The State of Manufacturing® 2017 - Complete Survey Book

A COMPREHENSIVE SURVEY OF MINNESOTA’S MANUFACTURERS

2017

BOUNDLESS OPTIMISM Minnesota’s manufacturers forecast record growth and profitability

2017 A Comprehensive Survey of Minnesota’s Manufacturers

The State of ManufacturingÂŽ 2017

A comprehensive survey of Minnesota’s manufacturers Rob Autry, Pollster Tom Mason, Strategic Consultant Lynn Shelton, Director Scott Buchschacher, Creative Director Shane Ramnarine, Copy Editor All rights reserved. Except for brief quotations in critical articles and reviews, no part of this book may be reproduced in any manner without prior permission of the publishers.

Special thanks to all of the sponsoring organizations and executives who participated in the focus groups.

Enterprise Minnesota, 310 4th Avenue South, Suite 7050 Minneapolis, Minnesota 55415

CONTENTS

Introduction ......................................................................................... 4 Pollster’s Analysis.............................................................................. 9 Poll Summary.................................................................................... 16 Focus Groups (location) Warroad (Marvin Windows)..................................................................... 33 Detroit Lakes (M State)............................................................................. 43 Edina (G&A Partners)............................................................................... 56 St. Louis Park (Minnesota Precision Manufacturers Association)............ 75 St. Paul (St. Paul College)......................................................................... 92 Marshall (Southwest Minnesota State University).................................. 108 Alexandria (Alexandria Technical & Community College).................... 125 Alexandria Students (Alexandria Technical & Community College)..... 138 White Bear Lake (White Bear Lake High School)................................. 147 Brainerd (Brainerd High School)............................................................ 156 St. Cloud (Gray Plant Mooty)................................................................. 169 Minneapolis (Dunwoody College of Technology—Students)................ 185 Owatonna (Southwest Minnesota Initiative)........................................... 200 Mankato (Greater Mankato Growth)...................................................... 214 Pine City (Pine Technical and Community College).............................. 230

Selected Cross Tabulations.......................................................... 247

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INTRODUCTION

Good News for Everybody Manufacturers’ exploding optimism should put a smile on all our faces.

By Bob Kill, president & CEO, Enterprise Minnesota

This ninth edition of our State of Manufacturing

survey will reveal that Minnesota’s manufacturers have reached a record level of optimism about their prospects in 2017. They are bullish on the economy, optimistic about their companies’ growth potential, and less concerned about the challenges that confront them—all in record proportion during the history of the survey.

That’s, of course, great news for them, but too few Minnesotans truly comprehend how this optimism translates into their lives as well.

Manufacturers preside over a job-creating engine that not only drives our macro economies but feeds the economic vitality of our home communities as well. They provide high-quality jobs that pay well and offer strong job security, particularly in Greater Minnesota, where some small communities struggle to retain their local identities.

Minnesota’s Department of Employment and Economic Development (DEED) supported this conclusion when it recently released some eyeopening data. Our state’s manufacturers, they said, deliver 16 percent of ®

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Minnesota’s GDP—the single largest private-sector contributor—with an average annual wage of $63,236, 15 percent higher than the average for all industries.

And manufacturers stimulate economic contributions from other businesses. For every person employed in manufacturing, there are 1.9 people employed by firms that provide services and products to manufacturing companies.

So you can see that when manufacturing does well, we all do well;

Bob Kill

manufacturers’ exploding optimism should put a smile on all of our faces.

And when you think about thanking a manufacturer, you don’t have to go to 3M or Medtronic or any of our terrific locally-based Fortune 500 companies. You probably don’t have to venture far from your neighborhood. Fully half of Minnesota’s manufacturers employ 20 people or less, and 56 percent of them reside outside the seven counties in the Twin Cities metropolitan area.

Manufacturers’ attitudes about some of their challenges also seem to have acquired a more hopeful tone in this year’s survey. The skills gap, for one, has dogged manufacturers for almost a decade now, as they try to 5

negotiate an evolving labor pool in which they will replace retiring Baby Boomers with a generation of Millenials who are far less numerous and who need to become qualified to operate the increasingly sophisticated equipment on their manufacturing floors.

I’ve always believed that the market forces that usually bring stability to the American economy will eventually bring balance to the labor issues. And as you read the focus group transcripts in this year’s book, you’ll get a sense that the market is responding. On the whole, hopeful conversation replaced the anxiety of past focus groups. Many related how they are collaborating to reach students in creative ways. They are strengthening their relationships with schools, talking directly to students, teachers, and counselors. They’re helping to equip high school manufacturing labs with better equipment and more satisfying curriculum. And they’re far more aggressive with internships.

That sense of optimism also emerged in the five focus groups we conducted that consisted solely of students, this year including high schoolers for the first time. The message is getting out there. You can’t read the focus group with Brainerd high school students, for example, without having the sense that we’re turning the tide on the skills gap, in a big way.

Automation is another market force that will help alleviate the skills gap challenges as it brings greater efficiencies to manufacturing operations. Executives were universally quick to acknowledge in focus groups that automation is an increasingly valuable tool, but not to eliminate their reliance on employees, as we sometimes see or read in the occasional hair-on-fire media reports. Hardly, they say. These efficiencies will help them cope with the predicted declines in workingage populations. They all emphasize that automation will increase the number of new high-quality jobs as they need to find people to operate these machines.

And now we have some people to thank for making this State of Manufacturing project such a success. I say this every year because it is always true. The State of Manufacturing would not succeed without the selfless collaboration of so many organizations and individuals. As always, we’re all grateful to our sponsors, whose financial backing helps us defray the considerable costs of the survey project and whose insights and ideas always contribute to a meaningful questionnaire and whose individual networks always plug us into a new set of thought leaders.

Pollster Rob Autry has conducted the survey in each of the nine years.

Rob, the founder of Meeting Street Research, is one of America’s premier pollsters. We’ve drawn credibility from his creativity, patience, and keen analytic skills. And Tom Mason, our long-time consultant, has also been with us from the beginning. He has now added another 15 focus 6

groups to the long list he’s done over nine years. Tom, whose company produces Enterprise Minnesota® magazine, also publishes the State of Manufacturing® book, along with creative director Scott Buchschacher.

A special thanks goes to Lynn Shelton, the director of marketing and legislative relations at Enterprise Minnesota, who has directed the State of Manufacturing project since it was nothing more than a concept.

Lynn and her staff—Lynet DaPra, Constance Fantin, and Chris Morse— devote their considerable talents to ensuring The State of Manufacturing work achieves Enterprise Minnesota’s business objectives.

Finally, I want to again extend sincere thanks to the manufacturers who take time out of their busy days to talk to our pollster, the many people who participate (often year after year) in our focus groups, and those who will attend events in which we present and discuss the results.

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Thank you to our 2017 sponsors!

PLATINUM—STATEWIDE SPONSORS • Bremer Bank • Granite Equity Partners • Gray Plant Mooty • Marsh & McLennan Agency • Minnesota Department of Employment and Economic Development (DEED) • RSM GOLD—ALLIED SPONSORS • Blandin Foundation • Central Package & Display SILVER—EXECUTIVE FOCUS GROUP SPONSORS • 360 • Agricultural Utilization Research Institute (AURI) • Alexandria Area Economic Development Commission • Alexandria Lakes Area Chamber of Commerce • Alexandria Technical & Community College • Center for Rural Policy and Development • G&A Partners • Gray Plant Mooty • Iron Range Resources & Rehabilitation Board (IRRRB) • Marvin Windows and Doors • Minnesota AgriGrowth Council • Minnesota Precision Manufacturing Association (MPMA) • Northwest Minnesota Foundation • Pine Technical & Community College • Saint Paul Port Authority • Southwest Initiative Foundation

• TEAM Industries • West Central Initiative SILVER—STUDENT FOCUS GROUP SPONSORS • Alexandria Area Economic Development Commission • Alexandria Lakes Area Chamber of Commerce • Alexandria Technical & Community College • Clow Stamping Company • Dunwoody College of Technology • Pequot Tool & Manufacturing • Productivity Inc. • Wilson Tool BRONZE—MANUFACTURING SPONSORS • Absolute Quality Manufacturing, Inc. • Delmar Company • Hed Cycling Products • Mactech, Inc. • Mars Supply • Tolerance Masters • Tri-State Manufacturers’ Association (TSMA) • Ultra Machining Company, Inc. (UMC) • Von Ruden Manufacturing, Inc. RECEPTION BEER SPONSOR • Summit Brewing Company

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POLLSTER’S ANALYSIS

Boundless Optimism Minnesota’s manufacturers forecast record growth and profitability

By Rob Autry

The ninth edition of the State of Manufacturing

survey reveals that Minnesota’s small and medium sized manufacturers are incredibly— and I don’t use that word carelessly—optimistic about the prospects of their company over the coming year.

Lifted by their perceptions of positive conditions in the U.S. economy and their own business circumstances, a whopping 94 percent of manufacturers feel confident about the futures of their companies, the highest number we have registered in the history of our survey. In record numbers, manufacturing executives are optimistic about the economy and bullish on their companies’ projections of revenue and profitability for 2017. Their concerns about the global economy are at all-time lows, as is their worry about government regulations.

Perhaps even more impressive is the fact that manufacturers’ level ®

About the pollster

Rob Autry, founder of Meeting Street Research, is one of the nation’s leading pollsters and research strategists. He has conducted all nine State of Manufacturing surveys.

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After rising for the fourth straight year, financial confidence is at an all-time high.

of certainty exceeds anything we’ve ever tested. Fully 57 percent said they are very confident, up 14 percent in just one year. That’s a staggering 30-point improvement over our first survey in 2008.

Their optimism is no doubt rooted in their sense that America is poised for a period of economic expansion. For the first time in the history of the poll, more manufacturers predict economic expansion in the coming year over a flat economy. “Flat economy” has been their projection every year since 2010. This year, 58 percent of manufacturers forecast expansion, with only 32 percent choosing “flat.” In contrast, the 2016 poll revealed that 48 percent of respondents indicated “flat,” with just 32 percent indicating “expansion.” That’s dramatic. And it’s across the board statewide, no matter the size or location of the companies. It’s the first time that’s ever been above fifty percent, and up sixteen points in the course of a year.

That optimism continues with respondents’ projections about revenue and profitability. A record 55 percent of manufacturers expect to see increases in gross revenue this year, 11 points higher than the responses to the same question last year. Forty-four percent expect increases in profitability, seven percent higher than last year and 14 percent higher than two years ago.

And, it gets better. Thirty-five percent of manufacturers expect revenues to increase by more than 10 percent in 2017 and 27 percent expect a double-digit increase in profitability, also record numbers.

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CONCERNS

The cost of health care coverage remains the top concern for manufacturing executives (59 percent), as it has for all nine editions of this survey. The intensity of this concern had diminished in the past few years, falling to 51 percent in 2016, but its resurgence may be attributed to the fact that the fielding of this year’s survey coincided with the highly visible attempt by the White House and Republican leadership in Congress to repeal and replace the Affordable Care Act. “Government policies and regulations” was a distant second concern (32 percent), along with “attracting and retaining qualified workers (31 percent). It may be interesting to note that concerns about “government regulations” have fallen by nearly 30 points since 2011, while “qualified workers” has more than doubled during that same period. At 17 percent, “economic and global uncertainty” is another concern that saw a dramatic decline. It was 39 percent just last year.

WORKFORCE

“Attracting and retaining a qualified workforce” experienced the largest bump up (from 26 to 34 percent) when manufacturers were asked to name the one or two biggest challenges that might negatively impact future growth. It is especially worrisome for companies over $5 million in revenue (56 percent), compared to companies with revenues in the $1 - $5 million range (38 percent) or those with less than $1 million (26 percent). Manufacturers placed the difficulty of attracting qualified

And for the first time, a majority of manufacturing executives say they are “very confident” about their firms’ financial perspectives.

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More than ever, these executives expect increases in gross revenue and profitability this year, though few expect increases in their capital expenditure.

workers at 68 percent, similar to the past several years. The difficulty is even more pronounced in Greater Minnesota (75 percent) than in metro (62 percent). Perhaps because of this, the concern over qualified workers has grown by 40 percent in Greater Minnesota, while only 23 percent in the metro.

Among companies that have had difficulty attracting qualified candidates, most said applicants lacked needed skills or education (51

The number of executives expecting double-digit growth in revenue and profitability are at an all-time high.

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The cost of health care coverage is the top factor executives say their companies are concerned about.

percent), or just a lack of applicants or interest (42 percent). Breaking the data out by region provides a more nuanced sense of the data. Twin Cities-based manufacturers say their top concern is that “applicants do not have the needed skills or education” (55 percent), followed by a “lack of interest” on behalf of applicants (39 percent) or that their company is “too small to compete” (32 percent). Manufacturers in Greater Minnesota cite approximately the same intensity for all three factors, followed closely by “company location” (34 percent).

Machine operators are now the most in demand by Minnesota’s manufacturers (38 percent), a nine-point increase from 2015. It is followed by assemblers (20 percent) and welders (nine percent). The need for machine operators is most acute in Greater Minnesota (41 percent).

The number of retiring Baby Boomers continues to have an impact on about 30 percent of manufacturing companies in the state, virtually the same percentage as in the last three surveys. What’s interesting is that the impact is greatest among companies with over $5 million in revenue (49 percent) and those that employ more than 50 employees (41 percent).

Executives feel better equipped to handle departures of key personnel (74 percent to 77 percent). In contrast, 36 percent feel “not well prepared” to handle the departure of CEOs or owners. This issue is most troublesome with companies that have less than $1 million revenue (51 percent “not well prepared). In contrast, 71 percent of companies with more than $5 million in revenue feel “well qualified” to hand the departure of a CEO or owner.

One reason for that confidence is that 70 percent of those companies 13

Two-thirds of executives say it is difficult to attract qualified candidates to their firm’s vacancies.

have a formal succession plan in place for the retirement of senior leadership, compared to 50 percent statewide.

WAGES & DEVELOPMENT

Fully 95 percent of Minnesota’s manufacturers expect their employee wages to increase (46 percent) or stay about the same (49 percent).

For those who expect increases, 25 percent expect the increases to be 5 percent or less, 12 percent expect increases between five and ten percent, and seven percent anticipate increases of ten percent or more.

The most frequent wage increases will come from companies over $5 million in revenue (70 percent) and companies with more than 50 employees (69 percent). Less likely to increase are companies with less than $1 million in revenue (31 percent) or companies that have been in business less than 15 years (38 percent).

Only about one-third of Minnesota companies are “investing in employee development or leadership training to attract and retain qualified employees and managers,” while about one fifth of those companies (21 percent) project investing more in those programs. Only 17 percent of companies have a “structured leadership development plan” for employees, down three percent from both 2015 and 2016.

COLLABORATION

In a new question, manufacturers say that local educational institutions would be most helpful by developing internship programs (32 percent), followed by “develop better trained two-year graduates (25 percent) and “provide in-house/company-specific training (17 percent).

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TRADE & SUPPLY CHAIN RELATIONSHIPS

Thirty-four percent of companies say they have gained new business from customers wanting to have suppliers closer to their location, up from 26 percent in 2015 and 32 percent in 2016. The largest increase (49 percent) was realized by companies with more than 50 employees.

The main driver for those gains was “shorter lead times” (33 percent), “total costs versus only product costs” (26 percent) and “closer relationships” (20 percent).

GROWTH

Companies are strategically planning for greater growth by a large margin. Fifty-four percent of manufacturers now have created strategic plans, fully 16 percent higher than 2016. The biggest increase (19 percent) comes from Greater Minnesota and smaller companies (17 percent, companies with revenue of less than $1 million and 16 percent companies with revenue between $1-5 million).

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INTRODUCTION

2017 State of Manufacturing® Survey Field Dates: March 1—March 21, 2017 Sample Size: N=400 Manufacturing Executives * Denotes result less than 0.5%.

NOTE: Due to rounding, some figures may be higher or lower by less than one-half of one percent.

Question 1 From a financial perspective, how do you feel right now about the future for your company?

12/08 1/10 1/11 1/12 3/13 3/14 3/15 2/16 3/17 79% 78% 83% 82% 82% 84% 89% 90% 94% TOTAL CONFIDENT 21% 21% 16% 17% 17% 15% 11% 9% 6% TOTAL NOT CONFIDENT 28% 51% 15% 5% * --

30% 35% 28% 28% 36% 40% 43% 57% VERY CONFIDENT 49% 49% 54% 54% 49% 48% 47% 37% SOMEWHAT CONFIDENT 16% 13% 13% 12% 13% 7% 5% 5% NOT VERY CONFIDENT 5% 4% 4% 5% 2% 3% 4% 1% NOT AT ALL CONFIDENT 1% 1% * * 1% 1% 1% -- DON’T KNOW/UNSURE -- -- * * -- -- -- -- REFUSED

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Question 2 Thinking about the upcoming year, in 2017, do you anticipate economic expansion, a flat economy, or a recession?

12/08 1/10 1/11 1/12 3/13 3/14 3/15 2/16 3/17 8% 26% 40% 32% 34% 37% 42% 32% 58% ECONOMIC EXPANSION 34% 53% 49% 55% 46% 54% 42% 48% 32% A FLAT ECONOMY 56% 19% 9% 10% 15% 7% 13% 15% 4% A RECESSION 2% 2% 3% 2% 5% 3% 3% 5% 5% DON’T KNOW/UNSURE -- -- -- 1% 1% -- -- * -- REFUSED Question 3 (ASKED IF Q2 RESPONSE, N=378) How well do you feel your firm is prepared to handle [an economic expansion/a flat economy/a recession]? Would you say you are very well, somewhat well, or not well prepared to handle it?

2/16 3/17 94% 93% TOTAL PREPARED 44% 54% VERY WELL PREPARED 50% 40% SOMEWHAT WELL PREPARED 6% 6% NOT WELL PREPARED 1% 1% DON’T KNOW/UNSURE -- -- REFUSED Question 4 Thinking about the business climate in Minnesota compared to say five years ago, would you say the business climate has gotten better, gotten worse or stayed about the same?

41% 18% 39% 3% --

GOTTEN BETTER GOTTEN WORSE STAYED ABOUT THE SAME DON’T KNOW REFUSED

Question 5 As you look to 2017, do you project your company’s gross revenues to increase or decrease compared to 2016, or will they probably stay the same?

(IF INCREASE/DECREASE:) Do you expect your gross revenues to (increase/ decrease) by more than 10% or less than 10%?

12/08 1/10 1/11 1/12 3/13 3/14 3/15 2/16 3/17 23% 44% 51% 47% 41% 45% 45% 44% 55% TOTAL INCREASE 32% 15% 6% 8% 9% 7% 7% 12% 7% TOTAL DECREASE 11% 29% 30% 25% 25% 23% 25% 25% 35% INCREASE BY MORE THAN 10%

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12% 15% 21% 22% 16% 21% 19% 19% 20% INCREASE BY LESS THAN 10% 10% 5% 2% 2% 4% 2% 2% 5% 2% DECREASE BY LESS THAN 10% 22% 10% 5% 6% 6% 5% 4% 7% 5% DECREASE BY MORE THAN 10% 44% 40% 41% 44% 48% 47% 47% 43% 36% STAY THE SAME 1% 1% 2% 1% 1% 2% 1% 1% 2% TOO SOON TO SAY/ DON’T KNOW * * 1% -- 1% 1% * -- -- REFUSED Question 6 And, as you look to 2017, do you project your company’s profitability to increase or decrease compared to 2016, or will it probably stay the same?

(IF INCREASE/DECREASE:) Do you expect your profitability to (increase/ decrease) by more than 10% or less than 10%?

12/08 1/10 1/11 1/12 3/13 3/14 3/15 2/16 3/17 17% 36% 39% 31% 32% 35% 30% 37% 44% TOTAL INCREASE 34% 17% 11% 13% 17% 17% 9% 12% 7% TOTAL DECREASE 9% 21% 21% 17% 16% 18% 14% 20% 27% INCREASE BY MORE THAN 10% 8% 15% 18% 14% 16% 17% 16% 16% 17% INCREASE BY LESS THAN 10% 13% 8% 6% 7% 9% 10% 4% 6% 2% DECREASE BY LESS THAN 10% 21% 10% 5% 6% 8% 7% 5% 6% 5% DECREASE BY MORE THAN 10% 48% 45% 48% 55% 49% 47% 60% 51% 46% STAY THE SAME 1% 1% 2% * 2% 1% * * 2% TOO SOON TO SAY/ DON’T KNOW -- * 1% 1% 1% * * -- 1% REFUSED

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Question 7 And, as you look to 2017, do you project your company’s capital expenditures to increase or decrease compared to 2016, or will they probably stay the same?

(IF INCREASE/DECREASE:) Do you expect your capital expenditures to (increase/decrease) by more than 10% or less than 10%?

12/08 1/10 1/11 1/12 3/13 3/14 3/15 2/16 3/17 19% 24% 32% 27% 28% 27% 27% 25% 23% TOTAL INCREASE 37% 24% 14% 24% 20% 19% 17% 19% 12% TOTAL DECREASE 9% 16% 20% 15% 17% 17% 14% 17% 15% INCREASE BY MORE THAN 10% 10% 8% 13% 12% 11% 10% 13% 8% 8% INCREASE BY LESS THAN 10% 12% 9% 6% 11% 6% 4% 6% 8% 4% DECREASE BY LESS THAN 10% 25% 15% 8% 13% 14% 15% 11% 12% 8% DECREASE BY MORE THAN 10% 43% 51% 53% 47% 50% 53% 55% 54% 63% STAY THE SAME 2% 1% 1% 1% 1% 1% * 2% 2% TOO SOON TO SAY/ DON’T KNOW * -- * * 1% 1% * * -- REFUSED Questions 8-16 Now, I would like to read you a list of factors that some companies are concerned about. For each one, please rate how concerned your company is about that particular factor using a scale from 1 to 10, where one means that your company is NOT AT ALL CONCERNED about it and where ten means your company is VERY CONCERNED about it. You can choose any number between one and ten depending on how strongly you feel about it.

10 8-10

5-7

(8) Competition from foreign sources 3/17 5% 12% 24% 2/16 6% 17% 20% 3/15 8% 15% 25% 3/14 6% 16% 23% 3/13 7% 17% 26% 1/12 7% 21% 23% 1/11 11% 20% 30% 1/10 12% 27% 24% 12/08 8% 18% 27%

1-4

Mean

64% 62% 60% 61% 56% 55% 49% 48% 54%

3.6 3.8 3.9 4.0 4.1 4.4 4.5 4.8 4.2

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(9) Managing supply chain relationships 3/17 3% 11% 32% 55% 4.0 2/16 2% 10% 29% 60% 3.8 3/15 4% 9% 35% 56% 4.0 3/14 3% 11% 39% 49% 4.4 3/13 3% 10% 38% 51% 4.1 1/12 4% 15% 39% 45% 4.6 (10) Government policies and regulations 3/17 18% 32% 39% 28% 2/16 24% 41% 33% 25% 3/15 28% 46% 30% 23% 3/14 30% 55% 29% 17% 3/13 32% 58% 24% 18% 1/12 33% 56% 29% 15% 1/11 31% 61% 26% 12% 1/10 38% 57% 25% 16%

10 8-10

5-7

(11) The costs of health care coverage 3/17 35% 59% 23% 2/16 30% 51% 26% 3/15 34% 56% 24% 3/14 36% 59% 20% 3/13 44% 67% 17% 1/12 36% 68% 17% 1/11 43% 71% 17% 1/10 42% 68% 17% 12/08 36% 64% 21%

5.9 6.3 6.7 7.1 7.2 7.3 7.6 7.3

1-4

Mean

17% 22% 20% 20% 14% 13% 8% 13% 13%

7.3 6.8 7.0 7.2 7.7 7.7 8.2 7.8 7.7

(12) Costs of employee salaries and benefits, not including health insurance 3/17 7% 20% 42% 37% 5.0 2/16 6% 19% 41% 39% 4.8 3/15 8% 18% 44% 36% 5.0 3/14 4% 18% 46% 37% 5.0 3/13 7% 19% 45% 34% 5.1 1/12 3% 13% 47% 37% 4.9 1/11 5% 15% 49% 33% 5.0 1/10 6% 16% 46% 34% 5.0 12/08 7% 18% 49% 32% 5.3

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(13) Attracting and retaining qualified workers 3/17 12% 31% 36% 31% 2/16 10% 32% 33% 34% 3/15 12% 33% 36% 30% 3/14 10% 34% 35% 30% 3/13 9% 30% 32% 35% 1/12 11% 31% 32% 37% 1/11 4% 14% 37% 45% 1/10 8% 19% 27% 51% 12/08 8% 22% 31% 45%

10 8-10

5-7

(14) Economic and global uncertainty 3/17 7% 17% 42% 2/16 11% 29% 38% 3/15 12% 29% 43% 3/14 11% 31% 46%

5.7 5.5 5.7 5.8 5.4 5.5 4.6 4.4 4.8

1-4

Mean

40% 32% 28% 24%

4.8 5.6 5.8 6.0

(15) The shipping and logistics of getting your products to market 3/17 5% 12% 26% 62% 3.8 2/16 3% 12% 19% 68% 3.4 3/15 5% 14% 27% 58% 4.0 (16) Current and future leaders 3/17 12% 26% 38%

35%

5.3

Summary of Concerns – Ranked By % 10

Concerns

%10

%8-10

Mean

The costs of health care coverage

35%

59%

7.3

Government policies and regulations

18%

32%

5.9

Attracting and retaining qualified workers

12%

31%

5.7

Current and future leaders

12%

26%

5.3

Costs of employee salaries and benefits, not including health insurance

7%

20%

5.0

Economic and global uncertainty

7%

17%

4.8

The shipping and logistics of getting your products to market

5%

12%

3.8

Competition from foreign sources

5%

12%

3.6

Managing supply chain relationships

3%

11%

4.0

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Question 17 What would you say are the one or two biggest challenges your firm is facing that might negatively impact future growth?

3/14 3/15 2/16 3/17 48% 43% 40% 38% Unfavorable business climate, such as taxes, regulations and policy uncertainties 31% 41% 34% 36% Rising health care and insurance costs 21% 29% 26% 34% Attracting and retaining a qualified workforce 31% 23% 32% 22% Weak economy and lower sales for your products 29% 20% 15% 18% Rising costs of energy and materials for your products 3% 4% 3% 3% OTHER * 1% 1% 1% DON’T KNOW/NOT SURE * * * -- REFUSED Question 18 Thinking ahead…what would you say are the two or three most important drivers of your firm’s future growth?

3/15 2/16 3/17 75% 82% 74% New customers 40% 51% 41% New products 25% 26% 24% Developing company managers and leaders 19% 22% 19% Enhancing supply chain relationships -- -- 10% Achieving or upgrading to new ISO 9001:2015 standards 6% 6% 6% OTHER 1% 5% 3% DON’T KNOW/NOT SURE *

*

--

REFUSED

Question 19 Have or will wages for your employees increase for 2017, or will they decrease or stay about the same?

46% INCREASE 1% DECREASE 49% STAY ABOUT THE SAME 3% DON’T KNOW 1% REFUSED

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Question 20 (ASKED IF WAGES WILL INCREASE, N=185) And, what percentage do you expect wages at your company to increase for 2017?

53% 26% 14% 7%

UNDER FIVE PERCENT FIVE PERCENT TO LESS THAN TEN PERCENT TEN PERCENT OR MORE DON’T KNOW/NOT SURE

Question 21 Are you currently investing in employee development or leadership training in order to attract and retain qualified employees and managers?

2/16 3/17 32% 34% YES 67% 65% NO 1% 1% NOT SURE -- * REFUSED Question 22 Generally speaking, would you say that as a percentage of payroll your company will invest MORE in employee skills, talent, and leadership development or LESS next year compared to 2016, or will it stay about the same?

12/08 1/10 1/11 1/12 3/13 3/14 3/15 2/16 3/17 16% 19% 18% 17% 18% 25% 22% 22% 21% WILL INVEST MORE 13% 10% 8% 8% 12% 7% 6% 5% 3% WILL INVEST LESS 69% 67% 71% 72% 68% 67% 71% 72% 75% STAY THE SAME 1% 1% 2% 1% 1% 1% * * 1% DON’T KNOW * 3% 3% 1% 1% * * * * REFUSED PREVIOUS QUESTION WORDING: Generally speaking, would you say that as a percentage of payroll your company will invest MORE in employee development or LESS next year compared to 2016, or will it stay about the same?

Question 23 Does your company have a formal structured leadership development program for employees at all levels at your company?

3/15 2/16 3/17 20% 20% 17% YES 80% 79% 82% NO * 1% 1% DON’T KNOW/UNSURE * -- -- REFUSED PREVIOUS QUESTION WORDING: Does your company have a formal structured leadership development program for supervisors and managers?

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Question 24 Is your company using automation to enhance your workforce or production?

51% YES 49% NO * DON’T KNOW/UNSURE -- REFUSED Question 25 And, in the next five years, how much do you expect automation to increase in your company?

36% TOTAL A LOT/SOME 63% TOTAL LITTLE/NOT AT ALL 14% INCREASE A LOT 22% SOME 32% ONLY A LITTLE 31% NOT INCREASE AT ALL 1% DON’T KNOW/UNSURE * REFUSED Question 26 Thinking about your company’s potential advisors, who do you turn to MOST for advice when it comes to making business decisions for your company?

