’s efforts at lean manufacturing. His best experience came when he transferred to Gettysburg, Pennsylvania to start up Pella’s first vinyl window and door manufacturing facility. In a display of shrewd self-confidence, Vector Windows used the 2008-2009 reces-

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sion to double down on its workforce. As cautious competitors pulled back their operations to assess the pace of the economy’s recovery, Vector aggressively expanded its sales force, recruiting high-potential employees who had been discarded by skittish competitors. Vector was founded in 1995 as Vinylite Windows, a company that would manufacture and sell vinyl windows and patio doors throughout the Upper Midwest. Today, 60 percent of its products are custom-sized windows in custom varieties, different colors, and glass packages for new construction. “We don’t really have a retail channel or a wholesale type thing, and we don’t sell to the big boxes,” Ackerson says. “So, we don’t have anything sitting on a shelf somewhere either. It’s basically ordered, and then two weeks later shipped to the customer.” While competitors extended lead times to try to save costs, Ackerson says, Vector continued to deliver its high-quality product on time and solidified sales relationships. “We

went in whole-hog,” he says. “We invested in the business, invested in our people, and we literally grew by market share. We stole a lot more business from our competitors.” As the economy recovered, Vector enjoyed an even larger slice of its market. Vector’s revenue grew all through the recession, Ackerson says. In fact, it has experienced double-digit sales growth every year since he joined the company. Now, enter the robot. Last October, Ackerson attended GlassBuild America, a window and door manufacturing trade show in Las Vegas, where he was first introduced to the robot. Most of his operations depend on manual processes, but one area had potential: creating high-efficiency, double-paned windows. Quick calculations revealed that a robot would enable him to reduce a process that required 12 operators—six each on two shifts—down to four in just one shift. Vector is able to use this robotic technology to combine two panes of glass with a space and replace the air between them. Justifying the decision, Ackerson says, was “close to a no-brainer,” even though the $1.5 million price tag made the robot a very expensive piece of equipment. Freeing up eight full-time positions for experienced, reliable employees was a real gift, from Ackerson’s point of view. “We continue to struggle to find good people,” he admits. “It’s not just freeing up those eight bodies, it’s being able to put them to work somewhere else as we continue to grow so we don’t have to hire eight more individuals

PHOTOGRAPH BY JEREMY PETRICK

Jeff Ackerson is president and CEO at Fergus Falls-based Vector Windows, where he is also a co-owner.

on top of it.” Nonetheless, Ackerson and his management team took great pains to ensure that employees understood the robot acquisition would be seen as a win-win companywide. How? “Communication, communication, communication,” he says. First, employees needed to know that it wasn’t an attempt to steal their jobs, which became fairly obvious. Employees knew, for example, that Vector was struggling to maintain its employee count, just as every manufacturer in the region. On top of this, Ackerson says that every employee is told repeatedly no one will ever lose his or her job from an improvement activity. “If we can find a way to go from six people to five, we’re not going to lay someone off. We tried to make the change a positive for everybody, even the ones who we’re moving out of their comfort zone and into a new area of the business.” But Ackerson wasn’t taking any chances. He circulated photos and brochures to hype the “cool factor” of deploying robot technology. Company management convened teams to discuss the project every time they received new information. “We went to those glass line employees first and made sure they were 100 percent up to speed on what was happening, where it was coming from, what it was going to look like, just to keep them the most in the loop. “Our promise to them was, by being able to reduce those costs, we’re going to grow the sales enough to make sure that we can reallocate anybody freed up off of this equipment into other areas of the business. “This may have been particularly compelling, since employees have a literal investment in the success of the business. Profit-sharing at Vector means that every employee gets a dime of the company’s profit. We made sure that employees knew this was going to drop to the bottom line. So, it’s a big deal to them that we’re driving more profit.” In the end, a positive buzz circulated through the manufacturing floor when the trailer rolled into the company with the large piece of robotic equipment. From the beginning, employees requested opportunities to take a look at how it operates. The company even shut down operations to give mini-tours to all who wanted to watch it work.

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AWARDS

Vet Friendly Minnesota college receives a top honor for its service to military veterans.

innesota West Community and Technical College has been named the second most military-friendly school in the nation among small community colleges by the Military Friendly® Schools survey. Military veterans who served this country are able to serve their minds at Minnesota West under the leadership of Terry Gaalswyk and Barb Staples. “Minnesota West has adjusted its programs over the years relative to the needs of the community it serves,” says Dr. Terry Gaalswyk, the school’s president. “Through those close community relationships, we create opportunities for veterans and their families to come live and work in southwest Minnesota.” Minnesota West is a community college within the Minnesota State system. It operates five campuses in southwest Minnesota—Canby, Granite Falls, Jackson, Pipestone, and Worthington—as well as learning centers in Luverne and Marshall. For more than 15 years, the Pittsburghbased organization Military Friendly has used public data sources, proprietary data from its survey, and personal data from surveys of veterans themselves to evaluate more than 1,600 schools nationwide. Any school is eligible to participate in the survey if the school is eligible to receive federal veteran education benefits and has at least three federal veteran programs in operation and good standing. Only ten education institutions receive the Top 10 elite award within their enrollment size and type category; other awards include Gold, Silver, and Bronze. If a school meets military-friendly standards, but does not exceed them, it is designated Military Friendly with no award. The organization says the free-of-charge survey evaluates educational institutions on their service to student veterans using six categories worth different weightings: military student support and retention (30 percent), graduation and career outcomes

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(30 percent), financial aid and loan repayment (12 percent), admissions and orientation (10 percent), academic policies and compliance (9 percent), and culture and commitment (9 percent). To be an award contender, schools must exceed the Military Friendly standards in each category. For example, Minnesota West scored 100 percent when compared to the Military Friendly standard within the culture and commitment category and exceeded the standard by another 87 percent. Questions in this category focused on the availability of clubs or associations for military service members or veterans and whether there was a dedicated social space for gathering, campus/social networking opportunities, and activities to help military students integrate with non-veteran groups, to name a few. Barb Staples, the veterans service coordinator at Minnesota West, says the school provides student veterans their own space

through a veterans’ center and a veterans’ club, as well as opportunities to volunteer in their communities. “We work closely with Regional Veteran Service Officers to give veterans access to resources and ensure their veteran and military benefits are coordinated,” she says. “Most importantly, we have a certified Veterans Service Coordinator to help with all of this and work directly with veterans and their families.” The community college recognizes that skills and talents developed during military service are a valuable resource in the classroom and for veterans’ next career moves. Staples says that veterans can provide a significant resource to help Minnesota companies solve the state’s shrinking number of skilled employees. “They are in a different place in their lives than new, incoming students,” she says. “They are more reliable, more mature, and more ready to take on the challenges of any job out there.” With more than 50 veterans on campus, Minnesota West’s growing ranks of student veterans are a result of intentional outreach efforts. “We have outreach people who visit veteran centers and veteran career fairs and offer our services,” Staples says. “They are all briefed about education benefits and financial assistance available to them at Minnesota West.” Because the college taps into the talents and unique backgrounds of veterans and augments them through its programs, student veterans are provided a conduit for

Minnesota West President Dr. Terry Gaalswyk and Veterans Service Coordinator Barb Staples

their transition into the workforce. “It’s about taking their serviceoriented perspective and commitment to be leaders and bringing that to our communities in ways where our veterans can be civically engaged and help our communities grow. That’s the talent we need in southwest Minnesota,” Gaalswyk says. Minnesota West uses regional partnerships and strong relationships with local high schools and co-ops to create programming that addresses the particular needs of veterans. “My work with veterans focuses on their service mindset and how to align

Staples says that veterans can provide a significant resource to help Minnesota companies solve the state’s shrinking number of skilled employees. “They are in a different place in their lives than new, incoming students,” she says. “They are more reliable, more mature, and more ready to take on the challenges of any job out there.” that with their future working lives,” Staples says. “Having a service mindset means they are always in service to their communities, their fellow peers in the classroom, and their families, and this absolutely makes them a great asset to any workforce.” Gaalswyk attributes the success of Minnesota West to the students themselves as well as the dedication of people like Barb Staples. “The award we received is a reflection of that commitment. Barb has done a remarkable job organizing the college’s resources and attention to service our veterans. We would not be positioned to serve these needs without her efforts, and we will continue to align opportunities for the great men and women who have served our country.” —Catrin Thorman

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Four Questions Alissa Henriksen: Why marketing matters for HR.

ou started working as a recruiter for larger companies. What was your takeaway from that experience as you and Lucas decided to start your own company? I was recruited by a recruiting firm out of college. I didn’t know anything about recruiting, so they walked me through it. For three years I worked with two different firms, and I saw that we weren’t connecting with clients enough to understand their business. We were just doing what we had to do to get through the day: Here’s a piece of paper, here’s the job, go find someone. It felt like we were throwing people at the wall and hoping one of them would grab on. I saw we needed to dig deeper into what the client was experiencing. What are their challenges? What are their opportunities? What’s going to happen when this person comes on board? And so with that, we created a new business plan, a new opportunity to connect with clients in new ways. We recognized how important it was as a business to get into the community, to see it, to feel it, and to talk to people, even outside of the manufacturing facility. You have no idea what it’s like until you’re there, physically. We started with Polaris in Roseau, Minnesota. We met with the company, we met realtors, a school principal…we really got into it. It was huge. With that perspective, you can speak to talent on an entirely different level. You get a sense of what kind of person is really going to be attracted to this location. I mean, in the winter they can drive their snowmobiles to work. As an advisor and as somebody in our business, you have to know all of the challenges. What is your sweet spot placement? We’re working on placing experienced individual contributors to senior and executive leadership. We work with a wide range of growth-oriented, private, family-owned companies to public companies, typically $20 million to $400 million in revenue. They want one part-

