Enterprise Minnesota Magazine December 2014

LAKE SUPERIOR COLLEGE’S MASSIVE NEW EXPANSION

Helping Manufacturing Enterprises Grow Profitably

DECEMBER 2014

Linda Besse’s culture of continuous improvement Tom Schabel’s ‘values’ proposition How manufacturers help stabilize the Iron Range economy

DUNWOODY PRESIDENT

RichWagner And Minnesota’s next generation of manufacturers

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DECEMBER 2014

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PROFILE DUNWOODY’S PRESIDENT RICH WAGNER And the next generation of Minnesota’s manufacturers

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WELL WITHIN RANGE

FAMILY AFFAIR

THE PEER FACTOR

Four companies that show how manufacturers help sustain the Iron Range economy

Eight members of the Goerges clan have helped transform Pequot Tool and Manufacturing into a thriving $18 million company.

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2 Exceptional government ROI GAP creates jobs and boosts our economy in almost unbelievable ways.

Match.com for business Redwood County supports a diverse community of manufacturers.

6 The Language of Continuous Improvement

Executives focus on the challenges and opportunities of the worker shortage.

32 A Year in Review

Linda Besse meshes a four-generation culture.

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

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

DECEMBER 2014 ENTERPRISE MINNESOTA /

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bob kill

Exceptional government ROI GAP creates jobs and boosts our economy in almost unbelievable ways

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f I were to tell you about an investment that delivers an ROI of up to $30 for every dollar invested, you’d probably look for an apparition of Bernie Madoff somewhere in the background. I wouldn’t blame you, except this is real. It’s verified – and it’s a legislative initiative.

I’m talking about the Growth Acceleration Program (GAP), a state investment that enables small and medium size manufacturers to improve their operations (and cre-

ate more jobs) and position companies for growth by utilizing the diverse consulting services of Enterprise Minnesota, and some of its consulting partners. We administer GAP with Minnesota’s Department of Employment and Economic Development (DEED) acting as the fiscal agent.

Since it was first authorized in 2008, 245 Minnesota manufacturers have taken advantage of the program.

An independent survey research firm has found that GAP, on average, generates a 2

/ ENTERPRISE MINNESOTA DECEMBER 2014

whopping $30-to-$1 return-on-investment.

In addition, it has created and retained 2,146 jobs in Minnesota, boosted company sales by $148 million, and saved companies $29.9 million in business costs.

I recently toured Virginia, MN-based Conveyor Belt Service, Inc. with Senator Dave Tomassoni (6-DFL), and Representative Jason Metsa (6B-DFL), a company that has distinctively benefited from GAP. The support of these two legislators, along with many others on both sides of the political aisle, has been indispensable to GAP’s success. (The Iron Range Resources and Rehabilitation Board has developed its own GAP program, targeted at Range manufacturers. A profile of Conveyor Belt Service and Bruce Mars, its forward thinking owner, is featured on p. 12).

GAP is rigorous. To qualify for GAP, manufacturers (or manufacturing-related companies) must be located in Minnesota, must operate as independent profit centers and employ 250 or fewer fulltime employees. They must be working from a solid business plan for improvements, and demonstrate a tangible economic need for GAP. GAP requires skin in the game. Companies must match at least $1 for every $1 of GAP investment.

And GAP’s benefits ripple throughout Minnesota’s economy. No one disputes the fact that every job created by manufacturers has a multiplier of generating 1.2 to 2 additional jobs. If there was a silver lining to the 2008 recession, it was that communities started to realize how manufacturers quietly sustain their economies. Manufacturing jobs pay well, and they come with benefits and stability. When manufacturers grow, entire communities thrive.

Bob Kill is president and CEO of Enterprise Minnesota.

Helping Manufacturing Enterprises Grow Profitably Publisher Lynn K. Shelton

Custom Publishing By

Contributing Writers Clayton Benjamin Lynn Shelton Photographers Joshua Dixon Tom Lindstrom Chris Morse Nels Norquist Randy Olson Contacts To subscribe subscribe@enterpriseminnesota.org To change an address or renew ldapra@enterpriseminnesota.org For back issues ldapra@enterpriseminnesota.org For permission to copy lynn.shelton@enterpriseminnesota.org 612-455-4215 To make event reservations events@enterpriseminnesota.org 612-455-4239 For additional magazines and reprints contact Lynet DaPra at lynet.dapra@enterpriseminnesota.org 612-455-4202 To advertise or sponsor an event jim.schottmuller@enterpriseminnesota.org, 612-455-4225 To pitch a story tmason@mason-publicaffairs.com

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Enterprise Minnesota’s Business Events offer outstanding professional expertise and practical business solutions to improve competitiveness and growth opportunities for Minnesota’s manufacturers and related industries.

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TOPIC

CITY

Achieving Office and Production Efficiency the Lean Way – 10 Effective Steps

St. Cloud

11/12/14

Successful Manufacturing Leaders – Effective Employee Development Strategies

Plymouth

12/10/14

Empowering Leaders – The Keys to Attracting, Retaining and Growing Talent

Arden Hills

1/14/15

Creating a Mindset for Strategic Growth

Alexandria

2/11/15

A Vision of Growth – Strategies for Manufacturers

Ramsey

3/18/15

Creating Business Value – Planning for a Prosperous Future

Brooklyn Park

4/22/15

Cultivating Business Internationally – Increase Your Market Share

Owatonna

6/17/15

Leadership Teams – Guidance for Good Business Governance

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GREAT PLACES TO MAKE STUFF

Match.com for business Redwood County supports a diverse community of manufacturers

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community of about 5,000 people located a couple hours southwest of the Twin Cities. RADC is considered a well-run and forward-thinking organization that serves 16 area communities. The day’s chief organizer was Julie Rath, one of two development officers at RADC, whom Kill describes as “one of the best” economic development professionals in the state.

He then toured four local companies

PHOTOGRAPH BY JOSHUA DIXON

hen Enterprise Minnesota’s president and CEO Bob Kill traveled recently to Redwood Falls he got to experience first hand how a diverse community of manufacturers can give their community a solid economic base.

Kill was invited by the Redwood Area Development Corporation (RADC) to keynote their annual Manufacturing Week luncheon. Redwood Falls is a prosperous

that displayed the area’s vigorous diversity.

On the large size was Daktronics, a satellite plant of the $500 million Brookings, SD-based company that is best known for its electronic LED displays that comprise some of the most sophisticated scoreboards for big-time sports stadiums. The company also designs, manufactures, sells, and services video displays, digital billboards, dynamic message signs, and sound systems.

In addition, the company recently completed a 30,000 square foot addition to its 100,000 square foot building to enable building larger products.

Much smaller, but no less sophisticated, Kill reports, was Heartland Wood Products whose dozen employees have created a brisk business creating custom high-end mouldings and trim. Kill said the company has deployed nation-leading technologies and some “pretty ingenious” automation to enhance workflow in its 25,000 square foot production facility. The computerized production enhances quality, speeds up production, promotes safety and makes the best use of natural resources.

Activeaid, Kill’s next stop, manufactures

Tom Quakenbush, plant manager of the Redwood Falls branch of Daktronics, the nation’s premier manufacturer of scoreboards, and Julie Rath, economic developer, Redwood Area Development Corporation.

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home medical device equipment. It has compiled an exclusive and diverse selection of Rehab Shower Commode Chairs, Bathroom Transfer and Bathing Aids, and Hospital Rehab Therapy products.

And he ended his day at RVI, a company that provides warranty repairs for OEMs. They service power supply sources, many of which are in high-end servers, and other

Julie Rath, economic developer, Redwood Area Development Corporation

kinds of power generation equipment.

Said Kill: “All in all, it shows how remarkably diverse and multi-faceted manufacturers can provide a thriving economic base to their communities as well as assorted opportunities for stable careers.”

Rath describes her mission at RADC as being a conduit for all sorts of needs from her 38 local manufacturers, from facilitating worker training, to nurturing supply-chain relationships, to recruiting new companies to the area.

“I view us as Match.com for business,” she says. “We help put pieces together.”

Rath’s priority for local manufacturers is to recruit and train labor for Redwood County’s growing economy. She works closely with the workforce center in Marshall and with Minnesota West Community and Technical College which has campuses in Canby, Granite Falls, Jackson, Pipestone and Worthington.

Redwood Falls is home to one of its four learning centers.

Three times she’s leveraged funds from Minnesota’s Job Skills Partnership fund to secure a portable welding lab from

Minnesota West to help students attain a welding certificate. Most students, Rath says, are in their 30s, looking for a new career. Most already have jobs by the time their get their certificate, she says. In one instance, Vesta-based CW Welding and Fabrication hired the whole class of welders.

To help Redwood-based Northstar Systembuilt and Schult homes – both involved in the construction of modular housing – Rath is helping organize a certificate program for carpentry set to begin in January. Students will complete 200 hours of training by March, she says, “right when the housing season picks up.”

RADC’s efforts to attract new businesses to Redwood were enhanced in early December when it unveiled an Internet tool called Map and Tour, a virtual mapping directory. Called Redwood County Resources: Ready for You, the site represents more than 800 businesses in the county, 150 of which are included in the directory. Sponsors hope it will eventually provide a digital flyover of Redwood County, offering ready access to

Yellow Medicine Counties, owns a 94 miles short line railroad track from Norwood Young America to Hanley Falls, MN. The MPLI connects with the Twin Cities & Western Railroad (TC&W) at Norwood Young America providing the MPLI with access to major Class I Railroads operating through the Twin Cities through 16 small communities along the line.