1ST COMB. 32% 35% Business partner 16% 28% Accountant 21% 26% Family 8% 18% Financial advisor or banker 4% 9% Lawyer 2% 4% IT consultant 7% 9% Other 9% 9% None of the above 2% 2% Don’t Know/Refused Question 27 I am going to read you a few different roles within manufacturing and I would like to know how well you feel your firm is prepared to handle the departure of someone in that role. Would you say you are very well, somewhat well, or not well prepared to handle that person’s departure?

TOTAL VERY SMWT NOT DON’T WELL WELL WELL WELL KNOW REFUSED

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(A) The CEO or owner 3/17 57% 29% 28% 36% 5% 1% 2/16 53% 28% 25% 42% 4% 1% (B) Members of your management team 3/17 74% 32% 42% 19% 7% 1% (C) A manager or supervisor 3/17 74% 30% 44% 18% 7% 1% 2/16 73% 32% 41% 20% 6% 1% (D) A skilled worker 3/17 77% 28% 49% 17% 5% 1% 2/16 75% 32% 43% 20% 4% 1% Question 28 How much of an impact do you anticipant retirements having on your company in the next couple of years?

3/15 2/16 3/17 29% 28% 30% TOTAL SIGNIFICANT/MODEST IMPACT 70% 72% 70% TOTAL MINOR/NO IMPACT 14% 14% 16% 14% 30% 20% 40% 52% 1% -- * --

12% 17% 24% 46% 1% --

Significant impact Modest impact Only a minor impact No impact at all DON’T KNOW REFUSED

Question 29 How difficult is it to attract qualified candidates for your firm’s vacancies?

12/08 1/10 1/11 1/12 3/13 3/14 3/15 2/16 3/17 55% 40% 45% 58% 60% 67% 71% 66% 68% TOTAL DIFFICULT 43% 55% 50% 39% 36% 32% 27% 29% 29% TOTAL NOT DIFFICULT 18% 36% 22% 21% 1% 1%

14% 17% 22% 22% 29% 27% 26% 26% VERY DIFFICULT 26% 28% 37% 38% 38% 44% 41% 42% SOMEWHAT DIFFICULT 24% 25% 26% 19% 19% 13% 17% 15% NOT TOO DIFFICULT 31% 26% 13% 17% 12% 14% 12% 14% NOT DIFFICULT AT ALL 1% 2% 1% 3% 1% 2% 4% 3% DON’T KNOW 4% 3% 2% 1% * 1% 1% -- REFUSED

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Question 30 For what reasons have job candidates not taken a job or followed through with an interview?

3/15 2/16 52% 44% 27% 25% 18% 14% 16% 10% desire 23% 16% 17% 11% 6% 16% 1% 2%

3/17 51% The skills required for the job didn’t match the candidate’s 26% Compensation is not high enough 19% Long commuting time or distance 16% Work schedules not flexible enough or don’t fit the applicant’s 14% The perceived lack of upward job mobility 9% OTHER 12% DON’T KNOW 2% REFUSED

Some answer choices were worded differently in previous surveys.

Question 31 (ASKED IF DIFFICULT TO ATTRACT QUALIFIED CANDIDATES, N=271) What would you say is the biggest challenge your firm faces in attracting qualified candidates?

Among Those Who Have Difficulty: 3/15 62% 48% 34% 19% 18% -- 9% 8% 6% 7% 1% *

2/16 52% 42% 35% 22% 17% -- -- -- -- 4% 2% 1%

3/17 51% Applicants do not have the needed skills or education 42% Lack of applicants or interest 37% Company too small to competitively recruit 22% Inability to offer competitive wages 20% Company location or geography 8% Lack of child care options -- Climate -- Inconvenient work hours -- Dirty facilities 4% SOMETHING ELSE 1% DON’T KNOW -- REFUSED

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Among Total Sample: 3/15 44% 34% 24% 14% 13% -- 6% 6% 4% 5% * *

2/16 35% 28% 23% 15% 11% -- -- -- -- 3% 1% *

3/17 34% Applicants do not have the needed skills or education 29% Lack of applicants or interest 25% Company too small to competitively recruit 15% Inability to offer competitive wages 14% Company location or geography 5% Lack of child care options -- Climate -- Inconvenient work hours -- Dirty facilities 3% SOMETHING ELSE 1% DON’T KNOW -- REFUSED

Question 32 When looking to hire new employees, where is your need greatest?

55% 40% 45% 58% 60% 67% 71% 66% 68% TOTAL DIFFICULT 3/13 3/14 3/15 2/16 3/17 20% 22% 25% 30% 28% Entry-level employees 19% 21% 23% 21% 25% Employees with technical training 49% 47% 39% 38% 36% Employees with technical training and experience 6% 6% 6% 4% 4% Employees with four-year college degrees -- 1% -- -- -- ALL OF THE ABOVE 4% 1% 4% 4% 3% OTHER 1% -- 1% * 2% DEPENDS 1% 1% 1% 3% 2% DON’T KNOW 1% 1% * * -- REFUSED Question 33 What types of manufacturing jobs or positions are in most demand at your company?

3/15 2/16 3/17 29% 32% 38% Machine operator 23% 25% 20% Assembler 9% 9% 9% Welder -- -- 7% Front office or administrative help 10% 7% 6% Engineer 4% 4% 2% Supervisor -- -- 1% Senior Leadership Position 22% 17% 14% OTHER 2% 6% 3% DON’T KNOW 1% 1% * REFUSED

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Question 34 Will the shortage of qualified workers affect your company’s bottom line and ability to meet your growth plan in the coming year?

(IF YES) Will it affect your company A LOT or just A LITTLE? 3/14 3/15 2/16 3/17 33% 36% 28% 37% TOTAL YES 10% 13% 11% 14% YES, A LOT 23% 23% 18% 23% YES, A LITTLE 61% 62% 66% 61% NO 4% * 4% * MAYBE/TOO SOON TO TELL 1% 1% 1% 2% DON’T KNOW * * * -- REFUSED Question 35 What could local educational institutions do to help manufacturing companies like yours?

32% 25% 17% 10% 8% 9% *

Develop internship programs for local manufacturers Develop more and better trained two-year graduates Provide in-house/company-specific training Provide equipment-specific training Other DON’T KNOW REFUSED

Question 36 On a different topic, does your company have a succession plan for when the President/Owner/CEO or top management positions retire or move on?

50% YES 48% NO 2% DON’T KNOW/NOT SURE * REFUSED Question 37 Changing topics again, in general, do you think free trade agreements help manufacturers like your company, hurt manufacturers like your company, or not make much of a difference either way?

17% 19% 58% 6% *

Help manufacturers Hurt manufacturers Make no difference NOT SURE REFUSED

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Question 38 Have you gained new OEM business from customers wanting to have suppliers closer to their location?

3/15 2/16 3/17 26% 32% 34% YES 71% 64% 62% NO 3% 4% 4% DON’T KNOW/NOT SURE * * * REFUSED Question 39 (ASKED IF GAINED NEW OEM, N=137) And, what would you say is the main reason why your supply chain relationships changed?

Among Those Who Gained: 3/15 30% 23% 25% 12% 10% --

2/16 31% 30% 21% 11% 7% --

3/17 33% 26% 20% 12% 8% --

Shorter lead times Total costs versus only product costs Closer relationships/regional suppliers Better inventory management by the OEM DON’T KNOW/NOT SURE REFUSED

Among Total Sample: 3/15 8% 6% 6% 3% 3% --

2/16 10% 10% 7% 4% 2% --

3/17 12% 9% 7% 4% 3% --

Shorter lead times Total costs versus only product costs Closer relationships/regional suppliers Better inventory management by the OEM DON’T KNOW/NOT SURE REFUSED

Question 40 On a different topic, does your company have a formal strategic plan for profitable growth?

3/15 2/16 3/17 39% 38% 54% YES 59% 60% 45% NO 1% 1% 1% DON’T KNOW/NOT SURE * * * REFUSED PREVIOUS QUESTION WORDING: Does your firm have a formal strategic growth plan?

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Question 41 Which ONE of the following best describes most of your firm’s customers and potential customers’ expectations about ISO certification?

3/15 2/16 7% 7% 10% 10% require it 27% 29% 53% 51% 2% 2% * *

3/17 7% Most require your firm to have ISO certification 13% Most request that your firm have ISO certification, but don’t 30% 48% 1% --

Most don’t care about ISO certification ISO certification is not applicable in our case DON’T KNOW/NOT SURE REFUSED

Question 42 How well do you feel your company is prepared to meet the demands of the new ISO 9001:2015 Standard?

44% TOTAL WELL PREPARED 21% 23% 35% 19% 2%

VERY WELL PREPARED SOMEWHAT WELL PREPARED NOT WELL PREPARED DON’T KNOW/UNSURE REFUSED

Now, I have just a few more questions for statistical purposes only...

Question 43 How many people does your company employ in all its facilities in Minnesota?

12/08 1/10 1/11 1/12 3/13 3/14 3/15 2/16 3/17 86% 89% 83% 86% 85% 80% 79% 80% 80% UNDER 50 7% 7% 9% 9% 7% 11% 10% 9% 15% 51-150 6% 4% 8% 4% 6% 8% 6% 3% 4% OVER 150 86% -- -- 7% -- 2% 4% 1% *

89% 83% 60% 61% 47% 55% 56% 58% UNDER 10 -- -- 15% 13% 21% 14% 15% 14% 11-25 -- -- 11% 11% 12% 9% 9% 8% 26-50 7% 9% 5% 5% 8% 5% 7% 10% 51-100 -- -- 4% 2% 3% 5% 2% 5% 101-150 2% 2% 1% 3% 3% 2% 2% 1% 151 TO 250 2% 6% 3% 4% 5% 4% 2% 3% MORE THAN 250 -- -- -- * 1% 1% 6% * DON’T KNOW/NOT SURE -- * 1% 1% * 5% 2% 1% REFUSED

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Question 44 What are your annual business revenues?

12/08 1/10 1/11 1/12 3/13 3/14 3/15 2/16 3/17 47% 56% 46% 50% 50% 38% 42% 47% 44% UNDER $1 MILLION 49% 39% 48% 42% 40% 55% 44% 43% 43% OVER $1 MILLION 31% 6% 5% 7% 5%

23% 25% 22% 22% 26% 23% 24% 23% MORE THAN $1M TO $5M 6% 7% 7% 5% 12% 6% 9% 6% MORE THAN $5M TO $10M 5% 6% 5% 3% 7% 5% 5% 6% MORE THAN $10M TO $20M 6% 11% 8% 10% 10% 10% 5% 7% MORE THAN $20M 5% 7% 8% 9% 6% 14% 9% 13% DON’T KNOW/REFUSED

Question 45 Which one of the following best describes your company’s primary business?

12/08 1/10 1/11 1/12 3/13 3/14 3/15 2/16 3/17 13% 16% 15% 13% 14% 17% 20% 17% 20% METAL FABRICATION 16% 14% 16% 30% 13% 13% 14% 19% 14% PROCESS MANUFACTURING 37% 29% 22% 17% 26% 25% 18% 26% 12% PRECISION MANUFACTURING 12% 15% 13% 10% 12% 30% 14% 18% 11% AN ORIGINAL EQUIPMENT MANUFACTURER, OEM 4% 5% 7% 6% 4% 5% 5% 4% 5% PLASTICS 4% 3% 6% 5% 1% 5% 3% 4% 3% ELECTRONICS COMPONENTS 3% 2% 3% 2% -- 2% 1% 2% 2% INFORMATION TECHNOLOGY, IT -- -- -- -- -- -- 3% -- -- OTHER MANUFACTURING -- 1% 3% 3% 7% 4% 17% 8% 31% SOMETHING ELSE 1% -- * -- 1% -- * 1% -- DON’T KNOW * 1% * 1% 1% * 4% 1% * REFUSED Question 46 How many years has your firm been in operation?

12/08 1/10 1/11 1/12 3/13 3/14 3/15 2/16 3/17 -- * -- * 1% * * 1% * LESS THAN 1 YEAR 3% 5% 2% 1% 1% 2% 1% 5% 3% 1-3 YEARS 3% 8% 6% 5% 4% 1% 4% 6% 7% 4-6 YEARS 10% 13% 11% 12% 10% 6% 5% 7% 9% 7-10 YEARS 13% 13% 9% 11% 14% 10% 12% 11% 8% 11-15 YEARS 71% 60% 71% 69% 70% 81% 74% 69% 73% 16 YEARS OR MORE -- -- * * -- * * -- -- DON’T KNOW * -- -- * 1% -- 4% 1% -- REFUSED

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Question 47 And, in what year were you born?

12/08 1/10 1/11 1/12 3/13 3/14 3/15 2/16 3/17 5% 3% 3% 4% 3% 1% 3% 5% 8% 18 - 34 13% 15% 11% 9% 10% 7% 7% 11% 10% 35 - 44 37% 37% 35% 30% 30% 29% 26% 23% 21% 45 - 54 28% 29% 32% 35% 35% 40% 37% 36% 36% 55 - 64 14% 15% 17% 22% 20% 22% 19% 18% 17% 65 AND ABOVE 2% 2% 3% 1% 2% 1% 8% 6% 8% REFUSED Question 48 GENDER 12/08 1/10 1/11 1/12 3/13 3/14 3/15 2/16 3/17 76% 83% 86% 84% 84% 86% 81% 80% 76% MALE 24% 17% 14% 16% 16% 14% 19% 20% 24% FEMALE

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FOCUS GROUPS

Warroad March 14, 2017

Marvin Windows

Is there a difference between the way you view your business’s prospects today than, say, two years ago?

• Business ebbs and flows. We continue to be in a trajectory of growth, but right now, in comparison to two years ago, our growth rate has probably just about doubled. We are currently pushing our carriers—Fed Ex, UPS, USPS, DHL, everybody—to the limits of what they’re able to provide for us as far as lift out of the local area. We’re fortunate in the fact that we have a couple Falcon 50 jets that, basically, leave our dock at 10:00 p.m.

• I’d say one of our challenges in the not-too-distant future is what kind of equipment we can get into our local area and get service to Memphis and to Louisville in a timely fashion. Our international market is just taking off gangbusters. Our struggle is keeping up with the growth right now. I had a brief conversation with somebody here earlier about housing, and we’ve recently gotten some additional apartments in, but I think affordable housing to a family who wants to start a future for themselves is one of the challenges that we see in our local area.

Sponsors: Marvin Windows and Doors, Northwest Minnesota Foundation, 360 33

Housing is an issue that has come up a couple times here before. Is it still a challenge?

• We have been growing like crazy—leaps and bounds as a company— and we have been fighting with the whole housing situation and not being able to recruit people in because they had no place stay. We were doing statewide, even national, recruiting programs to try to bring people into the community. There was just no place for them to live.

• We even built some temporary housing ourselves, the company did, and about that same time, basically, two events happened that affected our business. One was that the market started to peak and come down when price of gas started dropping, and the price of oil went down, so the demand for our product suddenly started to come down, and the retail market growth tapered off and even dropped back a little bit. At the same time, as a company, we had made some decisions around increasing capacity within our manufacturing network, because Roseau just could not keep up with all the demands, so we built another factory. Both of those events brought us to a point where we were at a much lower employmentdemand base then we were two years ago. Now, our problem of hiring and staffing and housing has temporarily abated.

• Go back to ‘08 and ‘09, prior to that, there was a good healthy rotation of people building houses, moving up in what kind of home they lived in, which vacated theirs for the next tier of income folks, which vacated the next tier for another tier of income folks, etc. There was a healthy quantity within our communities for a period of that type of thing going on. The same for the rental capacity.

• Then we got to where we had a shortage of employees, because our demand was high, and we were trying to bring those folks in. Some would live in the campers or tents at the park until it got cold, and by then they still hadn’t found housing, so they’d leave. We’d lose the employees that way.

• Here we were after 2008, ‘09 and ‘10 with nice low interest rates, but people were without credit. The whole idea of people building houses, even though they could get a four-percent mortgage: They weren’t doing it.

People buying houses weren’t doing it to the same degree. Now, we’re kind of coming out of that, and I think we’re back at a shortage.

• When I think of those move-ups or middle-management professionals 34

who want to come back and make this their home. (That’s not our entire workforce, but it’s a big portion of it. It’s a very important part of it.) They get excited and say, “I’m going to build my four-bedroom home or my three-bedroom home,” and then they price it. First of all, they maybe find a contractor, and then find out how much it cost and say, “Well, I guess I won’t be building it.” Then, you look to the existing inventory, and you get what you get.

• There’s a real problem. They go and do an appraisal process. This has happened to houses that are half built. They do appraisal processes with similar houses in the area and what they’ve sold for, and the mortgage falls through because, even though the person is approved for the credit, even though they can pay for it on their wages, they won’t let it go through, because the houses won’t appraise at that value.

• In other words, if it cost you $250,000 to build it, they say the second it is built, it is worth only $200,000.

• The other thing that goes on is, people come out of college and get a good job for Marvin or Central or whoever, and, the way the low-income housing works is, they can be just as broke as can be with college loans, and yet they don’t qualify for low-income housing, because they make too much, even they haven’t earned a penny. That’s outdated and needs to change.

How do you feel about your overall prospects for your company?

Define that in whatever way you want. As you’re sitting here, how do you feel about the prospects for your company in the coming year?

• We are facing different challenges than two or three years ago. I would say our outlook is optimistic because we are reinventing ourselves.

• We are continuously looking, even though we’ve lost some product, on how we take advantage of that. How do we in-source and bring other products, other activities in. I feel optimistic in our ability to reinvent ourselves, but it would be nice to have some of that growth back. Should that growth come back at the same level it was in 2008 through 2013, we’ll be right back with those same sets of problems. Because the fundamental, underlying issues around workforce housing and the ability to recruit people to fill key roles is still the same problem it was three or four years ago.

• There are some macroeconomic conditions that every industry faces.

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It will have ups and downs, and we can’t do anything about those. We can react to them. We can’t control them. Then, I think about what the organization can do in labor and housing.

• I don’t want to open a can of worms, but I would put regulations and taxes out there to say it is not the easiest environment to work in. I am not a political person by nature at all, but when you just look at it, I’m worried from a regulatory and tax standpoint. I would pool those right in with labor and housing.

It is interesting to define how you feel about your prospects. At least one of you is looking at doubling your sales but challenged by employee issues, infrastructure, etc.

• It’s a great problem to have, but we are just about to run out of bandwidth to keep up with the growth rate. With the influx of people, we are currently bringing in one coach bus from Grand Forks. We bring a bus in from Crookston. We bring a bus in from Bagley. Local recruiting has been strong as of late. Yet if some other markets take off, it gets to be a huge challenge, because our customer base will outpace our ability to fill orders. When we fail, the customers go away. If you don’t keep up with their expectations, there’s an issue, and you start losing business.

How you feel about the economy in general? Are your plans based on a robust national economy?

• I think the economy is very precarious. The stock market defies all logic, in my mind. I think, for the most part, consumers are being very, very conservative in their spending. It remains to be seen what’s coming down. It’s not just the U.S. economy, it’s really a world economy. There are a lot of scary possibilities out there, and they are holding us back.

• The economy has basically bottomed, and I think that is the reason why the stock market is up.

• It’s going to be really interesting over the next year, because in the sense of bringing manufacturing back to the United States, whether that transpires or not, will play a big role in the way things shape up in a couple of years. It has potential to do great things for manufacturing. It is tricky, tricky waters.

• I’m reasonably bullish on our economy to have some decent times coming. The problem goes back to the stock market. I think there is 36

going to be a correction. It’s not about if, it is about when. You know it has reached all-time highs. It is on an unprecedented run. Then, what will happen to some of our customers in that situation for companies like Polaris and Marvin, etc.? Usually the correction clams up discretional spending.

We’re not political, but uncertainty has been a big part of what people have talked about the last two of the last three years in terms of the economy. Are you uncertain about economic issues coming from Washington?

• Some of the things that the current administration is proposing are pretty radical. We’ve got a guy in the office now who’s a business guy, so he is going to be a friend to business, and so there is some potential opportunity there, but his bedside manner is less than perfect, and is he going to tick off all the people we need to do business with?

• I think that since the election there has been a little bit of settling in consumers’ minds. We’ve seen this in retail. People have started to buy again. That is what you see whenever you have a presidential election where the incumbent can’t win. There has to be a change in the administration, either the same party or a different party, and people are uncertain. We’ve seen that settle down and seen some of our customers have come back, and retail has started to pick up again.

Over the past few years, participants in these focus groups have been nervous about capital expenditures. How about today?

• We are at a point where we have to become more efficient. We expect different processes and better equipment to help us into the next 20 years. It is the only way we will be able to survive.

• We have a workforce, a large body of people who are ready to retire. A mass exodus is about to happen, and we’re going to have to become more efficient. We are going to have to trade off some of the years of experience that was built up to more process-driven solutions. It’s going to force our hand there.

• I think that although we are not as mature a company as Marvin, we are the same way. We are going to do more with less. We are basically trying to replace people with automation.

One of the things that we are asking about for the first time in the poll 37

is the level at which you are looking at automation to solve problems— productivity issues, people issues. Are you taking advantage of more automation?

• We have been investing in processes with injection molding presses and robotic welding. We are actually delivering parts to the assembly line with robots. That’s one way to automate to keep our costs down and keep our labor demand more steady. We are replacing older equipment. Our capital program is stable. We do about the same level of capital spending from year to year. Occasionally we have a big project that comes in that will blow it out of the water for a couple of years, but we’re about that same, in terms of long-term investment. Some of it is about investing a certain amount of capital on the facility, a certain amount on aging equipment, and then a certain amount on new technology. We have a good balance.

Some people contend that automation will reduce the employment opportunities. Is that true?

• To me, that means lower employment levels that can help solve the problems going back to housing and availability of people. By bringing automation in as your business grows and you get those boom times, your peaks aren’t as high, from a demand standpoint. If your business goes up ten percent, you don’t have to go up ten percent in labor, because you’ve got five percent of that solved through automation. That said, we haven’t been using automation as a way to reduce our employment levels so much as to help our cost situation and prepare us for that boon that’ll come back around again.

• Automation is one of the tools to get better repeatability, and maybe solve some labor issues. We’ve definitely made some mistakes in the past by going too far, and I am sure every company has. Some of that is trial and error, and that’s part of the process of experiment.

• It is not that we are not looking for it, but I think we are looking smartly at when we do it and what problems it will solve for us. Sometimes it’s labor or costs or efficiency or better productivity or quality. You can imagine putting silicon on a piece of glass and me trying to do that versus a machine. I don’t care about the labor so much as the repeatability to produce a higher quality. I can see some companies use automation as a driving force to improve efficiency.

• Then, there is just the plain economics of it. For your dollar, which returns more? The machine or the person needs to earn their way. If 38

employees get more costly, then automation is more competitive, and the other way around. Also, one thing I haven’t heard mentioned: Automation can move where the employee is. Whereas the employee can be out of state or whatever and engineering or whatever. I think that is the other side of the coin.

We have a list of things we call “heartburn issues”—things that confront you every year. The cost of health care has been number one on the level of concern every year, although the intensity has gone down appreciably over the last four years. What’s your sense of it today?

• We have become sensitized to it.

• We’re just used to it going up every friggin’ year.

• Bitching about it didn’t change any it anyhow, so we just had to just accept it.

• Why keep beating your head against the wall for something you can’t control or influence?

• It’s gotten so expensive, you are still paying out of pocket for everything you do. Really, all it is doing is protecting you from the catastrophic, life-threatening illness. We used to have a zero-deductible plan eight years ago; now, it’s $4,000 deductible, and the premiums are double what they were.

• We are self-insured, and we’ve got nearly 6,000 employees. We’ve invested incredibly heavily in a healthy workforce. For us, it’s been as much about the business return, the financial return: I get sick of people questioning whether there is a financial return; if you invest in health care outcomes, it’s gonna help the business financially.

• There is a humanistic aspect of it. It’s rough, because we’ve always been a very human-centered company. If you care about your employees, you don’t always get win/win. This is a classic case of you get to take care of your people who work for you and their families, and if you do it right, you can lower your costs and have better outcomes both financially and health-wise.

• Whereas automation isn’t a pillar, intervention and health is. The bigger you are, the easier it is to do it, because the reparative is so big, 39

and you feel like you can control it if you are self-insured, and you have fewer than 100 employees in a pool. I don’t know the right term, but you wonder if anything you do is going to make a difference. For us, population health outcomes can be effective, and we seem to have a nice history of controlling our costs. We call it bending the cost curve.

• It is a good thing that we are helping our workforce to live healthier, but it’s taken away from our resources for what we are supposed to be doing, which is manufacturing product.

Health care is getting a lot of attention in Washington, D.C, right now.

Does that change your attitude about health care costs?

• In the state of Minnesota, we have the health insurance program going into the Affordable Care, but there is no doubt it was going to be a loser, because we didn’t have uninsured people to speak of. We have programs for uninsured people, low-income people. We were there. There is no doubt where this money is going, and that money needs to stay. I don’t know how many people there would be employed for that money, but we were in fair shape before, and now we are picking up the tab again.

Another challenge: Your ability to attract and retain employees. Is this more or less of a challenge these days?

• It’s a top-three issue for us.

• It’s probably different for each. Right now for us, I worry a little less about factory wageworkers and a little more about professionals. I think about technical engineers and IT and about any professional-level. It is hard.

• We hear that there is a big skills gap, and I believe that. We have some sectors of manufacturing that seem to be hotter than others, welding being one of those. So, I guess what our partner would call and say and some of our advisory counsels is that they are having a difficult time recruiting and retaining workers. The ones they get are difficult to up-skill. How do you provide the education and things like that to actually keep the business moving forward, knowing that you still have product to go out the door?

There is a difference between a skilled-working and an entry-level worker. Are you having trouble finding the latter?

• That was a big issue two and three years ago. Finding someone who 40

could do more than fog mirrors, and who would show up for work. I mean, it was bad. I think right now, everybody’s demand for employees is down a little bit, so we’ve got a little bit of buffer built up. You know, we’ve got a couple handfuls of employees who are probably looking for work because they screwed up at their last company and did something that got them fired. All in all, they are probably a pretty good worker if they just bear down and do it.

• Polaris was pulling in 50 to 100 people from all over the world, from all over the United States, to come and work temporarily to run the plant in Roseau. Some of them were very good workers. Right now, we have a little bit of buffer, but if each of our businesses went up even five percent, we would be back wondering where the people are. To go out and hire five or ten good people right now: No problem. To go out and hire five percent of your workforce, if you are a Polaris or a Marvin, for an assembly-type worker: Good luck. I bet you would run into big trouble fast. Housing is part of that.

• The other thing as far as retaining and attracting a skilled worker—well, hourly, too—a lot of that goes back to the housing thing. It’s hard to attract them to an area when there isn’t a good match for housing. You know, for a while we had a lot of people who were interested in coming to the area after they got in big trouble in ‘08 and ‘09, after they lost their houses and lost their credit rating. They had no credit, so they couldn’t even rent an apartment, because their credit score was so bad, let alone buy a house.

That’s the vicious cycle that we’re in—some part of that cycle. It’s not where it was two years ago, but if we had an uptick where it took five percent more hourly employees in each of our factories simultaneously, we would have a huge problem.

Are you investing in developing current and future leadership-supervisors?

• Absolutely. I mean, it’s just part of the whole equation, just like everything else. Just getting in manufacturing and having enough workforce that has the skillsets, desire to be a strong leader of their trade.

After the baby boomers, there is a huge void, and we all know it. For a couple of decades now, it has been de-emphasized to the point where there is just not a strong base.

• I mean, we are definitely trying to make sure we are an open place of opportunity for people that have the desire and skillsets, to give them a pathway. There is a lot of focus on that. At some point, we are going to 41

have to bring people in, as well.

• This area is very well connected with the University of Minnesota Crookston and Thief River Falls Community College. To be able to grow our internal employees and help educate them, the companies will pay for education for their people. I think Marvin does, Polaris does. If they want a higher education, the companies make it available. Both colleges will come teach it locally. We’ve done things to be able to grow those who want to grow.

• I’ll speak to when I was at Polaris: You want to have a healthy balance of bringing in a little bit of fresh blood. It wasn’t all inbred with your own company’s thinking. Let’s say you have four supervisor openings: You’d maybe like to fill two of those externally from people who weren’t current employees of your company and two of them internally that you grew up through the organization, to kind of keep a balance of creating opportunities for your existing employees and to show them there is a path to grow and to have that tribal knowledge there and that type of thing, and the culture come along with that person, but then also to bring in the new, fresh ideas of people who have been somewhere else and seen other things.

• You try to find the right balance of that. Both of those are more challenging right now, at times. A big part of it is the housing. In most categories, we would have plenty of applicants for that professional—a couple, not the case—but a lot of them, we would a lot of applicants, and they would come up and look, and with the housing and the things that are available—things for their significant other, whether a husband or a wife, whether they are a career person or not. Those are challenges here. Some people do not like the idea of relocating their family, and it’s the only gig in town. You come here to work for Polaris or Marvin or any one of us as a professional, you relocate your family: You’re all in. If you don’t like it three months from now, it isn’t drive five blocks down the street to apply at another company and not have to move your family again. You’re moving again if it doesn’t work out or you decide you don’’t like it or whatever, unlike a metro area, where you can move your family there, and if it doesn’t work out, you’ve still got 100 other choices.