/ ENTERPRISE MINNESOTA SUMMER 2019

ner who they can trust and go to and say, “I need a strong director of quality. I need a strong national account manager. I need a strong project engineer. I need a strong VP of operations.” We are a generalist firm that focuses on longterm partnerships. So, what’s your advice to the $5 million company? What can they learn from your experience? You need to focus on your brand. There was a day where you could say that prospective employees didn’t go to your website. Today, that’s the first thing they do when they research your company. If your website doesn’t convey a compelling brand identification, it will be more challenging to attract people to work at your company, let alone cus-

INNOVATIONS

tomers. You have to tell your story. You have to identify who you are, what you do in the marketplace, and why someone might want to come and work with you. A high percentage of companies we work with are missing the boat on describing, “Who are we? What’s our secret sauce?” This was an aha moment for us. As a starting point for a small business, I recommend investing in your company and employer brand first to define their identity. If you can capture that, you might not need an outside support system to go out and attract talent. Over the years, we’ve been going into our client communities and spreading awareness of their business and needs. Nine times out of ten, people in the community say, “I didn’t even know these types of opportunities existed.” And so, here we are

Alissa Henriksen

Alissa Henriksen and her husband Lucas co-founded Grey Search + Strategy 11 years ago with the idea that companies needed to bring more brand strategy to their recruiting efforts. Achieving a full-ride athletic scholarship to play volleyball at South Dakota State University, she has devoted her entire career to recruiting. Grey Search + Strategy has recruited executives, rebuilt recruiting and interviewing processes to attract and retain talent, crafted strategies for rural areas, and developed proprietary playbooks that guide managers through successful hiring.

being a brand advocate as much as a recruiter in their community. We saw this as an opportunity, and we rebranded our own company and acquired a small boutique branding and design firm. It was an amazing connection that changed our entire world—from how we connect with our clients and prospective candidates, to the way we communicate who we are and what we do differently, to the way potential clients are approaching us. We referred a branding and design firm to help our clients go through their identity process. It became obvious to Lucas and me that offering both strategic search and branding design services made sense, so we acquired Davies Branding + Design. Who are you, what do you do, why do people want to come work for you? What gets the current employees excited to be there? That’s their employment brand. It’s exciting and fun work to do for clients who work with us, because as soon as they start seeing the impact it makes, a light bulb goes off and they’re even more excited to talk about their brand. A sales differentiator? How can you attract the right talent if you don’t know your true brand? Brand is your company’s unique identity; it is the way you’re communicating to the marketplace and ties everything together. If companies could capture what their brand is and means, and then spend time investing into it, they would close some of their employment gaps. To take it a step further, it’s the way you communicate with your employees, the way you write your job descriptions, the hard vs. soft skills required for the roles, and even the internal interview process you put all candidates through for your open positions. It is easy to get caught in the “this is the way we’ve always done it” mentality, but once you start to step outside the box and even become a bit “disruptive,” you will see your employment gaps become smaller and your job openings close with the right talent! There are many opportunities for companies to think and act differently to separate themselves as the best place to work and grow; that’s where we have found our key differentiator with Grey Search + Strategy, thinking differently and acting upon it.

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E X C L U S I V E

P O L L

Doing More

with Less

Optimistic manufacturing executives underscore that improved productivity is the way to combat the long-term constraints of fewer employees.

/ ENTERPRISE MINNESOTA SUMMER 2019

innesota’s manufacturers retained near-record levels of optimism about the prospects of their companies in 2019, according to the most recent edition of the State of Manufacturing® survey. But underneath that cheery confidence is a growing concern that the looming shortage of workers will constrain their ability to grow profitably, and a recognition that the long-term solution will be through improved productivity. The State of Manufacturing, created and overseen by Enterprise Minnesota, is a statistically balanced opinion survey of manufacturing executives in Minnesota. The 2019 study is the 11th edition of the annual survey. It was conducted by

Amid all this optimism, executives voiced uncertainty about the health of the overall economy. Only 49 percent predict expansion, a full 15-point drop from the 2018 survey. Similarly, 39 percent expect a “flat economy,” up 11 percent from last year. Rob Autry, the founder of Meeting Street Research, a public opinion research firm based in Charleston, South Carolina. He has overseen all 11 surveys. Autry’s firm interviewed 400 manufacturing executives from March 5 to March 20. Executives included CEOs, CFOs, COOs, presidents, vice presidents and managing officers. Meeting Street also completed 123 additional interviews among manufacturers outside the Twin Cities to gather a sufficient sample size to analyze the state according to Minnesota Initiative Foundation regions. The survey’s margin of error is +/- 4.9 percent.

Financial confidence soars. Financial confidence soars. “From a financial perspective, how do you feel right now about the future for your company?” Confident

79%

78%

21%

December 2008

January 2010

Not Confident

83%

82%

84%

16%

17%

15%

January 2011

January 2012

March 2013

March 2014

94%

93%

March 2016

March 2017

March 2018

March 2019

89%

90%

11%

March 2015

More than half will

More than half willincrease wages in 2019. increase wages in 2019. “Have or will wages for your employees increase for 2019, or will they decrease or stay about the same?” Increase

49%

46%

Decrease

Stay About the Same

58%

52% 45%

37%

2017

2018

2019

The worker shortage impacts growth

The worker shortage impacts growth. “What would you say are the one or two biggest challenges your company is facing that might negatively impact future growth?” 2014

2015

2016

2017

2018

2019

Attracting and retaining a qualified workforce

21%

29%

26%

34%

49%

48%

Cost of health care insurance

31%

41%

34%

36%

30%

Increasing costs of energy and materials for your products

29%

20%

15%

18%

34%

28%

Unfavorable business climate

48%

43%

40%

38%

18%

19%

Lower sales for your products

31%

23%

32%

22%

17%

12%

Government regulations

Foreign competition

SUMMER 2019 ENTERPRISE MINNESOTA /

Few companies operate from formal plans.

Few companies operate from formal plans. “How does your company plan to grow?”

The strategy is strictly the role of the CEO

32%

We have a 1-3 year written plan and all staff know their roles and actions to achieve the plan Our company has some ideas, but has not yet worked through what our primary focus is, and is not We have a plan, but that needs to be further communicated with staff

Enterprise Minnesota supplemented the survey data by conducting 13 focus groups statewide (see page 20). The survey revealed that overall confidence continues to soar at extremely high levels among Minnesota’s manufacturing executives.

28%

16%

15%

million, and 74 percent at companies with more than 50 employees). Metro companies (62 percent) are more likely to expect wage increases than those in Greater Minnesota (53 percent).

The survey’s sole hint of uncertainty can be found in the sharp drop in number of manufacturers who expect America’s economy to expand in 2019. Only 49 percent predict expansion, a full 15-point drop from the 2018 survey. Similarly, 39 percent expect a “flat economy,” up 11 percent from last year. Only five percent expect “recession.” There was an intriguing east-west split among the Initiative Foundation regions, with the west showing far greater pessimism about the economy: Forty-five percent of executives in the Northwest (based in Bemidji) predicted economic expansion; West Central executives (Fergus Falls) came in at 41 percent; and pessimism was strongest in the Southwest (Hutchinson) at 37 percent. Manufacturers in the east expressed greater confidence in the economy: Northland, Duluth, 56 percent; Initiative Foundation, Little Falls, 54 percent; and the South, Owatonna, 54 percent.

Minnesota Initiative Foundation

• Ninety-three percent of executives feel “confident” about the futures of their companies, exactly the same percentage as last year. Only five percent are “not confident,” the lowest number recorded in the history of the survey.

At 48 percent, the ongoing worker shortage topped the list of most significant challenges “that might negatively impact future growth.” • Fifty-nine percent of executives expect increases in gross revenue, while 45 percent project increases in profitability, both close to record highs. • Fifty-eight percent expect employee wages to increase in 2019, which is six percent higher than 2018. Only one percent expect wages to decrease. The greatest increases were projected by large companies (78 percent at companies with revenues greater than $5 18

Northwest Minnesota Foundation

West Central Initiative

Northland Foundation

Initiative Foundation

Southwest Initiative Foundation

Minnesota Initiative Foundations

Southern Minnesota Initiative Foundation

/ ENTERPRISE MINNESOTA SUMMER 2019

Ongoing Anxieties

At 58 percent, concerns about the costs of providing health care coverage to employees is rated as the top concern among manufacturers, as it has in each of the 11 years of the survey. Apprehension about government policies and regulations is a top concern of 40 percent of manufacturers, down from a whopping 61 percent in 2011. Fears of foreign competition is down to 13 percent, which is down from 20 percent in 2011. A plurality (45 percent) of executives say Minnesota is a better place to do business than it was five years ago. Thirty-seven percent say it has stayed about the same.