The successful plot point in the future of manufacturing for Redwood – and Rath’s career – may well have occurred in July 2006, when Omaha-based Emerson Electric decided to offshore its electronics operation in Redwood Falls, leaving 240 highly qualified employees looking for work.

Rath convened the current plant manager and various civic leaders to brainstorm possible replacements. She said they cast a wide net of local professionals who might have backdoor access to potential companies. A contact at KLGR, the local radio station, volunteered to talk to Daktronic’s Matt Kurtenbach, son of Al Kurtenbach, the company’s founder, in Brookings.

Rath sent an email. At 2 p.m. the next

“The only way to grow our economy is to have more manufacturers employ more people. If they are making a good livable wage, then Main Street is stronger, the schools are stronger, the churches are doing better. It just builds community.” – Julie Rath 20 different information clusters, including demographics, quality of life, quality of health care, information about the school district, available housing, and accessible recreation opportunities.

Among the immediate challenges that confront Rath and Redwood’s other economic developers is the scarcity of available buildings suitable for manufacturing. “We do have available building sites,” she says. Lamberton, for example has a 20-acre energy park, still undeveloped but plotted, that is also situated on the Canadian Pacific Railroad.

Rath is also an administrator for the Minnesota Valley Regional Rail Authority (MVRRA), operated by the Minnesota Prairie Line Inc. (MPLI), which stops in Carver, Sibley, Renville, Redwood and

day he called, expressing interest: “I think we’d be interested in coming to look,” he said.

That was June 24. By mid-Oct Daktronics had a signed agreement, and turned the key on January 1. “I almost did a backflip,” Rath remembers.

All in all, Rath is persuaded that manufacturing is becoming cornerstone of the economy in Greater Minnesota.

“Agriculture is here, but we’re not going to bring any more farmers into the picture as far as ownership,” she says. “The only way to grow our economy is to have more manufacturers employ more people. If they are making a good livable wage, then Main Street is stronger, the schools are stronger, the churches are doing better. It just builds community.”

DECEMBER 2014 ENTERPRISE MINNESOTA /

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PROFILE

The Language of Continuous Improvement Linda Besse supervises a four-generation culture that meshes World War II vets with employees who sport green hair inda Besse, director of human resources at Sauk Centre-based Bayer Interior Woods recalls quizzing an employee about the cost of a piece of wood used in the company’s production process.

“I don’t know,” the employee responded, “four dollars?”

“Would you believe $50,0000?” Besse asked, adding: “If you slipped on this chunk of wood, twisted your ankle, and had surgery, it is going to cost $50,000.”

Creative questioning, Besse contends, is just one tactic that helps create an effective in-house culture of continuous improvement for manufacturers. In this case, she transformed a communication about waste into a lesson on safety.

“I ask people to think about safety and they look at me as if I had two heads,” she says. “They say, what does that really mean? I say, if you can tell me how to make your job easier, we’ll make it safer.”

Besse spoke recently at an Enterprise Minnesota event called Effective Employee Development Strategies – Essential Skills to Accelerate Your Lean Investments, held at Plymouth-based Productivity, Inc. Besse says she began her personal “lean journey” at the very beginning of her long and diverse career in manufacturing in the mid-90s. She began working as an HR manager for distribution facilities at the HON Company in Muskateen, Iowa. There, she worked regularly with consultants from Japan who led what they called RCI events.

“Continuous improvement wasn’t fast enough,” she remembers “It had to be rapid continuous improvement.”

From there, she developed Six Sigma expertise at Innovex, in Litchfield, a company that, before it offshored its operation to Thailand, made flexible circuitry for cellphones and flatscreen televisions. “We did chemical etching of circuitry. We got into Six Sigma because you can’t make a lot of mistakes when you are dealing with gold overlay,” she says.

TWI training was key to her next

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position at Komo Machine, in Sauk Rapids, a company that coped with downsizing markets through lean manufacturing.

Besse’s narrative is especially interesting in that she’s had to overcome a cluster of HR serious obstacles that have hindered other manufacturers from easily maintaining a focus on improvement.

Bayer Interior Woods is a custom wood products manufacturer that provides custom molding, cabinets, shelves and storage solutions for the housing industry.

As such, it had to ride out a significant downturn in business when housing collapsed in 2008-2009, eventually taking a serious bite out of its workforce.

Bayer’s workforce is back up to about 125, but its setting in rural Sauk Centre heightens the competition to find qualified workers, where now, she says, turnover is a constant challenge. Competition from rival companies as far away as St. Cloud makes it increasingly difficult to retain employees.

The HR bottom line now is that Bayer’s roster of employees now stretches four generations, from World War II veterans to people with green hair. Sixty percent of their employees have fewer than two years’ work experience.

“I have a woman 78 years old, who is still working assembling doors,” she says.

“And she’ll keep assembling doors as long as she wants to.”

The operative question, Besse admits, is “How do you mesh all that together?” she asks. “Communication is huge, and not everybody speaks the same language.”

“That’s what we’re about,” she says, “finding the magic and sharing it with others. People want to be creative. People want to have a part in change. If you can build that culture together, that’s huge. By using the resources through Enterprise Minnesota, we’ve been able to do that within our organization. We’ve got a long road to go, but it is an exciting journey.”

PHOTOGRAPH BY RANDY OLSON

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Linda Besse, director of human resources, and Janet Wiener at Sauk Centre-based Bayer Interior Woods.

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ake Superior College (LSC) gave northeast Minnesota manufacturers a significant shot in the arm this fall when it expanded its campus by leasing a substantial new building in downtown Duluth. The new campus facility will expand LSC’s useable space for training future manufacturers from roughly 1,200 square feet to the lion’s share of a whopping 33,700 square feet.

The recently remodeled facility is now home to much more robust integrated manufacturing training programs, including machine tool, welding, and computeraided design. The welding capacity alone increased from 16 to 36 booths, according to Gary Kruchowski, the school’s director of public affairs and advancement.

LSC now provides instruction on a jet cutter, an in-demand industrial tool capable of cutting a wide variety of materials using a very high-pressure jet of water, or a mixture of water and an abrasive substance.

Jet cutting is often used during fabrication of machine parts.

“We have a lot more equipment, so we can serve more students,” says Steve Wagner, vice president of workforce development at the school. “That means we can send more students out to industry.”

LSC’s new facility also enabled it to

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become a regional training center for Haas, the nation’s largest CNC machine tool manufacturer. “It was definitely an addition to capacity,” Wagner says. “We have the ability to bring in industry partners. We say, ‘here, you can try out this machine (in our facility).’ ” Kruchowski said the school hadn’t expanded its manufacturing space since the school was founded in 1968. “We didn’t have enough space for all the equipment,” he said. Worse yet, he adds, the existing equipment had already maxed out the electrical service capabilities for that part of the building.

“It had been clear for several years that we needed to upgrade the space -- especially since we were seeing a higher demand for machinists and welders,” Kruchowski says.

The flat out surge in demand for trained workers in a growing economy compelled the school to bypass growth via government bonding through MnSCU (Minnesota’s State Colleges and Universities, LSC’s parent organization), because that process can sometimes devour up to eight years of legislative planning and negotiating at the Minnesota capitol.

LSC took a full year to cast a wide net

over available properties in Duluth. The finalists eventually included three locations from the local school district, including a recently-closed secondary vocational resource center. But the college ultimately selected a site that had once been used as a printing facility for AdvanStar, a publisher of trade magazines.

“There was a substantial amount of space available,” Kruchowski says. “The (AdvanStar site) turned out to most closely address our needs. Plus, we had a landlord that was willing to work with us in upgrading the facility to meet our needs.”

He says that the building required a “substantial upgrade” of about $2 million to accommodate the school’s requirements.

In addition to instructional labs and classrooms, the college has established a fabrication lab on site, focusing on rapid prototyping and reverse engineering, including 3D printing. The equipment is open to community partners, including area manufacturers and high schools.

Wagner says the increased space enabled the school to achieve double digit increases in enrollment for the fall. The school is now offering evening courses in the facility as well as preparing to offer additional courses at the downtown facility.

Kruchowski says the expanded facilities will be used to educate students who work in the downtown economy, through paralegal training and even general education coursework.

Another attraction of the downtown facility is its accessibility to public

transportation. Getting to the main campus via public transportation can involve a complicated series of transfers that can take 45 minutes to an hour, Kruchowski says. In contrast, “basically all the bus routes pass through Duluth.”

Wagner predicts the new capabilities may help LSC engage local manufacturers in more specific and proactive ways, particularly in the fabrication lab. “We haven’t done a lot of customized training for employers,” he says, mostly because the school’s core manufacturing constituencies are small and medium size manufacturing companies that don’t yet have the critical mass to make it affordable.

Another positive impact of the larger campus has increased interest from Wisconsin companies, particularly in Superior, which may have leaned toward WITC (Wisconsin Indianhead Technical College) in the past. “Now they stop by and say, you guys are doing some great stuff.”,Wagner says.

In another development, LSC’s expanding aviation programs will also have a new home base in the coming year. The college has signed a 10-year lease with the Duluth Airport Authority (DAA) for a 40,000-square-foot facility that will be remodeled by the DAA to house LSC’s Center for Advanced Aviation which includes professional pilot, aviation management and aviation maintenance technician programs.