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FOCUS GROUPS

Detroit Lakes March 14, 2017

M State

We sometimes read big national stories about how manufacturers are trying to use automation to eliminate the cost of employees. What do you think?

• Automation is difficult for us because we make a wide variety of different products. It’s pretty labor intensive and difficult to automate when we do the lower volumes of individual pieces. You need a larger volume to be able to automate in our business.

• Part of our business plan for long-term growth is for more automation, and that’s not so much to eliminate workers, but we’re finding that the kids today don’t want to just be a welder or a plumber or an electrician. They want to operate some type of machinery. We’ve had some luck with getting local kids right out of high school and getting them on a machine in our facility. Plus, manufacturing is getting more automated. There are more things you can do now. So, automation is part of our plan. We are going to add equipment, but we need fairly skilled labor to operate that equipment.

• Automation will probably make us more reliant on a higher-skilled workforce, but the thought is we can find that easier than more blue-collar Sponsors: TEAM Industries, West Central Initiative

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workers. Plus, it makes us more efficient.

• It’s hard to automate. It’s not as easy as saying, “We’re going to go with 10,000 of these,” and set up to do it, but some of our machinery that we’re looking at is more automated, not less—more CNC kinds of things— which will add not just shop floor people but engineers and whatnot to program them.

• We’re probably 12 to 13 years into it. We have 200 people and probably up to 40 robots now, where before we had 300 people and two robots.

How’s your productivity, based on the level of automation that you’ve done?

• Very slow. We don’t automate something that’s not running well to begin with. Day in, day out you still have glitches. Take something that’s not capable and put a robot in front of it, and all of a sudden it becomes capable.

• We print shirts, perhaps do a bunch of different things, but we’re a job shop. We’re made-to-order; we don’t produce in bulk. We are automated to the extent that we have automated equipment, doing our printing, doing our embroidery—but we still need a machine operator to run that equipment.

So, we’ve evolved where when I first started 20 years ago we were doing mostly manual work, and now we have 30 auto presses and zero manual.

• It’s made us much more efficient, but we still need people. You still need a team of five people to run a production cell. And we’re growing, which is great. So, I wouldn’t see our company ramping up our automation so that it would take away our people at all.

• We’re continuing to focus on more automation. Our main goal out of it is not to eliminate people but allow us to grow. We have a limited number of seats on the bus the way it is and limited amount of space, and automation allows us to be more productive but allow us to grow at the same time. Maybe we can grow our business 15 percent without any additional folks.

What about the skills gap? How do you address that?

• We partner with all the local colleges. For us, it was more about awareness. There is a percentage of students who aren’t college bound. They won’t want to stay local, but they need to be educated on opportunities locally, and about how they can have a career.

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• Like the design part of it. We invited students to a learning session. We invited all the local colleges to attend that session to say, “This is what we do. These are the jobs that we have. How can we partner with you?” Every school wants to partner with us differently. Since that point, we are not having a difficult time finding graphic designers.

• Now, we have a pool of applicants ready when we have the need.

We’ve grown that area, too. Our next step is, okay, it works for graphic designers. How can that work for other needs that we have? Especially like our production areas. The next step for us is high schools. Partnering with high schools. Educating not only the students, but parents and community on what we have here.

Who else? Skills gap, still a growing problem? Less of a problem?

• We’ve got a huge problem with our graphic guys. Everybody has had help-wanted signs out for a long time. We make whiskey barrels, so it’s not a skill set anyone typically knows coming in. It’s all on-the-job training.

We’ve been forced to add some equipment to make it go a bit easier on our employees.

How do you recruit new people?

• A lot of it just has been word of mouth. Putting an ad in the paper hasn’t benefited us for the past couple of years.

• Social media has been a new one we’ve been playing with. So, then maybe they’ll tag somebody else and then pretty soon you get an application or something. Or just word of mouth. If they know a friend or somebody who’s employed and not happy where they’re at or something and there’s an opportunity that way. The papers or something like that have been not as effective anymore.

Is anybody less profitable because you can’t find people?

• I believe that. Our business is somewhat seasonal. I think there’s some extra cost definitely associated with that. We’re definitely looking for more people who have the desire to work in the manufacture setting but also with the skillset of being able to understand some basic electronics.

Are you finding people with the basic skills that you need to bring them up to operate the equipment that you have?

• For the most part. We do have some who are not able to make it to the higher levels of our product builds. Mostly, we are able to train and bring them up to those levels.

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• We also have a hard time finding good skilled people. When we do find the people, we try to retain them. We’ve developed a culture initiative that has kept a lot of them interested, especially the younger people. What we do is not glamorous, so that’s always a challenge. It’s dirty, and it’s not exactly something that a lot of kids want to do. I think if you try and make it a fairly upbeat and fun place to work, sometimes people will be willing to stick around, just because they enjoy the people they work with and they like going to work.

What kinds of things do you do?

• We do a lot of employee lunches, a lot of employee appreciation-type things—bowling, tubing. We’ve done a lot of fun thing. It helps us retain employees.

• We have a lot of available machine capacity, but we struggle finding employees who want to work second-shift hours, third shift. In the last year, we invested in more equipment so we can add more people to our first-shift group. That’s how we’ve been able to keep up with our workload demands. We have all this available capacity.

Do you still do three shifts?

• We do two 10-hour shifts, or 20 hours.

• One of the things we did with the night crew is, they worked three nights. They worked Tuesday, Wednesday, Thursday night, and they worked 13-hour shifts. It’s a long shift, that’s 39 hours, and we pay them for 40. They get a four-day weekend every week. I was amazed when we started that how many people were interested. We had some office people who asked if they could do it. It was just a very flexible, and you get the outdoorsy types who want to be out hunting and fishing and whatnot. That was fairly successful.

Is that a permanent change?

• We’re not doing it right now. Our business has been slower. But, yeah, we’ll definitely implement it again.

How was your productivity after that long night?

• You notice it. It’s not as efficient, plus it’s a night shift, and they’re supervised a little bit different. It tends to have a little more of a casual culture. That night group is small, but it works. It tends to be a little less skilled—a lot more assembly, those kinds of things. Most of our younger mechanics can do it. They don’t seem to mind it. It wouldn’t work for me, I know that. I’ve been surprised, even some of the older gentleman have 46

done it and liked it.

Do you pay a differential?

• A dollar more an hour.

• We partnered with the high schools, trying to bring in some interns, to get the kids familiarized with manufacturing—not just machine operator but engineering, quality engineering, and everything around it.

• You have to retain the people when you get them. We hire for attitude, and then we train them for skill. With the generational changes, you have to have a management team that understands it’s not the old command and control. They have to feel like they’re a part of something, or they’re just going to walk off. I mean, your 50- to 60-year-olds will stay there all day long and do exactly what you say. Any younger than that, and they want to be a member of something more than a machine.

Do you have problems with employees showing soft skills, like showing up?

• For sure.

• It’s hard to get anybody under about 30 to work overtime. They just don’t want to do it. We’ve struggled with that. Obviously, the easiest thing for us to do is to add a few hours to the week, which increases your productivity substantially, and we’ve been able to do it. We’ve been able to make it work, but that’s the frustration I have—just the lack of interest in doing it. We’ve over-hired at times to try and accommodate for that.

How important is focusing on the next generation of leaders inside the company?

• We’re going through that right now. We’ve gotten several key employees in management, supervisor positions, so we’re working on developing that next line. We look and try and key in on some internal candidates where we can. That helps with retention, definitely where they see, “I’m not going to be stuck at this job for another 20 years.” There are some opportunities to move up, so we try and do that wherever we can.

Through a formal program?

• Yes. We’ve done some work with the university—informal training, leadership training.

• We’re not large, but I think 75 percent of our employees have been there 20 years. It’s difficult for them to change. We have that discussion in 47

our peer council group, and, all of a sudden, you get the new employees who drink the Kool-Aid and be part of the group. We struggle a lot with existing employees don’t want to share the Kool-Aid. They push back at new employees. It’s a big struggle—not so much with the new employees but to get the old employees to adapt to the new ones.

• Training is our top HR initiative for this year. Working with Moorhead State is one of the things that we’re exploring, and putting some things together for our leadership training. We do have somebody internally as part of our HR department who enjoys training. She does a great job.

• We don’t have a succession planning system within our organization.

Like me, most of our managers haven’t been there for 20 years. Hopefully I retire someday. But you do have to have a plan for all of that, and that breeds interest in keeping people. That there is a potential for growth. The longer they stay, the more experience they gain, as well.

Let’s jump topics: How do you feel about the future of your company?

What’s your general outlook?

• I’m positive. I’m very positive.

Stronger than maybe last year at this time?

• Oh yeah. We just came off our record year. We have a five-year group plan doubling ourselves.

• We feel like we can get there.

Is anyone pessimistic about your prospects about this up coming year?

• Birth rate in America just hit point 0.7 percent. My point is that, if you’re all going to double somewhere, I don’t know where they’re all coming from. Eighteen years from now that’s what it is.

• We do a lot of business, and we do our own products, as well, but we do a lot of contract manufacturing for first tier OEMs, and they’re all projecting increases this year. So, some of them, one particular OEM we have is increasing enough business, that’s our whole year’s goal. For our whole company. So, how do we handle that? It’s a good kind of problem.

Do you do any ERG business?

• A little bit.

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• That one’s probably a little flatter, but a lot of the other industries are growing. A lot of the industrial stuff is definitely growing.

• We’re owned by a company that’s newspaper driven. There’s only so much growth you can do online, and I think they’re trying. The print side of things, I don’t know. I mean nobody knows. It’s going to be a struggle, I think. We have opportunities for growth here at Detroit Lakes, because we do a lot of commercial work, as well. I think our company could grow.

If we can maintain for the next few years, I think that will be good. But I think long term, the newspaper side of our business, it’s no secret that I don’t think print is going to be around forever. That’s my challenge. I guess that’s where we’re at.

• I still think with the right next-level equipment, I think we could grow.

When the company, the corporate level is struggling on the newspaper side of things, they’re not going to want to invest, and that’s our challenge here.

• I rarely delve into politics, and I don’t want to do that here, other than to say, we have very interesting times going on in Washington D.C. right now, and the market has responded with almost magnificent enthusiasm for what’s going on. We’ve talked over the last couple of years about people being a little uncertain about the economy. Not knowing what Washington’s going to do and whether it will affect the overall economy or the bottom line or the top line of any of our businesses.

What’s your sense as you watch the news? Or if you’re on vacation from the news like I am. I don’t do that anymore. But anybody?

• I think when the election was over, there was a huge spike for our business. There was a enthusiasm in markets—not just in the stock market.

I think that would probably correct itself eventually. Just enthusiasm for less government intervention, less restriction, those kinds of things.

Whether that translates in long-term gains, I don’t know, but there’s certainly been some optimism. Although, I’ll say that after almost every presidential election. The few that I’ve been through, it seems like it doesn’t matter who gets selected. Once it’s over, you see a little spike in the business, and then things kind of seem to perk up. But this one was much more pronounced. Whether that translates into long-term opportunity, I don’t know.

• I think the theme of less regulation is good news for our customers.

They then take a little breather from all these new regulations and things coming out. That’ll help the business side of it a little bit.

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• The activity after the election was dramatic for us. That was very noticeable.

Do you think people were waiting until the election?

• Looks like some. Some of the people had the demand right now, and some are gearing up for it.

• Fourth quarter, particularly the last two months with the election going on, were kind of a drag in our industry. It’s that time, first quarters are definitely a bit better than expected. I think a lot of it was just sitting on the fence. A lot of people were.

• We started this in 2009, just as the economy was going off the cliff and manufacturers were grabbing to stay on the cliff. It had a pretty big effect within the industry about how people forecast and how they deal with vendors and the supply chain and all of that.

I’m just thinking, are there residual lessons from 2009 that exist today?

• We have a partnership with a staffing firm that we are able to bring in temporary people, and they are essentially a part of our full-time team, but when things get tough, that’s the first group that would be affected.

• Our permanent to our full-time employees or our owners, for that matter, are more protected than they were before.

I was surprised and impressed by the number of companies in that downturn who said, essentially, that a catastrophe is a terrible thing to waste. They looked for opportunities in all of that. Is that ever in the back of your mind or is it just something that happens naturally?

• When you bring it up, it’s kind of an interesting comment, because we spent all of our time talking about growth and how we’re going to find employees—how we’re going to get more out of it and how we’re going to get more efficient. We never spend any time talking about what happens if the market collapses. Then, what do we do? From a strategic standpoint, it probably should be a part of a discussion to have some kind of a plan, but I can’t say that we look forward and say it’s going to fall off. What are we going to do if that happens?

• We’re always the opposite: How do we prepare for that next wave of business?

Related to that, and we talked about it a little bit with automation, 50

but what’s your sense about capital expenditures? Are you confident enough to go out and make capital expenditures without hesitance?

Anybody not making capital expenditures for one reason or another?

Even if you could.

• We just got done adding our own sawmill and stall mill so that we’re able to process all of our own raw material. We’re capping everything else off and trying to just hone on getting efficient at this new machinery and not flat-lining our production—increasing it, obviously. By this new equipment, we will increase our capacity, but we don’t want to go too far above that.

Any nervousness about doing something that’s a big thing?

• Well with the liquor industry, it’s grown so much since 2009. Ironically, that was a big start for craft distilleries and has just grown so much since then. Now, there’s starting to be the follow up for folks who just didn’t have enough capital. We’re starting to see a little bit of that. Instead of just distilling, we’re trying to expand into brewing and other areas, as well.

We always talk about what I call the heartburn issues. We ask people to assess what they think about various challenges that confront manufacturers and then describe whether they’re important or not anymore. And top of that list—for a long time, for every poll, every survey—has been cost of health care, health insurance. Is it still something that you worry about or has it just become a cost of doing business?

• The cost of doing business. We were lucky enough, this past renewal year we saw a 12 percent decrease in our ratings. I haven’t talked to any other company that can say that. We feel lucky in that regard. It helped the organization, and wellness is a big part of what we do as a company.

• We’re reaching the age of our workforce that starting to see much more expenses. As the workforce grows older, of course, the claims get bigger along with the increase. It’s definitely a concern.

• In the manufacturing industry, you don’t see a lot of younger people in it. I think the age every year goes up for the people involved.

• Stability would be the big thing. We’ve had three years of three- to five-percent health insurance premium increases, but I’m just waiting for the shoe to fall. We’re going to get 30 percent of settlements. In the past, we’ve had 20 percent the one year, and then five, the next year 10, and then maybe flat for a year or two, and then a huge one. It’s a huge cost of what we do and what we offer to our employees.

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Did Obamacare make a difference? When we first started talking about these things there were a lot of conversations when you brought up Obamacare was like the group stuck it’s finger in electric socket because it was so dramatic. Bottom line, did it have a positive or negative effect on your business?

• For us it was positive, because we had more participation in our plan.

There are areas of our workforce that are aging, but we have a young group as well, and we added that group into the plan. I think that helped our plan.

Obviously, the concern is what’s going to happen with Obamacare.

• We’ve had a lot of stories from employees who had spouses that had other plans and maybe they had something out in the marketplace. They were seeing huge premium increases and that was forcing them to consider plan with us.

• It’s caused a lot of confusion from the other side, as well. From the health care providers and health care industries, this a mass confusion. The customer service from their side is just awful. What’s frustrating is, you offer a product to your employees, and they try to use that product, and they just run into all kinds of frustrations. They’re coming in the office saying, I can’t get an answer on this. I can’t find out that. You call the health care provider or the broker, and they don’t have the answers.

• The other guy always uses the excuse that he’s servicing so much more with so much less. They’ve cut back the money that he’s got. He’s got half the employees and twice the subscribers. They don’t know what’s going on, and they’ve consolidated the zone offices. If he’s got a question, who does he go to? You know it’s like calling a call center for when your TV blows up. It’s just frustrating, awful thing to be part of.

Let me move to a different topic. How are you feeling about foreign competition these days? Is it something that you think about a lot?

That you don’t think about, it’s not a factor? Or somewhere in between? Anybody affected by foreign competition, first off? Do you see foreign competition? I would think people could make stuff pretty competitively.

• We’re blended. Probably 50 percent of what we sell has some foreign content in it. We’ve been benchmarked, and it’s driven us to get better at what we do in order to stay competitive. Yeah I’m sure that companies could move overseas and buy components, but you have to have some piece of customer service—design aspect—that they don’t have.

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• I think the threat drives us to be better.

If I listed several things that give you the most heartburn—qualified workers, a weakening economy, cost of energy, unfavorable business climate, or rising health care—which one would it be?

• Employees.

• I’d say the economy.

• Right now, qualified employees.

As you plot your growth over time here, will more of your growth, new growth come from acquiring new customers, or developing new products?

• For us, it’ll be acquiring new customers.

• Same thing for us.

• I’d say the same for us.

Is it a steady stream of acquisition?

• It’s not a steady stream. We’ve introduced some of our products in different markets, and that’s opened doors for us for new customers. Our products are being used in a different applications. Some may look at that as a different product, but that’s the challenge of our sales and marketing group to find those. Then, repeat customers--growing the base that you’re working on.

One of the things that developed in 2009 and seems to be continuing is differing changes in the supply and sales chain, meaning that the OEMs tend to be more demanding, and they’re less flexible, and they’re more about price than ever. Do you find that?

• And they expect more. They want more up front. They want more for the same. Every time there’s a economic downturn, and we come out of it, it seems like we have to provide more than we did before to get the same amount of work.

In 2008, I thought I saw a lot of sense of collaboration among customers and people saying, let’s work together. Let’s find product together and after that downfall, it was just give me what I want when I want it at the least price. Was that it? Was that a good description of how it has developed? Is there still room for collaboration in the sales channel with customers?

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• I think it depends on your customers’ culture. With our customers, they’re focused on quality, and they want to make quality product and use that as their marketing scheme. Otherwise, on the other end, it’s just completely down to price.

• Some companies have their higher-end production stuff, and it is focused on that price. In their other divisions, they might have their replacement parts or accessories, and that’s a whole different set of people.

Their culture’s different.

How is it to be a manufacturer here? Or would it be, I’m talking about the greater Detroit Lakes area, or is it just the same as it would be everywhere?

• We’re more of a vacation-type atmosphere town. I think if people could have the choice to make the lifestyle that they want and live here, they would. Otherwise, they’ll migrate to Minneapolis or Fargo or somewhere like that. If you can achieve your goals in this town, I think a lot of people would rather live here.

• The area is not nearly as diverse as others. I think because of that, we do lose potential advantages that others might have. I can comment about a former company that I worked for, and we had probably about 20 percent Caucasian to 80 percent non-Caucasian workers. Those 80 percent were broken down into maybe, 25 percent from an Asian country, 25 percent were Hispanic, and the different perceptions that people had and things like that made our team much stronger. It’s one of those things that made it tough, because there were a lot of language barriers and some cultural issues that were different and things like that.

• It worked well for us where I used to work. I see some of that lacking here because, nothing against the culture we live here because I love it here, but some people are hungrier than others, and they want to work harder than others, and still believe in that American dream—going out there and doing their best—and some of that has gotten away with some of the younger generation.

Is housing an issue here? I mean, is it the lack of available housing?

Why do you think? Is it affordable or is it just housing in general?

• Affordable would be a part of it.

• We had several new hires just in the last six months relocate to Detroit Lakes. We helped them try to find new housing, and that is always a 54

struggle. There’s not enough of the local lower-cost housing to buy versus the higher-cost—those are available, but it’s just that certain niche. Then, rentals. I think a lot of people aren’t going to move here and buy right away. Maybe they just want to rent something. It’s a little bit of a struggle.

• The housing comes down to affordable housing for people who work in manufacturing. A lot of these people go look at the developers and say build the apartment building where you charge $500 a month, well it’s not possible. These new apartment buildings that have gone up is great, and they are filling up pretty well, but they are at $950 or $1000 a month.

• It’s kind of a Catch-22, where we need housing, but what the people probably asking for in this industry is more affordable housing, and it’s difficult to accomplish.

• A lot of the people where I work don’t live in Detroit Lakes. They can’t afford to live here.

• My husband works in Fargo, and I work in Pelican Rapids. We settled on Detroit Lakes because it’s smack-dab in the middle. It took us over six months to find the house that we wanted because there just wasn’t very much to pick from.

• We’re running into an issue of the community not being big enough to begin with. There’s no bank left, there’s no hardware store left, there’s no grocery store left. Maybe there’s housing, but people don’t want to live there because every time I need eggs, I’ve got to go into Detroit Lakes.

That’s happening, also. The business is all that’s left, other than the schools, and the schools are being put together. Three years from now, will there be a school?

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FOCUS GROUPS

Edina March 16, 2017

G&A Partners

What’s going on in today’s economy, as it pertains to your forecasts?

• I think it’s going to stay about the same, and I think it will for a couple reasons. One, I think the private sector is doing extremely well.

I’ve heard one economist refer to it as a plow-horse economy; in that you have a thoroughbred being burdened by the size of government, and that the size of government is holding back the private sector. I don’t see the size of government getting smaller. Trump is obviously going to try, but there’s a lot of inertia that will stand in his way. I see the economy will continue to do well in the private sector and be burdened and held back by the government.

• In my forecasting – and I always say I’m insignificant; it’s very hard to lay forecasted numbers out. All we have is history. What I do is I go out and see my clients, the big clients . . . by the way, you’re one of them. It’s nice to know. Sitting across the table, but it’s anonymous, right? Thank you for the work, by the way. It’s fun to go to the top twenty clients I have to ask them what they see. I’m in with a plastic machine shop, a fabrication and gasket supplier, and a builder, and it’s kind of interesting that some of them see their futures going up five or ten Sponsor: G&A Partners

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percent. I pencil in mine, and I look at the last numbers and I go, “Wow, actually this year’s better than it’s been in the last few years!” I don’t know if it’s the Presidency or not, but more and more people seem to be working. I can’t hire anybody. There are a lot of chain issues going along with that.

• I think there’s a lot of uncertainty. It seems like a roller coaster every day. Interestingly enough, it is difficult for us to forecast, and we forecasted a very conservative year. A little growth over last year.

Well, we’re already out of the ballpark: January, February and March is way above, like 200,000 above. It was funny. This was just one of the examples. We call a military and defense . . . one of our customers, one of our large customers. I call him last Tuesday, the market manager, and ask, “What’s on the forecast?” Nothing, absolutely nothing. Two days later, $150,000 worth of new purchase orders! It’s like they don’t even have the visibility. The level of uncertainty . . . We have to be conservative because we don’t know what’s going to happen in six months. First, we have always found that the first six months of the year are strong and the last six months of the year are less strong. Depending on people’s fiscal calendar year, they just shrink as it goes toward the end of the year, so we still feel like we’re living with a level of uncertainty.

• I would say, overall, it’s guarded optimism. Everyone thinks things are going to come back, but in our business, our average equipment sale is maybe $350,000, and, quite often, to either very small shops, fabricators, or to some large multinationals, but they generally won’t commit to a purchase until they have a strong sense of orders, or actually orders in hand. Everyone thinks things are going to pick up, but no one will spend money until the absolute last minute. Our industry dropped by roughly fifty percent last year, simply because everyone held back, and everything just came to a grinding halt. And we’re on the front end of the manufacturing. . . .

Is that because of political uncertainty?

• They weren’t willing to take the risk because they did not have orders in hand, so they didn’t need capacity. They didn’t need equipment. They weren’t expanding. They were holding back to see the results, I think, of the election. Now that they’ve seen the results of the election, I think they’re waiting to see what happens with regulation.

Is there a correlation between the obvious exuberance of the stock market and what you perceive to be the overall health of the economy?

• If you look at the stock market, the stock market is typically a look 57

forward in anticipation of twelve months. Like he’s saying, when the companies are actually getting ready to spend dollars, they’re not looking out twelve months. They’re looking out at a much shorter term. “Do I need to spend the money today because the stock market’s anticipating that earnings are going to grow?” If they don’t, we’re going to see a significant correction in the market. Before I commit my dollars I’m going to be pretty certain. I’m not going to project. So, no, I don’t think there is a correlation between the exuberance in the market and how companies are looking at spending their money and their capital.

• Our business is really dependent upon the sectors. Last year it was horrible for agriculture, off-road construction, and energy. This year it’s much better, so it really depends on what sectors are doing well. Last year medical was over-heated. This year it hasn’t been that way at all, so it’s just really interesting to watch the different sectors and the phases they go through.

The Great Recession left some enduring legacies on the way manufacturers do business. OEMs became more demanding about payment terms, inventory and turnaround. Does that still exist?

• Absolutely. Supply chain, for us, is completely different than it was ten years ago. There’s no credibility to lead times or promise dates. It’s a different world. There’s probably no inventory available, or no one’s willing to commit to carry it, so it is different. It certainly affects our ability to produce goods in a timely fashion, which should equate to profitability, yes. Competitiveness becomes more difficult for a small enterprise when compared to ones that are twenty times as large.

• We’ve increased our inventory since last November from 1.1 million to 1.6. Still, forty to sixty percent of the orders which are entered every day we don’t have the materials for. It’s basically B- and C-class materials. Customers keep compressing the lead time, lead time, lead time. Try to get them to VMI, vendor manage inventory something, and they’re so difficult to work with. We work with large OEMs. All they do is keep beating us up every day. It is like, “Folks, you want to have parttime, let’s work together to figure out a plan to get you what you need when you want it,” but it is very hard for them to get concept of “Let’s do it together, and let’s plan and forecast in the future” because they don’t want to make commitment.

Has the sense of collaboration disintegrated?

• Yeah, yeah. Collaboration and partnership are the two most overused words. From a customer perspective – and our top ten customers are 58

all Fortune 100 companies, multi-billion dollar, multi-nationals – they continue to partner with us, which says, “We want you to give us extended terms. We want you to carry more of the risk on the inventory.

We want you to absorb all of our cost. That’s what our definition of partnership is, and oh, by the way, we’re going to bring your business to every low-cost country there is and if you’re not the low price, we’re going to take the business away.”

Has the relationship devolved the price?

• It depends on whom you’re dealing with. Unfortunately for ours, our customers have global purchasing that is only price. That’s the only thing they get measured on, year after year: price. We need to have the relationship with the engineers and the plants who see the quality and the value of great service. It’s really difficult because we keep getting forced to deal with the global purchasing guys, and they only have one metric, which is price.

Are you then now forced to just focus on price?

• No, you fire them and then go find new accounts. It takes a lot of time, effort, dollars, and salespeople. And then, of course, management.

We don’t have any patience. Back to this collaboration: Net ninety seems to be the new norm. I’m like, “What? Oh, can we pay with a credit card?

What? And your price sucks? Here we go again!”

• No, I was at a supplier conference and they were explaining to us they were going to go to net seventy-five and they were going to simply pay twice a month.

• Exactly.

• So, at seventy-five days, your invoice now goes into the process and we pay on the first and the third Thursday. If you missed – you know, if this is Friday is your seventy-fifth day – it’s another two weeks.

Somebody beat me to ask the question, “Can I ship your orders on that same schedule?”

• Wow. And? • And, unfortunately, the people who were at the front of the room explaining this to us were simply the people delivering the message and were not the appropriate people. But yeah, it’s ridiculous.

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• Yeah, the one I love too is, it’s the three-fifth proxy of paying the fifth day of the third month. We have had customers try all of those things with us and it does take a lot of effort to have conversations. We look at, “Will you pay us ACH two percent for that, then?” We’ll try to figure out a way that’ll satisfy them and satisfy us, but the contracts they’re giving are not favorable at all. You really have to run it through an attorney and figure out where you can leverage, what variables are negotiable. We’ve had to fire customers. We’ve also had to go through the bids, reverse action, and we’ve lost business, but they can’t take it away. When they go to execute, nobody else can deliver the quality. One of our large customers says, “We won’t even think about changing unless we can save $100,000.”

Do you participate in the reverse auction then? How do you participate in it?

• We will, but we will stop when it’s up here. We’re not going to raise the bottom. Those people who raise the bottom, they can’t execute. We still have three customers that we’ve lost business from two years ago and we’re still delivering the parts. When are these parts going away?

Can we move them? Can we get rid of them? We have thin margins on it, but they can’t take it away, and so we have customers we have to give ninety-day notice of a price increase, and we have to have every justification under the sun as to why we’re giving that price increase, and we do. We’ll go into the meeting and we’ll give them everything.

We’re totally transparent, and we say, “Here’s what we can do for you.

If you can’t live with it, let us help you leave. Let us help you move on gracefully.” They never leave, so they just put you through a lot of hoops, and it’s really unnecessary. At the end of the day, they can’t execute.

So, you want to talk about this really quickly?

• Yeah. Sure. So I know another legacy of 2009 is that projections get more and more difficult. Remember the old way when you could do a twenty-four-month projection? That doesn’t really happen much anymore, I guess. As you project out your business, is this year going to be better than last year, worse than last year or about the same, given all the things we’ve just been talking about?

• Yeah, and nothing to do with the economy, but more to do with the specific dynamics of our customers, we’re going to be about the same.

• And was last year a good year?

• Last year was the third-best year in the company’s seventy-one-year 60

history.

• Good.

• Congratulations.

• Good for you.

• Congratulations.

• Thanks. It felt terrible because we’re coming off our best year in fifteen years. It felt like we lost.

• Yeah, last year was our best year and I’m forecasting a 10 percent shrinkage based on firing of customers.