A majority of manufacturers (54 percent) cited “maximizing productivity” as the way they would navigate challenges related to the worker shortage. Workers

The inability to attract qualified labor is very high on the heartburn scale of manufacturers. At 48 percent, the ongoing worker shortage topped the list of biggest challenges “that might negatively impact future growth.” This number is 27 points higher than it was in 2014. In this context, the cost of health insurance fell to 30 percent, and “increasing costs of energy” came in at 28 percent. Seventy-one percent statewide said the worker shortage makes things “difficult.” Most affected are larger companies: 84 percent of companies with revenues in excess of $5 million found it difficult; 84 percent of companies with more than 50 employees also found it difficult. Seventy-six percent of companies in Greater Minnesota found it “difficult.” Broken down by Initiative Foundation regions, it looks like this: • Eighty-five percent each in the West Central and South • Seventy-six percent in the Southwest • Seventy-five percent in the Northwest • Seventy-three percent in the Initiative Foundation • Sixty-five percent in Northland

Productivity combats the worker shortage.

Productivity combats the worker shortage. “What are some of the things you are doing to navigate around the worker shortage challenges?” Maximizing productivity

54%

Increasing compensation

38%

Training interns to become employees

32%

Being more aggressive in marketing your company to potential employees

31% 27%

Working directly with area tech colleges Part Time/Temporary help

Larger companies emphasize productivity.

Larger companies emphasize productivity. Most Important Drivers of Future Growth by Revenue Size Revenue Under $1 Million New Customers

29%

Eliminating Time & Energy Waste

18%

Better Strategic Planning & Implementation

15% 11%

41%

37%

33%

New Products

Revenue Over $5 Million

55%

58%

Maximizing Productivity

Developing Company Managers & Leaders

Revenue $1-$5 Million

40%

20%

29%

24%

30%

20%

27%

23%

Companies invest little leadership training.

Companies invest little in leadership training. Amount of Investment in Leadership Training Programs by Key Groups Among Companies with Program

Major

Modest

Little

Metro companies

38%

56%

Greater Minnesota companies

10%

35%

48%

Less than $1 million in revenue

26%

70%

$1-5 million in revenue

41%

54%

Over $5 million in revenue

13%

45%

36%

50 or fewer employees

31%

57%

Over 50 employees

47%

42%

Productivity

A majority of manufacturers (54 percent) cited “maximizing productivity” as the way they would navigate challenges related to the worker shortage, with 76

percent saying they would emphasize improving “people development and process improvement equally.” Even more telling, manufacturers now say that maximizing productivity is second only SUMMER 2019 ENTERPRISE MINNESOTA /

2019 FOCUS GROUPS

2019 State of Manufacturing® Event Schedule The State of Manufacturing® results will be unveiled at a series of meetings statewide. All are invited. You can register at www.stateofmanufacturing.com.

Here’s the schedule. Statewide Survey Release Event Tuesday, May 14 3 – 6 p.m. Earle Brown Heritage Center Carriage Hall 6155 Earle Brown Dr Brooklyn Center, MN 55430

Northwest Minnesota Tuesday, May 21 9 a.m. - 12 p.m. Sanford Center – Ballroom 1 1111 Event Center Dr. NE Bemidji, MN 56601

Southern Minnesota Tuesday, June 4 9 a.m. - 12 p.m. Owatonna Country Club 1991 Lemond Road - Ballroom Owatonna, MN 55060

West Central Minnesota Monday, June 17 12 – 3 p.m. Grand Arbor - Community Room 4403 Pioneer Road SE Alexandria, MN 56308

Southwest Minnesota Tuesday, June 18 9 a.m. - 12 p.m. Ridgewater College Student Center, Room A-240 2101 15th Av. NW Willmar, MN 56201

Northeast Minnesota Thursday, June 20 9 a.m. - 12 p.m. Kitchi Gammi Club – Great Hall 831 East Superior St. Duluth, MN 55802

Central Minnesota Thursday, June 13 9 a.m. - 12 p.m. Bison Creek Event Center 1207 Hwy 25 North Buffalo, MN 55313 Enterprise Minnesota produced the State of Manufacturing events through the generous support of its Platinum and Gold sponsors: Platinum sponsors: Bremer Bank, Granite Equity Partners, Gray Plant Mooty, King Solutions, Minnesota Department of Employment and Economic Development, Olsen Thielen, and Widseth Smith Nolting. Gold sponsors: Blandin Foundation and Iron Range Resources & Rehabilitation Board (IRRRB).

/ ENTERPRISE MINNESOTA SUMMER 2019

March 21 – Bemidji Northwest Minnesota Foundation March 22 – Alexandria Alexandria Area Economic Development Commission; West Central Initiative March 26 – Jackson Southwest Initiative Foundation March 26 – Owatonna Southern Minnesota Initiative Foundation March 28 – Roseville Olsen Thielen March 29 – Pine City Pine Technical & Community College April 2 – Rosemount Dakota County Technical College April 2 – Plymouth Productivity Inc April 3 – Coon Rapids Lee & Associates April 4 – Duluth APEX; Duluth Economic Development Authority (DEDA); Lake Superior College; Minnesota Power; The Northspan Group, Inc. April 5 – St. Cloud Gray Plant Mooty April 5 – Brainerd Clow Stamping Company; Pequot Tool & Manufacturing April 16 – Shakopee Grey Search + Strategy

to “finding new customers” as an “important driver of future growth.” Two extrapolations from this data provide even greater insight into the value of productivity: • Companies with revenues over $5 million predict that maximizing productivity will have equal significance as finding new customers as the top driver of future growth. • When they combine “eliminating time & energy waste” with “maximizing productivity,” a whopping 70 percent of larger manufacturers project that improved productivity will be the most significant driver of future revenue growth.

EDITOR’S NOTE: Full results of the State of Manufacturing® can be viewed at www.enterpriseminnesota.org. There you will find a full rendering of the survey’s top-line findings, a select number of cross tabulations, and edited transcripts of all focus groups.

Automation

Sixty-four percent of manufacturers deploy some form of automation in their manufacturing operations. Of those, 50 percent say it is to improve productivity; 38 percent say it is to improve product quality; 30 percent say it is to improve safety; and 24 percent say it is to enhance the work environment. The number of companies that have introduced “structured leadership development” programs has inched up from 19 percent in 2018 to 23 percent in 2019. But of those companies, 52 percent described their involvement as requiring “a little investment.” Only eight percent described it as “a major investment.” Large, metro-based companies appear to be pursuing training most aggressively.

Strategic Planning

Curiously, the number of companies that deploy a “formal strategic plan for profitable growth” has declined. Today, 49 percent of companies statewide use a strategic plan, while 49 percent do not, a slight decline from 2018, when the comparison was 53 percent to 47 percent in favor of planning. Not surprisingly, larger companies are more likely to operate from a formal strategic plan. Eighty-five percent of companies with more than 50 employees use a plan. On top of that, a growing number of executives declare that strategy is “strictly the role of the CEO” (32 percent in 2019, 28 percent in 2018). Twenty-eight percent of manufacturers say their companies “have a 1 to 3 year written plan and all staff know their roles and actions to achieve the plan.”

MANUFACTURING IS VITAL TO MINNESOTA’S ECONOMY

Our programs and services here at the Minnesota Department of Employment and Economic Development can help your business thrive. We offer: ●

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The look you get when you realize it comes with the machine.

About the pollster Rob Autry, founder of Meeting Street Research, is one of the nation’s leading pollsters and research strategists. The Meeting Street Research team has over 25 years of combined public opinion research experience and 2,000 research projects under its belt. Autry has conducted all 11 State of Manufacturing® surveys. Before founding Meeting Street, Autry was a partner at Public Opinion Strategies.

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State of Manufacturing/The Educators

IT’S ABOUT BUILDING

PARTNERSHIPS Bemidji counselors and school administrators have created a much-admired program to prepare students for careers that don’t necessarily require a four-year degree.

/ ENTERPRISE MINNESOTA

SUMMER 2019

EDITOR’S NOTE: This is an edited version of a focus group conducted in connection with the 2019 State of Manufacturing® survey. The full text can be found at www.enterpriseminnesota.org. There is an organization in Minnesota that projects the number of unfilled jobs in the state to grow from 60,000 to near a quarter-million in just the next several years. What’s your reaction to that as educators? • I would make it clear it’s a living wage job. And if it was 60,000 of those, I’d be very concerned. Entry-level jobs don’t concern me as much. • I just think as educators we have a responsibility to prepare students for success after high school, to be able to fill the different in-demand jobs that may be available—whether it’s in health care, manufacturing, or any kind of position that may be skilled or unskilled. • We don’t push for college as much, not like we used to, because seven out of every 10 jobs require a skill. So, it’s more about the skills and the trades; it’s our job to find the passion of our students and to support that passion. • I would add that it’s our job to make sure we graduate well-rounded students who are full of options and able to live in the 21st century with adaptability and flexibility. As a school district, we can’t do much in terms of bringing in workers from other states, but I think if we increase our capacity to graduate more students, we are contributing and doing our part to help feed that workforce. • And it’s giving high school students the opportunity to develop their passions and learn their skills and their interests, giving students the opportunity to work and learn on the job. And creating a partnership for students who need to learn soft skills. Or who need to learn some of the basics. They might not really understand what their interests and passions are until they are hands

on in the business, employed with a paycheck, with a boss, and with expectations to perform and execute. So, to find a partnership between businesses and school districts that allows for more internships and work experiences to develop those interests, I think that is effective. • I get weary of the relationship you’ve brought up between private and public entities. What I feel could occur, or I get worried about, is if we don’t build a quality partnership, the private industry will say education’s job is to make sure students are ready so that they step right out of high school and into my employment, and they’re not ready for it.