The school expects the facility to be ready by July 1, 2015.

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LSC students Jake Holcomb (left) and Derek Peterson.

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e all know a version of “John Brown,” an employee that looked a lot better on paper than he turned out to be in practice.

John is highly qualified. He has all the skills, knowledge and experience required for his marketing position at your company. But John’s performance is not what you’d expect from a professional with his experience, skills, and knowledge.

His behavior, attitude and values are also not what is expected from someone of his caliber. So what’s wrong? What makes John the perfect candidate for the job, but stops him from actually performance on the job?

Pat Voyles is a business growth consultant at Enterprise Minnesota who specializes in helping manufacturers develop productive employee teams by aligning their leadership strategy to support their business strategy. She used her time at a recent Enterprise Minnesota business event on Empowering Leadership, held at Delkor Systems in Arden Hills, to evaluate the challenge of underperformers.

1. Respect the power of attitudes.

Harvard Business School found that there are four factors critical to success in business, according to Voyles: intelligence, information, attitude and skills. Of those, attitude accounted for 93 percent of the success.

Many times companies will hire employees for their skills, their knowledge, and their experience, but they don’t hire them for who they are, Voyles says. “What they can do is important, but who they are is even more important,” she says. “You can train people to develop new skills or help them gain new knowledge and gain experience. But if they don’t have the right character … it is going to be a lot harder to get them to support your vision and mission 10

/ ENTERPRISE MINNESOTA DECEMBER 2014

-- and to get the results you want.”

2. Align strategic factors. “You start by

aligning your talent in support of your vision, your mission, your strategy, your culture and your competencies,” Voyles says.

• Vision. Would every one of your employers be able to communicate where your company is headed? “It helps them understand what organization changes are, and why they are necessary,” Voyles says.

• Mission. What’s the purpose of your company? “When you have employees who understand the mission of your company, how their jobs contribute to

your overall success, you’ll have employees who are more engaged, more motivated, more productive,” Voyles says. “And they are going to be less resistant to the kinds of changes you are trying to make.

• Strategy. “A simple strategy that’s tied to your vision and mission really gives employees a purpose and a passion for your vision and mission,” Voyles says.

“And they are probably more likely to execute your strategy.”

• Culture. Peter Drucker used to say, “culture eats strategy for breakfast,” according to Voyles. “No matter how brilliant a strategy, or how far reaching the vision, neither will be realized if the culture doesn’t support it,” she says.

• Competencies. Are employees competent to move the company now and in the future? Paraphrasing business guru Jim Collins, Voyles says “you need to have the right people in the right jobs with the right skills doing the right things at the right time.”

3. Know your workforce. Every modern manufacturer is confronted by the prospect of interconnecting a multi-generational workforce with different, even competing priorities and motivations. Voyles outlined each generation.

work they do and they show loyalty to the boss, not necessarily the company Generation Y, 1978-beyond.

Characteristics: Create meaningful work and life.

• Attract: Seeks companies that celebrate flexible work hours, working remotely, and steady advancement and career opportunities

• Engage: Seeks challenging work to apply their academic and work experience to--immediately. They’re not interested in “grunt” work or “paying their dues.”

They have a feeling of “entitlement.”

• Retain: Requires instant feedback that is justified, immediate and gives a fair opportunity for corrective action and sees themselves working everywhere— except cubicles!

Traditionalists, born before 1946.

Characteristics: Loyal, legacy builders.

• Attract: Most are in or near retirement and may want to work part-time or in a job share • Engage: Value assignments that visibly contribute to the company’s success and enjoy working in team environments, building relationships with coworkers and strong leadership is key • Retain: Steady and secure employment matters most, along with competitive pay, stellar benefits and retirement plans Baby Boomers, 1946-1964. Characteristic: Optimism, putting their stamp on things.

• Attract: Looking to join companies that are solid financially and have a positive image in the community • Engage: Motivated by level of responsibilities, opportunities for advancement, compensation, perks, and recognition • Retain: Company must show it cares for its employees and provides opportunities for career development, competitive pay and benefits, and recognition is important Generation X, 1965-1977: Characteristics: Independence, work to live.

• Attract: Values stable companies that provide flexibility, work/life balance, competitive pay and benefits, and opportunities for advancement • Engage: Interactive learning environments with ‘hands-off’ management.

They seek career ladders and promotions. Xers love technology—the latest and greatest gadgets and apps—so equip them • Retain: “Non” corporate environment where meetings are held electronically, dress is casual, time is the currency they value and they’re not defined by the DECEMBER 2014 ENTERPRISE MINNESOTA /

11

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nterprise Minnesota president & time employees to access business CEO Bob Kill, Minnesota State improvement services. Eligible Senator David Tomassoni (6-DFL), and companies must have a business plan Minnesota State Representative Jason for improvements and demonstrate an Metsa (6B-DFL) recently visited Virginiaeconomic need for GAP. All companies based Conveyor Belt Service, Inc. to awarded GAP resources must match at tour the facility and experience firsthand least $1 for every $1 of GAP investment. company improvements enabled by the First authorized by the Legislature Growth Acceleration Program (GAP). in 2007, GAP has helped over 245 Conveyor Belt Service manufactures Minnesota manufacturers and continues to rubber-fabricated parts and is a belt receive bipartisan support for its valuable service contractor for the mining and role in job creation and job retention in shipping industries. It has received Minnesota’s manufacturing industry.

GAP investments to help foster company improvements by working with Enterprise Minnesota on a strategic business plan to reduce waste and expand its facilities.

Joining the tour were: Jerry Fallos, district outreach director, U.S. Senator Amy Klobuchar; Trent Janezich, interim executive director, Advanced Minnesota of the Northeast Higher Minnesota State Representative Jason Metsa (6B-DFL); Minnesota Education District; Peter Makowski, field State Senator David Tomassoni (6-DFL); BruceMars, president of Conveyor Belt Service, Inc., and Bob Kill, president & CEO of representative, U.S. Enterprise Minnesota.

Senator Al Franken; and Jordan Metsa, field representative, U.S. Congressman Rick “With all the challenges we face as a Nolan. business and our desire to grow, we felt Bruce Mars, president of Conveyor Belt very fortunate to partner with Enterprise Service, Inc., led the tour.

Minnesota and to be able to take Enterprise Minnesota is working with advantage of the Growth Acceleration Conveyor Belt Service to develop more Program,” said Bruce Mars, president of efficient layouts for its existing and new Conveyor Belt Service. facilities. This has led to significant cost Enterprise Minnesota works directly savings and increased production capacity, with companies throughout the state. allowing the company to invest in $50,000 “Manufacturing, particularly in Greater of new equipment and adding several fullMinnesota, forms the bedrock of many time employees.

Minnesota communities, offering highGAP is a direct state investment wage, high-skill jobs that create economic program aimed at helping manufacturing opportunity and stability for the present companies of 250 or fewer fulland the future,” Kill said.

PHOTOGRAPH BY CHRIS MORSE

Governing and Growing Companies in Greater Minnesota.

E

Four Questions With Tom Schabel, CEO, Alexandria Industries

Y

ou’ve devoted an extraordinary amount of time and energy around creating and implementing a values policy for your company. Why? Three years ago, we developed a shared vision for the next five years for Alexandria Industries. We talked about what kind of legacy we would like to leave behind. In the process of creating our shared vision, we believed there was also a need to bring stronger focus on our values, as well.

We’d always done strategic planning, but creating our five-year vision was an interesting process. We asked ourselves what we wanted to create with the organization. While our leadership understood the reason for this work, the process took us to a new level to agree on that shared vision.

For us, the power that came with that work was a defining moment.

From a values standpoint, we were strong. But as we acquired other companies outside of Alexandria and as we grew, we had new leaders coming into different roles. It was important to agree on our values. We wanted to make sure our employees, regardless of facility or role, defined integrity, for example, the same way we do in Alexandria, Minn.

There were many different opinions.

People’s personalities played out in the process. A few of us are processors, so we chew endlessly on things. Others want to jump up and down at the first good idea. Managing the visioning process gave everybody time and space to agree and make sure we were in alignment with our values too.

How did you introduce it to employees?

We knew we couldn’t just have an employee meeting and leave it at that.

We wanted people to understand that this is more than a sign on the wall.

We wanted them to know that we thought through our new vision and values. This wasn’t something we

would only refer to occasionally, but an initiative that we would execute on daily and hold each other accountable.

We emphasized that our vision is more than a statement and our values are our way of life. We visited each of our facilities in Minnesota, Indiana and Texas. We met in smaller groups, so we could have good in-depth discussions.

Now, at nearly every meeting, we start by asking attendees, “What is our vision?” “What are our values?”

One of our presidents started asking employees to cite examples of where they have seen our values practiced throughout the organization, and this has been incorporated into most meetings today. That’s powerful. It’s rewarding to hear someone talk about how one of their coworkers has lived out our values.

Do customers perceive anything different from your end, as a result of your values work?

During our annual Listening Tour where we visit our top 30 customers, the second agenda item is our values.

We share what they mean to us, along with examples of the behaviors that exemplify them. It keeps us accountable. I tell customers to let me know immediately if the behaviors they experience from Alexandria Industries do not represent our values.