• But your profits are going to go up. . . .

• Exactly, and we’re going to squeeze a little bit more and it’s better.

• Who else?

• Our business is exactly opposite theirs. Last year was our worst year ever.

• Is it industry-related, sector-related, or . . . ?

• Yeah, absolutely.

• You’re ag? You work in ag or energy or . . . ?

• No, machinery- fabricating machinery. Water jets, actually. I must admit there’s two elements to our business. One is replacement parts, which segment has grown since the inception of the company and has never fallen back. But, when it came to new equipment and new systems, it dropped off last year substantially.

• What’s your sense as you look at your clients about who are growing and who are not?

• It’s amazing that every comment I’m hearing this morning is something I hear from customers out in the field. The lack of certainty . . . I hear a real negative impression about the trust that we have between 61

companies, and yet, some of you are coming off of best years ever, but you’re refusing to be optimistic because of all the uncertainty that’s going on.

• I see that all the time: customers being asked to carry the load, to be mini-banks, and, as a banker, that offends me.

• “By questioning the terms, you’re asking me to finance your business, and I can’t imagine I have more favorable terms than you can get. Your cost of money has to be cheaper than my cost of money. So why are we shifting the cost to the higher cost? Supply chain is supposed to take costs out.”

• I just wonder if this last recession had a lasting material impact on our confidence in our system.

• Oh yeah.

• I think that’s a big part of what we’re talking about today. That sounds like a downer, doesn’t it?

• What kind of funds do you have?

• We have R&M, and I apologize I’m late. But yeah, last year was a very good year for us, and I’m finding the same things. I’m questioning, probably the same customer, with the reverse auctions. Now they’re asking for a five-percent up-front funding. Our profits last year were decent on the net side. My customers are OEMs and I’ve found that the good thing is we’re starting to talk with material adjustments based on the CRU, which is really helpful. It’s taken a long time to get there, but for the last two or three years, we’ve been able to . . . Obviously when we’re sure what was going down it was easier to negotiate it, so that’s helped a lot. The partnership: it depends on the customer. Some of the customers are still partnering with that true sense of the partner. Although they’re working with me on productivity, in the sense of finding better ways to build the product. Whether it’s a new tool we build or just to change the material thickness or the size. We do tool and die work, production stamping, progressive stamping and then sheet metal for metal fabrication. But, yeah, I’ve got a very positive outlook for the next year or two.

Given that, what’s your attitude about capital expenditures?

There’s been some hesitance, since the recession, of people to invest 62

in equipment and things like capital expenditures. What’s your attitude? Are you doing it?

• Well, we’re cutting appeals right and left. We are investing again.

This year we invested in 2014. We invested again this year.

• We are, too. We have a fairly aggressive investment program just because of the disaster that occurred to us in ’09 and ’10. I had to hold off and so I was still holding really lousy equipment and trying to produce parts with it.

• I think fixing the Section 179 helped to justify it.

• Yes, it did.

• So now you forecast your profits and we can actually reduce the tax hit. . . .

• Yeah.

• That helped a lot this year.

• Yeah.

• And the R&D credit . . . Do you use the R&D credit?

• Yes. • I have only used it once.

• It’s a good tool.

• It is.

• Yeah, you get a look at it year over year.

• I’m going to buy a C & C tool for a quarter of a million dollars and I wish it was a water cutter.

• I’ll give you my cutter.

• I need to know where to put big equipment that doesn’t go in a landfill. We have a piece of equipment that is dead; it needs to go. It’s a first-generation.

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You know, some of the things we test in every poll are just some lightning rounds- I call them the heartburn issues: things that present challenges to manufacturers, and how you do business in things. We’ve talked about several of them, but what’s your attitude about general government policies and regulations? You talked about it at the very beginning, but is it better? Is it worse? Do you think there’s a new generation of leadership coming who might actually alleviate some of that?

• I’m really tired of the National Labor Relations Board and the latest EEOC technical bulletin on wellness programs. We are more generous than the bulletin, so we have to scale back, which means it affects our employees’ pocketbooks. It’s just so annoying. It’s like, really? And the National Labor Relations Board, I wish they . . . we could do something about that.

• Go away. Go away.

• And I’m tired of all the stupid surveys you get. Anyone else get those stupid surveys? The manufacturing one for the federal government . . .

“Oh, this will only take 45 minutes.” Three hours later and you still don’t have everything filled out. Did anyone else get the ones about IT and bonuses? I mean, really. I just wanted to beat my head against the wall . . . and they’re mandated by the law. It’s like, “What are you going to do with this information? How is it going to help me? Am I ever going to get the information?”

Anyone else? Regulations, government, from the state or from the feds? Is your attitude that there might be light at the end of the tunnel or not?

• No light, but what I find disturbing is there are multiple layers of regulation and none of them are consistent. If you’re talking minimum wage or other HR topics, you haven’t snuck down to the neighborhood yet, but certainly the city, state, and federal . . . None of them are consistent, and usually they’re all challenging the courts. From a small manufacturer’s perspective, it’s hard to keep track of everything that’s out there or to plan to do something about it, especially when the news will tell you it’s coming. There’s going to be a sick pay ordinance in [CITY] or something, or minimum wage, and then it gets challenged in the courts. It drops out of the news for eighteen months and whether it ever comes back again, you almost need staff just to follow what’s going on.

• Or it gets buried in an omnibus bill; it’s so invisible.

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• And it varies. . . . So regulation, if you’re in a small enterprise, is a burden.

Well, and let’s go with that. What . . . $15 minimum wage is . . . had the momentum. I don’t know if it continues, but what does that do to you as an employer?

• For us it does nothing because it’s well below any threshold we have.

Even the start-up? Even the first-level employees?

• Right.

• Same with us. Doesn’t mean anything.

• It’ll have a little impact on us for starting; for really low-entry, laborrelated work. Unskilled.

• I have a little bit of a long-term perspective. My opinion is of the negative impact it’s doing because we no longer have entry-level positions. I was part of a mock-interview process up in [CITY], where we got together with about 120 students who are looking for internship programs. Not one of the twenty-five students I interviewed had work experience. They’re not learning essential skills. They’re not learning the social environment of a workforce, of going to work on time, communicating with your team, or raising your hand if you have a question about what your responsibilities are. That has gone away because we’re supposed to support a family at the entry-level workforce.

When they come out of college without any work experience, that does impact small business, whether it’s manufacturing or anywhere. I think the impact that it’s going to have on us is not today, but three to four years from now.

• I think it’s already today. You hear all these people sitting at the table saying they can’t hire people.

• Right.

• They can’t fire people.

• We’re in HR and it is the number-one topic I hear from every sector.

Absolutely every sector. What you’re getting to now is because of the skillsets coming out, or lack thereof. There’s a lot of creativity going on in manufacturing. It’s a credit to [ORGANIZATION] and a host of other organizations, trying to look at kids in grade school right now, 65

talking about manufacturing and the life. It’s a lot different, as [NAME] and I were saying, than watching my dad grow up in a factory, right?

What we have right now until we get to that skillset and until we get to those experience levels is every industry is just robbing Peter to pay Paul. You’re artificially forcing these salaries up in some regard because of competition for the people, right? I think it’s a broader issue and it’s affecting every industry. It’s affecting manufacturing, it’s affecting IT. . . . even in professional services. At some point the pendulum’s going to swing on professional services too, right? There’ll be more people going this direction and less people in that.

Let’s go the other way then? Who among you is not as profitable today as you could be if you could hire more and better? Is that a fair assessment?

• We have to spend a lot of time training and we’ve actually . . . I had this great employee who was our executive assistant last year. She was a horrible executive assistant but she was a great technical writer. With ISO 2015 and all that institutional knowledge, she’s been working since October on our institutional knowledge to help people document all of the processes, particularly in manufacturing, so we can go through the review process. It just so happens our son-in-law is a videographer and he works in [CITY] and we said “[NAME], you have to come videotape these different processes for us so we can give them to new people.” We have to get really creative on how we help reinforce the seventeen to twenty-one times people need to hear this stuff to learn a process, so we have an out-of-control system right now. Our process is not capable of issuing material because people can’t do the math. They’re just arbitrarily determining the amount they used. Whatever on the job routing is what gets allocated, whether or not I use that amount, so we have to do different things. We have to change our process to accommodate the incompetence.

• Well, I use a temp agency. My daughter actually is a staff, or headhunter, and I say if somebody good comes through, grab them by the collar, and I want them. The last four months I got eight people and only kept two of them. It’s the bottom of the slurry barrel. There’s nothing left.

You take those two and now we put them through our training and it’s a two- to three-year deal. If they’re going to do C&C programming, setup and any of that, we send them to school. All I’m thinking about is how much I should start helping to pay for this. If I can find the person who can actually get up and come to work, who has a little excitement in them and they want to learn . . . Should I stick some checks in front of them to help pay for that schooling to get that hourly wage up and productivity up 66

I’m looking for? I’m basically set at my level right now, unless I find a company to buy. I’m going to buy my growth.

What about the work ethic of entry-level workers?

• I think it’s a little bit of a fallacy, for us. I think it’s just generalizing.

It’s like taking baby boomers and making them this big deal. I personally think we’ve blown it out of proportion about millennials. Our daughter is a millennial. She is one of the hardest workers. All the millennials I know are very diligent workers and aren’t exhibiting all those bad behaviors. We did have one who couldn’t get to work and his father was very wealthy. I don’t think he ever felt like he really needed to work. He needed to leave. I think one out of twenty might be bad, but it’s doing a disservice to label a generation.

• Inexperienced? Yes, you have to help guide them; of what the expectations and work environment are, but that’s anybody who’s new.

You have to guide them on our way, the [COMPANY] way.

• We have multiple shifts, so we have the flexibility that if somebody doesn’t want to get up in the morning, but is more afternoon and evening, we can accommodate that. That side of it isn’t it, it’s really more the skills. It’s more about making people aware of what we can offer so they have an opinion. We’re an aluminum foundry. There’s a lot of perception as to what that entails. We’re spending more time at the high schools, talking to the high-school counselors, and talking about some of the automation opportunities. We’re sponsoring some of the robot teams in the area to get the kids understanding that the foundry isn’t what it used to be when their parents were growing up, and that it actually offers some cool jobs. We’re doing the same thing. You get people in and are we willing to invest in their education, or partner with them, and try to bring that loyalty to them.

It seems there are three elements to the skills-gap issue. One is to encourage young people to develop an interest in nurturing new employees at a younger level and try to get them and their parents and their counselors to realize the opportunities that exist out there.

Another is to work more closely with vocational and technical schools to make sure they’re producing students with educations that matter to you. And the third one is to take people yourselves and train them yourselves. Which is the more relevant to you?

• Combination of all three.

• In-house. We take them to a certain level and then we’ll send them to 67

a school . . . the amount of school for programming, for the higher-level kids. The actual operators we’ll train in-house. The issue is to get the . . . We had 100 students come through for Manufacturing Day, we had job applications, and offered hours from 3:30, after school, 3:30 to 6:30 and 3:30 to 7:30. We didn’t get one. It’s a bigger problem; attracting them and [SCHOOL] is right in [CITY] and I know [NAME], the director. We couldn’t get one applicant.

• Interesting. So, if you manage to grow them and culture them, how do you keep them?

• It’s a culture thing. We try to stress our cultural values: safety, growth, and investment in people and equipment.

And they stay or they move on?

• It’s fifty-fifty. I mean, like you were saying, you start with eight and you end up with two. So, yeah, it’s an issue, but . . .

• He didn’t say whether that was voluntary.

• Well, it’s the same. You go through a lot of people, though, to find the two.

• The second most prevalent topic we hear, again, talking to all varieties of HR, it’s the gap: just finding the right people and the skillset.

The second part is all-around culture and getting discretionary effort out of these people. There’s a combination. It used to be, they would look at discretionary effort as just a separate item; just work a little longer, work a little harder, work a little this and that. It’s gone beyond that. It’s gone to providing an environment where they feel wanted. There’s training involved. “There’s somebody who’s looking at my future.” If there was one thing [NAME] touched on that happened in 2008-2009 which has a residual effect on us today, it’s the fear of uncertainty. Loyalty went out the window years ago, right? We’re trying to bring that back with culture.

We’re trying to bring that back with a view that employees are the most important asset I have. When companies embrace that and they start providing the training, they provide culture and the message. When they start getting at discretionary effort, people feel a little bit more confident that their future’s going to be there. I think we have this residual effect of uncertainty, like everybody’s talked about, on them personally. Every person’s out there for themselves right now. It’s a survival mode.

How do you build that culture of loyalty?

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• I buy lunch for the company once a month and it doesn’t matter what it costs. My holiday party is probably second to none. It’s a [RESORT] drunkfest, but I have thirty-five employees, so I manage by walking around. I know whose background is what. I know if somebody’s rich dad is taking care of them. I know maybe this guy’s looking at getting married and now I have a chance to choke or train them. I’m looking for someone who wants to better themselves, and if that’s half of the math, I can fill in the other half. That’s what I’m looking for in two of the eight.

I’m looking for someone who’s hungry, who wants to maybe move out of the house. I’m looking for a lot of things when I’m managing by walking around, and that’s how I build on it. I hand a paycheck. “Customers love you. It’s not me. I’m just the money manager. We’re getting paid because of what you’re doing.” I think like that, so it’s a culture thing for me, too.

• I would say I’m less tied to the culture, the [COMPANY] that the employees need to be loyal to [COMPANY]. I’d rather have them be loyal to the work they’re doing and the people they’re doing it with. If push came to shove I’d rather have employees have friends at work, because the more friends they have at work, the more difficult it is to leave. They’re a fabric of your life and everything you do. Our employees do a lot of celebrations together that we don’t even know about; but I think that’s wonderful, and I’d rather have that. I’d rather instill a culture of teamwork, and I hate to say it, but we use the three Cs: communication, coordination, and collaboration. I would rather have the people work together to solve the problems at the level that they can solve them. We spend a lot of time working with staff to work together and we do have some perks. We have a wellness center. We have a fitness workout. We have showers. They can do that. They can use it before, during, and after work. We have an incentive program for manufacturing staff. Right now it’s biggest on attendance and some company metrics and if they make that then they get four hours of PTO added to the bank, so they can earn up to six extra days. We also do something only one to two percent of the companies offer and that’s called results-based time off. If you hit your results, you can take some time off. There isn’t a limit and there isn’t a minimum, but it has to be based on results. So, technically, people will take about three to four weeks a year, but it doesn’t hit your balance sheet, because when they leave they’re not taking anything with them. We’ve tried to do some innovative things like that. The next two metrics we’re going to work on, one for manufacturing, is the hours of productivity. The second one is we know what our baseline for returns and allowances was last year and I know that the percentage is related to quality. We’re going to offer you . . . we have to figure out the program, but we will get back that money 69

to employees. You increase the quality and reduce the rejections and you will precipitate money. I think it’s a lot of things and both. It’s not just one. It is a holistic system you have to look at, “What are we really doing and how do we share and communicate that with the staff?”

Let’s talk about automation. What do you tell the journalists who write about manufacturers trying to put people out of work with machines?

• That’s not the purpose, though, especially since 2009. Manufacturers had to use automation to improve productivity, to remain competitive.

That’s what they’ve done. If, in fact, laborers fall out of the mix, that’s just a normal option.

• I think the other thing you would get is you look at lean, and is lean really about taking people out? Lean is really a growth strategy that asks, “Can I grow my business and not have to add more people?” I think about automation the same way. Automation is a way to have growth, and are we going to eliminate the need for more positions? Yes. Are we going to eliminate our current workforce? Probably not. If we do, it’s going to come through just the organic turnover that we’re not going to have to replace people. I don’t think automation is one where you’re really going in and saying, “I’m going to eliminate ten jobs because of this.” This is a way for me to be more productive, more competitive, to grow the business without having to try to hire ten more people that I’m having a hard time finding.

• Even so, quite often, just to stay even . . . not to grow the business.

• Right.

• Or just to take the number of man-hours out. It affects our capacity, the number of work hours that are put into certain processes. If we can automate those, we can reduce the hours. We can keep the staff, but we can just take on more work.

One last thing. Where is the cost of health care among the challenges that confront you as a business person?

• That’s a loaded question. How much time do we have?

As much as you need.

• Well, I think what’s going on – and everybody’s impacted by the ACA in different ways – so I think the law that was passed was intended 70

to ask, “How do we get more people insured and give them more access to the ability to get insured?” It had nothing to do, as you read about, it really had nothing to do with keeping costs down, or controlling costs or managing the costs. Taxes and assessments, and burdens and regulations and 1094-95, all the things employers had to do, just added to the cost of what they had to do to offer, plus the taxes which were put into the fully-insured premiums or self-insured plans that were out there, to fund this mechanism they had, right? It was just more taxes. I think what they’re trying to do now, as you guys all read and hear about, it’s trying to thread the needle on, “We can do things through budget reconciliation,” which is just a portion of it, and try to fix everything else through health and human services and what the top price can do as far as regulations around that. What I think needed to happen was that it had to be a bipartisan effort. If we keep up what’s going on now, it’s going to fall off the cliff, because of what you see offered to the carriers. What I think the Republicans put in place . . . It’s the only thing they can put in place that has even a chance of passing, but I think what they have to do is fix this because it’s still going to be burdensome. We’re all going to be paying for it through the group-sponsored plans or as individuals through the taxation. I don’t know what’s going to come after this, when you talk about the full tax reform and how that gets impacted by individual tax rates, corporate tax rates, and any potential deductibility issues that come in with employer-sponsored plans. That’s probably the second phase, and we don’t even know what that looks like until we get through this first phase. It’s going to be a bumpy ride through the summer as they go through the House and Senate and I’m not confident that anything meaningful is going to get done this summer.

How does it affect your ability to plan?

• It’s the cost of business.

• We’ve been having this same topic. I’ve been in business, I think, about forty years now. I remember in 1980, complaining of the cost of healthcare, that it was more than the promise we were making. Like you say, it’s the cost of doing business.

• He was complaining about the cost of healthcare and not health insurance, right?

• No, health insurance.

• Oh, health insurance.

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• And, at that time, we had very generous programs. Unlike today, it was basically a 100-percent program.

• I came out of college, you guys, and I got 100 percent paid. Then, I get married and that’s 100 percent paid. Then I get my kids: 100 percent paid. I don’t know. That juicy system isn’t existing anymore, is it?

• No, government.

• I know that our cost of healthcare in 2013 was the same as it is today, but I lucked out. What I did in the meantime was I joined a captive for two years. Talking about heartburn . . . If you ever want your turn at heartburn, join a captive and then just go on the risk-based system. We snuck through those two years. Last year I made the decision that we had to get out of it, because some of the stuff is just unbelievable. First of all, our captive was in [STATE]. Well, wow. Go to [STATE]. It’s just not a good system to be in; [STATE] deciding healthcare. I have a background and a Master’s degree in healthcare administration. I spent nineteen years in healthcare running programs before I flipped over to manufacturing, so I understand per-member, per-month costs. I understand medical issues, and I did not enjoy sitting around with a bunch of other owners deciding what meds are STAT. “Well, let’s not make sure everybody can get a STAT. Let’s just cut the formulary and then impact your health because you’re not going to have the access to that medication.” I, personally, don’t like that system. I was just part of the captive, not self-insured.

I said, “I can’t do this anymore. Let me just go back to medical full insurance.” Well, the premium I’m paying today is the same amount I paid four years ago. I lucked out.

• Just in claims?

• No, that’s my premium every month. It’s a fixed cost, rather than being part of the captive and all the variables that go with it, because you’re paying both your stop-loss premium, two different stop-loss premiums, plus all the claims, plus the pharmacy. We did just fine through all of it, but we have worked really hard to help educate our staff on wellness, do biometric screens every fall, and do a bunch of assessments. I’ll tell you, it’s a lot of work. People will say you’ll save money by going to a captive or self-insurance. The amount of heartburn you have to go through, in my opinion, just wasn’t . . . far outweighed . . . and I’m well educated in healthcare systems.

How many employees?

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• Eighty.

• We have 400 employees and so we are self-insured. We use [NETWORK] as our administrator, but we’ve been working on the wellness. We’ve gone outside of the [NETWORK] network and we’ve, through our broker, we’ve formed partnerships. The one we are with now is [NETWORK] out of [CITY], where we have negotiated our own deals and discounts to try to steer our employees. We’re taking a view that we’re going to spend more money up front on the wellness in the hopes that we, down the line, eliminate some of the catastrophic. We’ve gone to a couple of incentives, financial incentives, for our employees.

We offer a reduction on the premiums they pay if they participate in the wellness. If they go to a [NETWORK] clinic there’s no employee cost for primary care. We also have gone into the prescriptions for cholesterol and blood pressure and we’re going to pick up 100 percent of the cost; no co-pay. We want you do be healthy and so we’re trying to encourage that in order to try to tip the scales a little bit on our healthcare costs, but it’s a huge issue. And then, going back to the Affordable Care Act, I saw a study that stated the Affordable Care Act added about $5,000 of cost per employee, on average, to the typical company. If you look at that . . . at 400 employees, that’s about $2 million. Our payroll is $20 million. That’s a ten-percent increase and that’s just the taxes, that’s not the cost of the benefits. That’s the administrative costs and the taxes to afford everybody else’s. That’s huge. Is it a cost of business? Absolutely. Does it still create heartburn and aggravation? You bet.

• I think that’s one of the things that is, again, a byproduct of it, right?

The whole ACA, what it created, is a lot of uncertainty with a lot of things, right? The IRS enforcing the component of ACA makes that uncertain. We don’t know when it is going to be applied or when it is not going to be applied. We miss dates. We have dates. I think the byproduct, or the trickle-down, on that is it makes investment in other programs that you want to do get shelved. Or, you slow down and you’re saying, “Whoa, I really would like to do that. This would help me grow my business. This would help me improve productivity. But I have this thing hanging out here yet, that I don’t know. Are they really going to enforce a penalty on me? Am I really going to stare at . . . ?” Ironically, I’ve been in this for a little while, and two years ago we had people challenging it, basically saying, “Hey, screw it, I’m not paying it. I’m not going to pay the taxes. They can come get me. They can come find me.” There was that kind of attitude. Then there was a group of people that just stuck their heads in the sand and said, “This can’t be happening. Please, this can’t be happening.” And then there are the ones who are proactively 73

looking for alternative solutions, like you. . . . I think the one thing I’ve seen over the last six years is that it’s slowed down other creative things in industry and a lot of businesses to do what might be really great for growth. That’s probably the biggest crime in this whole thing; it made a lot of uncertainty that way and took away opportunity for really doing investment in, maybe the product, or in the solution, or investing in customers, right?

• I think that’s what [NAME] described at the beginning of the conversation about a thoroughbred being pulled back by the regulatory challenges. If [NAME] would look at not having $2 million in his pocket . . . Healthcare used to be considered a benefit. “What can I do with that $2 million? As an employee benefit to hire, retain and develop my talented employees, or invest in the capital equipment . . . which is what most companies would do with that money that they no longer have?”

That’s where it promotes business growth.

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FOCUS GROUPS

St. Louis Park March 17, 2017

Minnesota Precision Manufacturers Association

What’s your view of the economy?

• From a planning point of view, we’ve gone with the concept of the fivepercent rule this year, which is a great uptick right away. But, as the year goes on, it will level off. That’s how we’re looking at it.

• I think this initial hit for us, at least—it sounds like, a lot of other companies agree, it’s been a good initial hit for growth.

• We don’t think we would have seen an uptick in activity if there wouldn’t have been a change—significantly more on boats, full-time tooling, and production. We’re also seeing more orders taking place.

Do you sense optimism among your customers?

• We don’t really have a sense of an attitude. We have not seen this uptick of activity after an election. If you want to say what changed from one thing to another, we haven’t seen this uptick on an election on the last three cycles, at least.

• We’re at the end of the construction cycle, so it doesn’t impact us, Sponsors: MPMA, St. Paul Port Authority

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because there’s too much of a lag. We’re looking at 18 to 24 months from the time an order is started. Our growth is about 12 percent this year, but we’re expecting softening now next year just because of the construction industry, not politics.

How does 12 percent compare to last year?

• It’s better. We were at eight last year.

• We were soft last year. Whether or not that was part of the uncertainty going around the election, I don’t know. I think it had more to do with the fact that some of our more important customers do a lot with the oil and gas industries, and their businesses are down. I think it’s about what was going on with their customer base more so than what was going on politically.

• We were down last year significantly, and we had a really hard time getting any long-term commitments from our customer base; they just weren’t ready to go. They would wait until they absolutely couldn’t live without something, and then they would order in quantities that were much smaller. 2015 was actually a very good year for us.

• We were kind of surprised that 2016, took such a dive. What we saw at the beginning of 2017 and towards the tail end of 2016 were better attitudes. We started talking in the fourth quarter about what can we get for next year. Can we get a blanket order for 12 months, for 18 months, for 24 months? Now they’ve started talking that way again.

• Which we didn’t get any of in 2016; they were not going to even talk about commitments. We’re really tied to the general economy of the country with our customers. If the economy gets better, we feel that our business will get better along with theirs.

• I look at five percent as kind of where we’re headed this year, as well.

The last two years have been pretty flat for us, especially with our OEMs. Where we’re seeing some uptick in our business right now is more with our MRO-type business, which is kind of interesting, because it was pretty soft there for awhile. What’s interesting is we’re also global, so we’re experiencing things that are tied back to our operation in Shanghai. We got accustomed to three percent growth every year, and all of a sudden last year reality hit with about a five percent growth in that operation, yet our operation in Europe was about a 16 to 20 percent growth. That was a newer operation we put up in 2011, so we’re just starting to see the fruit of our efforts over there as we’re going through the process.

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• It’s been interesting with our floor care. They’ve been soft. They project 10 percent comp on a growth from back in 2013. They were looking at 10 percent comp on a growth, and they’ve been soft until just recently. We’re starting to see some activity with them a little bit.

Is this sustainable?

• One of the things I heard, because we provide capital equipment, so it’s not consumables, is that our customers, even if they’re slow, they have money budgeted for capital improvement. That’s probably the first thing that gets shut down if they’re concerned about how much revenue they’re going to be coming into in the next couple of quarters. It seems to me like their optimism is up. We’re seeing more quoting activity pretty much across the board, across our other customer segments as well, so that kind of makes us feel a little better. We’re not willing to go out yet, we need to hire some people, and we’re having a struggle with that. We’re holding back on some of our own investments.

• It depends on the market. We’re in medical devices, and there’s still so much uncertainty as to where health care is going and what’s going to be funded and not funded. A lot of the health care companies we support are kind of holding tight right now.

• On the aerospace side, there’s some confusion as to whether or not it’s going to be supported or not supported. And then the DoD side of the business is basically euphoric right now, hearing huge numbers. We’re getting, “Hey, get ready. You’ve got to have all this stuff ready to go.” It’s this weird roller coaster ride.

• For us, the bigger challenge is where, federally, they’re going with the tax ramifications. Because we’re a privately held company, we support a lot of our capital expenditure through the ownership group. If taxes are lower, we’ll have more money to spend. We’ll be able to reinvest in the business.

If that doesn’t happen, we’re curious as to how we’re going to keep up with the projected growth in some of these markets without having the cash.

• You asked about, “Is it sustainable?” I would say for us, we have some large OEMs that do a really good job at forecasting. Historically, when they say, “this is about what we think the next 12 to 18 months is going to be,” they’re pretty spot on. After that, the level of visibility—the forecast—is almost nonexistent, so it’s really hard to get a sense of will it be sustainable or won’t it. Other than a handful of three or four large OEMs, the rest of our client base either isn’t able to or is unwilling to provide meaningful forecast data. The visibility we have for anything past a few months is iffy 77

at best, I would say.

• We’re in manufacturing as well, and yet we still are not seeing any forecasts showing up. I feel like people are sitting on their hands waiting to see how this plays out a bit more; understandably. Defense is usually a longer, slower process. We had 10 percent growth last year, and we’ve actually had negative this year for the first two months on the aerospace side of things—aircraft manufacturing. I don’t know what’s going on, but it isn’t positive.

Does that surprise you?

• It does. Orders have really tapered off. We don’t know what is going to happen.

When we first convened these focus groups, the economy was just about to go over a cliff. Someone at the time said the resulting changes would change the way we do business, things like lead times, terms, inventory. Was he right?

• Yes. Continuing is what (NAME) was saying; that non-willingness to commit. They’ll give you the small contract or the small order. They won’t say, “Here’s your one-year or two-year order,” and commit to it, even though they could pull it back. That’s what I see. They wait until the last minute. They don’t want to build. They keep their inventories really tight.

• Everyone’s just scared that it’s going to fall off the cliff again. I remember that meeting—my first meeting. We were sitting there, saying, “You haven’t seen it yet.” A month or two later, it dropped like a rock. Our customers were still set into a strong blah, blah, blah, but you saw all the other bad things happening—housing and some of the other industries.

• I think everyone’s still kind of scared. They’re still there, but the OEMs, whether it’s the individual purchasing people, they just don’t want to get stuck. We all got hammered with that recession. You might look forward to recession, but not one like that. That was endless.

• What happened to us during the beginning of that and through the whole thing was all of our contracts we had got nulled anyway. What are we going to do? There’s really not a whole lot. You can spend all the money to get a contract written in your favor but they won’t take that.