We don’t push for college as much, not like we used to, because seven out of every 10 jobs require a skill. So, it’s more about the skills and the trades; it’s our job to find the passion of our students and to support that passion. • So all of a sudden, we’re supposed to pigeonhole our kids at certain things that they’re not even ready or willing to do. And it’s because the private industry is telling us that we have to, or they’re saying, when I form a partnership with you guys, you give me a kid who’s not ready to work or ready to do the things that I need him or her to do, and I’m trying to run a business. And I get worried that with the large amount of jobs available, we start to ask what is education doing to prepare these kids for my particular field? Even though there are 160,000 jobs with an extreme array of what it is that we’re supposed to be preparing them for. • At the high school level, when students are starting to look at opportunities

and what their skills and interests are, exposure is so important. So many students don’t have exposure to what it truly means to be in the health field or a manufacturing business setting. They haven’t had the experience yet, so they can’t draw from it. At the high school level, offering exposure is a way for students to see if it fits or not. For example, some students are going to take part in a Certified Nursing Assistant (CNA) position and think, “Absolutely, I want to go into the health field.” Then they become a CNA and they realize, hey, this is not for me. Or a student goes into manufacturing, mechatronics and then sees it in more of a realistic point of view. Then, prior to graduation and going to college, they have a little more depth in terms of making those vital decisions. Bemidji gets great kudos for being a district that understands four-year degrees aren’t the only path. What’s the secret sauce? How did that happen here? • I think we have an excellent school-towork program. • I think it’s our community, too. • Community has really engaged the school, and there is a partnership with our community economic development team. They see it as an issue not only for Bemidji. And they see if we can get our kids engaged here, even if they leave, possibly they’ll come back. And if they don’t come back, they’re going to speak highly of the area and know that this is a community that does good things for kids. So, it’s not only what we’re doing in the schools, it’s bigger than that. Are there formal relationships between the business community, community leaders, and the school or was it more of an organic growth? • Each academy we started has a high school staff lead—we’re going to have 18 of them next year—and then our community partner or partners. We work in conjunction with our partners to decide which classes are required

SUMMER 2019 ENTERPRISE MINNESOTA /

and which are recommended. We get advice from our partners on curriculum and what we should be teaching. An example of that from a couple of years ago is one of my tech teachers and I went to our electronics team and he asked, “What should our outcomes be for drafting?” And they said, “Well, what are you drafting on?” “Well, we’re doing paper and pencil T-squares like I did back in the 80s.” And the guy looked at us like, “Why are you doing that? Everything’s CAD [computeraided design]. We don’t do paper and pencil.” And we felt stupid at the time, but you don’t know what you don’t know.

It’s our job to make sure we graduate well-rounded students who are full of options and able to live in the 21st century with adaptability and flexibility. • By having partnerships, we got all those drafting tables out, no more T-squares, and I took six months to raise $10,000 and we put 32 computers in there. So, everything’s CAD. That’s one example of working with our community partners. And we have industry partners who were going to start their own apprenticeship program or their own internship program, but now that they know what we have, they don’t have to do that. There isn’t a partner that isn’t supportive of what we’re doing because we all want the same thing. Are resources still a challenge here in Bemidji? • I surely don’t feel that we have an abundance of resources. There’s been a lot of work done with the academies to try to encourage community partners to give to that program. But it’s not like the money is just flowing in. • I think it’s a large web of 15 years of work and building. • It’s not as though we all of a sudden were blessed with a pot of money or a pot of broad resources. I think it’s the

/ ENTERPRISE MINNESOTA SUMMER 2019

building of partnerships. We’re seeing a willingness within our community to partner in any way. And one of the things that you see is not every partner is just throwing money at the problem. They’re developing exposure programs. They are taking our kids on internships. They are coming into our school and doing trainings. So, you’re getting some financial resources, some raw resources, and in-kind training. You’re getting a lot of pieces where people are willing to be part of the educational process. Does a lack of counselors create a lack of resources? • Yes. • I think we do a lot less of the guidance and counseling and working with kids than we should. And it’s because of limited resources. We are hoping that we can move in a direction to get more resources, and we’ve been talking a lot about it this year. We’re very reactive, and we’re not able to be proactive because of numbers. It’s 1,472 students, or whatever the number is, and two counselors. So yes, we feel that resources are an issue. • That’s a big part of it. The funding formulas don’t allow for it to happen, and it’s an expensive decision. We have to think outside the box, and thanks to the career academies and to some brands, we are looking at doubling our number of counselors at the high school next year. So, that’s exciting. • We have over 600 kids right now signed up for the academies. And we’re only a year and a half in. So, we have everything in place except for bodies— a team to work with our kids. • Again, the guidance piece and the jobs and the frustration a business might have with school counselors comes down to resources. I really believe that. I believe as we get more resources, we have more community partners who put resources into working proactively with kids, instead of it being a reactive system where we’re putting out fires. That’s going to make a difference in how we can better serve students, and it’s a guidance format for all of us—middle school and high school. We can start to work a little bit more, and

not just with the kids who have mental health concerns or social emotional issues, but also the ones who just want a little help and guidance, need some direction and want to talk to a manufacturer or talk to a business or do more things with the academies. It’s hard for

Community has really engaged the school, and there is a partnership with our community economic development team. us to get the time to really meet and discuss that and college plans with kids. Let’s talk about that college track, the B.A. track. It has become cliché in these focus groups for someone to say that public high schools just want to be factories for four-year degrees. What’s your perception of this? Is there a prejudice that the four-year degree is the only way to a remunerative and satisfying career? • Well, you said nine out of 10 groups say it’s too high. We look at a kid who has to mature, and through the maturation process maybe he wants to be a nurse, a school counselor, a teacher, and you have to give him that chance to mature and all that. College helps a lot of folks mature. I mean, I want to push 80 percent of them to look at that. • We’re not pushing them at the high school level. We already know our group that’s going out to a four-year college. We’re not worried about that. • Well, 75 percent of them are in music. That’s 75 percent right there. They’re in our first hour of music. • Where do the poor kids go after high school? In the ‘60s and ‘70s they joined the Army, they joined the Navy. And growing up in a farm community, that was my out, to join the military. Now you look at kids and you ask, “What options do I have for you to break the track?” Kids might be A students, they might be in choir, they might be in band, they might be in everything. But understanding what they can access, that’s the piece we provide that other

schools are asking, “Well, what’s the difference?” • I think the difference is we have somewhat of a generational gap than the rest of the state because we still have families where parents didn’t graduate high school, but they were able to find employment. What we are finding is we’re able to provide that understanding of access. We’re giving them the bridge of perseverance. It’s the idea that, “Okay, we’re going to have you take the mechatronics program that we have here, and we are going to lead you through it. We are going to support you through it.” • For every one job that requires a doctorate, there are two jobs that require a bachelor’s degree, a master’s degree and there are seven that require a trade. All of my field trips right now have kids step foot on a college campus. A lot of my kids in mechatronics, they get F’s and D’s in a traditional classroom. And they get all A’s with hands-on learning. The fact that they’re like, “I got an A in a college class” is important. So, it’s the mindset. • And my philosophy when I was working at the high school was fostering that love for learning, regardless of whether it was a trade or looking at a four-year college or being a doctor, whatever. But just fostering that love for learning and getting excited and passionate about a vision for yourself and a future. I think so many kids get kind of lost in all of that. You know, what to do with life and all these bigger questions. And it’s kind of just going back to finding those interests and those things that they love and then opening the doors. Seven hundred students per counselor would explain it pretty well. • Yeah, and we have tried to do some

things in the students’ homeroom settings and other things to break it down. It comes down to just needing to spend more time talking to kids. • But who’s to say the skill and trade is the end? If I go get a CNA certificate, I can get it for free through the high school. Well, if I’m going for nursing or going for veterinary medicine or something that’s related, it’s a resume builder and it’s a stepping stone. I can work as a CNA in the summers. And I don’t have to go work at a low wage. I don’t have to be a lifeguard at a pool. It’s good not only from the wage standpoint but as a resume builder. So, it’s a stepping stone, because someday you might run the company. You might as well have the foundation. I was surprised to hear a college president say a few years ago that 40 percent of her students need remedial work in ei-

It’s not as though we all of a sudden were blessed with a pot of money or a pot of broad resources. I think it’s the building of partnerships. ther math or reading. And she said that’s a number that holds up nationwide. First, do you agree with that? Second, why do you think that’s true? • I don’t know the statistic or if that is a perfect statistic nationwide, but I’m guessing if they said it was, then it is. • Yeah. But I believe the push for all to go to college in the past, and us not recognizing that some students just weren’t either ready or cut out and mature enough, caused some kids who weren’t ready to get accepted. And I

think in some cases, because colleges are also trying to fill their admission requirements, they’re accepting kids who maybe don’t have the skills and abilities to be able to do what they need. I mean, and I hate to say it this way, but it’s a little bit on the college. They might need to recognize that a lot of students need to have better than a D in high school Algebra II to be successful in college. Maybe they need to have a B or better. • If they look at their admission requirements, that would help that remedial rate. We have students who are superstars in math, but we also have students who really struggle to get through the state’s math requirements to graduate. But you know, some schools are lowering their standards because they’re trying to fill their quota, their admission requirements. • I would worry about their math failure rate versus how many kids have to take it. Because if they make it through and they’re successful, what does it matter if it’s 80 percent, 40 percent? If they’ve accepted them and they get through the class, well, the kid’s paying for the class. • I think you’d have to work pretty hard not to get accepted into a school. • And that’s what I’m saying. It’s more about the attrition rate and the success rate. • The other side of that statement is that maybe schools aren’t emphasizing those basic skills sufficiently. • Many welders use trig and calc everyday. They just don’t realize it as that’s the job. • Our school requires four years of math education where the state requires three. We require four years of science where the state requires three. So, as a board and as a district, we’ve accentuated being college ready. Now, because of what we’re talking about, there needs to be some adaptation to that at some point so that some of our students who have the three credits, the state requirement, can go into a tech track or something different.