We’ve had great discussions around values during the Listening Tours. At one customer meeting, there was a new vice president of supply chain management. I put the values up on the screen. She stood up, pointed at them and said, “That’s what we believe!” Then the conversation went in a whole different direction. We talked about how our values aligned, and how we should take advantage of that. Our discussion grew into so much more than just what we’re doing for pricing.

What’s next?

Earlier this summer, we conducted an employee culture survey at our

INNOVATIONS

Tom Schabel With experience in the aluminum extrusion and precision machining industry since 1977, Tom Schabel, CEO of Alexandria Industries, helped pioneer the vision to serve customers globally as a premier supplier of engineered products.

Part of the commitment is demonstrated in Schabel’s heavy emphasis on driving a company-wide system of values which include: integrity, faith, mutual respect, commitment to excellence, and employee well-being.

company. It was not a satisfaction survey. We wanted to know how well we are aligning our vision and values through the eyes of our 585 employees.

We received an 85 percent participation rate. We also held focus groups to get more detail about certain outcomes of the survey so we could fully understand what the results really meant and how our values play out in our organization.

We’re still processing the results, which will become part of our continuous improvement plan for 2015. We’ll lean on this information as we continue to work on values alignment for a healthy culture – one that is understood and lived out by all of our employees.

DECEMBER 2014 ENTERPRISE MINNESOTA /

13

Profile

Dunwoody’s President

RichWagner

I

n 2009, as Minnesota manufacturers struggled to recruit even minimally qualified CNC operators, college president Rich Wagner and his colleagues at the Minneapolis-based Dunwoody College of Technology tried to fill the void. Working in part with Darlene Miller, president and CEO of Permack Industries and an appointee to the President’s Council on Jobs and Competitiveness, Wagner partnered with South Central College in Mankato to conceive Right Skills Now, a fast-track certificate program that would dispatch certified CNC operators to area shop floors after just one semester of training that included 16 weeks of highly focused classroom time and eight weeks of paid internship.

The program supplied a common-sense, market-based solution to an unmistakable demand. At the time, Wagner says, United States manufacturers were looking at “tens of thousands” of unfilled manufacturing jobs while experiencing 10.4 percent 14

/ ENTERPRISE MINNESOTA DECEMBER 2014

unemployment. “Why not figure a way to move those things together? Why can’t we get those people to get the skills now?

Why wait for a two-year AAS degree or a four-year graduate to come your way when you can get the person you need and then work with us – or any other institution – to continue to train them?”

Now training its sixth cohort of students, Right Skills Now has graduated 120 students, 95 percent of whom got job placements.

Its success quickly caught the attention of educators nationwide; today, tech schools in a large number of states have duplicated the program.

“Part of the Right Skills Now concept is that whatever is successful needs to be scalable,” Wagner says. “It’s a matter of seeing what’s working, grabbing hold of best practices, and bringing it home.”

What’s more, Dunwoody’s Right Skills Now students acquire “stackable” credentials, so that graduates could apply their credits later to finish a two-year AAS (Associate of Applied Science) degree and get additional skills. Graduates can then also go on and complete a bachelor’s degree in Industrial Engineering Technology at the College.

Wagner recently offered his vision of the challenges facing manufacturers in a wide-ranging keynote address to executives at Enterprise Minnesota’s exclusive annual statewide day-long CEO council conference in Minneapolis.

He told the audience – composed exclusively of manufacturing CEO-members of Enterprise Minnesota’s 11 peer councils across the state, and their guests – that their

PHOTOGRAPH BY ANTHONY BRETT SCHRECK

And the next generation of Minnesota’s manufacturers

primary challenge for at least the next decade will continue to be the increasingly chronic shortage of qualified employees to fill vacancies created by rapidly retiring Baby Boomers.

“Talent is our most scarce resource.

And it is going to remain that way for the foreseeable future.” he said.

And the challenge is not just limited to manufacturers or even to Minnesota.

“So you’ve got all these other industries out there competing for the same students who are getting through high school.” The automotive industry alone, he said, will need to hire more than 12,500 techs to fill openings left by retirements over the next half-dozen years.

“If you think the manufacturing industry has some challenges with external perceptions, what do you think people think of auto mechanics? When somebody says, I want to be an auto mechanic, do you think somebody says, “that’s a great choice?” That, despite the fact that today’s auto techs work on technology that exceeds all of the technology that was on the Apollo Spacecraft when we sent an American to the moon and brought him back in the 1960s.”

DECEMBER 2014 ENTERPRISE MINNESOTA /

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he says. “We have to figure out how to get more students to the finish line, which for us (at Dunwoody) is the starting line. We can’t afford to leave 75 out of 100 ninth graders behind in the kind of training they need to access the middle class -- not while we have great jobs in manufacturing staring at us. “We have the talent. We’re just not getting it through to 12th grade.”

To accomplish this, Wagner says manufacturers have to personally tutor

Dunwoody’s “ROE” Return on Education

He described a recent tour of the Boeing factory in Seattle, Washington, whose employees produce massive new aircraft in a plant large enough to fit over the entire campus of Disneyland. “They have to maintain a staff of 42,000 workers in just that that one facility,” he said. “(Washington) is up against the same challenges we’re up against. You go to any other state in the union and guess what they’re talking about? How do we find the talent we need for the future,” he said.

And while every state faces the same challenges, they also face a new reality: “This is no longer a competition between the states,” he said. “This has become a 16

/ ENTERPRISE MINNESOTA DECEMBER 2014

competition to make sure that the United States of America remains the leader it always has been. “We all have to start thinking differently.”

Compounding the challenge, he said, is that the number of students graduating from Minnesota high schools will remain flat for another four or five years.

He expects the number to “start creeping up slightly” in the 2017-18 school year.

“So high school class sizes are going to stay pretty small,” Wagner says, “and that’s just demographics.”

The other problem, he adds, is that “we don’t have enough kids graduating from high school.”

He cites national statistics that roughly project that for every 100 students who enroll in ninth grade, 75 will graduate from high school, 50 will attend a four-year college, and 25 will graduate from college.

In Minneapolis, the home of Dunwoody’s campus, the projections are even more dismal. For every 100 ninth graders here, barely 40 will achieve a high school diploma. Of those maybe 10 will attempt any kind of post-secondary education.

“We have to figure out K-12 education,”

As a private, non-profit institution, Dunwoody’s financial model is tuition-driven, not unlike St. Olaf or Macalester. “We don’t get any state allocations,” Wagner says.

“Everything is paid through tuition and fundraising.” Which means Dunwoody’s tuition is higher than its public school counterparts.

Dunwoody’s average student loan debt after two years is between $20-24,000. And Wagner says he’s not afraid to encourage students to borrow in order to come to Dunwoody. “I think they should have some skin in the game,” he says.

“When you’ve got to put something in, you’re more apt to want to complete it.”

The other justification for its tuition is that after two years, most students are in the workforce, earning money.

At the same time, he says, Dunwoody has long sought to balance the costs in a Dunwoody education. And that means looking at ROE, Return on Education. “You would not do a capital investment without ROI,” he says, “so we ask, what’s the ROE?” Essentially, it means that Dunwoody won’t educate students for fields that won’t deliver a sufficiently remunerative career.

“We will always stay true to the fact that all of our students will start out making between $15-$20 per hour and will have five year earning potential somewhere over $60,000, he says. “We think that’s worth the investment.”

high school educators and parents that the reality of modern careers in manufacturing doesn’t match up with their stereotypes.

They think manufacturing consists of low-paying jobs on manual machinery in a dirty environment, he says. “They think about some guy with no shirt on, wearing bib overalls, cigarette hanging out of his mouth, with an incandescent light bulb in the ceiling that’s flickering.”

Manufacturers should make a commitment to talk to counselors, to school districts, to take the school superintendent out for coffee and explain to him or her the career pathways that are available just at their companies.

“This is no longer a competition between the states,” he said. “This has become a competition to make sure that the United States of America remains the leader it always has been. We all have to start thinking differently.”

“They listen to our industry partners,” he says. “It’s going to take a while,” he says.

“We’re trying to move mountains here, so we’ve got to do it together. We need (manufacturers) at the table. We need to represent and be represented at any kind of association or with any kind of politicians that we can.”

Wagner is hopeful that the trend is going in the right direction. “I think our state is getting it,” he says. “There is a voice coming out of the wilderness talking about the need for manufacturing.”

A

growing opportunity on Wagner’s list for technical educators is to increase the amount of direct collaboration with manufacturers. He describes attending a recent conference in Chattanooga, Tennessee, where he observed firsthand how the Tennessee Technology Training Centers are using certificate-only training to work directly with industry.

An executive at the Chattanooga-based Volkswagen manufacturing plant told him that the Training Centers were a key reason the company built its new facility with 2,500 high quality jobs and about 10,000 secondary and tertiary jobs.

Dunwoody’s Legacy of Innovative Educators Dunwoody, one of just three privately endowed technical colleges in the United States, was founded 100 years ago by William Dunwoody, a founder of the company that eventually became General Mills. Among his endowments were gifts to Dr. Amos Abbott, who founded a medical treatment center that eventually became Abbott Northwestern Hospital and the Minneapolis-based Society for Fine Arts, which became the Minneapolis Institute of Art. Dr. Charles Prosser, Dunwoody’s first president, is considered the father of vocational technical education in the United States, as the architect of the 1917 Smith-Hughes Act, which created vocational technical education.

Wagner perpetuates that legacy by keeping Dunwoody at the vanguard of challenges for technical institutions and the companies they serve. He says a solution for the chronic worker shortage is to attack it at the K-12 level.