When it’s all said and done, they don’t need them and they’re not going to buy them; they’ll just keep pushing it out. They always put a clause in there. They can change the delivery until eventually, it just falls away.

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• Back to your prior point, I’ve heard a little more talk on the street that we might be on a kind of the precipice of much better times. But I think, personally, a lot of things are going to have to fall in line. The administration is going to have to get what they want to do done, and then that’s actually got to work.

• There are a lot of “ifs” involved: If they get the border done. If they renegotiate NAFTA. If they do all these things, then we could go back to the 1970s-type business. There’s a huge “but.” Is that going to happen?

Really, I think what everybody’s seeing so far is that it’s really hard to do anything in this atmosphere right now, no matter what.

• I watched an interview with President Trump, and I think maybe he’s right on. He thought he could put the best bill forward for, in this case, health care, and he’d get no votes from the Democratic side. There’s a lot of head-butting going on and a lot of politicking. If we can get past the politicking at the federal level, I do think there’s a really good chance the economy could actually start to grow, and everything will get better for awhile.

• I think the social pressures on the country and on society are having an increased, significant impact on the business world—for a long time. I think we’re more isolated between the two. With the general tone coming from social issues and general stuff outside the business world, it’s setting a tone and a focus that takes away from business. It takes away from productivity and jobs. There’s only so much energy available, and there’s such a significant portion going that direction. It’s really taken away from the economy and relief. I think that’s going to be a very large issue; to keep the energy we need within our market, within our businesses, going in the direction we need it to and not trying to counter what’s happening in some other area around us. There’s a lot of distraction that’s having a pretty negative impact on business and the economy.

• One thing, too, talking about coming out of ‘09: The concept of brisk mitigation is favored in our business. First, find your customer base. You can’t be leveraged by a few customers anymore. Far more attention needs to be applied to supplier agreements. Those things matter now, especially when things get tight. We also do a little bit more planning for equipment.

When things are slow and pick back up, then there’s a huge demand for equipment and a shortage. A little bit more preparation for when you are slow and for when things bounce back up; overall, risk mitigation is a concept we talk about all the time now.

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• I think it’s happening at the OEMs, too. If I look at our aerospace customers back to the contracts, they’re now asking for five-year contracts with zero percent increases. They’re trying to lock us in for the long term, with no gains at all to minimize their impact down the road of what they don’t know is happening; it’s that uncertainty principle.

• Yeah, and the med device space is going the opposite way. They used to do three- and four-year contracts, and now they’re going with oneyear contracts, because they want to be able to adjust quickly and either get more or give less on a short-term basis. It’s interesting to watch how different industries are handling the uncertainty in the economy.

Has it devolved to price alone?

• I’d say no. Price and quality. Well, maybe it’s just our industry, but they’re driving through really, really a lot of DFBNs. One customer is down to zero.

• Zero defib, yeah.

• Back to your previous point: We’re at the end of a five-year contract with two of our large OEMs. One of them, actually, they have asked for this in the previous contract, but they want a year-over-year reduction from now on. They asked for a 30 percent discount across the board.

• Now that has been an aggressive starting point.

• You can imagine our response. It’s stalled our contract negotiations for another six months. It’s the most aggressive contract language we’ve ever seen from what used to be a fairly good relationship with this OEM. This OEM, in particular, moves a lot of their work overseas.

It’s because they think they might be able to get it somewhere else?

• No. I think they’re feeling pressured they will have to bring manufacturing back, and they need to find a way to reduce their prices on the local manufacturers.

What about terms? Someone mentioned that (COMPANY) is requiring net 120.

• One of our customers, this might be the one you mentioned, demands a discount at 30 days and then 90 net. They want a two percent, which is really going against everything we’ve ever done. Thirty is net, right? And anything before that, we’ll talk about a discount.

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• Standard terms have always been one percent net 10, so one percent 10 net 30 is our term. Going back to the pricing thing: I have to agree that pricing has become very important. We get supplier scorecards from most of our customers, and in the last five to eight years, cost reductions weighs very heavily on our report card; so it’s having more weight on our total score. They like to see year-over-year reductions in cost.

• But the demands continue to increase. That’s the challenge. Back to the quality comments. They want the year-over-year reduction, but then they double the amount of time you have to spend inspecting, or the quality goes up to a point where you can’t afford to do that level of quality at the price they’re requesting. You think, “Okay, we’re going to take it overseas,” but I don’t think they’re finding it overseas, either. I’m not sure where the disconnect is, but it’s across the board; increase in quality expectations at lower prices.

• It’s short-sighted pricing in our industry. Our two biggest customers brought injectionables in-house to their facilities and they take the gravy jobs. Right now, instead of working together to create a healthy supply relationship, we’re fighting over resources. They’re not using the contracts effectively. When they have a tool that is an issue, they send it to us to fix because they can’t find someone to fix it on their own. They might save 15 percent this year. Long-term, they’re not going to save that 15 percent.

No matter what we do, we can’t explain that to them effectively. It’s short sided.

• Another new challenge for us is, a lot of our customers are requiring us to do managed inventory. We spend a lot of resources on managing their inventory, and yet they want a price reduction or at least no price increase.

We’re doing a lot of the work for them.

• Specifically, in the aerospace industry, I think that’s happening a lot more. My understanding is that came over from the auto industry, so what killed the auto industry has now made its way into aerospace. There are a lot of the consultants who worked in that industry who have dried up because the auto industry is not adapting that way. Those consultants now have moved into the aerospace industry. The inside joke is they’re going to kill the aerospace industry and then move on to whatever they take next.

Are you able to charge for any of that?

• No. • We’ve had pushback on that as well, but we are also seeing, “We’ll give 81

you a contract for the long-term part, but delivery is a lot shorter, and you have to manage it.” They expect you to make the higher volume for that pricing but then you’re shipping it out at a much lower volume. So, with the current usage rates, it might be a year before they take that high of a volume but they expect you to give them a price at that price point.

• We do have a couple of vendor-managed agreements that have triggers built into them where after a certain amount of inventory is kept over a certain amount of time, we can charge them. We have done that. We get those kinds of requests on a fairly regular basis, too. We’re selective about which ones we will accept, but we also try and work in those triggers because you can be upside down pretty quick otherwise.

• We’re progressing in our lean journey, so we’re trying not to hold too much inventory, but it’s the frequency of shipments. They all have ridiculous min-maxes, and you don’t know. You’re looking at their forecast and when they’re going to pull. They’ll be at their maximum, and they’ll pull in one day. Boom: Then you need to ship, and then you’re constantly shipping. Almost every week, you’re shipping small quantities, which was not the way the contract was originally set up—all those shipping charges and everything like that.

So it’s the cost of doing business now?

• I think so. We, as a small company, need to adjust to that. I don’t know how we’re going to change the large OEMs and their practices.

• We had some key customers who, basically, lost suppliers because of bankruptcies and stuff back during the recession. All of a sudden they start coming back at us about our financial conditions, yet they’re still pushing for price reductions.

• Where’s the happy medium for when you get to the point? Do you give them the purchase order to buy it? Or do you just say, “I can’t sustain it at this point in time?” If you’ve got a unique product you’re supplying to them, you could be hurting them on the other side as you go through your process too.

• Question for you. Do you have some of your customers asking for financial statements?

• Yes. • We do not give it to them. What we’ll do is get something from our 82

accounting firm or the bank that shows we have the financial conditions to support them.

Another legacy of the recession has to do with banking, Dodd-Frank, right?

• We actually got away from the big guys and went to a smaller bank.

They were more willing to work with us as we were trying to grow our business. When we went to Europe, they were willing to help us finance equipment to go to Europe, whereas the big guys said, “No way,” because it’s out of the country.

Are they more involved?

• Yes, in a positive way. It’s the open communication with them, so they understand what we’re doing.

• We were able to refinance some debt last year for equipment through a community bank, which really surprised me. They came back with a deal nobody else came out with regarding rate and terms. We have equipment where some big banks—just equipment finance companies—they rolled everything into something that made sense for us to jumble on. The cash flow over every month was tremendously good for us. Now, we’re getting a lot of contacts from the bigger banks. The big three are hammering on us, “Do you need anything?” I bet I get about 10 calls a day from funding companies. I don’t take any of them anymore, but if you need working capital, a lot of those are working capital calls. They want to give you money. They want to give you money. I think maybe there’s still a lot of money sitting in a pot.

• Well, part of that are the reserves; some of the stuff that is Dodd-Frank and what have you, it’s come through that we’ve had to hold back and put more reserve in. I would tell you that things are getting a lot more competitive. Again, there’s certainly money out there, especially looking at stuff. We have become more accommodating or flexible. Case in point, you were talking about terms earlier, 120 days. Where historically, if your terms are net 30, you go three times, that’s 90 days. Anything over 90 days is deemed ineligible for the working capital, like credit. Well, now we have to do some one-off deals with some of these clients. And, again, as long as you guys are comfortable knowing that, maybe it’s one of the bigger OEMs or whatever, then we get a little more comfortable with that too going on 120 days with something like that. We’ve had to become more customized—probably the best way to describe it.

Let’s talk about some heartburn issues. First, competition from 83

foreign sources? That was kind of a big one a few years ago. Is that still around?

• My business hasn’t seen that lately. We did have it earlier • Yes, the re-shoring, I think.

• Yes, that’s a part of it.

• Well, we’ve certainly gotten some things back from China. But I still worry about, going back to your earlier question, Trump screwing up trade and just making a big backlash. There is some unfair trade. That’s one of the things he’s talked about doing, and it will really mess things up.

That, and the dollar getting stronger and stronger. As far as manufacturing, because we start raising our interest rates, the dollar’s going to get stronger.

That just makes us and our customers less competitive overseas. Of course, their competitors won’t be competitive here.

• We lost a significant client this past year, going to source in China.

• And all about price?

• Yes, we’ll stay close to them for the next couple of years and see how it works out.

• Do you consider Wisconsin, Texas, and Florida foreign? I think that’s been our bigger challenge—states with a lower tax rate on business. It does make it difficult, sitting here in the state of Minnesota; great people and a great environment, but when we’ve got margin expectations and I have to factor in almost double the state income tax that you would pay in some of these other states, it prices me out of the market. We’ve lost probably two or three large opportunities recently to states with a much lower tax rate, and the only thing I can speculate is that factors into their pricing, and then it changes how we compete.

Another issue: How about the cost of healthcare? Is it just the cost of doing business now?

• We’re seeing the health care costs that we have are impacting wage increases. I think part of it is it’s the cost of business. We were able to mitigate an eight percent increase last year versus double digits, but it is having an impact on overall costs and expenses to our employees and their families. It’s impacting what their wages are.

• It’s the cost of doing business—one thing we look at is, it’s very high.

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It pushes us to do more automation on stuff. On the other hand, we’re under 50 employees right now, so we’re community-rated; that holds our rates down. As soon as we get above 50 employees, we get a lot of older employees with wide health problems. I hate to think how high it would go up—might be 50 percent to the 75 percent mark. If Minnesota and the state and the fed are all online with that, it’d get us more coverage.

• At 50 people, you really don’t have a good enough sample to be statistically rated, so it’s a good argument.

• Our workforce, like everybody’s, got older, which has a negative effect on health care costs.

• Plus, say you got married and had families. 15 years ago, or 10 years ago, even, our plan was really tailored toward the single person, and it was a great plan for them, but it really lacked on the family coverage, so we’ve had to redo the whole plan which added a lot more cost by bringing on dependents.

• Plus, you have families instead of singles.

• Right. We have lots of families. We don’t have any singles left.

• Well, I got nine, eight days.

• We do have some uncomfortable conversations with our employees about being healthy, as well. That’s on us; wellness programs, corporate fitness, nutrition, weight, and smoking are what we offer. That’s on us.

Outside of the cost, that’s something we can’t control. All those things are on us. It’s uncomfortable for people to have those discussions in the workplace, but if we want costs to come down, we have to address those as an employer.

You can’t make someone be healthy. How you do it?

• It should be positive. It should be proactive. We see people, when they get into health and fitness, they’re better employees. They’re happier. It’s a compounding effect. I, personally, look at corporate fitness programs, bringing in trainers, and consistently working with your insurance agents.

We need to be way more proactive on that front, internally. That’s on us.

• We did a couple of things about three years ago. We, along with (COMPANY) and three other larger employers in Albert Lea, opened our own health clinic for our employees. We had nurse practitioners so, if you 85

or someone in your family needs to be seen for a runny nose or an earache or whatever, that’s where you’d go. You don’t go to urgent care. We also had every employee do a bio marker physical. There are five different bio markers: smoking, weight, cholesterol, and a few other things. For every marker you hit, you earned more money toward your deductible.

You could earn up to $2,000 dollars a year, which ends up being direct deposited, basically, into your health savings account to help drive health behavior. It’s worked. We had a two percent increase last year in health care premium.

How about the cost of employee salaries and benefits, not including health insurance? How much of an issue is that these days in terms of operating a profitable business?

• That’s been huge for us.

• We’ve had to increase all our production wages in order to keep the people we have and attract new people. A temporary workforce has gone up as well.

• We’ve had to adjust. We’re not like a machine shop, I mean skilled workforce, but even without our people, we’ve had an increase at least anywhere from a dollar, dollar and a half per hour.

• First off, to get bodies in from the temp services, let alone retain people, we had to go through a process. We’ve seen a lot of that, especially in the last two years. We’ve made almost two to three adjustments on the base wages just to retain people as we’re going through a process and also to stay competitively priced.

• The leverage has shifted back to the employee.

• Everybody grabbed their seat belts to strap down after the recession and wanted to just make sure they had a job. There’s a much-increased level of confidence to see what else is out there—to move to other places that are palatable in the market.

Are retiring boomers having an effect on doing business now?

• I think, down the path, the biggest challenge is going to be that knowledge transfer. It’s something we see a lot of with our suppliers— where they’re trying to cut costs—and so they’re getting rid of all the knowledge base. Now, all of a sudden, they can’t service us on the other side, so it’s an interesting cycle for us.

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• We’re spending more time training our people. I’m traveling more with our younger people to try and educate them and talk to them about where we can use our products. Again, when you have 40 to 50 years’ knowledge base, and you’re trying to pass that on, it’s not that easy all the time, but I think it’s important that it gets transferred.

• It’s also driving up our costs because we have to bring on multiple people to try to take that knowledge out of a long-term employee.

• Somebody I know has one to two years left, so they take that out.

I’m actually carrying double head count for a while to try and pull that knowledge out, which is the only way because when you grow up in a business, you get some of these individuals who have done every aspect of the business for 40 years.

• The minute they say, “I’m done,” and they walk out, that collective history—knowledge, what works, doesn’t work—walks out the door with them.

How important is training the next generation of supervisors and leaders?

• We do a lot of cross-training right now on their skills matrix. We put some incentive behind them. The incentives are there for retention, but at the same time, cross-training so when one of our departments gets soft, we’re able to move bodies around more freely as we build our process.

We’re fortunate we’re not a union, so that helps a lot. If you’re a union shop, sometimes those can be a real pain. One of our important values is growth, and growth isn’t just the growth of the company, it’s the growth of the individuals as well. We put a lot of emphasis on that.

• We have a formal rotational backup program for all the supervisors and an established apprentice program for people in the tool room. It’s in our documentation. It’s part of our processes. It’s a great process, actually. It’s improved everything. It’s a net positive.

• Just on training, quickly: We’ve spent a considerable amount of money putting a lot of our training online so it’s repeatable. Too often, what we’ve seen is, we bring a person in, we have a great training program, and that individual leaves. People get trained, and then nothing else happens. We are basically creating an online university for those types of programs we need internally so that we can sustain them. When that 40-year individual walks out, we’ve got that covered.

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What about the skills gap?

• The most important one I see is the mindset that you have to go to a four-year college or a four-year program for a career. It’s the lack of knowledge of what the industry is, because it’s not seen. I think there are gaps and places in machine tool programs around the state and the country that have vacancies, so it’s not the capacity to train from the entry level. It is a matter of getting people to those programs. Historically, there’s been too much of a focus on training second and third careers because of job layoffs and those who are unemployable try to fit in this market because there are jobs. I think it really starts at the middle school, junior high, and the high school as far as the education system goes in refocusing their efforts. Their purpose is to get you educated, be productive, a community member, and have a career, not to teach you to graduate high school, go to college, graduate college and then worry about what you’re going to do for a career. I think there is a focus change that has to happen.

• I think if you follow the money trail, and by money trail, I mean what we’re funding as a state, you’ll find that very little funding goes into that industrial arts programs at the high school level. We spend more building football stadiums in this state than we do helping our kids have a future. The last time I checked, not every kid in high school goes on to play professional football, so I get frustrated by that. A great example is we’re in the back yard of our local high school—literally in the back yard.

They could walk from the back door of the high school into our building.

During manufacturer’s week, we had a big deal. We wanted them to come over and tour our building. They couldn’t do it that week because it was Homecoming Week, and they didn’t want to disrupt the Homecoming activities that were going on so kids could come over and see what’s going on in the building. The next week, they came to us and asked us for a donation because they’re building an athletic facility onsite. I said, “Absolutely not. Get out of here.” You can’t have it both ways. We’ve open enrollment, but when you look at open enrollment, nobody open-enrolls for an industrial arts program. They open-enroll to play hockey or football somewhere. But, again, we’re not helping.

Do you have a sympathetic ear in that high school?

• Not in that one. What we’ve ended up doing is playing close enough high schools against that. We’ll send our funding, our people, and our time with the competitive high school right across the interstate because they’re willing to listen. They’ll catch on, but it’s just frustrating.

• Part of that is what the state does. (SCHOOL) had, at one point, 90 percent of their students taking at least one technical technology course 88

during their career, but then the state changed the optional class type thing.

• All of a sudden, they took music or band. They still have a great program, but they’re really missing the chance of having that opportunity for a kid to try the class out and see, “Hey, do I really like this?”—whether it’s drafting or wood shop or metal shop or fixing stuff. You miss catching them when they’re young because of the way the structure is towards going to the four-year school.

How important is the skills gap to your ability to run a profitable manufacturing company?

• Right now, the students are about a 60 percent level to where they were 10 years ago.

• 40 percent of their abilities after two years of school in the last 20.

• My brother’s been helping with one of the first robotics teams in the high school, and he’s a retired tool and die maker. He gets so frustrated with these kids. They don’t know which end of the drill to hang onto.

They don’t know how to center punch something so you can drill a hole— fundamental things—which end of the file to hang onto.

• We’re really focused on the very young: 16, 17. I have two children.

One of them is a junior in a four-year college, and one of them is a firstyear at technical college for machining. The difference between those two is my son knows exactly what he’s going to do after graduation, two years away. My daughter has now realized that graduation is just over a year away, just like my son, but she has no clue. She’s like, “Oh my god, this is getting real. What am I going to do when I have this degree in my hand?”

My son knows exactly what he’s going to do. He’s going to come back and work for me.

• Yes, because he’s up in Alexandria and they get multiple job offers within their first year.

• That’s a point. One thing is, I’m bullish on more rural areas. I think it’s easier to connect with the technical schools, but it’s a completely different conversation in a metro area. Candidly, the traditional public schools, I’m a huge proponent, but they’re not agile. They’re not moving their curriculum quickly. My recommendation is to work with public/private partnerships like Achieve Minneapolis. They have the wherewithal, the programs, the experience to implement programs to effectively change that. We should all be showing up at career days to talk about manufacturing. That’s on us.

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They have open space for that. Locally, let’s look at those private/public partnerships. Those are the connections we need to make.

• I’m rural, as well, but we run into what the state funds and that kind of thing.

• And what jobs are, and they’ll say, “Why do you need to do more.

We’re doing as much as we can. We’re all here. It’s a business. We’re going to come out and pay up for what we say we want.” There are certain things they could be doing that would make it more viable for us to, say, do the career exploration in high school. If you don’t need four years of a foreign language, if you don’t need some of these things, do you really need them to get into four years’ of college? Get into this college? If you don’t, what’s happening is they’re taking those classes, and it’s stopping them from taking classes that may be there to give them an idea of, “What do I want to do for a career?” That’s hurting them.

• Some of you may be involved with advisory committees at some of the technical colleges. Those instructors have to spend so much time going over recruiting their students that it’s kind of crazy. It gets in the way.

Teachers and instructors, once they get students in there, they’re pretty good, but they have a hard time. I know like in (SCHOOL), they go out to all the small communities and talk to high school kids. By the time they’re seniors, it could be a little too late. If it’s tenth, eleventh grade, you can do something there.

• Historically, you need somebody who’s passionate about their career to go out and do the recruiting. Honestly, the business owners need to be out there doing their community program.

• This person they’re going to be teaching; just like their coach. A coach is going out recruiting and they say, “I’m going to go work for that coach.”

The teachers are going out recruiting. A student says, “Hey, I like that teacher. I like the program. I can go over to that school and learn.” Just like we’re trying to recruit people to employ us—it needs to be the right person—somebody in an admin role who is trying to say, “Here are the jobs, the wages you can get, and this is what you can do.” He isn’t going to spur anybody’s interest, because they don’t know anything about it. If it does, it’s going to spur interest, because I need to show a high-dollar value to get them interested. I don’t want to get interested in this career because of a high-dollar value. I want to be interested in it because it fits what they want to do and they get enjoyment out of it. That’s the key piece, I think, we’re missing.

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An economist told me a couple weeks ago that there would be no skills gap if manufacturers would pay what they needed to pay to attract the workers.

• I’d say, “Hey, you’ll get bodies in the building. It doesn’t give you the skill to get the work done.”

• It’s about productivity. If we’re getting price pressures from our customers, it’s pretty hard to balance a line with what you can afford to pay your people. If they can show you through whatever management or production system you’re using that they can help increase your yields and take down your costs per person so those profit dollars per employee is going up, then you can justify it.

• I would tell him, “We don’t have low-paid, low-skill workers. Our pay is high for the area we’re in, and our people are skilled. There is no room in my company for an unskilled worker.” We may have entry-levels, which have some ability to learn. That’s a different story, but there is no more factory worker. There is no more sitting in front of a machine for 20 years doing the same thing. We all agree that generation has passed.

• The jobs are gone, but careers are left. There’s obviously fewer of them.

Trump is never going to get all of the manufacturing jobs back, because you can’t come out of high school and sit there and run the drill press and support a family anymore. You can go to technical college, become a good machinist, and do that, but you can’t do it out of high school.

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STUDENTS

FOCUS GROUPS

St. Paul March 20, 2017

St. Paul College

What was your path to St. Paul College? What or who influenced you to come here?

• Prior students who have been here and are now in the career field they came here for – just recommendations coming here, and stuff like that. . . .

Did you know, early on, that you wanted to do that? You wanted to come here?

• Not at all. It was not until I was just about out of the military when I decided where I wanted to go.

• I like working with my hands. I was going to go into greenhouses – either that or welding, and I picked welding. We had our own greenhouse.

The welding was a basic high school welding shop. We had a couple of booths and a couple of [BRAND] welders. We were a private charter school. We were publicly funded and so we did what we could to get by.

• I tried doing everything else: manufacturing-wise and assembly, some design work and different things, but machining is a core of a lot of that stuff.

Sponsor: Productivity, Inc.

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• I received a taste of machining at my last job and started looking for a program. I assumed it would be longer. This is three semesters with really thorough instruction. I looked into it, found it, and thought it was a good deal. I know this used to be [SCHOOL]. I used to go here and found out it is a college now, instead of a technical school. They had the program available. I live in [CITY] and it’s close to home.

• A long time ago we had a program in [CITY] where we could spend half the day at the [SCHOOL]. It was there I took welding, and I enjoyed it. I always thought, “You know, some day when I grow up, I’ll take the real welding course, you know, the full-fledged one.”

What kinds of things did you do in between?

• School, lawyer, computer tech, computer consultant, networking. . . .

Finally I said, “Okay, I’m done with all that crap. I want to go do welding.”

How did you select this particular school?

• There were two factors. Its location was probably the primary thing, followed by its reputation; it was the best school within a reasonable distance from my house. Another thing is I wanted to get into robotics.

None of the other schools had any robots. I was looking to integrate my computer experiences with welding experiences and troubleshoot while dealing with robots, but there’s not a lot of that. Unfortunately there’s not a lot of that here, either. It is the only school with a robot.

• I jumped out of high school and went to [SCHOOL]. I spent about a year there and found I just couldn’t get a lot of what I needed from my teachers because of how big the classes were. I strayed from that, tried working full-time at [COMPANY], and performed cross-country forklift operations. I did some web designing on the side. I figured I’d give school a shot again. I tried going for carpentry at [SCHOOL]. I tried doing some fun stuff at [SCHOOL], but that didn’t work out very well either. This one . . . the classrooms are small enough for you to learn a lot and get enough attention from your teachers. That’s perfect for me. I love the hands-on. I love communication. It’s not just, “Turn to page twenty and there will be a test tomorrow.” I love it. They will not leave you high and dry just so you can learn from it.

• In high school there was more of the “Read this by yourself and you’ll have a test on it.” Here, my instructor, we would spend an extra hour in the classroom if we need to; if we didn’t get everything. We just finished a project and half of us didn’t understand it. He assigned another project so we would get it. That has not really happened to me before. . . .

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Who else, college?

• I went to [COLLEGE] for two years, moved back here, and went to [COLLEGE] for a semester.

• [CITY] school? I was pursuing a degree in education for a while, but the whole four-year college thing was very expensive, and I figured out that wasn’t really what I wanted to do. After a while of trying it and not feeling like that was my spot, I did a little research on welding, in particular, and where a good place to learn it would be. [SCHOOL] has a lot of awards and accolades about being the best place around here. I decided to try it out and have really enjoyed it.

• I’ve been a cook since I was thirteen and I just turned thirty-five. I am a state-certified sous-chef, head chef-level, and federally through the [COMPANY]. I don’t want to do it. I feel like I’m retiring. I’ve been doing it for too long. Besides, my dad was telling me, in his last year of his life, “You need to stop doing what’s easy, comfortable, and what we’ve been doing for generations. You need to do what I did and break away from it. Become a designing engineer. Use your brain. You have the brain power.” I said, “I don’t want to sit at a desk.” But, while we were doing in-home hospice care, I was really thinking about it. I wondered, “How can I transfer? I should go to the trades. I want a new career. What were my favorite parts about cooking?” I decided fire and chemistry were my favorite parts and so I concluded, “Well, then, welding.” I enrolled in [SCHOOL] and I was able to see my dad smile one last time when I told him that I enrolled in there for welding. He was minimally conscious, but he received that little “proud daddy” moment. After he passed I ended up moving with my kids to [COUNTY], to a friend’s house, and joined the workforce. They asked, “Why don’t you just wait?” I said, “I’ve been waiting forever.” They said, “No, no, no, just wait. Join this [PROGRAM] program. Get a taste of the sampler and see if we can’t . . . Why not go to school here?” I replied, “Because I already have everything done. I’m supposed to start.” They insisted, “Nope, just try it.” I went along with it and then I fell in love. I transferred here and started in the spring instead of last fall.

There are always fewer women than men in these classes. Do you think there will be more and more women getting into manufacturing and the trades?

• I don’t know. I don’t know how to answer that because, I mean, I was a cook. I was surrounded by men. It’s not really much of a transition for me.

It seems as though there’s less stigma about it nowadays. The younger . . . but that’s a generation below me. Maybe the younger kids. I have sisters 94

who are younger and they’re in the trades. One works for a wire company.

The other one works for a medical supply company. They didn’t even think about it being, when I was their age, about it being a guy-versus-girl trade. They realized, “Oh, there’s money here, and I’m able to do it, right?”

I think “yes” is the answer to that question, because there’s less concern about . . .

• . . . what age, sex, or body type you have. You can fit in anywhere, no matter how strong you are.

• I’m not trying to be sexist or anything, but I feel like our history is more of men in the trades. I feel like you have to be a certain kind of girl to break free from the norm and get into a trade. I believe that women are going to get into trades; hopefully, at least.

• I went to [COLLEGE] for one semester while trying to take generals and figure out what I wanted to do. I hate sitting in a classroom. I wanted to get hands-on because I like to do stuff. I don’t want to work behind a desk and sit there all day. My brother, he’s kind of a businessman, he said, “I’m going to [COLLEGE] because my friend goes there. He says it’s pretty good . . . and he had a job, and that was important to me.” He looked into it with me; at all the best schools and price points. This is the top of the line school in my area, for sure.

What inspired you to go to [COLLEGE] first before trying this?

• It was really close by. I thought I had to do something school-wise because you’re told in high school, “You have to get a degree,” and all this stuff. Unless you gravitate toward being in a trade or doing that kind of stuff in high school, you don’t really know what’s out there, how much money you can make from it, or that it is a good living. You don’t know until . . . in my case I wasn’t too late, but, if I would have known that when I was eighteen, I could have been making money right now . . . a lot more money. . . .

• My dad and I were looking into this school, we found there was a tuition assistance program, and I hit an age where I could qualify as independent. That gave me the opportunity to jump back into school and get federal grant money so I could go.

• I wanted job security; that was first on my mind. I thought, going through UPS and forklift operations, that the most I was going to make was $45,000, at best, and they could replace you with anybody. In five minutes somebody can learn how to run a forklift. They wouldn’t know how to 95

operate it well, but they’d know. Finding something out there where there was a career you can get into . . . It’s hands-on, it’s reliable, and I appreciate that. Pursuing that is what I did when I found it.