SUMMER 2019 ENTERPRISE MINNESOTA /

Q&A

WALZ ON

‘ONE MINNESOTA’ Legislator Tim Mahoney and Governor Tim Walz discuss the value of manufacturing jobs and what the government can do to help sustain them.

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In the Mankato area, the focus is around agriculture. In Winona, it’s around composite industries. There is a sense that a lot of folks in rural America, or Greater Minnesota, felt like they got left behind, especially after the Great Recession. The jobs came back to the urban areas; Minneapolis-St. Paul is booming. What I think kept us going, which we want to keep pushing, are the manufacturing jobs that came back. In the political world, people try to pit one area against another: “I’ve got mine and the reason you don’t have yours is because they have it.” In Minnesota, the depth of the economy and the manufacturing base stopped some of that from

happening. We just need to make sure we don’t lose that; we provide the workforce and some other things, and we make it happen. Some people have described manufacturing jobs as job-creating engines. I think you believe that. I absolutely do believe it. I think all of us know that these jobs pay way above average, and they become skills you end up keeping for a long time. Those peripheral jobs in smaller communities really matter. These are the folks who can then afford to go and buy their furniture or their truck in town. They can have a little extra money to go out to eat.

PHOTOGRAPHS BY PAULA PRIMEAU

epresentative Tim Mahoney: You’ve talked a lot about economic inequities in Minnesota. Would you describe that objective in terms of its special relevance to Minnesota’s manufacturers? Governor Tim Walz: I have talked a lot about One Minnesota. I think the strength of Minnesota is the depth and diversity of our economy. Good middle-class jobs that don’t come with a lot of student loan debt, but come with the nobleness of the skills that are provided, are the manufacturing jobs in many cases. In southern Minnesota, as a member of Congress, I often talked about these initiatives that tried to create energy around manufacturing.

Nothing would make me happier if my kids came home and said, “You know what? I think I want to pursue a trade. I’d like to pursue manufacturing,” or “I’d like to know how to do this.” I think it’s that exposure and manufacturers letting us know what they need from us.

SUMMER 2019 ENTERPRISE MINNESOTA /

There’s an old phrase that talks about every employee should be somewhat of an entrepreneur so he or she can go up to the boss and say, “If we do it this way, it will save you time and money.” Absolutely. And it’s important they have the skills to do it.

We should be teaching our students how to be thinkers for the future. I was touring the Fairmont area a year ago, this last summer. I went through five different manufacturing facilities. They went from the kind that get grease underneath your fingernails to ones where you could wear a white shirt. Bob Kill (president and CEO of Enterprise Minnesota) often mentions that the road to continued economic prosperity for manufacturers and their employees will evolve from public-private partnerships, especially in Greater Minnesota. He says these coalitions should include business groups, policymakers, nonprofits, educators, vendors, and community leaders. What are your thoughts on this? What role, if any, does administration play? Bob is right; I’ve seen this. As a member of Congress representing southern Minnesota, I saw how these collaborations worked. I think it’s unique to Minnesota. And it gives us a real advantage. Transportation fits into this. We can’t have an antiquated transportation system. There’s a reason that Walmart, UPS, and FedEx all encourage massive investments in transportation and are even encouraging things like user fees or a gas tax. A $0.20 gas tax? They do. They know if your gas is cheaper, and you’re sitting in traffic burning it, that’s useless. I think they see all these things fitting together, and the State’s role, in many cases, is being the partner that provides the infrastructure, whether that is transportation infrastructure or 28

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the workforce that’s there. I think that’s what they are asking for. Minnesota State University–Mankato plays a role. South Central College and its mechatronics program can play a role. Our trade unions can also play a role. All of these paths lead to job training, and one of the things we are seeing is the need and the acceleration of doing that quickly. I often talk about this with the National Governors Association. All of us are dealing with a workforce shortage. It starts with parents telling a story about manufacturing. If you are of a certain age, like me, we were all told that manufacturing jobs were going overseas and, unless we went to college for an office job, there was going to be nothing there. I would argue, in many cases, that led to a lot of debt and people choosing careers that weren’t best suited for them. I think we are now getting back to the point where a lot of different pathways are opening up. One of my best friends is a Macalester grad who spent a lifetime being a great carpenter. His retirement is better than most. It’s not an either/or. The humanities matter, a liberal arts education matters. We should be teaching our students, especially in our public elementary and high schools, how to be thinkers for the future, how to be problem-solvers, how to be on time and do things, and lock them into lifelong learning. We all know they are probably going to switch professions seven to nine times in their lifetimes.

Most manufacturers feel an acute challenge with recruiting and retaining skilled employees. How does your administration read the situation? There are a lot of good ideas out there. We certainly don’t believe, as an administration, that we are going to reinvent the wheel. We believe in opening up pathways for things that are already there. There are a lot of smart people. They may be in technology-related sectors or they may be in manufacturing. We just need to make sure we are being nimble enough to see what that future workforce is going to look like and make sure we’re training for it. And then we have to make sure we understand the demographics we’re up against. As the cold, agrarian state we might be known for, Minnesota is one of the few Upper Midwest states that actually has an influx of people coming in. This is about quality of life and services. We need to attract people to this state, but the one

Good middle-class jobs that don’t come with a lot of student loan debt, but come with the nobleness of the skills that are provided, are the manufacturing jobs in many cases. thing we cannot afford to do is let any of our existing folks fall through the cracks. I say this because 70 percent of our workforce is going to come from communities of color. In engineering, and in some of these high tech manufacturing roles like robotics, white men make up 80 percent of those jobs and white women make up 19 percent. That tells you something. Local manufacturers talk a lot about K-12 educators and parents continuing to emphasize the four-year track. They may not fully understand what the manufacturers are saying, the kinds of rewards involved, and the well-paying careers that can be found after a two-

year degree. Has that been your experience when talking to people around the state? Absolutely. It’s a hard problem for several reasons. Again, if you’re of a certain age, until recently parents didn’t know these education alternatives were options. We, as a state, have to start thinking about using social media in different ways to provide those opportunities for students at a younger age. By the time students start a career, which we usually expose them to in 9th or 10th grade, it’s almost too late. They need to start getting this in middle school or later on in elementary school through a Career Day type of scenario to know what’s available. After four years in an apprenticeship and then a couple years of experience, there are sheet metal workers making about $105,000 a year, and they are doing incredibly detailed work on places like our U.S. Bank Stadium. Nothing would make me happier if my kids came home and said, “You know what? I think I want to pursue a trade. I’d like to pursue manufacturing,” or “I’d like to know how to do this.” I think it’s that exposure and manufacturers letting us know what they need from us.

us. I know there is a nostalgia. I saw it in the presidential campaign when a candidate said he was going to bring back coal jobs. Well, even if we choose to use coal again, it’s not going to be mined by hand and it’s not going to create the jobs that were there in the 1970s. It’s the same thing with manufacturing. But, it doesn’t mean that there is not that need, as you said. Making an F-35 fuel pump involves taking a very expensive piece of industrial grade aluminum block and not screwing it up. A lot of these folks

at the National Governors Association about how we can work together. This is not about how we compete against other states—that’s a zero-sum game. The great secret that we’ve always known is Minnesota workers have incredibly high work ethic. It’s not misplaced pride. It’s pretty obvious you’re very optimistic about Minnesota’s future. I am, because the past shows me that I should be. I do believe we have to take

The great secret that we’ve always known is that Minnesota workers have an incredibly high work ethic.

It’s hard to get that out of manufacturers and get that collaboration with our two-year colleges so that students know where to go and what to do. We, as a state, need to be partners in that. Plasma welding is a great example at HitchDoc out in western Minnesota. They would have to send their folks to Chicago, I believe, because they couldn’t get enough people. The state needs to be able to bring that to them. If we have the expertise, the training, and the capacity, we can partner together to bring them in. Manufacturers are looking to compensate their work shortage by improving productivity at their plants through operational improvements, technological improvements, and by developing the leadership skills of their current employees. Here’s where we go into robotics. Now, some people are criticizing these manufacturers saying they are eliminating jobs by using robotics. I have always thought they are just upgrading the job. Somebody has to make the robots, and somebody has to maintain them.

are doing on-the-job training, they’re able to get that. I don’t think we can run from the future. We can’t tell people that there’s somehow something inherently evil about folks trying to save costs in manufacturing. American workers are still, by far, the most productive workers in the world. I think this is where I’m going to make the case to businesses: enhancing the capacity to keep those talented employees is going to be really important. “We can’t do paid family leave.” Really? You like retraining people all the time? You like having people come in and out? What does that cost you?