The avuncular Wagner is anything but a traditional college president. Wagner readily relates the tale of his shaky academic beginning. After high school, he enrolled in the freshman class at Lehigh University, a campus of about 7,000 students in Bethlehem, Pennsylvania, north of Philadelphia, intending to be an electrical engineer. His first semester, he says, he earned a .75 grade point average. His 1.01 GPA the next semester warranted a summons to the dean’s office. “I tried to explain to the dean if you take that .75 and 1.01 and you extrapolate a line out, by the time I’m a senior I’m an honor grad,” he jokes now. It didn’t work. Wagner was asked to leave for poor academic performance.

His subsequent stint in the Navy abruptly transformed his academic identity.

What changed? “First of all,” he jests, “you have to go to class. They march you there and they march you home. That helps.”

He says he thrived in the Navy’s approach to hands-on applied learning.

“Instead of saying, ‘let’s talk about what happens when resistance approaches infinity in a circuit,’ we would learn by going out in the lab and doing it. It was a hear-it, see-it, learn-it methodology that really gave me the confidence that I could be successful.”

His subsequent education track was impressive. He received a B.S. from Excelsior College (Albany, New York) in 1989, an MBA from Rollins College (Winter Park, Florida) in 1993, and his Ph.D. from the University of Minnesota in 2006. He joined Dunwoody’s faculty in 1996, spent one year at Hennepin Technical College, and then returned to Dunwoody as vice president of academic affairs, in 2005. He was named president in 2009.

He told Wagner that the Training Centers created a pipeline of skilled workers right to their factory. “They built a campus right in the factory,” Wagner said. “So they have students right in the Volkswagen facility for a year.” And after they graduate, they go right into the factory.

“I thought, if the southeastern part of our nation is figuring out workforce education, and actually attracting companies because of their workforce, the Minnesota Miracle is pretty much over, isn’t it?” Wagner said. “They don’t have to sell January-February-March as something we put up with to have a great workforce.

“We (manufacturing educators) have got to do a better job of meeting the needs

of manufacturers,” he said.

He described other challenges and solutions facing Dunwoody and its constituent manufacturers.

Apprenticeships. When Plymouthbased Bühler, a food-processing subsidiary of a huge Dutch multinational corporation, reached out to Dunwoody with a chronic demand for customer service engineers, Dunwoody created an old-fashioned apprenticeship program.

Over three years, trainees would alternate 10-week periods between Dunwoody and the company. At the conclusion of the program, the employee is a customer service engineer, a position that could evolve into other positions.

“Think about it,” Wagner observes.

“They are hiring their future workforce DECEMBER 2014 ENTERPRISE MINNESOTA /

17

right out of high school, and putting them through a European-style apprenticeship model that’s working.” Wagner says the program is currently operating its third cohort of six to eight students each.

The Makers Coalition. Dunwoody

collaborated on training with the large but relatively quiet local community of major sewing-based manufacturers to provide training for the next generation of commercial sewers. Facing a shortage of trained personnel, local executives formed

the Makers Coalition, in which CEOs from all those companies collaborated to help create and fund a 12-week, non-credit based certificate-training program designed to fast-track students into $14-$15/hour jobs with benefits.

Wagner said that one of the students, once homeless, was featured on CBS Evening News. “He’s now working at a job with benefits, living in an apartment and being successful,” Wagner says.

Dunwoody’s succession plan. Wagner says Dunwoody is likely to lose 60 percent of its faculty to retirement over the next five years, including three of its five-member executive team. Like many of the companies it serves, Dunwoody is confronted by some basic questions, Wagner says: “Where is that talent going to come from? Where is your next generation of leadership going to come from? How can we help take a technician and transition that person into a leadership management role – and help with succession planning?”

Regional Recruiting. Dunwoody is currently fashioning what Wagner calls

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of a thing to sell,” Wagner says, “not only a great institution with a great legacy,” but an attractive location. “Where would (a student) rather be: The University of Wisconsin-Stout in Menomonie, or right here in Minneapolis? There is a lot of sell being right next to Minneapolis,” he says.

Four-year degrees. As Minnesota

“Talent is our most scarce resource. And it is going to remain that way for the foreseeable future,” Wagner says.

“a residency experience,” in which the college will purposefully recruit students from Wisconsin, North Dakota, South Dakota, Iowa, and Illinois, in a program that will connect eventual graduates with local industry. “We think we have a heck

continues to rank as one of the lowest in the U.S. for per capita engineering programs, Dunwoody plans to offer four-year degrees, beginning with a BS in mechanical engineering. “We’ve heard from a lot of industry representatives that (they) need people with hands on, applied knowledge programs,” Wagner says. The program may

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begin as early as the fall of 2016, and will eventually grow to four or five engineering majors.

Women in the workplace. Dunwoody intends to increasingly work with K-12 educators to emphasize the value of its traditional career training to female students, according to Wagner. “We think that by the time a girl gets to 12th grade, she’s been socialized out of a lot of these great career pathways,” he says. “We want to figure out ways to stay connected with the girls as they are going through K-12. They can make good decisions about great careers.”

Veterans: Calling Dunwoody a “military friendly” school signifies more than public relations, Wagner says. Since Dunwoody’s private school tuition is higher than its public school counterparts, the school funds any tuition shortfall for vets not covered by the GI Bill. “They’ve done too much to serve our country,” Wagner says. “We owe our veterans an education and a transition to good jobs and great careers. And by the way, they make great employees.”

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19

WELL WITHIN

Four companies that show how manufacturers help sustain the Iron Range economy

RANGE L&M Radiator

Long veterans of the boom or bust economic cycles of worldwide mining, President Dan Chisholm and Executive Vice President Laura Ekholm, the brotherand-sister tandem that owns Hibbing-based L&M Radiators, are currently trying to make the most of a down cycle. In just two years, their company has been forced to mothball a couple of domestic manufacturing plants in the U.S., and reduce its number of employees from a peak of 900 to about half that.

L&M manufactures the Mesabi® line of radiators for heavy equipment in the mining industry. Largely considered the gold standard of its niche market, no amount of quality product can overcome a sour marketplace.

“Mining is down pretty hard, right now, and unfortunately, so are we,” says Ekholm. “That’s the nature of the business.” Business dropped off two years ago and they hoped in vain for a fairly short downturn.

But experience tells them that the 20

/ ENTERPRISE MINNESOTA DECEMBER 2014

PHOTOGRAPHS BY TOM LINDSTROM

Preparing for a rapid revival

“Every time we live through the up cycle and the following down cycle, we get smarter,” says Laura Ekholm, executive vice president at L&M Radiator.

markets will return and they intend to be ready.

“If history has anything to say about it, it will be rapid growth,” Ekholm says.

“Every time we live through the up cycle and the following down cycle, we get smarter,” she says. They’ve devoted the down time to lean up efficiencies in their operation (they are just finishing their sixth Kaizen), and to invest a lot of energy revamping their training programs, particularly through TWI. They have dramatically reduced training times and refined their standard processes between plants across the world.

Over the years L&M has benefited greatly from taking the long view of its business vicissitudes. The company was founded in 1957 when Clay Murray, maternal grandfather to the two current owners, licensed a radiator technology for huge trucks. Murray, in charge of maintenance at a mine in Hibbing, had grown frustrated with the number of repairs required by radiators. His research uncovered a British company that had developed a field repairable individual tool radiator. Which became the basis of L&M’s current Mesabi® line of industrial radiators.

Murray and a partner, George Langer, founded L&M. (Langer died in a plane crash shortly after the company began and Murray became the sole owner.)

Alex Chisholm, Murray’s son-in-law, joined the company in 1961. An engineer with a keen eye for strategic marketing, Chisholm set up L&M to experience explosive financial gains during the mid2000s. Beginning in the late ‘60s he opened facilities around the world that would accommodate eventual growth. He opened facilities in Mexico (1967), Australia (1972), and El Paso, Texas (1980), as well as other business ventures in Canada and Africa.

“We slowly became a world-wide presence,” Ekholm says. L&M’s challenge is that it manufactures aftermarket radiators, initially intended to replace radiators and cooling systems on existing machinery. “Our product is huge,” Ekholm says. “Trying to ship it is slow. It requires a quick turnaround, so there was value in being closer to the active markets.”

The company’s fortunes improved when major mining customers started to demand that Mesabi® radiators come as original equipment on the massive trucks (bigger than 180 tons).

About this time, Dan Chisholm joined the company, as president. He asked Laura, who had spent 16 years as an investment banker in the Twin Cities, to join the company in 1999.

“We were growing,” Ekholm remembers. “It was really busy.” To accommodate rapid growth in the mid2000s, L&M opened two more plants, one in Independence, Iowa (2005) and another in Yankton, South Dakota (2007).

In 2011, L&M opened a plant in Chile to accommodate opportunities in South America. They moved their plant in El Paso to a larger facility in Las Cruces, New Mexico, and expanded their plants in Iowa and South Dakota.

Ekholm predicts that Minnesota could help its local mining economy by

still consume the products that are mined.

“My opinion is that businesses want to follow the rules. Give them the rules and they’ll follow them. Our economy is going to benefit. The job will be here and the minerals that we pull out of the ground are going to be more affordable.”