• Doing the cooking, with management taking so long, I got stuck in second shift. My kids were finally old enough to recognize, “We don’t see you anymore. Where are you? You need to stay home at night and tuck us in.” I realized, “Ooh, I have to find a job which will let me do that.” I knew right away that I was going to . . . even if it was line production, I was going to have to do some kind of factory work; because they actually care.

They genuinely care about their employees more than the unions do. They help make sure families are taken care of. I determined, “Well, I’m going to need a day job and weekends off. I’m going to need enough money for the kids and me to survive. I have to do this. I have to get into some kind of factory work, or some trade, where I’m required to do day shift. I could get babysitters to watch my kids at night for the second part of my shift, but I want to see them grow.”

• Kind of going off of what he said, the job security portion, when you’re in the trades you are your own job security. If you’re CNC, or a good welder, you can go into business on your own and be quite successful.

In fact, it’s one of those career paths where you can start working for somebody, accumulate a little experience, and then you can take a step out into the industry on your own. I know a couple of people who are intending to do just that.

• My dad owned his own machine business when I was younger. He eventually sold it, but I grew up around CNC machines my whole life and I thought they were cool; you get to tell a robot what to do and it makes parts. That’s what I do.

• I have a bunch of friends who live on farms and all you do is fix stuff yourself. A bunch of my buddies have parents who welded, so I tried it there, tried it in high school, and I loved it. I heard [COLLEGE] had one of the best instructors and the best program. I asked, “Why not?” I originally was going to apply to [SCHOOL], but then I switched over to here.

• I grew up around manufacturing my whole life. My father is on the construction/agricultural side. They also did work for [COMPANY]. They did everything from hydraulic stuff to water scale CNC stuff. Now they’re doing stuff for [COMPANY]. I watched, growing up, because he started with this [COMPANY]; when it was this tiny little thing, half a dozen people, and now it’s a half of a million square-foot facility with multiple 96

government contracts. The owner started out with a Bridgeport and a LaBlonde in his garage in [CITY] thirty years ago. It’s just one of those things where there’s a genuine opportunity, not only as an owner, but as an employee. You can actually push technology itself. I think that’s what got me into it: watching my father start with some little company, develop a bunch of product, and then this thing’s growing. That’s what pulled me into it.

• I was actually home-schooled but my local high school offered a program where you could take high school classes at [COLLEGE]. One of those offered was called Auto Dismantling. Once a week we did welding.

It wasn’t a very big area and I didn’t really care. At that point I was just looking forward to welding once a week and then it took off from there. I decided to come here because a teacher talked about [COLLEGE] a lot if you want to do welding.

• My experience might be a little bit different. My parents don’t come from any sort of manufacturing background at all. My dad was in advertising and my mom was a lawyer before she passed. When I got out of high school it was definitely, “You will go to a four-year college and get a degree.” Coming out and saying, “No, I’m going to go to a two-year college and will get a technical degree,” definitely was met with some skepticism at first. I think there’s a lot more information out there now about how lucrative this career path can be. After showing my dad a few resources he was convinced pretty quickly that it was a good move.

When we interview manufacturing executives someone will always mention that one of their obstacles to recruiting new employees is that parents, teachers and school counselors are always pushing for the four-year degree. What do you say?

• That’s why I’m finally here; because I’ve done [COLLEGE] out of high school, [COLLEGE], [COLLEGE], and [COLLEGE] here. The only reason I went to [COLLEGE] out of high school is because they said, “You must get a four-year degree.” The good thing here is I’ve been working with [NAME], the dean of our school, about . . . I’ll end up with an Associate’s degree because of the accumulated knowledge. Something [COLLEGE] does is work through Associate-degree stuff with you, as well as your diploma or certificate, whatever program you’re in. It’s another piece of the puzzle put together to take to somebody and show them.

• A lot of high schools don’t push the technical stuff anymore. I lived in [CITY], ended up in [SCHOOL] because my parents worked there, and then I came here. I often joke with people that the only thing they taught 97

me there was white-collar crime. If you go there, they’re going to be doctors, lawyers, this, that and the other thing . . . and there’s a small group of us there who were always hands-on types. You could always pick them out. We’d basically be outsiders, and luckily they started a little program at [COLLEGE], but it was once or twice a week only, fixing old cars. If that wasn’t your deal – I know a couple of guys who really wanted to get into welding or things like that – you didn’t really have the opportunity.

• I agree with that. If you’re not really in a shop setting the majority of the teachers will push you to a four-year college. Whereas, if you were to sit in a regular class and not a shop setting – English or something – they’re going to push you more towards the four-year. If you go to the shop setting part of the school they’re going to push you more towards trades and stuff like that. You see a majority of the people in the high school I went to who were not in the shop setting. They all got pushed. I have friends who are going to [COLLEGE] and they don’t even know what the hell they want to do. They’re just getting into generals. Everyone who was in the shop setting went into the trades, they all know exactly what they want to do, and they enjoy it.

• I took that bit for granted. Because we moved around so much I was always in the alternative schools; the bad-kid schools. Granted, I graduated with twice as many credits as I needed because of it, but, because I was in that environment all through high school, it was always “Pick a job. Go to a school that will be good and one that’s short enough to where you don’t lose interest. Then, work at it for five to ten years because you’re going to change your mind.” In our environment they weren’t saying, “You’re going to pick one career for the rest of your life.” They said, “Nah, just go do something you’re going to like for a while and, if you change your mind or whatever, go to school again.” That’s what a lot of us kids from that environment did. I say “a lot of us kids,” because I was from a small town. There were sixty-nine kids in my graduating class. There were five different towns that collaborated and put together an alternative school-type system in [CITY], but we all attended at night.

• I think it’s difficult, too, because high school . . . every teacher . . . My wife is a teacher, and all teachers are required to have four-year degrees.

I think sometimes they miss the value. This is kind of off-topic. They miss the value of a two-year degree, but the school wouldn’t be there if it weren’t for trades and manufacturing.

• What happened to change that? Back when I was in high school in the mid- to early seventies, they actually pushed me toward the technical thing.

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I did the welding but I knew I wanted to go to college. I wanted to get a four-year degree. I did get all kinds of schooling. I’m hearing all the people now saying they don’t even have a shop. We had a bell shop, a wood shop, an auto shop. . . .

• I think a lot of it is financial, as shops cost a lot of money in a high school to run with all of the materials and everything you need. There’s possibly pressure from parents of the children at the school as well, pushing them towards four-year degrees, I don’t know.

• The statistics show that people with a four-year degree, over a lifetime, make much more money than those that don’t have the four . . .

• . . . For now . . .

• Now that you mention it, I never really realized how set up it was, how great of an opportunity I had, because [SCHOOL] has wood, metal, automotive, and everything like that. They also have an academy class and stuff. I never thought about if you go to a smaller school, or more of a rural school, that you’re not going to have the opportunity because you’re going to be pushed more towards going to college and getting a four-year degree.

• Yeah, I agree with that. I went to three different high schools. I started at [SCHOOL] for my freshman year and they were pushing, “Four-year college, four-year college.” We had a wood shop, but you made basic stuff.

Then I went to [SCHOOL] and I absolutely hated it even though we had a wood shop. Next, I went to [SCHOOL] and it’s basically cut down the middle; one side is a whole “shop-ish” area, so, if you had a shop teacher, they’re saying, “Go into trade.” If you had more of a math or English teacher, they were saying, “No, you need to go into a four.” It’s kind of leveled out, but it’s also, I think . . . nowadays you have to go to a school that has trades in it if you want to go to a trade. Not a lot of people can do that, because there are not a lot of schools within their borders.

• I graduated from [SCHOOL], just down the road, and the closest thing we had to a metal shop, or any other kind of shop, was the technical theater kind of thing that was tucked into the corner with some hand-me-down saws and everything else. God, I wish there were some counselors who even bothered to suggest going to technical schools.

• They were aware of it, but it was frowned upon. You’re going to a private campus school, so it’s assumed, with your better education, higher pay, and the money you’re putting into it, that you’re going to be the better 99

student who can go and get a four-year degree and then keep going up.

This is short-sighted in the fact that the parents might have had higher aspirations, but I had my ten-year reunion and the number of people who are now at [COMPANY], [COMPANY], and [COMPANY] moving boxes is phenomenal.

• I earned a degree, a bachelor of science in technical theater, from [SCHOOL]. I bounced around doing what I loved, and that was doing all of these other things – theater-related stuff, because that was what I was familiar with. Eventually I decided that not having benefits, a 401K, or any sort of retirement future, was terrible. I took the skills I had and moved them into a different field that had those possibilities. Designing stuff, making stuff with my hands, transitioned into making things with metal instead of with two-by-fours.

• I went to [SCHOOL] and they had a lab with 3D printers and stuff like that. The counselors never told me to go to a trade school. They always told me to try and be an engineer or go to a four-year college and stuff like that. My shop teacher knew I didn’t like school, so he mentioned, “I think a trade school would be perfect for you.” I went to a trade school. I was never told once by a counselor to go to a trade school.

• I was homeschooled for pretty much all of my life. I took some courses.

What really helped me into the program was PSEO. That was definitely the big deal. I was going to opt-in [SCHOOL] and ended up taking an auto body course. I did some welding in that one. I enjoyed the welding and the auto body, but once I decided to go for the full degree, the welding portion was fantastic and I loved it. The auto body, not so much. It was not my thing, I don’t know. I wandered around for a while, did a bunch of side jobs, and worked at different factories. I was a sander for a while: sanding chairs, and stuff like that. I finally came back here, and the thing that got me the most was that the PSEO helped me find what I enjoyed. The low prices . . . I thought, “Well, if I can get financial aid . . . I’m not looking at that much . . . It’s affordable and it’s something I can do . . . That makes it easy for me to be able to come here and do this.” That was what really got me into it.

How many people know what company you’re going to work for?

• I have friends who are working over at a place near where my parents live in [CITY], called [COMPANY].

• A lot of welders there.

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• I did three different jobs. I’m doing one right now that I did while I went to school here, which was great. [NAME] is actually the guy who you go to and say, “Hey, I’m kind of looking for something.” He’ll help you find a job. That’s worth my tuition right there.

• No, I bounced around. I worked at [COMPANY] for six months, then at a sign company for four or five months, and now I’m working at [COMPANY]. I still don’t know what I want to do. There are a lot of attractive things about the union shop and there are attractive things about working in a fab shop.

Is there anyone here that has any doubt that there’s a job awaiting them when they finish?

• No doubt, but I plan on building resumes at the end of April or beginning of May, so that I can time it right. I was going to do informational interviews because this is new to me. I don’t know anything about the companies, the work environments, or anything. I was going to do that and try to find one to work at this summer. My sights are set on maybe sweeping the floors, some line production for a semester, but, still, just getting in there and actually into the field. I’m going to school for it and I have a lot of experience though it’s in a completely different field. It’s with people, managing people and whatnot. I have no doubts that, between experience and going to school here – especially with the references I hope to have from the staff here – it won’t be a problem at all.

• I don’t see an issue with trying to find a job as a welder or for any manufacturing. It’s not the type of manufacturing or anything like that.

There’s a shit-ton of positions and they’re all open. I’m linked to a website and I get an email for every job that pops up for welding. There’s not enough, my personal belief, welders for the jobs that need to be filled.

• But then you get that picky type of person, “Oh, I only want to be a [blank] for this company. Oh, I can’t find a job.” Being a welder, you’re very versatile as to what you can do. There are multiple types of welding: TIG, MIG, short art, and spray. It’s people getting the idea they want to do just one job for the rest of their life. It just doesn’t work out.

What surprised you about being a student here?

• In my high school I felt like the teacher didn’t know what the heck she was talking about. I felt like my teacher was uneducated about welding. I hate to bash on the school, but when I came here it took me by surprise.

• Yeah, I went to HVAC school before coming here to [SCHOOL], and 101

most of it was just watching videos; not actually applying it to a piece of equipment. Here you actually apply it to real-world stuff. It’s mostly handson, like 95 percent of it here with welding, whereas HVAC it was like 40 hours of lab in one semester and that was pretty much it. Weld times . . . you want to actually be working on a piece of equipment so you really didn’t get any hands-on. I went to HVAC school, earned my degree, and I found that wasn’t right for me. I came over here and it’s a completely different atmosphere.

• One thing I like, because you reminded me of it, is that when we are in class it’s kind of like we’re on the floor, you know? We’re informed either the day prior, or the Monday prior, what we have to get done. We clock in and we do it. You hear whether we choose to actually take it or not.

Break time, or go eat? it’s just like in the real world. We’re being put in an environment where, although we’re in school, we’re still working. It’s just a short, part-time, rather than a full-time position, but it keeps . . . I was worried that, going from cooking sixty hours a week, I’d have a hard time adjusting to the school environment again. I feel like they’re keeping up the work environment as we go along.

• If you have the equation . . . what’s the word I’m going for here?

• Formulas.

Formula, thank you.

• It’s simple enough to understand. I know we had one guy in our class, when we were working on tubes and trying to find the surface area of them, he was having such a hard time trying to grasp it. There are two circles you have to work with, but, after an hour of explaining, he finally figured it out.

It takes time, but math is simple.

• I took calculus in high school.

• I’m here from the military where I was an infantryman. I didn’t want to go to school, couldn’t apply myself to school or anything like that, at the time. I was honestly impressed with what my actual math and English scores were.

• Yeah, that basic arithmetic, I scored 106 out of 120. For welding, a twenty-six is what you’re supposed to get and I was really surprised.

The proctor commented, “That’s a really great score, 106.” It’s just basic math and then you have reading and all that stuff. I’ve already taken those classes, so I didn’t really have to do the assessment.

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• Another student and I had really low scores on the math. The teachers got together and hired a tutor. The tutor was amazing. Thank goodness for that, but the tutor’s not going to be here next semester. I hope they replace them with somebody who is amazing, because that made it a lot easier. The math is hard for me. It really is.

• We struggle because some of us are fine with the math and would like to move on but another portion of the class is struggling really hard with it.

It makes it difficult to gauge what the right speed to go at is for some of the math, depending on the student.

• You have that aspect with all parts of the program; some people can get certain parts of it and then other people . . . take welding, getting your hands synchronized with your feet and eyes . . . They fall behind, the program moves forward, and, even with all that remediation to try and . . . or, facilities, try and bring the skills up for those of you who can . . . Certain things people do well on and certain things they don’t. They try and get everybody to keep going at the same level. Unless you took a lot of initiative, you’re on your own. Also, you’re just cursory. I mean, the complexities involved with a lot of the things we’re doing, and what they’re teaching us, we’re just scratching the surface as to what’s there.

Manufacturing executives tell us that the skills gap is still a big challenge for them. What advice would you give them?

• Internships . . . I haven’t had one. There have been a couple different places I’ve talked to about them, but I’ve seen internships as a trial for everybody. You get to learn the company or the job. You get to learn and the company gets less expensive labor. There’s some risk involved for them, of course; learning or teaching and having somebody walk away, but that’s experience.

• I would agree with that because right now the amount of comfortability I have going into the welding field . . . My confidence level is shit. If I were to have an internship, if there were more available options for an internship, I’d be more comfortable going into the field, whether it’s that you’re slowly moving into it, or you’re jumping into it right away.

• All my jobs have been internships and I was working with the baby boomer who has worked the job. Not this job, so much, but my last two.

Learning from them and knowing the way to do it at a really a low price for them. I didn’t get benefits . . . well, I did with the union, but it’s really cheap labor, compared to their entry. . . .

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• Coming straight out of high school, it’s going to be my first real job ever. I guess I’m nervous. I’ve never had a full-time job before. I worked part-time, thirty hours a week. I want a full-time internship so I can get up, go to work every . . . five, six days a week, and have that feeling I can do it.

• I went straight from high school into an apprenticeship. It was electronic restoration. We worked on very high-end audio equipment.

I started out with an interest in the work. I ended up being there for six years and I was there almost full-time right off the bat. I think back in the forties and fifties it wasn’t uncommon for someone to dive into the trades and have someone who’s been in the trades for a long time to teach them. I think something of that sort would be a great segue. The program they teach here is very good, but it’s also fairly generalized. For instance, if you want to get into Swiss Machine in the CNC side, it is still somewhat esoteric. You have to learn that on the job site, things of that sort.

Companies shouldn’t be afraid to hire on full-time interns, or things of that sort.

• I don’t know if there’s anything like this, but if there was an available list of which companies are readily available to give out internships . . .

[COLLEGE] had a list of who was actually looking for people that want interns, who they’re willing to teach while they’re working, stuff like that.

That would also help. I think that would also help bring more people in and it would also help the workers, themselves, become more knowledgeable about the job.

• When I went to HVAC school they had postings of about thirty different jobs. I thought that was really nice. The problem with that is they say HVAC is one of the highest-paid trade jobs, but they want three years of experience. The big issue was you can get paid $60,000-70,000 coming right out of school. . . . Some are willing to pay that if you’re willing to sell a bunch of crap. I would look up HVAC jobs and most of them were looking for five or ten years of experience and they were willing to pay six figures. One of the biggest issues was how you get this on-the-job experience when they’re looking for five years of experience.

• When you look at job postings like that, you’re saying, “Oh, shit, I can’t do that. I don’t have that much experience.”

• For people who actually try and apply for that job . . . that’s when you realize they’ll probably work with you.

• Like I said, I was lucky to find out about the [PROGRAM], you 104

know, the county workforce? That’s another integral place to recruit people because it’s not only people who are looking for jobs. They’re on unemployment, they’ve been laid off, or whatever, but there are also a lot of people my age who are just looking for something new. Or, they are finally going out, and they’ve been home moms, you know? Their kids are finally old enough that they can go out again and they’re being told, “Hey, you can go to school for an affordable amount. Here’s what you might like to do,” but it’s not much information. They’re being told, “Here’s a tool to go find it,” but not how to go find it, and not what to look for. If I didn’t have that one person saying, “Hey, I’ve got this one little nugget of information that nobody is utilizing right now,” I would have never found out about the [PROGRAM] and I would have never really considered [CITY]. I would have been stuck in [CITY], because that’s what popped up when I looked at schools for welding.

Some manufacturers have challenged with the so-called soft skills of younger employees. You know, coming to work on time, staying all day, staying off the phone, things like that. Do you agree that is an issue?

• One of the biggest issues.

• We lost out on our math portion last semester because half of our class would show up about two hours late and then stay for three hours . . . not even three hours, maybe like an hour and a half, and then go home. The rest of us, we’re trying to learn as much math as we can.

• I think there should be more “if you miss so many days you’re out your money.”

• Thinning the herd, basically.

• [SCHOOL] does that.

• That’s what our instructor did.

• Three days and he lost one letter grade. Four days and he lost another. . ..

• We had people who fell off the face of the earth. Honestly, we don’t know where they went. We have people who show up when they want to.

If they want to sleep in an extra couple of hours they say, “Oh, I’m just going to go in late.”

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• I was going to say, for some people, at least in our class, we’ll have a Wednesday class where it’s a half-day. A lot of times the people who are driving in for fifty minutes, for them, they kind of weigh it. “Okay, I’m driving almost two hours for a half day of school, maybe it’s better if I just stay home.”

• There are also the people who work forty hours a week. I work a fulltime job and go to school full time. A lot of times, around 11:30 or 12:00, I’ll leave school and go to work so I can make my hours and make my money to go here. Alarm-clock issues? I’m a prime example. I have three different alarm clocks and I have eight different alarms on my phone. I won’t wake up to it at all.

• Yeah, and some of us have been around long enough to figure out that, when you lose a job once, it’s, “Whoops, I won’t do it again.”

• I believe some people just don’t care, if those are the right words.

• I know there’s one person I can think of who, honestly, just doesn’t give a shit. Why do they go here? I don’t know. Why do they even attend a class some parts of the week? Or, they’ll be here a full week, or half a week. I don’t know. You pay $3,000 and, on top of that, a couple grand for tools, and then you get people who don’t want to show up.

• I’ll piggy-back on that one. I paid for my own education, worked hard, and I want to be here as much as I can be here, even if I stay late sometimes. “Okay, I have to stay late. I have to get my stuff done.”

• I think a lot has to do with the younger group of people not understanding the repercussion of not showing up. I work full-time, as well as going to school full-time, and right now I’m just at the car dealership. It is insane: the turnaround you see from people not showing up on time. For a lot of us here, we look at that, and just aren’t able to understand it. Most people who are serious about the trades go, “Oh, forty hours a week, that’s cute.” You know?

• I actually work at a car dealership and the turnaround . . . I work in the quick lane at a [COMPANY] dealership and the turnover rate for every person . . . maybe that person will be there for about two months. It’s ridiculous.

• The majority of them are high-schoolers, but still, that’s . . . They’re starting out in that state of mind. “Oh, that’s just a simple job, I can just go 106

get another one.”

• Food service, there’s a reason why everybody’s “Hun,” “Sweetie,” and “Darlin’.” You don’t care to learn their name until they’ve been there at least a month. Then they might get a stickable nickname. You don’t actually learn their real name until six months down the road.

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FOCUS GROUPS

Marshall March 21, 2017

Southwest Minnesota State University

How do you feel about the future of your company? Big picture.

• I feel pretty good about [COMPANY] right now. I’m fairly new to the company; I’ve been here about four years. Some of the major changes have been internal and not so much external for us. We have a new CEO of late, we’ve seen a lot of energy, a lot of changes, and we’ve just recently been through what we call an “operational turnaround” in our business, which is very successful. In fact, we’re having a little celebration out at [COMPANY] tonight to celebrate our three-year turnaround and the successes we’ve had. If I felt anything but optimism about [COMPANY] I’d be crazy, I think, at this point.

• I’ll throw in . . . I guess we’re going to be celebrating our fiftieth anniversary of being in business this year. We’ve gone through a lot of variations and we try to be very diverse in what we do, but right now a lot of our product is in the area of connective repair craft, military and commercial. We’re seeing talk about increasing the military budget as a positive effect on us. If they do some infrastructural changes and aircraft increases that will also help. We provide medical products, which are kind of up and down, all over the place. Last year we fell in a strange cycle.

Sponsor: Southwest Initiative Foundation

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Everybody else was having a bad year, but it was probably one of our best years. Last year was a little bit down. One of our product lines hit an “end of life” in its marketing and the customer really hasn’t replaced it yet. We did some readjustments and other things and it had really no impact on our U.S. manufacturing. It did, however, impact our Asian source we work with; that was probably one of the bigger things. From this year to last year, we’re probably going to be up about five or six percent, so it’s not bad.

• I’d say we’re cautiously optimistic right now. Last year we started off, had a lot of growth, our company bought a new facility in [STATE], and now we have five manufacturing plants. In the second half of last year the wheels kind of fell off as far as our workflow. We had a really busy first half and then the second half slowed way down. Now, starting in January, we’re seeing an uptick.

Why the slowdown?

• We deal with a lot of different industries and everyone said things like, “With the budgets in the second half of the year,” and “We aren’t going to do certain projects we thought would come in, but didn’t.” We kept getting pushed off. The election was another excuse we heard a lot. We’re starting to see an uptick, but it’s about getting a better feeling before we are confident it can continue through the rest of this year.

• [COMPANY] has been in business for about fifty-five years. We were acquired by an equity firm probably five or six years ago. Since that time we gained some facilities in Minnesota and a facility in [COUNTRY].

[CITY] is the founding location and the largest facility. I would say we’re pretty optimistic now. We were heavily into the gas and oil industries, and have been for many years. We made it an issue to, probably seven or eight years ago, start diversifying a little bit more. We’ve noticed a big downturn in our gas and oil industries, obviously. Those actually are starting to pick up just a little bit now. We do a lot of work for the aerospace and medical industries, and our aerospace business is huge, primarily in our [CITY] location. We do a lot of defense work and, if you’ve ever heard of a JDAM bomb, we do casings for the JDAM bomb. The bomb business is huge. Our [COMPANY] and [COMPANY] customers are throwing so much work at us that we can hardly even begin to meet demand. [CITY], in our region, our business is down probably five million from maybe four to five years ago. It’s creeping back up now with more of the aerospace stuff coming into our facility. Some of our gas and oil business is picking up as well.

How is agriculture affecting your business?

• We’re really optimistic. We’re just starting to dabble a little bit in the ag; meaning we develop a product to help the environment. That’s taking 109

off pretty well.

• I’ll say something and try to get a reaction out of [NAME]. We’re quite optimistic, have done some different things, and we’re trying to get some of our technologies into national manufacturing rather than just go directly to farm nutrition, for instance. Those are some value-added things for us.

Obviously, and it’s received a lot of press lately, looking at the shrimp opportunity looks to be huge for us. We have opportunity on the agronomy side with some of our technologies in terms of yield improvements and so forth. You asked if the ag economy was affecting anything; I would say in that vein of our business it does slightly because it’s an extra input cost. Many times the farmers are trying to cut costs when grain prices are low, for instance. Overall, we have a huge growth opportunity we see as a company.

Do you still have the Governor of [STATE] calling you every other week to try to get you to relocate?

• I think it’s twice a week.

• Are you ever tempted?

• We’re always tempted. But the state, I give them a little credit; they’ve responded, the state of Minnesota.

• Well, just in our industry, food production, we serve a market that’s really there regardless of what the economy is doing. In talking about the term grain prices, for us to survive as a company and make a profit, as well as be an integral part of a product, our outlook is, I’d say, fairly positive. We’re seeing growth in demand for the products that we produce in [CITY], so that’s been positive. We certainly wish the ethanol industry would turn the corner a bit, but that doesn’t seem to want to happen any time soon. The bulk of our products we produce have been profitable.

• In terms of the [STATE] economy, I think [STATE] is really two states.

We have everything along that eastern edge of the state. It’s very different.

It’s dominated by the healthcare, the [MEDICAL COMPANY], and the colleges. Then there’s [COMPANY] and western [STATE]; which are much more energy-dependent. This has significantly impacted . . . The boom days are over and budgets are being cut. I think this year will be another year of right-sizing the [STATE] budget. As a Minnesota resident it doesn’t impact us that much. I think [STATE] is working through that, oil prices are stabilizing somewhat, and they continue to improve methods and processes to bring the breakeven points of those wells out in western [STATE] and [STATE] down. All of that works to our favor. One of the 110

things I always think is fun in these groups is when you get a room full of entrepreneurs together and ask them how they think things are going.

We’re all a bunch of risk-takers so we think it’s fine. Even in 2009, when there were bombs landing and everything was on fire, we were saying, “We’ll find a way through this. Yes, it’s ugly and it’s bleak.” I think if you get a room full of us who say things are bad, you can be sure that it’s bad.

• It’s really bad.

Do you find that OEMs continue to be more demanding?

• Yeah, one of our biggest customers, [COMPANY], I believe it’s net sixty, but then they have a twenty-five-day window after that, they pay on the twenty-fourth day and there’s no money up front. The demands which are there you have to carry the cost for. Before you get that back and you ship immediately, you pay seventy-four days after that. There’s certainly some effects that are forced upon you to do business with them.

• What we’re seeing to some extent is that a few of our suppliers have merged. That hasn’t always been advantageous for us because now they may have cut some product lines that were not as profitable. You and I are probably in very similar businesses with the military and aerospace. If you ever work with them . . . they have one item on their bill of materials and you had better find it even though it went obsolete two years ago. We will find that they’re very hard at coming up with replacements and that creates a crunch for us. We have suppliers who had to combine and they’re just not as responsive or turning around things as quick as the original company was. Somebody was talking about 120 days. If we had some wait times of 100 days we’d be happy. Some of ours are a whole lot longer than that.

Does that diminish the sense of collaboration in the supply chain?

• Definitely, in our industry. We can’t even compete with . . . A lot of our gas and oil industries are going onto free markets. It’s all going overseas and we can’t compete with any of it. Even if we were to build it in our [COUNTRY] plant we still can’t compete. We run into this issue, too; supplier debt with customer-designated suppliers. They tell us that we have to order this casting from this supplier and, when that supplier is struggling or having some issues, you’re stuck, you’re up a creek. We’ve run into quite a few of those issues recently as well.

• I have questions. When you’re shipping stuff overseas, or the product is made overseas or in [COUNTRY], do you see it as coming back at all with Trump’s initiatives? There’s talk about it, but is it really going to happen?

• We had a plant in [COUNTRY] which we closed about a year and a 111

half ago. We had it for about six years and we brought all that work back.

With that facility, part of it was a relationship with one of our biggest customers. They wanted a supplier in that area to support their customers in that region so we jumped on and we went that route, but the wages in [COUNTRY], and the labor laws in [COUNTRY], are becoming more and more like the U.S. They learn quickly and so we brought all of our work back to the U.S. • And you’re actually being competitive?

• The work that we were doing, yeah, some of it we left. The work which we were competitive at was brought back. The same thing is happening in [COUNTRY] now. We’ve been in [COUNTRY] for three years and, again, it’s not work that we take from the U.S. and bring it to [COUNTRY]; it’s work that we do in [COUNTRY] for our customers who are in [COUNTRY]. It’s work that we would otherwise not have the ability to . . . You can see that same thing is happening. The wages are increasing, the benefits are increasing, and the window of opportunity as far as a less cost labor force. It’s starting to close the gap. So, as far as that, we’re coming back. Some of our customers have had success with overseas things and have been bringing some of it back to the U.S. Our largest customer, [COMPANY], is taking more and more out of the U.S. and leaving it primarily in Asia. I don’t see that coming back, because of the prices they’re demanding. There’s no way we could compete. They’re huge; the differences between the Asian markets and what we can produce.