The wages go up when your skills go up. The role of work and the nature of future work is one of the great challenges facing

What’s the best use of Minnesota’s Trade Office for manufacturers? I was just talking to other governors

on these challenges. We cannot allow an aging infrastructure to put us at a disadvantage. We cannot allow our worst-inthe-nation gap between students of color and white students to continue on. And we can’t continue to see labor in the workforce at odds with management, ownership, and the business community. We’re in this together. Again, we are not competing with other states, like Wisconsin. We’ll beat them. We’re competing against Japan, we’re competing against China, we’re competing against the European Union, and what we are competing for is the opportunity to get a really good job, live a dignified life, and maybe have some spending money and time with your family. That’s what it’s about. SUMMER 2019 ENTERPRISE MINNESOTA /

STRATEGY

THE

MANAGERIAL STRATEGY THE ARRIVAL

Kevin Hogan arrived at the Brooklyn Park headquarters of Diversified Plastics in July 2017 prepared to take the reins of the company from owner Jim Dow, who was retiring. It seemed like an ideal pairing of managerial skills and business opportunity. Hogan brought to the company a diverse résumé of executive experience and expertise. With an MBA from the Carlson School of Business at the University of Minnesota, he has served in positions at Pillsbury, Jostens, and Select Comfort, as well as several startups. For its part, Diversified was a profitable company with a longstanding and deeply loyal workforce. Six of its 60 employees started as members of the “baker’s dozen” of employees who had been with Dow since he founded the company 40 years earlier. Based on five consecutive years of record revenues, the company enjoyed an enviably cash-rich balance sheet. And perhaps most important, Dow, then 80 years old, seemed ready to hand it over. He joked that he had taken the company as far as his 30

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“entrepreneurial” orientation would let him, adding that it was time for “professional management” to achieve things he hadn’t. And in 2011, he created an Employee Stock Ownership Plan (ESOP) that enabled his employees to harvest some of those rewards.

“If you don’t know where you’re going, you might end up someplace else.” —Yogi Berra, Hall of Fame, Yankees catcher and amateur business sage At the same time, Hogan knew well how many “entrepreneurial” manufacturers will notionally acknowledge the managerial attributes that sustained their companies as startups aren’t always compatible with taking the company to higher levels of functionality and greater profitability. They might concede that willful personalities, freewheeling ideas, and decisions-byinstinct should probably yield to a manage-

ment group dedicated to the single-minded execution of a well-thought-out strategic plan. But when confronted with the reality of surrendering control, many just can’t do it. Would Dow be one of them? Hogan got his answer on the first day when Dow showed him his new office—the large corner office—from which Dow had run his company for four decades. It was empty. Dow had relocated his possessions to a tiny, closet-sized space, barely big enough to accommodate a desk. The symbolism spoke louder than words. Dow didn’t intend to spend a lot of time in-office, and Hogan would get an opportunity to transform Diversified from a sluggish lifestyle business into one that understands its value proposition in a crowded marketplace and that knew how to develop its strengths and target them toward the most profitable current and potential customers. “Jim has worked exceedingly hard to separate from the business,” Hogan says today. “He has just done a fabulous job of stepping away and letting me establish my

PHOTOGRAPHS BY PAULA PRIMEAU

Kevin Hogan uses sharp strategic focus to help transform Diversified Plastics from a loose ‘entrepreneurial’ operation to a well-honed operation.

Customers genuinely liked the way they were treated by Diversified’s employees. “It came through loud and clear,” says CEO Kevin Hogan. “They even mentioned people by name.” SUMMER 2019 ENTERPRISE MINNESOTA /

presence and my orientation in the business. I mean, I couldn’t have asked for a better situation.”

THE OFFSITE

Hogan planted the seeds of his strategic planning in December 2017 by inviting nine staff members—four members of the leadership team, four managers and Jim Dow—to Hennepin Technical College for a two-day offsite planning session. His mission was to build a foundation of stakeholders among employees who had grown accustomed to operating under Dow’s selfdescribed entrepreneurial approach. He preached the value of profitable growth. Even though Diversified had delivered five to six percent growth in recent years, the fact that the company had grown to only $13 million after 40 years in business indicated the company had not aggressively pursued revenues. Looming over the discussion was Diversified’s long-term objective to reduce the company’s reliance on two customers that were responsible for 60 percent of the company’s sales. But Hogan had to start by creating stakeholders among the participants. Four of them were employees with 40-plus years at the company. The others aside from Hogan and one manager, had been with the company between 10 to 15 years. Hogan knew going into the planning session one participant had described it like this: “We’re just going to go for a couple of days and then this thing will die away, and we’ll do what we’ve always done, and just play it by ear.” “I understood the skepticism. If you’ve been in this company for 40 years and you’ve never seen a strategic plan develop and come to life, you don’t have that experience. So, I understood where they were coming from,” Hogan says.

He opted to bring in a third-party facilitator to eliminate all the interpersonal “clutter” that might derail candid conversations. He originally thought he would facilitate the conversation but quickly realized his new team seemed to scrutinize his every movement and was “trying to figure out whether or not I was a three-headed, fire-breathing monster.” Even after the company continued its strategic planning process, there was, Hogan says, still a fair amount of skepticism about “how we were going to keep this going” and “whether we were really going to follow through on what we said we would do.” “And that’s not unusual,” he adds, “especially, when in the past, they’d started down this strategic path, but stalled, and ended up with literally three or four pages of notes or flip charts, but it never went anywhere else.” Borrowing from the Entrepreneurial Operation System for small businesses, Hogan began by trying to establish a 10-year revenue goal. His goal, in part, was to demonstrate to his ESOP-holding employees the value of compounding stock appreciation to their own company portfolios. They agreed that an aspirational target of 10 percent annual growth was a reasonable goal. This meant that over 10 years, the stock valuation would appreciate by a whopping 270 percent. “It helped them realize that, hey, if our share price could get to this point, I’d be pretty dang happy as an employee-owner of this company.” The group devoted most of its time and attention to developing a three-year foundation that might frame out how to achieve things while on the journey toward the 10-year target. They targeted profitable customer growth, strengthened their internal infrastructure, and energized a strong employee base to sustain growth. “Different revenue is going to provide

From left to right: Mark Gremmels (Director of Operations), Gary LaTraille (Director of Quality Assurance), Kevin Hogan, Annette Lund (Vice President), Roger Vang (CFO)

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different benefits to the company,” Hogan says. “So, part of our go-to-market approach was to start educating ourselves on the fact that we can look at revenue differently. And even our customer base, we can start making decisions on whether they’re the right customers or not.” Not all revenue is profitable revenue.

REFINEMENTS

Enlisting the consultative help of Enterprise Minnesota’s Steve Haarstad, members of the management team also had to identify a market niche that would differentiate it from America’s 4,000 injection molders. If they didn’t, Haarstad said, their products would quickly devolve into markets based on price alone. Haarstad advised that Diversified would have to identify how to be different. “It’s an important part of strategy to not just blend in,” he said. Quoting academic Michael Porter, Haarstad said, “‘Strategy is about setting yourself apart from the competition. It’s not just a matter of being better at what you do.’” “Of course, we want to be better at what we do, but ‘it’s a matter of being different at what you do.’” Hogan, Haarstad, and an internal team including Annette Lund, vice president, set out to define Diversified’s value proposition. Over the years, the company had developed a niche around its willingness to take on short-run production, to work on highly-engineered projects, inventory resins and finished goods that competitors would be unwilling to accommodate, and to provide in-house tooling, also unusual in the market. Hogan wanted to emphasize a company attribute that was revealed during his own buyer interviews: Customers genuinely liked the way they were treated by Diversified’s employees. “It came through loud and clear,” Hogan says. “They even mentioned people by name.” Hogan says it represented a definite market advantage. “Once a customer has found a supplier that they work well with, it’s a sticky business to move. It’s a pain for customers to move a tool and to re-qualify a supplier and get them to ramp up and all of that. The simple but powerful aspect of being nice to our customers is good for retaining long-term business.” Beyond that, the company decided to focus primarily on three target markets, each that matched up well with Diversified’s capabilities. Industrial Water

Kevin Hogan, Sieklin Khon, Sovatha Prim

Jim Dow has just done a fabulous job of stepping away and letting me establish my presence and my orientation in the business. I mean, I couldn’t have asked for a better situation. Filtration, a $9 billion market; Industrial including avionics and aerospace, a $20 billion market; and Medical Devices, a $350 billion market.