Detroit Diesel

Great new facility with room to grow After seven years of steady, even remarkable, financial growth, Dave Rhode, plant manager of Detroit Diesel in late November consolidated his rag tag collection of four different facilities throughout Hibbing into a brand new

Plant Manager Dave Rhode this month moved Detroit Diesel into a new 60,000 square foot facility. In seven years, the company has enjoyed 14-fold growth and more than doubled its number of full-time employees to 110.

expanding mining opportunities on the Iron Range. “This is my soapbox: We as a state need to support (mining). It is going to mean huge job growth. We have to temper the environmental concerns with practical business.”

She adds that it is “pretty arrogant” for Americans to disdain mining, when they

60,000 square foot facility. Since acquiring the former DMR Electronics in Hibbing and bringing on Rhode, the Hibbing facility has increased company revenues 14-fold and more than doubled its number of fulltime employees to 110, with another 20-30 contract employees.

Detroit Diesel, a subsidiary of Daimler DECEMBER 2014 ENTERPRISE MINNESOTA /

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Trucks North America based in Michigan, manufactures heavy-duty diesel engines and axles for the commercial truck market. Its Hibbing facility is one of six remanufacturing centers located throughout the United States.

The Hibbing facility manufactures and remanufactures electronic circuit boards and wire harnessing primarily for use in vehicles.

The company thrived throughout the recession.

“When money gets tight you are going to look for the most economic option.

Remanufactured goods cost less than new,” Rhode says. “Things still break; you still have to replace them.”

A lot of Detroit Diesel’s remanufactured products go into on- and off-highway diesel engine products. Someone who owns a fleet of trucks in a sour economy, Rhode says, is less likely to invest in new semis, and they are going to have to maintain the ones they have.

At the same time, Rhode endeavored to bring his employees from the culture of a mom and pop organization to a more streamlined and sophisticated manufacturing operation, primed for growth. He said he had worked with Enterprise Minnesota’s David Ahlquist at previous companies, so he recruited Enterprise Minnesota to help introduce his plant to a wide variety of manufacturing techniques. He brought on the company’s first Enterprise Resource Planning (ERP) software system to automate the processes and resources of a company. He achieved ISO 9000 and ISO 14001 recognition. He started with Lean 101 training, worked through 5S, value stream mapping, and took on Training Within Industry projects.

As the company grew, so did its need to expand beyond the 31,000 square foot facility it originally leased from DMR Electronics. In 2008 they added another 6,000 feet in a building adjacent to its primary location. Shortly thereafter they added another 12,000 feet across town; then came another 5,000 feet in another part of town.

“We had an efficiency problem,” Rhode says. “We had all these facilities located throughout the city of Hibbing and we needed systems. We had to add transportation and we had to deal with the elements of northern Minnesota. We were very inefficient.”

If his company were to continue achieving its target of $2 million revenue 22

/ ENTERPRISE MINNESOTA DECEMBER 2014

increases annually, the company had to look beyond “low cost, best fit solutions,” he says. He had his eye on a never-occupied 30,000 square foot spec building that had been built in 2008 by a collaboration of area economic development authorities and the Hibbing airport to attract a new manufacturer to the area.

“And while we weren’t a new business,” he says. “we were a growing business.”

Rhode’s team ultimately rejected the temptation of moving a portion of its operation into the smaller space.

“It quickly became apparent that we should take a wholesale approach and get agreement to add an additional 30,000 feet and locate 100 percent of our operation, with the added option of easily expanding another 30-40,000 square feet easily if we continue to grow as we expected.”

To help plan, he turned to Enterprise Minnesota to map out a plant layout that optimized the flow of product and materials throughout the plant.

Minnesota Twist Drill The power of local ownership

Back in about 2002, it is said, a business consultant who worked with the new offsite corporate owner of Minnesota Twist Drill approached the local management team of the Chisholm-based manufacturer of drill bits. You guys need to stop thinking like a

small company of entrepreneurs, he said, and you have to start thinking big, like a corporation.

Scott Allison, the current president of Minnesota Twist Drill, and the man who organized the team that eventually bought back the company, said the consultant had it all wrong.

“That is quite the opposite of the mentality that we have around here,” he says. “I want all of my people thinking like entrepreneurs. I want them thinking outside the box and being creative. That’s where people are at their best.”

That new corporation may have thought big, but it didn’t perform big. At the time Allison joined the company as plant engineer in 1998, the 200-plus employees at Minnesota Twist Drill were producing around 200,000 drill bits per day. By the time the corporation decided to sell it back, they were down to fewer than 50 employees.

The corporation’s focus was to develop a new brand and try to become a major player in the round tool market -- other than drill bits, Allison remembers. “But as corporations go, they make some moves, then directions change, priorities change, people change. Before we knew it, our company was not one of those priorities anymore.

In late 2003 the company was officially put on the market, “declared as a discontinued operation.”

Chisholm-based Minnesota Twist Drill was sold back to local ownership in 2003. Since then it has achieved revenues as high as $25 million and employs 125 people.

In 2000, Allison had become plant manager and approached the corporation about buying it. “They didn’t feel I could pull it off,” he says.

Ultimately, lacking other buyers, Allison submitted a bid. His team included Jim Fena, a previous owner (who remains as chairman today), as well as the IRRRB and American Bank in Hibbing. On September 3, 2003 they took ownership.

Since then, Minnesota Twist Drill has enjoyed revenues as high as $25 million and now employs 125 people. Today, the company owns a 70,000 square foot manufacturing facility in Chisholm as well as a 15,000 square foot distribution and packaging facility in Hibbing.

A big boost for the company was its acquisition in 2009 of Triumph Twist Drill in Crystal Lake, Illinois, a company that enabled Allison’s team to take over Triumph’s six existing brands. Prior to that, Minnesota Twist Drill sold drill bits through distributors who put their own brand on it. The company now markets its own brands of bits.

Conveyor Belt Service Preparing for the next generation of workers

Conveyor Belt Service (CBS) has been supporting Great Lakes mines and shipping industries out of its Virginia, Minn.-based plant since 1953. CBS was founded as a wholly-owned subsidiary of the W.P. & R.S. Mars Company of Duluth, that two years earlier had acquired exclusive rights to distribute the Goodyear line of conveyor belting for northern Minnesota.

Today its 28 full-time employees manufacture rubber fabricated parts and provide belt service contracting in a newly renovated 36,000 square foot facility.

Its business is currently very strong, with local taconite plants running close to capacity, according to Bruce Mars, the company president who splits his time between the Virginia plant and the Duluth-based holding company.

Mars says the company is expanding beyond the Iron Range. It is developing business with mines in the Upper Peninsula of Michigan, at a coal-fired power plant in Iowa, and in Reynolds, Indiana which this year constructed America’s first new taconite pellet plant in 40 years.

The company this year received Growth

Bruce Mars, president of Conveyor Belt Services is optimistic about the prospects for his miningdependent company: “If the world continues to consume steel at a high rate, they are going to need a lot of raw materials to make that steel and much of it will come from northern Minnesota.”

Acceleration Program (GAP) investments to help foster company improvements by working with Enterprise Minnesota on a strategic business plan to reduce waste and expand its facilities.

Enterprise Minnesota is working with Conveyor Belt Service to develop more efficient layouts for its existing and new facilities. This has led to significant cost savings and increased production capacity, allowing the company to invest in $50,000 of new equipment and adding several fulltime employees.

“GAP is immensely beneficial for medium and smaller-sized manufacturers like Conveyor Belt Service, as it provides opportunities to take advantage of business growth strategies to create jobs and compete in the global economy,” said Bob Kill, president & CEO of Enterprise Minnesota.

“With all the challenges we face as a business and our desire to grow, we felt very fortunate to partner with Enterprise Minnesota and to be able to take advantage of the Growth Acceleration Program,” Mars said. “GAP helped us find the confidence we needed to take the next steps in growing the business.”

Mars added that the company is currently preparing for a new wave expected retirements. “We lost over a hundred years of experience over the last five years,” he says. CBS tends to hold on

to employees – two have been with the company more than 40 years, Mars says – but the work is technical and physically demanding.

Twenty-four of his 27 employees are considered “belt technicians,” which Mars says is “very, very hard work.”

“They are on the road a lot, working in difficult conditions in the bowels of mining companies or in the bottom of a Great Lakes boat, or outside on the docks in a snowstorm,” he says. “Working safely is paramount, as is quality, and working quickly.”

That’s why he says, he retained Enterprise Minnesota to modernize his facility and help provide training for the next generation of CBS employees. Mars said the company invested $1.5 million to increase the size of the plant.

Enterprise Minnesota works directly with companies throughout the state.

“Manufacturing, particularly in Greater Minnesota, forms the bedrock of many Minnesota communities, offering highwage, high-skill jobs that create economic opportunity and stability for the present and the future,” Kill said.

As for the mining-dependent CBS, Mars is optimistic: “If the world continues to consume steel at a high rate, they are going to need a lot of raw materials to make that steel and much of it will come from northern Minnesota.”

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FAMILY AFFAIR Eight members of the Goerges clan have helped transform Pequot Tool and Manufacturing into a thriving $18 million company

BY CLAYTON BENJAMIN

I

t has been 33 years since Josef and Agnes Goerges founded Pequot Tool and Manufacturing. “In 1981, they closed the resort that they had and wanted to stay up north in the Brainerd Lakes area. Dad decided to return to a trade that he was in prior to the resort business,” says current CEO, and their son, Karlo Goerges. “His (Josef Goerges’) version was that he went broke in the resort business, so he decided to go back into the machining business,” laughs Karlo.