• How are the other countries technology-wise compared to where we’re at? Are they ahead of us? Are they behind us equipment-wise?

• They’re behind us in our industry.

• They are?

• Yeah, the stuff we would send over to [COUNTRY] some years ago . . .

We just closed, as I said, about a year and a half ago. They were a lot of our simple, long-running parts. Some of the higher-tech stuff they don’t have the capability to do. A lot of it. Some of it the customers are forced to keep here because they can’t find the skill there.

• I think a large part of what you’re getting to is that it’s still a very stratified economy. If you’re large, if you’re a big conglomerate, you have a lot of power and you’ve always had a lot of power. For the strong players, as you go down that food chain, you just have to figure out your niche and work through that. For as much as the United States celebrates small 112

business and small business owners, there’s a lot of lip service to that. The only advocate we have in the state of Minnesota is [ORGANIZATION]. If you’re a small manufacturer the only lobbyist we have, and the only time we have to lobby, is available through someone like [ORGANIZATION]. I think over the last eight, ten, twenty years, whatever it’s been, I think it has become very top-heavy.

• Why? • Again, I think regulation has worked against us. I think the lobbying efforts that go on in Washington, D.C., very much help those large, public companies who have access to capital public markets we don’t have. We have to figure out how to be nimble and tough and find opportunities for ourselves. We’re good at that, and we kind of say, “That’s fine. That’s what we’ve always done.” When we’re fighting against the 800-pound gorilla they tell us where to go and how much it’s going to cost us.

What about capital expenditures?

• We made that leap, I would say, in November. We’re just floating along right now, but we purchased our next big piece in technology with the hopes of improving the quality of work we can do. After seeing what the equipment can do, how it can take our business to the next level, and how it can grow our business with new customers; just what we found in the first couple of months with it . . . What we can do for our existing customers in a time-saving manner, in the cost savings, is unbelievable.

• Capital expenditures have been, at least for the last eighteen to twentyfour months . . . I’m not going to say we don’t think about it. Obviously we have a lot of hurdles which have to be passed before we can spend it, but it’s not an issue. There’s hardly a limit right now at [COMPANY] as to how much we can. If we get a good project, something that’s going to get a good payback . . . We recently put a really strong push toward R&R dollars to try and refurbish a lot of our aging factories, equipment and infrastructure; to get them back up to where they’re reliable. So, yeah, really, we have a pretty good cash flow, a pretty good basis in that respect, and so we’re pretty free about spending it right now.

• As far as capital expenditures, tax-wise, when they’ve had this $500,000 you could write off, it’s huge. Whether it’s farmers or small companies like mine, when you think, “Oh, I can write it off this year versus over seven years . . . “ If there’s any talk about that stuff, you have to keep it somehow.

• Every year they keep saying, “Maybe another year, maybe another 113

year.” Oh, they are. Every year when I talk to the accountants they’re open for another year. My understanding was when the bill passed it wasn’t like a seven-year deal or a ten-year deal. It’s more like, “Well, let’s see how it works.” Obviously it cost, and I don’t want to say it cost, but government gets less revenue when we can write it off all at one time. For capital expenditures, if you can write it off in that year of your profit, you’ve had a profitable year.

And theoretically the government gets more because you’re more profitable. . . .

• To be able to write off these capital expenditures this year is really big for us.

• I feel a little bit out of place representing a large company here, but I’ve been with [COMPANY] for fifteen years and I’ve watched the company grow from being very undisciplined in terms of CAPEX to now being much disciplined in terms of CAPEX. The money is there for a project, but it has to be a solid ROI; not something that’s fuzzy, because, on most of our larger projects, a look back will be expected and people will be held accountable for whether or not it’s returning an investment on what we put forward. I’d say [COMPANY] would identify a CAPEX budget companywide and that we went to make sure we are investing in the highest ROI investments.

• We operate the same way. Yeah, if we can ROI it then we don’t usually hesitate too much. There just has to be a solid amount.

• I think we’ve just reentered a time of rising interest rates and that’ll be a different animal again here for a while. That’ll impact CAPEX. • We’re constantly changing and reevaluating hurdle rates. At times we might have a different hurdle rate for, say, an energy project, that’s more of a long term investment rather than a short-term investment.

• Let’s do a lightning round about some issues that come up perennially.

One is competition from foreign sources. Still a factor?

• More of a problem in our industry, for the gas and oil industries, anyway. Not so much in medical and aerospace.

• I think the best idea I’ve heard in ten years as a small manufacturer is the border adjustment tax. I don’t think the retailers will allow that to move forward but, for all of us in this room who buy everything domestically and sometimes ship out . . . Doing exactly what our economy would like 114

to have more of us doing; as opposed to having the [NATIONALITY] build it and us bring it in and consume it . . . The border adjustment tax would go a long way in having people say, “Maybe we shouldn’t send it to [COUNTRY] or [COUNTRY]. Maybe our people right here, our companies in the United States, can build this.”

• I discount a lot of what goes on in Washington, but I think it’s such a good idea that it likely won’t get done. It makes a lot of sense.

• We see a lot of competition from other countries and it isn’t just [COUNTRY]. It’s [COUNTRY]. It’s [COUNTRY]. Some of our customers are now moving pretty much all their engineering to [COUNTRY]. They’re outsourcing a lot of other functions, which used to be in the U.S., that are not just manufacturing. They’ve done a lot with manufacturing out there but some of their evaluations of paperwork, basically, they’re farming out to [COUNTRY] and, I’d say, [COUNTRY] . . . manufacturing and things like that. We were talking before about [COUNTRY] being expensive, getting more expensive, and we’re seeing companies moving out away from there- going to other lower labor sources which are much cheaper than [COUNTRY].

How about government policies and regulations?

• We’re experiencing some new things that we’ve never had to go to before. We haven’t been in that type of business for long, but it’s like sticker shock. Now I realize why medical stuff is so expensive . . . which it doesn’t need to be. I can’t say it’s any different. It’s the nature of the beast for us and we’re trying to learn our way through it.

More federal than state?

• Oh, by far more federal, yeah.

• There’s no real guidance, either, and that’s the hard part. Being small business; you’re out on your own. Your face is definitely out in front of you and when you stumble across something you’re falling face first on your own. There’s nobody to say, “Hey, take this path,” or, “This is how we did it.” It’s more self-learning.

• I’ll give you a little example. We just gave FDA a list of possible failures on the project; what could happen if such a thing happened. We came up with about fifteen things. “What if a wheel fell off? What if a track broke?” the things that don’t normally happen. It’s similar to, “What happens when your tire goes flat on your car?” We came up with fifteen things. Now they want us to answer how we came up with those fifteen 115

things and what testing we did to determine that. Well, why didn’t we just come up with two things?

• We couldn’t come up with anything.

• We use that as a possible scenario, but it’s just stupid. I don’t have an answer to it and it’s more of a frustration. I didn’t know if Minnesota, or federal, could have some voice in that.

• We’ve experienced some of that lack of direction, especially with OSHA and pollution control. Four or five years ago we ran over a certain limit and we had to apply for an Option D permit for paint waste. The forms are a packet so thick. You go through them all because we painted too much one year. They said, “Well, it’s not our job to help you fill them out, so here’s the [ORGANIZATION] in Minnesota.” They came out, met with us, did all the paperwork, and we’re going on Year Four now, but Minnesota pollution control still rejected it. They said the [ORGANIZATION] is not calculating right. We can’t figure it out and they can’t even figure it out.

• When you ask for help and you talk to five different people you’ll get five totally different answers. How do we know which way to run with it and to, hopefully, make the right decision? We had OSHA last year. It was not a big deal, pretty much just citations, but one of them was for . . . We have welding respirators that are filtered for air quality so the guys don’t inhale any of the fumes. She would get back to the office and say, “Oh, I saw one of the guys wearing these respirator hoods.” I said, “Yeah, we have three of them here for the guy to use.” “Well, do you have your log time, in and out, when they change the filters?” I said, “No, I didn’t know that we had to have those.” Basically, when it came down to it, if I would have thrown them in the garbage before she got there, I’d have been way better off. I asked, “Why are you penalizing me for trying to protect my employees?” She replied, “Well, that’s my job. I really can’t answer that.”

We actually got fined, and my safety outfit that I use . . . He’s a long-time firefighter and you basically have to have the same qualifications to wear this as you do a firefighter SCBA. All this is a fan blowing clean air in your face, not an SCBA, but OSHA has it regulated that you have to have an online physical by [COMPANY] every year to wear this.

Did something happen in November that makes you feel like the regulatory regime might be lessened?

• There’s talk of it.

• Yeah, at least it’s being talked about it. The previous administration, 116

whether you’re for or against them; it was almost like they were having a contest to see who could put out more regulations. “Can we come up with two today because we only did one yesterday?” That sort of thing.

• I would say our challenge at [COMPANY] is absolutely at the state level. When you referenced the MPCA we very much feel your pain. We have, for example, a fairly simple project to right-size a scrubber in one of our pieces of equipment. It’s been held up for over two years. We’re trying to do the right thing to protect the environment, but it’s almost as if they have targeted us as an industry in the state to basically obstruct things we want to do. We certainly, as a company, understand the need for environmental regulations and we make a lot of efforts locally and company-wide. This plan, probably more than others in the company, because we operate in Minnesota; we’re very aware of our environmental footprint and take steps to lessen that. It’s been a challenge for us, to the extent of where if [COMPANY] is going to invest money. We have sister plants in [STATE] to do what we do. [STATE] and [STATE], I can almost guarantee you that money would not be invested in Minnesota.

Because the regulatory environment is friendlier?

• It’s friendlier in other states, not that it’s friendly overall, but it’s friendlier than in Minnesota.

• You can get something done, versus a packet saying, “It’s rejected, and, here, try again.”

• We don’t necessarily get word back saying, “We’re not going to allow this,” they just stall indefinitely and it’s constantly a new set of questions or a new person assigned to the permit application. We’ve done our due diligence as a company, but it’s a challenging environment. When you asked the question of if something happened in November, we don’t have a lot of confidence that anything done at the federal level is going to trickle down to the MPCA. Another issue: employee-related healthcare.

• I think we’ve come to terms that it’s just a cost of business and that it’s written into our budget. It used to give us a lot more headaches, we’ve done a lot of creative things over the years to try and reduce the cost, and we’ve about exhausted all of our options. We’re now self-insured and that’s about all we have left to do as far as carving out costs.

• I think it’s almost come to the point where it’s more important to try and manage that story with your employees. You’re raising the cost they 117

have to pay every month, changing their healthcare and who they can go to and making restrictions. Yeah, you’re right, you have to . . .

• It’s a necessary evil.

• It’s a necessary evil if you want to put it that way. I think it’s more . . .

We spend a lot of time trying to manage the message.

• No, we don’t, but we have focused a lot more on health and wellness; trying to get people to engage in healthier lifestyles and healthier habits.

We implemented a tobacco surcharge just last year and so tobacco users pay more for healthcare.

• We’re self-insured now, too, and I think the two go hand in hand. I don’t know that statistically we have numbers I could share with you, but I think, for the most part, it’s gone well.

What about the cost or the challenge of attracting and retaining qualified workers?

• That’s my number one biggest issue right there. I think the definition of “qualified” has changed a lot in the last ten years.

• Because our standards have . . .

• I think the standard of the employee has . . . or, I don’t know if I want to say this, what the employee is willing to give me or that they feel their job description has changed over time. Mentality. Cell phones are terrible for everybody, I’m sure.

• I think you’re just talking about generational differences.

• Correct.

• Everyone in this room probably sees that. I like to say, being from a younger generation – I was born right at the turn in 1980 – I see the generation in their twenties. It’s not . . . When I started working it was about what I can do for my company to bring value. I think a lot of people now are asking, “What can you, as a company, do for me as an employee?”

• In terms of our salaried employees, the Ph.D.s, and the higher . . . I think you can see there’s an uptick in the economy because there’s been a lot more job-jumping than there was five years ago. Before, you were happy to have a job. Now, it’s like free game again, a little bit. In terms of the manufacturing sector, I agree on the age thing. There’s a little more 118

sense of entitlement by the younger generation.

• I don’t think it measurably matters for our company.

• Oh, yeah, for sure. We’ve had to turn down work over the years because of lack of skilled people.

• Just getting workers, sometimes . . . that’s a big thing you’re talking about. Yeah, absolutely.

Is it demographic-, population-based or that they don’t have the skillset?

• One statistic I’ve heard is that the population in southwest Minnesota is decreasing. As more and more people move away to places like [CITY] or [CITY]; we’re seeing population in our region decrease, so, it’s just a smaller pool.

• I think there’s a third part to that, though. It’s what we talked about earlier with the entitlement. Some folks, a lot of folks, come in and, once they actually do the job for a few days or weeks, they just basically say, “I’m not doing that,” and they quit. “I am not going to do that kind of work. I’m better than that.” Whatever the reasons are, it’s boring, whatever, they’ll just move on. When we talked earlier about bringing work back in from overseas, that’s just, to me, going to exacerbate the problem. People continue to talk about that being a panacea to a lot of our issues. It’s going to magnify a lot of our issues because you’re going to try to bring work back. You’re going to have to ramp up your factories to try and make that and you’re not going to get the people- you just aren’t. You can’t get the people, basically, to do what we need to do today.

• When they say they aren’t going to do that work, what do they actually go to, then?

• A similar job, probably, and then they’re gone from that in three months.

• We ship them over to you and you ship them to us.

• There is that.

• Don’t you think that the jobs you’re talking about right now, these jobs, are going to be on a higher pay scale? Anybody willing to work with their hands in the next generation is going to be compensated because less and less people are willing to do that work, right? Wages are going to have to 119

keep up to keep them there.

• Since I’ve been there we’ve raised our starting wages probably three or four times to try and keep pace with that, but that’s not the end-all.

• That’s not the driving factor for them?

• It’s not, because there’s always someone else who they can get the same pay from, or maybe even a little bit more, perhaps a little bit less, but they think it’s greener on the other side.

• I don’t think wages are even the driving factor in some cases. It’s how much time can they not spend at work.

• The flexibility.

• That’s another thing we have changed dramatically in the past few years: our scheduling, how we schedule.

• Yeah, the flexibility thing is huge.

• And, certainly, at [COMPANY] we’re operating twenty-four/seven so we don’t have a lot of flexibility on our schedule. It’s a shift rotation and that’s very unappealing for a lot of people.

• I think that’s something which is evident as the economy gets more robust. If it does, it’s going to be harder to find people. That’s where I think the wellness programs and the culture piece . . . If you aren’t seen in southwest Minnesota as a very employee-friendly place to work, when you open up your positions you will not get any applications because they’ll talk. But, if you say, “Hey, these people really care, they work at trying to be flexible for me, and we have to be really smart. We are about a lot of things,” and be guerrilla-marketing people with that. If we just say, “They have to change;” they won’t. We have to figure out how to fight the animal differently. Parts of that are a wellness program, a cultural program, and trying to figure out and get inside their heads and figure out what they want. When you get hooked up with them, they’re really good, they’re smart, they’re technologically savvy, and they bring things to the table I can’t bring to the table. When I was twenty-five I was a moron, too, in different ways. We have to remember that now we’re fifty and fifty-five; we’re our mom and dad, and we’re looking at these people saying, “They shouldn’t do it this way, it’s always been that way.” We have to figure out how to get in their shoes and figure out how to make it work. Are you spending more time on in-house training of managers?

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• Yeah, most definitely because we’ve been on the other side of the street where we have not had a good managerial place. It depleted our morale instantly and took us two years to get it even close to where it was before this manager came in. We’re working on more of a formalized training program for managers, but nothing today.

• No, we don’t, either. We’re in the infancy stages of that as well. We’re starting with interns. When we get interns we just bring them in and send them out there with a supervisor. “Okay, guys, go out there and do it.” Now we’re developing a complete plan for every intern who comes in so they know exactly what to expect and we, therefore, know what to expect from them, too.

Internships?

• When we hire somebody now, in particular, welding . . . We’ll have them come in and weld for a day. First of all, we can see how they’re doing and then they can get a little taste of what . . . though it isn’t . . . That’s part of the interview process: Bring in welding gloves and your helmet and let’s do it.

• But you also work with, in the [CITY] area, the [COLLEGE] . . .

• Yeah, the local school.

• Yeah, they had the interns in their welding program.

• That’s for, like, a month or two months.

• Yeah, But I hired one of those interns who works for me full time now, so . . .

• We started an intern program about three years ago, by default, on our agronomy side. We needed some extra help, we brought eight of them in, and we actually had a program for them which was well-organized.

We got lucky because the person who was in charge of the program was pretty organized. I wasn’t a big believer in it, but now I am. It’s a way to get people into your system, to see that they fit your culture, so they can see if they fit your culture, you’re not obligated to them at all, and you can kind of cherry-pick the good ones out of there. We’ve doubled our intern program. I think we’re going to hire fifty this year, yep.

Are parents and school counselors and teachers still preaching fouryear degree?

• I think it’s starting to turn a little bit, but I think the state needs to really 121

continue to do a lot to offer, or to make those opportunities attractive for students, and the schools need to continue to market those programs.

Skilled machinists in our industry are still really hard to come by, even in our [CITY] location. We can have a skilled machinist opening for a long time before we find one.

• Yeah, they’re solid-gold. The skills, I think the skilled trades are still . . . It’s coming.

• I think the pendulum started to swing now. I think enough people have graduated, $100,000 in school debt, getting a $24,000 a year job, and are saying, “Man, I would have been better off to be a tradesman and started at $45,000 with benefits. I could have done something with that.”

• I think it’s definitely coming around.

• We’re hiring a fair number of people in [CITY] who are coming out of [SCHOOL] as mechanical, sometimes mechanical or industrial engineerdegree people, coming in and working in our plant as a plant operator, as a welder or a fabricator or an assembler, because they can make more money with us. The skillsets and knowledge they bring really fits in nicely.

• My wife’s a professor at [SCHOOL]. She is absolutely convinced that 30 percent of the students going there should not be going there.

• Well, I think it starts with the parents. I worked in manufacturing for many years and did I encourage my kids to go to the trade schools? No, I didn’t. Now I wished I would have, but at the time . . . I think parents need to realize, too. There needs to be some education for them, as well, that four-year college degree programs aren’t all . . .

• They need to look at all the options, I think.

• Are they getting a taste of it in high school anymore? The shop classes?

Are there any of those other than in the alternative schools?

• If you want go to college you can’t take those kinds of classes.

• They’re very old school.

• The hands-on life lessons . . .

• Well, with budget cuts, those programs are the first ones that are cut.

Back in [CITY], they have a welding program through the department, but 122

shop class . . . We used to have a lathe up there, and I don’t even know if they have any of that stuff anymore, those programs were the first ones . . .

• Because we hired all the shop teachers to come and run our plants. . . .

• One of the other things I’d like to mention about apprenticeships and such is that we just started working with the Department of Labor and Industry. They started a program called Pipeline. I don’t know if you guys have heard anything about this, but I don’t want to give out too many hints to some of the competition in here. We were able, because we were involved with it from the start, to go to meetings and devise what we thought an apprenticeship program should look like. We actually have a few people who we started working. We have gotten grants through this Pipeline to be able to pay for the schooling for some of our maintenance people.

Is childcare an issue in attracting or retaining employees?

• That’s the other one, but let’s do housing first. Anybody? Housing a problem anywhere?

• On the other level it is.

• I would say I’m not sure about attracting and retaining, but definitely to work around, schedule, and things like that we have to do that to just . . .

• Oh, yeah. Before it was, “Okay, we have one scheduled to work now.

It’s okay if you want to start earlier.” Earlier, or however that works.

• We had to check with seventeen daycares to find one to take our infant last year.

Why is there such a dearth of daycares?

• They claim regulations. I don’t know if [NAME] knows more about it than I do.

• I appreciate you asking that. We did one of these focus groups where people came out, it was actually in [CITY] a couple of years ago, they wanted to talk about trade and innovation and a bunch of big stuff, and it was an hour. At least thirty-five minutes of it was about childcare.

They tried to bring it back around and that’s all the businesses wanted to talk about: availability. Between everything from regulations, to folks retiring, to the financial model from where a childcare center in the region closed recently, displacing forty kids. We asked what happened there, if it was a retirement or anything, and they said, “No, it was basically they 123

couldn’t pay enough to compete to keep labor there from not going over to [COMPANY] or [COMPANY] or a place like that to work.” It’s systemic market failure that those places weren’t getting paid, so we tried to figure that out.

• I appreciate you asking this because, when we talk to cities, and when we talk to our own customers; it’s labor, housing, childcare, and broadband that are the four things coming up. Childcare’s the one that makes my head spin, so I was curious about absenteeism. On ability, I know [CITY] is so desperate to deal with that they’re actually, and I thought it was a joke but it’s not, they haven’t had the paper. They’ll give, if there’s a provider in town, they’ll hold a spot for one of their employees, they’ll give a $3,000 check, kind of like a sweepstakes, I’m sure it’s taxable, but it’s cheaper for them to give out cash prizes to buy spots than it is for them to deal with it.

We’re just trying to understand if that’s affecting, and we’re hearing twins getting split up in different homes, different towns, one going to [CITY], and one going to [CITY], etc. I’m just trying to do some myth-busting here.

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FOCUS GROUPS

Alexandria March 22, 2017

Alexandria Technical & Community College

What’s the outlook for your business?

• I don’t think taxes are going to go up. I think there’s going to be a reigning in of some of the prolific regulations being churned out of D.C., the federal government and all its appendages in recent years . . . maybe a chance to catch our breath a little bit, figure out what wood is going to stay on the pile that we have to deal with. From that standpoint, I feel energized by it.

• I agree with [NAME]. I think, hopefully, Big Government isn’t going to be as big and it will be easier to borrow money. Interest rates . . . of course they just want to bitch, but I’m positive for growth.

• I feel the same. Being positive that, being in [COUNTRY], and seeing the way things are there . . . [COUNTRY], [COUNTRY] . . . I feel the country right now is at the beginning. Our country is at the beginning of a turnover where it’s going to get better from 2008. It has moved to better sustain our nationality as Americans. I think that restricting a little bit with [COUNTRY] and other countries, bringing the cheaper goods in, it’ll be U.S.A.-made again. I feel positive of pushing that U.S.A.-made again.

Sponsors: Alexandria Area Economic Development Commission, Alexandria Lakes Area Chamber of Commerce, Alexandria Technical & Community College 125

• An interesting thing happened. We used to be with [COMPANY], but just this past year we got acquired by [COMPANY], a [LOCATION]based company. They had to laugh at us because they had Brexit, which has its own set of problems, and now we have a new administration. My only concern which might come out of it would be that we look to export globally. We look to sell products all over the world out of here. If we’re turning more into “Make America Great,” are they going to be receptive to us sending our products out? Larger capital purchases, for example. That would be my only concern with it. I think, by and large, the markets we’re trying to chase down globally, we should stand a chance to do fairly well in those. I’m not too concerned with it. I guess I sit neutral on it right now.

• Well, let me see. “At 9:10 on Wednesday morning, I’ll choose to be . . .” That’s how it feels. I choose to be optimistic, but I think I find myself guarded. I’m also hopeful, so we’ll see. I think I’ll choose to be hopeful today at 9:10, because I think there are some opportunities which could be very positive for us as businesses and employers.

• From a political standpoint, I’m with these gentlemen. I like to see the trends we’ve been facing get turned around. I am deeply concerned on one issue, and that’s trade here in Minnesota. We’re relying heavily on agricultural exports. I don’t see that we’re going to gain anything out of that.

That’s going to affect the local economy.

What about your customers? Are you sensing a more positive attitude?

• It’s been hit-and-miss. You’ll sporadically see times where they come in and they have no problem spending, and then there are times where they’re just guarded. We want to wait and see what happens after this quarter.

Okay, no problem. It becomes kind of like, “Okay, I have to buy a $50,000 machine and this last month we did really well, but now it’s cut back because people are guarded. Then, next month, how is that going to be if I do spend this extra money on a piece of equipment?” You look at it as not a routine that I’ve seen in the past where it’s . . .

That’s new?

• Yes. • That’s something that’s just starting. Do you put that with the economy?

• I do. I put that with the economy, with what’s going on in the nation and the world, because when it’s in the world it comes down to segregation.

Each part is segregated, but, as we were talking worldwide, I’ve been to companies where they have [COMPANY] planters. They’re shipped here 126

from [COUNTRY]. They’re shipped here from [CITY], [COUNTRY].

• [COMPANY] got a new plant there.

• Yeah. I’ve been there.

• Yeah. We’ve seen a real good start to the year for the first quarter. So far so good. Yeah, and I know about that plant down there, and they’re busy, really, really busy.

• In [COUNTRY]?

• Yeah, just turned around after two years. That was good to see. I have a vendor who deals heavily with them out of [CITY] and they just got this massive order from them because they changed one part of the course.

• Still, it was an uptick. We’ve got to wait and see. It depends on corn, it’s huge, so it really dictates a lot.

• If it’s all rhetoric, it’s one thing.

• Yeah, right.

• If it gets down to real changes, it’d make a difference.

• Our industrial OEM base has been very strong. A year ago, it was slow.

Our business was slow the last couple months of 2015 and the first four months of 2016. It felt like, “Gosh, is this 2009 all over again?”

That slow?

• Yeah, you felt it. Business rebounded and continued to strengthen. I would say the fourth quarter, somewhere between around Thanksgiving through the end of the year, there’s a softening in customer demand. I think plans close for the year’s end, or for inventory, or for the holidays. We did not see a slowdown this year. That strength has sustained itself into 2017, where . . . the challenges of abundance are always better than the challenges of scarcity. Nevertheless, they’re challenges, and so you can’t wish it was a little softer because it would fit better.

• The water’s a little hot right now, but I’ll take it.

• As you plan ahead, and I know it’s not as easy as it once was, but are you looking at a better year this year than last?

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• Yes, and last year ended up being a good year, but it was about five months of “Meh.” Pretty tepid demand, and slower than we wanted to be by a long shot . . . to being really strong in a way that allowed us to make up for the poor start we had to the year. This year we’re off to a great start and we hope to have a great finish.

• Last year our sales were down by three percent, but our profit was up by ten.

That’s the way to do it.

• We felt there was a slow time in the summer, but, during the summer, we were able to maintain forty hours and get caught up on all the orders which we were slow and behind on. When we got to that point and we were all caught up, we got hit again. I believe our sales were projecting at least a ten percent increase. If one industry is slower, we have another industry that keeps on growing. That’s been a big plus for us. We’re so diversified in what we do in different industries and it just keeps on going. Gas and oil are one of our biggest industries going right now. We have taken up a couple other companies that are into car washes and they’re designing a new product there, too. We’re constantly going on overtime. We work four tens, plus Fridays are our overtime days. Our average overtime is ten hours.

At least fifty percent of our employees.

Is that because you’ve leaned up your operation pretty well or is it you were selling more profitable things?

• More efficient, yeah. Technically, we probably wouldn’t have been down three percent, but one of our companies, our outside services, closed their plating division for two weeks. A lot of that product should have gone out the door. I think we would have been there if it weren’t shut down for two weeks without letting us really know ahead of time.

• ’15 and ’16 were, “Oh my gosh!” We could hardly breathe; they were just too crazy and too chaotic. We purposefully have not planned for any growth in ’17. We dipped our toe into a new market and we’re already up to our knees. That one could tip us over again. We’re good. We’re busy.

Right now things are just a little bit slow. But not concerning.

• We had growth between ’15 and ’16. We’re actually coming up right now; our fiscal year ends at the end of March. We’ve switched our fiscal calendar to align with that. Comparing some numbers and thinking back over it, we’ve had decent growth. I wouldn’t say it’s been large jumps. Our biggest piece was trying to lock in an investor to make sure the company stayed here in [CITY].

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Will your projected growth come from more products, or new products?

• I think it’s going to be both of those. There will be new products which come out. There will be new customers who are going to be uncovered now that we’re part of a larger organization. The third part is where I think there could be growth in [CITY] now that we’re part of a larger global organization. Now that they’ve seen what we can do here in [CITY], they’re contemplating moving parts of the business to this city.

• The story that I’ve heard – that’s so cool – it’s because of your people.

• Yeah, absolutely.

• The interest in the organization is because of the outstanding individuals who are part of that organization. I think that really speaks well for our community. I think we’ve talked about this before. There’s such an entrepreneurial spirit in this community. I think it’s a game changer for us.

• Yeah, and it’s entrepreneurial spirit with ties, in a sense, of stewardship towards the community. I think that’s a huge difference-maker . . . because people care. There are a lot of business owners in this region who are builders: builders of companies, builders of people, and builders of community.

It isn’t all about, “How fast can I make a dollar today, this week, this month, or this year?” It’s more of a builder’s perspective about business in life.

[NAME] mentioned 2009. Do you still feel residual aspects of the recession, especially with regard to your OEM relationships? They seem to have taken advantage of that in order to extract better terms, things about inventory, just more demanding, one-sided on the demand side than the supply. Is that true? Is it still here?

• Oh yeah. I would say that early on conversations about partnerships and partnership approach to relationships were genuine, authentic, real, substantive, and they evolved into, “We’re bigger for the customer.” The boilerplate agreements you’re getting are longer. They’re more unilateral.