THE ACQUISITON

Last December, Diversified announced the acquisition of Pacific Plastics Injection Molding, a southern California company, as a tangible demonstration of its transformation from a seat-of-thepants “entrepreneurial” operation to one driven by a 10-year strategy that seeks 10 percent annual growth in both revenue and profits. Hogan said the 30-year-old Californiabased company with 35 employees and an 18,000-foot facility fit well into Diversified’s new plans to grow. Both

companies serve industrial, medical and filtration markets. Pacific Plastics had been recognized as a potential acquisition target by Jim Dow, who over 40 years in the industry had accumulated a deep Rolodex of personal relationships and quick access to industry scuttlebutt. “Once we started talking with the owner and the management team we sensed the culture and expertise could be a tight fit,” Hogan says. “California wasn’t our top choice by any stretch given, well, it’s California, but as we saw the initial information with this company, it checked a number of important boxes,” Hogan says. His interest grew after meeting the owner, key staff, and conducting due diligence. “More and more of the boxes got checked, and, as it turned out, once we got through our analysis, almost every box was checked.” Hogan liked the synergy of services and customers between the two companies, as well as geographic benefits and the diversification into new industry segments. He was also attracted to some of the unique capabilities Pacific Plastics would add to its new owner, especially a relationship with a supplier in China. Plus, Hogan says, there was overlap of markets. “From a pure business standpoint, they serve similar markets, but also

some new ones.” The Pacific Plastics acquisition also fit nicely with Diversified’s new carbon additive manufacturing capability, specifically designed for volume production. Installed this past January, the new technology provides quality approaching and equaling injection molding, but without the cost of a tool. The carbon capability provides an entirely new revenue source for Diversified and is a perfect fit for the medical device market, according to Hogan. “This type of technology is the future of our business.” The company’s size and price were also a nice fit. “Pacific Plastics was a good size for us to bite off as our first acquisition, and, in the end, we had a cash-strong balance sheet. This is a way for cash to work better. And, if we do it right, to provide more return to the ESOP than if we didn’t do it,” says Hogan. From his perch in Minnesota, Hogan thinks strategic acquisitions may play an even stronger role in Diversified’s aggressive gameplan. “There’s a fair amount of consolidation going on in this industry, given the demographics of owners out there. I’m sure it’s going to continue for the next x-number of years. Once we see this is successful and we learn from it, I wouldn’t be surprised if we’re looking for additional acquisitions in the future.” SUMMER 2019 ENTERPRISE MINNESOTA /

Continuous Improvement

The

ENGAGED EMPLOYEE

The essential role of people in your CI journey.

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ean manufacturing business is all about processes, processes, processes. What can you do faster? Better? More easily? How can flows or configurations be changed to work efficiently? Our Continuous Improvement (CI) journeys often focus so much on the process and on things that we forget about the people. You can’t have processes without people, and you can’t improve processes without them either! The good news is there’s an entire workforce of CI process experts right at your fingertips—if you know how to engage them.

Using CI to engage employees

An engaged employee is one who is involved in, enthusiastic about, and committed to his or her workplace. When you have engaged employees who feel empowered and listened to, you get a workforce that achieves more, and you get happier customers as a result. Engaged employees result in 21 percent higher profitability for a company, 17 percent higher productivity, and achieve 10 percent higher customer metrics, according to Gallup. They get to work on time more consistently and have 70 percent fewer safety incidents. It’s a clear win-win-win for your workforce,

Think about it: You’re paying for the whole person, so why only rely on what they can do physically? You need their thinking skills and creativity, too!

By Greg Langfield

your bottom line, and your customers. Engaging an employee means utilizing as many of his or her skills and abilities as possible. Think about it: You’re paying for the whole person, so why only rely on what they can do physically? You need their thinking skills and creativity, too! In my experience, a lot of companies think their employees are engaged or at least have the opportunity to be engaged. But when the employees are asked about their level of engagement, they report feeling disconnected

SUMMER 2019 ENTERPRISE MINNESOTA /

or not heard. Sure, management may say they want feedback and ideas, but there are no processes in place for those ideas to be vetted, adjusted, and evaluated. The loop is never closed, and there’s a gap between what management believes and what employees report. Let’s take a look at one example of a common tool that many leaders point to as proof of engagement: The suggestion box. The box is filled with good intentions, metaphorically and literally. But the reality is that employees see the box and think, “Nothing I put in there will ever get heard.” Management sees the box and thinks, “That’s a storage unit for complaints.” From a CI perspective, the box is opaque so you can’t see what’s inside; it’s an object with a horizontal surface that has to be cleaned; and the box usually has a lock on it, which begs the question of why a company locks up good ideas. With the modern tools of Continuous Improvement, you can create an environment in which employee engagement is something very real and recognized by both management and employees. The three key areas of employee engagement are “doing,” “connecting,” and “sustaining”: Create processes that employees can do, make connections between those processes and the greater strategy, and sustain a culture of purposeful leadership that turns the vague term of “engagement” into something that’s tangible and obvious to everyone.

Doing: Make a good day better

A simple definition of lean is “Continuous Improvement through people.” In action, this means that an employee can become a problem solver when he or she is equipped with the CI tool set. They are engaged in tackling their own problems and making their day better.

Note that I didn’t say “making their day a good one.” There’s a distinction between a good day and a better day. When I talk to individuals on the production floor or at the office and I ask them what a good day looks like, they respond with answers about productivity, such as: “A good day is when my machine is working” or “A good day is when I get good parts in.” But when I ask “How can YOU make your day better?” they struggle to define any action they can take. When you think about maximizing your lean efforts, the value comes when you connect to employees and engage them to take action and make a good day a better day.

When you have engaged employees who feel empowered and listened to, you get a workforce that achieves more, and you get happier customers as a result. See the processes behind the people

If you put ownership on employees to come up with ideas for improvement, you must also enable them to take action on those ideas. As the adage goes, “An idea is a funny thing; it doesn’t work unless you do!” This is where the “doing” comes in: The process of engagement is enabling employees to do the improvements. Engaging employees and improving processes is like eating an elephant—you have to take one bite at a time. It’s developing the skill for noticing waste, problemsolving the improvement, and applying the process of Plan, Do, Check, and Adjust. For those of us trained in lean, we’re taught to focus on the big things. But it’s hard to

Greg Langfield is a business growth consultant at Enterprise Minnesota. His expertise ranges from enterprise-wide lean transformations to targeted improvements including various lean workshops and lean certifications. Before joining Enterprise Minnesota in 2012, Greg worked as an engineering manager for Covidien, as a project engineer for Automation Services Inc. and Doboy Packaging Machinery, and also as a design engineering manager for Laser Machining Inc. He has a bachelor’s degree in mechanical engineering from North Dakota State University.

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get employees to think that way; instead, start small. Really small. Even though the economy is strong and many companies are busy, there are still numerous opportunities for quick improvements. For example, we know that good things happen when we pay attention to processes. So, take the time to watch your production floor and the people walking it. What are they doing? Where, when, and why does the flow stop? Is it because someone is trying to get information they don’t have? Are they walking a long distance to get a tool? Ask employees to think of a problem that seems small but that drives them crazy. What’s their quick plan for improving it? How can two seconds of time be saved? Or, what could be implemented fast to alleviate headaches? The ideas should be quick and relatively easy, not ones that require a boardroom discussion. I know of one company where employees were spending time tracking down the originator of a document when something was unclear or there was a question. The flow stopped, and the long interruption was a headache for everyone. One employee suggested that each document be signed by the originator so they could instantly tell who owned it. This two-second fix saved a huge amount of time and avoided many headaches; now, anyone could go directly to the originator when needed.

Give permission to try

If employees are only expected to use their physical abilities and not their minds, that’s not going to help your organization or engage the employee. You need them to be problem-solvers and not fear failure. Not everyone’s ideas for quick fixes will succeed, and that’s okay. Help employees fail fast, cheap, and often. With this sort of mentality, and with processes in place to allow for it, you become a learning organization. And because you’re starting with small ideas that only take a few seconds, there’s less risk. The less an idea negatively impacts quality or safety, the more likely you should be to try it, check it, and adjust it if needed. What does this look like in practice? One idea is to modernize the old suggestion box comment card with a card called “Quick Wins.” On the card, an employee identifies the type of waste he or she sees (such as, a waste of time, movement, over-productivity), describes the problem, and describes his or her idea for a solution. A card like this helps the reviewer (production lead,

supervisor) quickly decide whether to take action because it communicates three things: Whether the idea is small enough to consider, who needs to support and execute the idea, and whether the idea should be implemented now, put into a parking lot for later, or is not feasible.

Recognize wins

Post the Quick Wins cards in a public place and recognize employees who are making improvements. Don’t wait to do recognition monthly or quarterly. Make sure it’s timely and in a way that’s appropriate for the employee (some may want a very formal recognition while others prefer something more low key). Creating a visual display of the Quick Wins cards and then recognizing employees will show others how fast and easy this process can be. It’s very tactical, but it’s important because it helps drive constant improvements, and it engages employees to fix the things they struggle with every day.

Connecting: Link processes to daily management With employees engaged in the tactical

For those of us trained in lean, we’re taught to focus on the big things. But it’s hard to get employees to think that way; instead, start small. work of making a good day better, those tactics can then be linked to a higher level strategy. How do these quick wins connect to the organization’s daily management? One way of making the connection is with a storyboard on which you track metrics that feed into your top-level targets like safety, quality, delivery/lead time, cost/ productivity, and employee development. The storyboard can track whether all employees arrive on time each day, how many Quick Wins cards were submitted, and so on. A board like this defines what makes a good day better, and its metrics become part of your culture. It helps define what’s important and connects it to action. A storyboard is just one idea, but my only rule for connecting the tactics to the

daily strategy is that whatever tool you use must be visual, and it must communicate results in seven seconds or less. Avoid using graphs—those take too long to read. Anyone must be able to understand quickly whether improvements are being made and whether metrics are being hit. I like using red or green dots because you can immediately tell whether it’s a good day or week. However, don’t be surprised if you have to convince some people of the power of dots! I worked with a production manager who was skeptical about posting red and green dots on a scheduling board. How could that possibly change anything? After two months of using red and green dots, he was a true believer. The power of making things simple and visible had improved scheduling and erased one of his biggest frustrations.