And that decision was a good one. In the last 33 years, Pequot Tool and Manufacturing has seen a steady growth in business and size. Originally the business was housed in a rented 3,200 square foot building in Pequot Lakes, with four semi-trailers sitting outside. Now the business has over 83,000 square feet dispersed through several buildings and is located in Jenkins, Minn.

Additionally, the business has grown from 3 employees to 149, and many of those employees are Josef’s and Agnes’s children.

Josef Goerges’ eldest-son Karlo took over as CEO after

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Josef retired from the business in 1999.

Additionally, Karlo’s brothers Joe, Mike, Brian and Gary also work at the familyrun business. Joe works in sales and project management. Mike works in sales management. Brian works in business development. And Gary works on the technical side in machining. Additionally, their sister Angela worked for the business for many years and still has ownership in the business. “Every one of my siblings (he has seven) has worked here at one point in time,” says Karlo.

So what’s it like working with so much family? It has its rewards but it’s not always easy. In 2005 the family asked Mark Shervey to take over as president of the company.

“What is clear is that the whole family is very talented,” Shervey says, “They’re very devoted to the company. They’re very passionate about it, but they all have their own expertise and opinions and don’t always agree on everything. Although they listen to reason. I still think the reason they wanted me to take over was to prevent sibling rivalries from overriding what needed to happen on a daily basis.”

Karlo says the family members are all hardworking individuals and credits their work ethic to his parents. He says, “My dad immigrated to this country after World War II in ‘51. He didn’t speak a word of English and had literally nothing in his pocket. He lived the American dream in that way. There was nothing he couldn’t do despite all the challenges he faced. So the culture built up in the family was always: ‘You’re going to make things happen.’ ” “His German stubbornness pushed us,” Karlo says.

One benefit of starting a family business in the 80s was the ability to pay the family members as the business succeeded. “It was a 24/7 business back then,” Karlo says, “To be real honest I don’t think you could have done it without family involved in the business. You look at some of the stories from back then. They didn’t pay themselves on a weekly business. They paid themselves as the money came in. I don’t think you could start a business today that way.”

However, though sibling rivalries do happen, it hasn’t stopped the business from being profitable. Now the business’s sales total over $18 million a year. Also,

PHOTOGRAPHS BY NELS NORQUIST

So what’s it like working with so much family? It has its rewards but it’s not always easy. In 2005 the family asked Mark Shervey (right) to take over as president of the company, Karlo Goerges (left).

the business offers services in milling and turning, fabricating, welding, stamping and assembly, material handling and blanking, metal finishing, deburring, and quality control.

Originally, the business started in the fabricating and stamping side of production; however, it has since focused more on machining. Shervey says, “about 70 percent of the business is machining and about 30 percent is fabricating.”

Fabricating is the building of metal structures by cutting, bending, and assembling them. At Pequot Tool fabricating includes stamping, laser cutting, forming, welding, and assembly.

Machining refers to various processes

in which a piece of raw material is cut into a desired final shape and size by a controlled material-removal process. The many processes that have this common theme, controlled material removal, are today collectively known as subtractive manufacturing, to be distinguished from processes of controlled material addition, which are known as additive manufacturing. Exactly what the “controlled” part of the definition implies can vary, but it almost always implies the use of machine tools (in addition to just power tools and hand tools). The machining tools used at Pequot Tool are computer numerical control (CNC) machines, in which computers are used to

control the movement and operation of the mills, lathes, and other cutting machines.

Shervey says, “Most of the parts we do are just components of a major assembly.

We may make a fuel valve for a jet engine and that might be the only part we sell to that company. Then there may be another company where we make a whole assembly together for a medical device of some type.

“We call it strictly a job shop, we don’t design anything. Our customers send us a design and we come up with the best process to make it,” Shervey says, “Most of our customers are OEMs (original equipment manufacturers.”

Besides making parts for jet engines

DECEMBER 2014 ENTERPRISE MINNESOTA /

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Brian McNamara, Press Brake Operator

and medical devices, the company has also made components for customers in the firearms industry, aerospace industry, motion control and hydraulics industry, computer industry, and has made parts for the point-of-sales devices in the retail industry.

In fact, Shervey says “Odds are, everybody has had their hands on our parts in a store because we make a lot of the brackets for a company that supplies credit card readers. If you swipe your credit card at the cash register you are probably swiping it on our bracket.”

The types of industries Pequot Tool machines and fabricates parts for are very diverse. “It’s one of our secrets to success,” Shervey says, “having diverse capabilities along with a diverse customer base.”

Though they cater to a diverse customer base now, this was not always the case. “We had to find our own customers,” Karlo says.

“We didn’t go to old tool and die customers because they didn’t need our services.”

“One of our first customers and one of our largest customers for many years was Tjernlund out of the cities,” Karlo says.

Shervey says, “They made blowers, housings, and the vent that would come out

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of a gas stove on the outside of a house.

Basically Pequot was doing stamping and assembly for them.”

Karlo says, “The key was trying to find those customers which you could build a long term relationship with, and with most of our customers we are still trying to do that. To develop those long term relationships.”

To build business, Shervey says Pequot Tool mostly relied on word of mouth.

Additionally, Shervey says he goes to many trade shows. In order to sell Pequot Tool’s business at those shows, Shervey says, he markets Pequot Tools’ diversity and its “ability to be more than just a supplier, but to really be part of their business: to help them grow and to help them solve problems.”

For example, one company Pequot Tool helped get off the ground is Engineered Network Systems, Inc. located in Burnsville, Minn. Shervey says, “When they started it was just two people, a marketing and engineering manager.

They didn’t have any manufacturing or anything. They had ideas to sell products and they were going out and marketing and engineering them and we were doing all of

their manufacturing for quite a few years.”

Shervey says, “Now that they’re growing, and they’re growing at a very fast rate, we’re still one of their major suppliers.

That was a partnership. We used to meet once a week at either their place or our place to discuss the projects, help design and engineer prototypes, and help them with whatever needed to be done.”

For Shervey, success in the business is “all about building relationships.”

At Pequot Tool, building relationships doesn’t just apply to customers, it also applies to building relationships amongst employees at Pequot Tool.

Shervey says, “The rewarding part of my job is seeing the business grow and the growth of employees: the relationship with our employees, their satisfaction, and paying out profit sharing with employees...

You know, seeing an employee drive a new truck to work or something. We feel we’re all a part of their lives and what’s going on.”

“It’s not just about the company,” Shervey says, “Its about the employees and our relationships with customers. We have relationships with our customers that go well beyond just supplying them

parts. That’s what makes business fun and interesting and rewarding.”

In order to create good relationships with employees, Karlo and Shervey realized they needed well trained employees so that those employees could be successful at their jobs. In early 2000 they approached Enterprise Minnesota to help them with training.

During that time, Pequot Tool found that the tech schools in the area were no longer a source of employees and potential employees. Additionally, as their business expanded, “We needed to teach soft skills. We needed to teach how to train, how to mentor people, how to grow your workforce,” Shervey says. “And not just on the technical side.”

“We struck a connection with Enterprise Minnesota and started using them for their series of TWI (Training Within Industry) trainings and we continue to use those today,” Shervey says. “Every year we do some refreshers for new leadership people coming up to teach them job relations and job instruction.”

Pequot Tool has also used Enterprise Minnesota for lean tools, such as valuestream mapping, and 5S. “We’ll continue to use them on those things too,” Shervey says.

Furthermore, Pequot Tool has found training so important that they have created

A robot loading an automated machining cell.

a full-time person in charge of employee development. “When we hire a person now, they are put on a career path and this person monitors their progress on it,” Shervey says, “and provides them with onsite training, including our own training, outside training and quite a bit of Internet training.”

“We also have a telepresence system tied to five colleges where employees can do college courses right here on site,” Shervey says. “Training is a huge part of our growth and our future. We knew that we would have to get more than just one source (for training) to maintain our growth.”

In addition to providing excellent training, Shervey says they also build relationships with their employees by providing occasional lunches, a BBQ forum, and holiday parties. Shervey also says they provide employees with a very

that continuous improvement is a must.

You have to invest in employee training.

What you’re doing today you aren’t going to be doing five years from now. Everything is changing and your employees have to grow with that and your facilities and equipment have to grow with it too.”

“To give you an idea, we have to reinvest $1 million dollars a year just in equipment,” Shervey says, “to keep us up-to-date and current with our customers’ needs.”

“Starting a business today is probably a lot different than starting a business in ‘81 because in ‘81 you could see further ahead what your needs would be. Today I wouldn’t know if a piece of equipment I own right now is going to be even applicable 10 years from now. So your future investment is going to be a lot larger

“To be real honest I don’t think you could have done it without family involved in the business. You look at some of the stories from back then. They didn’t pay themselves on a weekly business. They paid themselves as the money came in.

I don’t think you could start a business today that way.”

– Karlo Goerges safe and very clean work environment.

“Our employees are so important to us, that we need to keep them involved in the company and interested,” Shervey says.

“We have a fairly good retention rate.

Many people have been here for many years.”

When asked what advice he’d give new business owners, Karlo says, “Well, it’s going to be a lot of work, that is number one. But it’s really looking at the long term. You have so many issues looking at the long term, whether it’s machinery, people, or training. All of those play into things you should be looking at because things are always changing in our industry.”

“And I think the key is paying attention to your customer,” says Karlo. “You need to listen to what their wants and needs are, and you’ve got to do what is best for them.

If you don’t have quality, you aren’t going to stay in business. Delivering quality parts on time is key.”

Additionally, Shervey says, “If you’re going to start a business now, understand

today than it was back 30 years ago,” Shervey says.

Karlo says, “Things are changing faster these days.”

Shervey says, “It’s harder to be small because it’s harder to keep up with the technology.”

However, one thing Pequot Tool knows is how to grow and change with the times.

“One thing I usually get a kick out of is when we have people come in here on tours. A lot of the times we’ll walk through the plant and they’ll ask, ‘Well why didn’t you just build one big square building?’ and I tell them, ‘Well at the time we thought we did.’”

Pequot Tool has gone through seven expansions to add additional square feet to their plant, and they are currently going under an eighth. By the end of this 12,000 square-foot expansion, Pequot Tool will have 95,000 square feet of plant space.

Coming from a rented to 3,200 square foot shop with four semi-trailers, it’s easy to say that one thing Pequot Tool has learned, it is to grow.

DECEMBER 2014 ENTERPRISE MINNESOTA /

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Enterprise Minnesota’s Statewide CEO Council

Peer

The

Factor Executives focus on the challenges and opportunities of the worker shortage

M

ary Connor, a veteran consultant at Enterprise Minnesota who has been helping companies conceive and implement strategic plans for 15 years, thinks that her company’s annual Statewide CEO Council event is a useful way to elevate CEO thinking.

It “gets them out of the middle of muddle,” she says. “It takes them out of their day-to-day and enables them to look further out, higher up, and to cast a bigger net.”

Connor was one of five in-house experts who helped guide the daylong event with highly focused and interactive presentations October 20 at the Crowne Plaza Minneapolis West Hotel in Plymouth. Attendance at the exclusive day-long event was limited to members of Enterprise Minnesota’s 11 statewide peer councils and their guests.

“The purpose of our peer councils is to enable high level manufacturing executives to step away from their companies and interact directly – and candidly – with other executives,” said Bob Kill, president and CEO of Enterprise Minnesota. “Our statewide event enables all of them to get together in one place.

“Our mission is usually just to organize their conversations,” Kill adds. “And then we just stand back. There is a real power to

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high-level, highly personal conversations like these.”

The discussions this year concentrated primarily on how manufacturers are adapting virtually every aspect of their strategic planning to cope with the continuing shortage of welltrained workers.

The day’s tone was set by a luncheon keynote speech in which Rich Wagner, president of the Dunwoody College of Technology, outlined how the challenge to find qualified employees to fill vacancies created by rapidly retiring Baby Boomers will continue for at least the next decade. (See a full profile of Wagner, beginning on page 14).

“Talent is our most scarce resource,” he said.

He predicted the number of students graduating from Minnesota high schools will remain flat “for another four or five years” and then to “start creeping up slightly” in the 2017-18 school year.

Wagner then challenged manufacturing executives to commit to personally spreading the good news about their industry to counselors, to school districts, and to parents.

“Take the school superintendent out for coffee and explain to him or her the career pathways that are available just at your

“There is a real power to high-level, highly personal conversations

PHOTOGRAPHS BY CHRIS MORSE

among manufacturing CEOs,” says Bob Kill.

companies,” he suggested.

The issue received even more attention later in the day when Bob Kill presided over a panel of cutting-edge manufacturing executives that included Ross Anderson, Midwest Rubber Service and Supply Co; Steve Cremer, Harmony Enterprises, Inc.; Allan Cronen, GVL Poly; Al Sholts, Alexandria Industries; and Lori Tapani, Wyoming Machine.

Dave Buchholz, an Enterprise Minnesota consultant who specializes in continuous improvement, was also struck by the receptiveness of executives to learn from the experiences of others.

“They are still looking for ways to improve. A lot of these folks have been on their lean journey for years, and they’ve put resources behind it,” he says. “And yet they are still open and hungry for additional ways to improve their business model. They were very

open to sharing their experiences and also seeking what more can we do. They internalized that continuous improvement is an ongoing process that will always yield positive results. So they are always on board that they will always put additional resources behind it.”

Pat Voyles, a consultant who specializes in leadership and training at Enterprise Minnesota, was encouraged how CEOs shared ideas about how to prepare their workforce for the future. “It was helpful to hear from these CEOs about what they were able to do to help develop their workforce to get ready for the future,” she said.

Her mission at the event, she said, was to bring awareness about the need for talent development and “how culture and competence play into a company’s ability to create and implement the strategic plan they need.”

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29

“There has always been an awareness that manufacturers need to develop their talent,” she says, but companies don’t always comprehend that human capital is more than an expense.

“Companies are willing to invest in technology and processes,” she says, “but work gets done through people. … The people that got the company where it is today might not be the people that take the company into the future.

Companies need to assess their talent need now and start working at closing that skills gap.”

A fascinating byproduct of the worker shortage, according to Roger Hurd, one of Enterprise Minnesota’s marketing experts, is manufacturing increasingly “capacity constrained,” which might translate into a seller’s market for manufacturers who are strategically prepared.

“That being the case, you get to pick and choose what orders you want to take a little bit,” he said. In that circumstance, savvy manufacturers will develop a “customer strategy.” What kind of customers do you really want? Who can you serve really effectively

in relation to the competition?

“It gives you a chance to do the best work that you’d like to do, at the best margins,” Hurd says.

“That’s what we’ve been preaching all along, but it is interesting to hear the topic come up from the perspective of, if we’re going to have to turn work away, what should we turn away?”

Veteran consultant Mary Connor says the current climate heightens the need for CEOs to emphasize broad strategic planning. “One of the things we start the day with is to remind them that their job is to grow the company,” she says. “And part of growing the company is communicating the vision.”

While many company executives make decisions very quickly and easily, their internal communication skills “could use some development, frankly.

“Having the people in place who will take on those strategic decisions and turn them into tactical initiatives is where the gap is right now, in my mind, for most of our small and medium-size manufacturers,” she said.

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Sharing information i a simple and strai

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Final Word

A Year in Review Enterprise Minnesota combines leading edge consulting with being Minnesota’s connector for all things related to manufacturing

T

he end of the year provides a useful opportunity for any organization to look back and reassess what you’re doing and how well you’re doing it. I’m happy to say that on almost every level, Enterprise Minnesota had a very good year.

Our consulting practice remains robust and leading edge. In 2014 our team of 21 business advisors and technical experts helped 178 customers with 405 projects that tangibly helped them grow profitably (our mission).

Our offerings are diverse. Our: • Lean Enterprise consultants help companies develop an efficient, agile business operation that reduces time, motion, energy, and material waste. They help “lean up” facilities, processes, and even the front office; • ISO Quality Management System helps companies acquire their ISO 9001: 2008 certification. They use it to differentiate their products as well as demonstrate their company’s commitment to quality processes and products. With our proven track record, we guarantee your business will pass the registration audit; • Talent Development experts use classroom and workplace instruction to ensure that employees have the knowledge and the applicable know-how they need to be efficient and productive; • Strategy Management methodology helps position manufacturers for longterm growth by defining their mission, their vision, and their core values; • suite of Marketing Management solutions helps manufacturers create sustainable competitive advantages, whether they seek an entirely new marketing strategy, to develop a plan to market your products globally, or to get some 32

/ ENTERPRISE MINNESOTA DECEMBER 2014

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

help on pricing or channel strategy; and • our exclusive CEO Peer Council groups across Minnesota provide industry executives with a structured forum to speak candidly and confidentially about issues that matter to them and to their businesses.

Although our primary role is business consulting, Bob Kill, our president and CEO, has helped make Enterprise Minnesota the go-to connector of all the disparate members of Minnesota’s manufacturing community. His efforts have been particularly successful in forging positive relationships with our elected officials. The creation of high quality jobs is maybe the easiest way to find common ground for elected officials. And manufacturers may provide the best path to producing them. To

that end, Bob has personally facilitated 245 manufacturing company tours for legislators, congressional members and other community leaders.

Another way we communicate the value of manufacturing to Minnesota is through The State of Manufacturing®, our annual in-depth, statistically significant survey of the perceptions and opinions of over 400 Minnesota manufacturing executives. Each year, our survey is accompanied by as many as 20 focus groups, composed of executives managers, and thought leaders revealing their thoughts on the economy and other major issues impacting their ability to do business. And we are eager to share the data broadly. We release it through public events all throughout Minnesota. In 2014, more than 1,100 people attended 20 “rollout” events.

I would be remiss if I didn’t mention our business events. Once each month we host lively instructional business events for manufacturers on a variety of relevant topics. Usually moderated by one of our consulting experts, they always include several presentations in which manufacturing executives provide firsthand case studies on a variety of topics that demonstrate their business growth using their own personal experience. Check out our upcoming event, Creating a Mindset for Strategic Growth, to be held in Alexandria on January 14, 2015 by going to www:enterpriseminnesota.org.

And finally, there are our publications.

This magazine has been called “unquestionably” the leading regional manufacturing magazine in America. And it’s our honor to celebrate the amazing work of Minnesota manufacturers in these pages.

By intentionally focusing on manufacturers – people, not just data -- we highlight the successes, challenges, opinions, and insights of Minnesota’s manufacturers. And our Weekly Report provides something of a digital community newspaper for manufacturers.