Sustaining: Ensure purposeful leadership

Executing and sustaining purposeful leadership is at the highest strategic level of employee engagement, and it can be a difficult one to get right. Very few companies perform at this level.

SUMMER 2019 ENTERPRISE MINNESOTA /

Of course, there will probably be some employees who are resistant to engagement.

I like the definition of purposeful leadership used by John Shook, chairman of the Lean Global Network: “Get the job done and develop your people.” If you think about this as an equation (like I do!), you could visualize it this way:

Get the job done

+ = Continuously improving Develop your people processes to satisfy the customer

If you really want CI, then you must develop your people. They are the key to improving your processes. Development is also the final piece of employee engagement because it closes the loop of doing, connecting, and sustaining. Developing employees is easier said than done. In leadership, you’re constantly running around and putting out fires: You don’t have the right parts, you have to adjust the schedule, you have to move people around because you’re short in one area, and on and on. When we fight fires, we feel like we’re productive, but in reality we’re just busy. We’re not actually improving anything because we will fight those same fires tomorrow. We’ll never get rid of fires completely, but if we have employee engagement and we’re developing our employees, we can put some of those fires out for good. Ask employees, “How are we doing? What can we do better?” and really listen to

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them. By talking with them, getting their feedback, and empowering them to make quick improvements themselves, you’re demonstrating purposeful leadership. It tells employees that you trust them, you value their critical thinking skills, and you know they’re capable of problem-solving successfully. I led a Kaizen event, which is a weeklong workshop that helps an organization achieve a specific goal of process improvement or minimize waste, where I met a woman who lifted 30 to 40 pound boxes and placed them on pallets before they went out to dock. During every shift, she walked seven miles and lifted the equivalent of five tons. I asked her, “Aren’t you tired?” and she responded that she went home and napped every day. With some modest improvements, we cut her walking distance in half and put the boxes on her level so she didn’t have to bend down. By asking for feedback and listening to the problems, we engaged the employee and improved the process tremendously. Just like the Quick Wins cards for employee engagement, it’s important to create tactics and processes for sustained, purposeful leadership. If you don’t have consistency in your process, you can’t have improvements, and you end up wasting your time. What standards do you need as a leader? For your front-line leadership of supervisors, a tool like a standard work document outlines what they must do at the start of every shift (like update the Quick Wins storyboard), what to do in the middle of their shift, and at the end of it. Perhaps once a week you have a meeting to go over objectives. By communicating this to them

in writing, they know you’ve carved out a certain amount of time for them to sustain these things. These actions are important, and they’re not something that should wait until all of the fires have been put out. Plus, a standard work document provides another way to check processes if you’re not getting the results you want, or you can easily update it if processes must be changed. With tools like these, you have a system in place to drive improvements and skill development, and those small improvements impact your topline measurements. If you’re having better days instead of just good days, those top lines should be improving. When all of this comes together—making a good day better with employee engagement, connecting process to strategy, and sustaining purposeful leadership—it’s a beautiful thing to behold. One company I worked with had a challenge with operators and maintenance working together. Maintenance didn’t want the operators touching anything, and the operators said maintenance always complained about the operators doing a lousy job. There was a culture challenge, to say the least. After we’d been on the lean journey for a while and had implemented some processes, the management team did one of its regular walkarounds. The team immediately saw that the third-shift operators were struggling with scrap. Before anything was even said, the operator reported they had indeed had problems with scrap last night, and they did some machine adjustments, but nothing happened. Per the standard work document, the operator called maintenance over to make some adjustments, but those didn’t work either. Finally, they decided to try a different raw material and that worked, which told them something must have changed with the original raw material. The operator saved a sample of the material because she knew the management team was stopping by and would want to return the sample to the supplier. These teams, which used to have a culture challenge with each other, now had meaningful processes in place that enabled them to work together, stay engaged, and experience the improvements.

Overcoming resistance

Of course, there will probably be some employees who are resistant to engagement. That’s why you first need to start your efforts with a compelling vision. Where do

you want to go? What sort of future do you see for your organization and employees? The second thing you need is dissatisfaction with the status quo. Nothing kills CI faster than the belief that everything is okay. There’s no motivation for improvement there. A “good enough” mentality will never move you from a good day to a better day. Remember: Continuous Improvement doesn’t work unless you do! There needs to be some healthy tension around not being satisfied with where you are and a determination to keep improving. The third piece to overcoming resistance is to take small steps. It’s like losing weight: You can’t make drastic changes and expect everyone to be happy or that the changes will stick. Start small and get some quick wins under your belt that show progress and motivate the team. The final piece is having skill development to balance out everything else. If your employees don’t have the right skills or don’t feel empowered, you’ll have resistance. When I think about overcoming resistance, an experience with a particular com-

pany comes to mind. This company was doing changeover in the machine shop, and the employee—we’ll call him Tony—was a good employee and polite, but it was obvious he was pretty resistant to the changes. I walked his area with him and talked through some 5S tools and quick wins for removing his frustrations, and then I left. Weeks later, I was visiting with the operations manager and I asked him how Tony was doing. He told me that he ran into Tony at a community event and the first thing Tony asked was, “Did you see what I did with 5S? Have you seen the improvements in my area?” Tony went from being a skeptic to a champion because he had the process, the tools, and the empowerment to fix his own frustrations.

CI through engagement: Powerful results

As leaders, you owe employees good processes that support your strategies for improvement. The 5S pillars for organizing, cleaning, developing, and sustaining a productive work environment are a great

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place to start thinking about and creating those tactical processes for getting employees engaged. Engagement isn’t something that can wait until work slows down or you have no other priorities, because those two things will probably never happen. Start now and start small. The results will become a competitive advantage not only in terms of the benefits I mentioned above—like less absenteeism, greater productivity, and better customer satisfaction—but it can be an important way to retain employees as our industry faces labor challenges. The bottom line is this: Continuous Improvement takes work, and your employees are the problem-solvers. You have an entire workforce of CI experts right in front of you if you know how to engage them. If you focus on the little things, like the quick wins, it doesn’t take much to get the ball rolling. The results of employee engagement, as you can tell from the stories I’ve shared here, are very powerful. In the end, you won’t just make a good day a better day. You’ll make a good year a better year, and a good culture a better culture.

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Final Word

The Great Convening We’ve used the State of Manufacturing’s data to stimulate positive conversations among the diverse stakeholders of Minnesota’s manufacturers.

e created the State of Manufacturing® almost 12 years ago after observing how little credit the manufacturing industry got for its achievements. At best, manufacturers were primarily recognized as successful individuals who cared about their communities, but manufacturing as an industry languished in unflattering stereotypes. Manufacturing facilities were typecast as being populated with low-paying, strong-back employees who required little or no expertise. Their jobs were monotonous, sometimes unsafe,

We wanted to use the State of Manufacturing to demonstrate the dynamic benefits that can be directly achieved by diverse interests when working under the aegis of a community’s manufacturers. and extended little chance for advancement. And, to be candid, it seemed only a very few manufacturers expended much energy to dispelling those images. Many seemed content to quietly create widgets in relative anonymity. Coalition Building. We conceived the State of Manufacturing to convene the manufacturing community. Politicos have learned how to harness the aggregate power of seemingly unrelated interest groups by showing them how well they can succeed by working with each other. We wanted to use the State of Manufacturing to demonstrate the dynamic benefits that can be directly achieved by diverse interests when working under the aegis of a community’s manufacturers. 40

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Lynn Shelton is vice president of marketing at Enterprise Minnesota.

Flourishing manufacturers tend to share their prosperity. Communities benefit as their residents receive stable, high-paying, long-term manufacturing careers, with benefits. Suppliers and subcontractors can build entire businesses in serving the manufacturing supply chain. Bankers, accountants, and realtors can all use their relationships with manufacturers as the foundation of their businesses. And economic developers can exploit that stable financial base to attract other companies to their growing populations. We think the survey, focus groups, and ongoing public-

ity related to the State of Manufacturing helps underscore that all these groups enjoy a financial and cultural stake in ensuring the success of their manufacturers. Similarly, when the manufacturers have a challenge—e.g., the shortage of workers—they share in the benefits of solving that challenge. Manufacturers. A rewarding byproduct of our State of Manufacturing process has been how participants treat focus group discussions with such respect and enthusiasm. Two factors stand out to me that I hadn’t anticipated when we started: First, we attract high-level participants who come prepared to share honest, candid insights and opinions about their industry. Any fears executives had over sharing information about their companies evaporated immediately. And second, participants seem to like coming back year after year. I would guess there are about two dozen executives who have attended a focus group in each of our 11 years. Because of this, at least a couple of the focus groups have reached such a high level of familiarity and functionality that our facilitator does not have to do more than prime the pump with a couple questions, and then stay out of the way. Educators. Manufacturers will still attribute their inability to attract a skilled workforce to K-12 educators who won’t (or can’t) think beyond their narrow focus that a four-year degree is the only path to a prosperous, satisfying career. But many of them will confess that this barrier is slowly eroding. We have not used the State of Manufacturing data to communicate to educators, but we think it has stimulated conversations among manufacturers, educators, community leaders and parents about how manufacturing is loaded with opportunities. Policymakers. It’s great how the State of Manufacturing has created and nurtured overwhelmingly successful continued on page 9

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