There are a lot of provisions, but very few about, “You can lose by losing, but you can’t win by winning,” in terms of if you do something heroic.

There are no bonuses for saving the day.

• That is concerning, because you start to look at what the profile of an ideal customer is. You begin to contemplate that a smaller customer might be better because there’s a little more equity in the footing of the relationship.

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• Yeah, it’s a lot more people-focused because, in business, you’re transactional first and then you’re relational. The relationships really can make the difference because, by investing in each other, you’re really looking at the mutual interest in creating the golden outcome, as opposed to just, “You’re a vendor.”

Is price trumping everything?

• I don’t think it has.

• I believe that, with our company . . . We’re a smaller company. It’s great. I like working with smaller companies. We also have smaller companies we’d rather work with. We didn’t work with any OEMs, we just worked directly with companies. We have developed a relationship with most of our companies. If they have an issue with some drawings, they know they can come to us and we can work with them to make sure things are working correctly.

• You guys talked about blanket orders, too. We also have, I would say, at least ten of our major companies we do blanket orders with. They send us out a six-month order and they want all these drops at certain times, knowing they could call those drops at any time. You almost have to keep all those supplies on the shelf.

• With it being in a smaller building, you don’t always have that type of room to hold those parts, either. They’ve been going pretty fast. We like working the blanket orders. You know what to expect and how to manage your schedule.

What about terms?

• They’re really pushing for more days and better terms. It’s a pretty constant battle. We have an individual who’s quite a bird dog and she’s pretty tough to get by. It’s a daily battle.

Is it here to stay?

• I think so, because it’s very different today than it was a few years ago: the expectations. There are some small customers who we deal with, but most of ours are quite large. For some reason they think they can call the game the way they want to call it. To stand firm and say no, because metal is our biggest expense, you don’t pay them late.

• Right.

• If we get caught up in that game, we’re going to be dealing with cash 130

flow problems. We just can’t, so we have to try to stand as firm as we can.

• An answer to the question, “Will it stay?” The answer to that is, “It’ll stay if it works. If it doesn’t work, it won’t stay.” There are two ways it doesn’t work. One is people don’t agree with those terms. The desperate ones get in the driver’s seat because the desperate will do whatever it takes to grow the top line to preserve the business – even if it kills the business. It really creates a dissociative effect between price, cost, and value, but that’s not sustainable. The other thing is if you take healthy suppliers and make them weak, that doesn’t work either. It’ll stay if it works, but it’s unlikely that it’ll work.

Does it get to the point where you fire a customer?

• Sometimes.

• We have had fired a couple of customers.

That’s painful, I suspect.

• It can be liberating.

• It’s kind of scary sometimes when they’re not paying their bill and they’re expecting all this engineering on their product. You’re constantly changing things and delivery changes and then they’re saying, “Well, we’ll pay you when we get paid.” No, that’s not how it works. You pay in thirty to forty-five days, you don’t pay when you get paid. You’d better get some cash-flow money.

• Right.

• We’ve had that. But, getting back to another one of the first questions, that people look for quality, back in 2001, 2003, remember when all that stuff was being shipped over to [COUNTRY] and they were getting lower dollar price? Now these parts are coming back because the quality’s not there, but they still want that same dollar. No, you can’t. You can’t give them that same dollar you got in [COUNTRY] because there’s no equality there. They’re expecting great parts and a lot of our customers are expecting you to be ISO. Half of our customers are requiring you to be ISO. You have all that too involved. Do you think [COUNTRY] had ISO? Probably not, but they want the same price. You have to say, “Okay, well then, go back to [COUNTRY].”

• Right.

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• Pricing is a lot like the news. You can get your news anywhere and it can tell you anything, and you can get any price. If you’re looking for news that reinforces your perspective of the world, resonates with the cognitive dissonance, you can get that news. It’s the same thing with pricing, but there are fake prices and there’s fake news. In the end, time tends to wash out the phonies; the fakes, the pretenders, the distortions from reality. It’s just that interim time which is really hard on the truth tellers and the people who are providing a genuine price that there’s a basis for, which reflects the costs and the values that are being delivered. In that interim period, that’s where you get a lot of distortions, and those can be scary times. I tend to look at things, “Is it going to be in my obituary?” If it’s not, then you decide that, “Yeah, this is a life experience, but it’s going to be gone and forgotten. It’s maybe a good memory.”

• What?

• The conflict mineral provisions of Dodd-Frank . . . I’ve got to tell you it’s cost our company, since Dodd-Frank went through, several hundred dollars of administrative time because there’s a conflict-minerals provision in that. It’s got to do with [COUNTRY] and the twelve or thirteen surrounding countries, the three Ts and a G. It’s tin, tungsten, tantalum, and gold that could be mined out of [COUNTRY] or the surrounding countries and they’re called “conflict minerals.” It’s like blood diamonds. Is this where warlords are seizing those minerals from that area and then selling it to fund the war in the [COUNTRY]? Public companies have to report to the SCC about the use of conflict minerals that are mined or smelted from that region. The public companies need to report that in their annual report in their 10-Ks, filed with the SCC. We’re constantly being asked about the sources of any metals, inserts, or other products we’re fixing to things we make. If any of the three Ts or the G, the G being gold, and if they are, we have to report them. The supply chains, the whole template for knowing that, is pretty thin in developing it. It’s been a real scramble. They weren’t staffed for it, they weren’t funded for it, and they didn’t have the conceptual framework in place to gather that information and synthesize it into a useful disclosure. But it is a remarkable piece of government misfire. It’s just incompetency at the greatest level. For us, I can’t believe we’re the only people, because of the nature of our products, that is being affected by this. Nobody else has to do that?

What about the skills gap? Are you still challenged to find people that have the skills to do the jobs that you want to have done?

• I just went through this because we need to build up our second shift.

We have three tech-school kids working with us and eventually they’re 132

going to be moving on. We have one gal who’s going to retire. We need to build up this. Instead of waiting until May, we need to look out and say, “Okay, we need to start finding people.” We decided to go 100-mile radius on that, and just floored it for three weeks with ads. Then, we offered all of our employees a $250 bonus if they can refer somebody to us who is hired and, after they’ve been here for six months, we’d give them X amount of dollars. Okay? Believe it or not, I hired five people in one week and they all started and they’re still there.

Are these entry-level people? Are these people with a certain skill?

• Well, let’s just say there were two entry-level, one guy who had a lot of experience, and then two of them who had semi-experience. We do a lot of hands-on training and we’re also with, and I can’t remember what the exact name, but there’s a grant out there through Minnesota DEED. There is a grant out there for hiring and/or training people. We are involved in that.

We have these four people who need a lot of training, and we put a lot of effort into training, we do a lot of training in our shop and we’re able to get a grant that’s going to give us part of that training money back. They would have to be at our shop for nine months.

• Anyone else? Skills gap?

• Definitely. It’s turning into, I would say, the younger generation is all about the phone.

• I’m trying to lock the phone out of the shop. It can be in the breakroom.

It can be in their locker, but not in the shop because then it turns into a bathroom break, and then it turns into, “Oh, I just had to get a drink of water” or something. It just gets to be that technology addiction.

• Yeah, because I think the skills gap is, when I was raised to do a certain job, do it the best you can; that’s how you do your job. Now it’s turned into, “I showed up, I get paid for my time, I get the trophy.” It turned into a trophy just for participating instead of doing a fair day’s work for a fair day’s pay.

• It still exists and I believe that it’s not to going to get any better just because those sheer numbers aren’t available. We need to focus on automation and robotics. We need to focus, for us, on culture. We have individuals who come to us because of the culture of the organization. Once they’re here, I have a training team on my staff, so we do a lot of customized training. We partner with the college. They put together some great programs for us. They help us with adjunct professors to do some of the 133

skills training. As we’re taking a look at our vision and our strategies for the next five years, we’re having very serious discussions about what the technical training needs to look like. It’s not just at our Minnesota facilities.

We’re experiencing that in [STATE] and [CITY] as well. The majority of our hires in the past two years have been in our fab department, which are probably the less skilled. Even that department is getting more and more technical. We’re doing everything we can. We probably have eight students we’re paying tuition for.

From here?

• From here, yeah. We don’t use print ads anymore because we might as well throw them in the fire and burn them. We’re much more creative in where we look for employees and how we find employees. Most of our employees come through referrals of existing employees. We’re seizing every tool imaginable and every creative thought. Our benefit structure has changed just because it gets people interested in the organization. It’s a great recruitment tool. There are not waiting periods for benefits anymore because that’s important to individuals. Building a clinic is a game changer for us; the cost savings for the employees as a result of that. It’s just a big old pot of every vegetable imaginable that we put out.

Is it a bigger challenge to retain or attract?

• For us, attract, just because of the sheer numbers. In [COUNTY], there are sixty-three people who aren’t employed.

• Sixty of them don’t want to be employed.

• Right. Exactly.

• That’s the truth, yeah. If we can find them and they come into our organization, we don’t have turnover. There are a lot of opportunities in the county for people to work and even beyond. People aren’t afraid to drive forty-five, sixty minutes every day one way.

• Here, when they’re driving, their car is moving.

• It’s not like down in [CITY]. Everything’s sixty minutes away.

• Thinking of that with the robots . . . We’re talking about robots, and it’s kind of a crazy conversation, because I had that with my son. There are so many more companies who are going robot because you can’t get the labor, but here is another thing: when you have a robot, all you do is just turn it on. There is the alarm clock. They’re right there working for you. No insur134

ance, they’re there. No cell phones, “because I have a young child” breaks.

They continuously run. All you have to do is just turn them off. Next day, push the button again.

• Your labor comes when that breaks down. I know that as a service guy.

• Yes, correct. Correct.

• That’s when your labor comes into play. When it runs you’re receiving, say $65 an hour, for that machine to run. Now that machine breaks, it costs you $150. It’s a difficult moment.

• Right, but there’s probably going to be more and more robotics.

• Bill Gates is throwing out the idea of taxing, assigning, and ascribing labor income to a robot so that the federal government can tax it and get its share.

• Serious?

• You know about that, right?

• Oh my gosh. Oh my God. I never heard that one. Who wants to do that one?

• Bill Gates. He got his money. He got his.

What’s the correlation between automation, robotics, and your labor pool?

• They’re trying to keep their company in check, in alignment with the law of prosperity; that what you make is in direct proportion of the quality and the quantity of the services you deliver and that robots are a facilitating enabler in an era when there’s a lot of pressure on margins and costs.

Things which are low cognitive skilled-type tasks that the global market won’t pay people to do . . . you’ve got to automate those activities to the extent possible so that people are freed up to work on the things best aligned with the capabilities of human beings. In absence of that you’ll see a migration of all manufacturing activities to third- and fourth-world type economies and live with the results. It’s just crazy. It’s important and I’ll tell you what, those robots are designed, they’re developed, they’re built, and they’re upgraded by people who are not out on the streets in front of [COMPANY] asking for $15 an hour.

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• I agree with that because, if you didn’t have the robots, you’d have more back injuries, more neck injuries, and more carpal tunnel injuries, for sure.

• More work moved overseas, offshore. . . .

• We automate because we have to; we don’t have the bodies available.

• All the vegetables aren’t enough. I like what you said about that. Every vegetable is going in the pot and that’s still insufficient. It’s a way of supporting growth and your mission and vision.

• If we want to grow United States, and grow with all this manufacturing, we don’t have the people. We do have some people, but . . .

• You have to do something.

• Rooms filled with people tabulating numbers . . . and Bill Gates put them all out of work with Excel. The computers and software, it’s like, “Hey, that was automation.” ATM machines. Automation.

How important is the development of leaders within your organization as a way to address the culture and the efficiency of your operations?

I know [ORGANIZATION] has been doing a lot with that. How successful has your program been?

• It’s huge, absolutely huge. An example is we’re now in the beginning stages of our visioning process. We have a five-year vision and our strategic planning comes out of that. The last time we did this, five years ago, there were six of us sitting around the table. This year there are thirty-five of us with a plan that the next step will take us to about seventy individuals.

Again, when we talk about retention, people want to have an opportunity to participate in the opportunities and the vision and the growth of an organization. If you teach them those leadership skills about communication, decision-making, problem-solving, and all those different pieces, you’re creating leaders who are going to help you be successful going forward.

For us, it’s key. We have four levels of leadership development in-house.

The one I’m working on that I’m most excited about – we’re calling it leadership masters – and it’s a very high-level customized leadership program developing those next executives and senior leadership team members. The first one is called leadership essentials; that’s just teaching the very basics about communication and conflict, in addition to some of the technical stuff. For us, it’s key for our future. If you ask any of our employees, that’s what makes us different, all this stuff that’s available internally.

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• We’re at the point where we feel like we will scale only as fast as we develop the next set of leaders. Many times we go internal for that versus looking external. That’s exactly what [NAME] and their organization do, develop people from within because you know what you’re getting. We’ve identified certain groups. We’re starting to look at doing a mentorship program with people in the organization for our more seasoned veterans to share their experiences, developing the next generation of leaders. It seems like it’s a lot easier to bring in entry-level people for us than it is to go out and hire or recruit someone who will come in and match what we’re trying to achieve. It all boils down to people and in the relationships which are formed. It’s critical, absolutely critical for us. That’s been our call right now, to make sure we’re developing leaders.

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STUDENTS

FOCUS GROUPS

Alexandria March 22, 2017

Alexandria Technical & Community College

What was your pathway to Alec Tech?

• I worked in a shop for a few years and decided to expand my knowledge and end up in a nice cushy office job. So, I went back to school, and I live close enough to Alec to drive back and forth every day.

• Basically, I took quite a few drafting classes in high school, and I kind of enjoyed it, and Alex was far enough away from home to get away from mom and dad, yet close enough where if I wanted to go home on the weekends, I’d go home. Job placement was a big deal. I think there’s 100 percent job placement in drafting right now, and being here, there are multiple job offers for which there aren’t enough kids in the program to fill.

• I graduated from (SCHOOL) and from there I went to (SCHOOL) for electrical engineering. Once I got into some of the classes, I didn’t quite like how difficult some of them were, so I ended up just taking some generals after my first semester, and I found this program. I’m pretty good friends with a student who graduated a number of years ago and recommended this program. It’s been a pretty good fit since then.

Sponsors: Alexandria Area Economic Development Commission, Alexandria Lakes Area Chamber of Commerce, Alexandria Technical & Community College 138

• I served for four years in the United States Navy. I served in Japan and then came back here. I got married to the wrong woman, spent some time with her, and then I came back to Minnesota. Originally came up here to Alec for a law enforcement program, but I started working in factories and realized I liked that a whole lot more and wanted to get into making machines move and do stuff, rather than running after people.

What people were most influential in making your decision?

• My dad is a diesel mechanic by trade, owns his own shop, and came up and told me that I do not want to do that the rest of my life. It’s really hard on a man’s body, and he told me, “Try other things.” I ended up actually working for a welder back home and was told, “You don’t want to do this”—the same thing that my dad told me. I worked for a machinist for a while and found out that’s really what I wanted to do.

• I would say it’d be my parents and my coworkers—seeing how passionate they were about making precision parts and getting it right the first time and not wasting any time or materials on anything—just seeing the pride they took in it—making things that are useful. That was a big influence on me.

• I might have to say my parents, too. My dad worked at (COMPANY) for 17 years. Assembly puts a toll on your body after a while. I worked there for almost four years after I graduated, and I just realized that, you know, if you don’t go soon, you might not go at all. I wanted to further my education. I came here originally to look at the law enforcement program, but I looked around, and I realized I’m more hands-on. I liked working in manufacturing, so it just seemed like a good fit.

Anybody give you pushback about your decision?

• My mom wanted me to take an engineering course. We started looking into colleges. When I was in high school, she wanted me to go. After taking a year off after high school, I really didn’t want to go into a four-year college, just because of price of college. I came up here and started looking into aeromechanics. I wanted more hands-on, as well. Mechatronics seemed like a really good fit.

Anybody get encouragement from your high school teachers, counselors, et cetera?

• Everyone in high school was pushing you towards four-year. They never even mentioned a tech school.

• Yeah, I had the same thing. Counselors and teachers both were pushing 139

you to go four-year. Look here, look there. I never once really heard about a two-year school. My dad was really the only one who told and encouraged me to even look at a two-year school.

Did you have a tech center, or a shop, in your high school?

• Yeah. They didn’t do much with anything else. Small engines and welding were really about all they did. The teacher we had really wasn’t completely familiar with either of them, so she was learning it and teaching us at the same time. It wasn’t really ideal, just learning from YouTube as we go along. That’s about all it was.

• All the teachers said that. “Go to four-year. It’s your only choice, really.” My parents brought up the two-year program, and I researched what kinds of jobs were out there for two-years. I like the more hands-on stuff rather than sitting in a classroom for four years.

• I know that where I went to school the idea of working in a factory in any capacity was the equivalent of failing at life. That was how it was pushed.

• It’s more like, I think, just the opposite. I grew up in Alexandria and went to high school here and eventually got into courses that co-existed with Alexandria’s technical courses. Taking some of those, you can phase right from high school into the technical college. It’s really ease of access that came from there. I didn’t really get any pushback from teachers or whatever, because most of the courses you could take right in the school, and most of them supported it.

Who went to Alexandria High School, here? Do you think that’s having an effect on the number of students who might consider a career in manufacturing?

• I think it might actually dampen the effect because they’re a further distance away. (SCHOOL) used to be right next door, and kids could take courses. Walk over, take courses at the (SCHOOL), and go back to the high school. I know they’ve been struggling with students walking out and stuff like that.

• Well, I went to (SCHOOL) over in (CITY), and they have a similar thing going on. They partner with (SCHOOL) to do some college credit courses, and there’s definitely no frowning upon going to technical college there. In fact, a lot of the guidance counselors will push you more towards that way because of the price of college now. It can be a really good way to get your generals out of the way, figure out what you want to do, and 140

not spend $30,000 in your first year. I was looking at (SCHOOL) when I was a junior, because I have always been very mechanical. My guidance counselor actually pushed against that. If it was what I really wanted to do, and if I could find scholarships for it, they obviously couldn’t argue with going to such a renowned school.

• You can get a very similar education going to a smaller school and not spend nearly as much out of pocket. A lot of these technical colleges partner with companies to make sure you have a job lined up when you’re done with school so that you’re not just stuck floating.

What’s your favorite part of getting an education here?

• Well, one thing I really enjoy is, basically every class I take is with drafting students. I’ve had every single class with these guys so we form a really tight bond, and you enjoy showing up just to hang out with friends.

All the teachers and stuff, they’re more of your friend rather than like a prison guard.

• We have a lot of fun in our classes, and they’re what I enjoy doing.

• Yeah, we get random parts given to us, draft them up, and try and figure out what’s wrong with the print. With the new stuff we’re running, we keep getting different subjects to figure out.

• What I really like about the machining aspect of it is that someone brings in a broken part and says, “Here, fix it,” and then they leave. You have to reverse-engineer it and figure all that out. That’s what I like the best, because it’s the most challenging, and you learn the most from it. You get frustrated, then you end up figuring it out, and that’s where you realize, “Oh, this is what I did wrong,” and the next time you won’t do that.

What was the most difficult part of your experience here?

• It was made easier because our math classes and a lot of our general classes related everything back to what you’re going for. They’re all structured to help you with what you’re doing as a career, so it helps you throughout—even down in the shop—that you can take what you learned in math that day and apply it 20 minutes later, as opposed to not having any real-world application in a lot of these general classes.

• The hardest part was understanding how to program and how to run through programs using the technology that we do, because we’re on it every day.

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What would you tell, or do you tell, friends or relatives that are maybe thinking about plotting a career or a career change about your experience here?

• I tell them, “I’m going to make 50 a year coming out with a two-year degree, and you’re only making 45 with a four. Have a good day.”

• My daughter, when she goes to school, I’m going to tell her I’ll pay for her to have a two-year degree, unless it’s something she loved, then she can go on to a four-year. Instead of saying, “Oh, I want to be an engineer,” spending $50K to go to (SCHOOL) or something, and it end up being something you don’t like anyway, at least you’re only out, you know, $20,000. If you have a two-year degree—two years of your life—it’s just not a big investment. If it’s something you love, then you can go on and get into it more.

• They usually ask how I like it and if I would ever change. When I started here, actually the first couple weeks, I never thought I’d change.

I wouldn’t change my career because, when we started getting into it, I started liking it more, and I guess my family and friends are more supportive of me—that I’m happy with the career choice I made.

Manufacturers are challenged by recruiting young people. What advice would you give them?

• Companies in manufacturing, to get more people into the trade, should definitely talk to the high schools. Go there, talk to the high schools about what you do, and get them interested, because it starts with them. I had no idea what machining was until the welder I work for said, “Hey, go try this. Go talk to the guy down the road and get a job with him.” I had no idea what the heck was going on, and I would have never found it if he wouldn’t have recommended it to me. Some of these smaller towns don’t have that opportunity like Alec does, with three or four big machine shops within the immediate vicinity.

• Bringing even one of our Mechatronics trainers to a local high school, or one further down toward the Cities area, would generate awareness.

“After a year, I can make this whole thing go, and I know how to talk to it.”

In my high school, there was no exposure to that. It was, go to a four-year or have fun sweeping floors.

• We came here for a manufacturing-tour-days-type thing, which I still do. I think what really gets you interested is watching machinery work, having them run a prototype conveyor belt. You go to this program for two years, and you can do this. All of this. You can make it, you can wire it up, 142

you can put it to use, and you can actually program it to do exactly what you want. That, in itself, is kind of cool. But, what I would say for getting more people interested is, don’t exclude.

Company tours? What do you see?

• Automated robots running machines. Humongous machines that take up a whole room and are 15 feet high and stuff like that. Seeing the parts they’re running, it’s kind of over your head. You never want to blink because you don’t want to miss something.

• I came from a little no-name shop/town and, once I got down here and saw all these automated, huge machines that are just ginormous, I was like, “Whoa, I haven’t seen anything.”

So it wasn’t a detriment that you had no experience when you walked in the door here.

• I definitely notice they really gear up when it comes to talking with people who already have some skills—like being in lots of shop classes or coming from a family where they’re always in the garage. I come from a single-mother home, so I had no experience. If you have the interest to learn, you will learn it.

• No. Not at all. Not at all. I mean, it’s made some things harder to learn.

Some of the more hands-on stuff, actually using some power tools and getting into the shop floor. It can be uncomfortable at first, but you bring a different kind of thought process to the table.

What about gender? Are more women getting attracted to manufacturing?

• Yes, honestly, because there aren’t many women around it gives you almost a little leg up with interviewing or putting in applications, because you bring—I want to say a different set of skills to the table—but more diversity. At the same time, you’ll also encounter companies where they’re not ready for that kind of shift, either. I really haven’t had a whole lot of experience with that. This college, and everywhere we’ve looked at, has been very open concerning women in the workplace.

What’s the value of an internship?

• Probably 90 percent of it is internship—getting your hands dirty and getting right in the work of it. That’s something I very strongly believe in.

I’ve been working the entire time through school, and with drafting, you have to have an internship.

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• I’ve been with two companies since I’ve been in the school here. Yeah, I worked at, and in, engineering for both of them.

• I think it’s a great idea for the company as well as for me as a student because, while I’m there, I learn the culture of the company, and they learn if they like me as a person and if I’m going to fit into their culture.

Everything I do in class enhances my performance there. Everything they teach me enhances my performance in class. I’ve had a great experience with my internship, and they know whether or not they want to hire me, which they’ve chosen to do.

• I had an internship last year, and the relationships I made with the management level put me at an advantage in that company, say, versus other students in my class. As far as getting a job or a career, it can make that part easier.

Do you learn about the culture of the company in addition to what you do; I mean, not all companies are the same. Did you see that, between the two?

• I wish I would have gone out to a different company and got in as many experiences as I could. I believe that’s something, too. Sometimes you look at it as though going to different places is a bad thing, but I think that’s important; find what you like, and find a company you truly love and want to be at.

Has anyone had an internship where you decide, “You know, I like the career, but I sure don’t want to work here.”

• Before my current one, yes, I worked at a different company where I was like, “Okay, you guys are really nice people, but this is not going to go anywhere that I want to go.” They wanted me to be a maintenance tech, and there’s nothing wrong with that, but that was the roof.

• It was a very low ceiling, so I’m like, “Okay, I want more than that eventually, and you’ve nothing for me, so thank you for this opportunity, but I’m going to go somewhere where I can grow.”

• I’m technically interning at (COMPANY). It’s a separate one, and I like that better, just because of the software changes and how they handle their dimensioning and stuff.

How many people wash out of here?

• Very few.

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• There are people who just drop out.

• Yeah, a little bit of both.

• The first week they’re here, they know • It’s not for them.

• They know. It’s like a yes or no switch that goes off—that, yes, I really do like this and I really want to continue with this, or, no, I have to move on to something else.

• I don’t think there are too many who flunk out. It’s more trial and error for the first part, and you know right away if that’s what you can do or if it’s too much for you and you need to go a different route.

Manufacturers frequently point out a changing work ethic among entry-level workers. Do you agree?

• I think it’s more of like when you go compete for baseball or football.

Everybody gets a trophy in the Little Leagues or whatever. Once you get to high school, or out in the job, you expect just to get hand-me-downs. You expect to get what everybody else gets, but you’re not actually going to work at getting better. You just expect people to hand you stuff, and that’s what I get.

• I don’t know about us, but I do about some kids just because they’re so far behind everybody that it honestly isn’t even worth hiring them. That’s just my opinion.

• I even see it with my employment. You start at the bottom, basically sweeping floors, and work your way up throughout your schooling, which I think is the way it should be. They’re struggling to find people in the firstyear class who want to work their way up and don’t want to just start at the top. They have one person out of that class who was willing to do it, and we had four who were willing to do it, but nobody wants to start from the bottom anymore. I see it a lot. Everybody wants to start halfway up.

• I think there’s a lot of disillusion with the idea we’re going to be leaving our two-year course, making $70,000 a year, and I don’t know where they got it, but a lot of them think they deserve it.

People that just come in late. It’s just a small percentage? Come in late, or don’t show up.

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• But it’s the same ones.

• It’s the same people, in our group, or in our program. It’s not random.

Every day, somebody’s late, but it’s the same ones.

• It’s just those ones with that personality. They continuously are not working hard.

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FOCUS GROUPS

White Bear Lake March 23, 2017

White Bear Lake High School

When I say manufacturing, what do you think about? What comes to your mind?

• Definitely production.

• Production—just working in a factory and producing things.

• Before I took this class, I always said it was a dirtier kind of job and it’s just one of those things where you don’t really need a lot of a skill set. You just do one thing on a production line type- thing.

• I think of machine operators.

• I think of companies that are making or producing things that you use on a daily basis which are a lot bigger than what your average person is able to build. You think of a wood shop. People can build a wood table or whatever. But if you think about metal work, they’re mostly things that are outside of what the average person is able to do. Companies are able to produce large quantities of specific products, I would say.

Sponsors: Wilson Tool

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• Well, manufacturing companies, they make all sorts of stuff. They make almost everything, lawnmowers to even small stuff. They just make it.

When you think about careers in manufacturing, who do you think about? What interests you?

• Software engineers—people who have specific skill sets for CAD models and stuff like that; and then there’s actual machinists. That’s a different variety of skills, and engineering also goes along with that. There are mechanics also.

Typically, what kind of education do you think is required or optimal for getting into a manufacturing career?

• Four-year college or even more.

• I think of a two-year degree.

• After senior classes and stuff, most companies are willing to train people who might not have the skillset needed for the job. They just start lower and then, as you get more training, work your way up.

Has anyone visited a manufacturing company?

• Yes. I did. I thought it was pretty cool. Their machine shop is really big, I would say. There are a lot of machines in there and a lot of people working in the group—not like a big, big group—like a spread-out, a medium-sized group. We looked at all the machines and stuff. They had really high-tech stuff.

• I’ve been to (COMPANY) two or three times. It’s a local business here.

They have a more of a small manufacturing floor than what most people would think of, and they produce very precise molds for a lot of medical equipment for stuff around the world. I went to (COMPANY) a couple of weeks ago, and it was literally all sheet metal, and we saw most of the machines we saw here, so we’re learning what we saw there. We get an experience they are doing over there.

Was it in any way different from what you expected?

• A little bit. I thought there would be a few more people, and there weren’t really that many. They are in really high demand of hiring people, because a lot of people who work there are getting older.

How many of you students are interested in maybe looking at a career in manufacturing?

• I really enjoy it. Every time I come to this class sixth hour, I know I’m 148

going to end the day on a high note.

• I think it’s totally different from anything we’ve experienced inside a traditional classroom where you sit down and the teacher just talks.

We get a different perspective, and you’re off doing things, and you get to see the progress you make. When we’re making things on the mill or in the lathe, you get to say, “Oh, I made this, and this is how I’m going to go do something that, if it’s for medical equipment, could help save someone’s life or it could help somebody walk.” It gives you a different perspective. It’s something that’s fun, it’s different, and it’s in demand. The manufacturing places are in need of workers, and in this kind of class you get real experience that you might be able to apply in a real job.

• I like how we get a lot of free time—how you can just do what you want. You get to class, and it’s very fun because you usually don’t talk that much and you go out and get a lot of projects to work on. I like the freedom and the atmosphere of the class.

• I agree that it’s fun to see the progress as you create the project. You start with something that’s just plain, and then you make the changes to it to complete your product. It’s also good that you have more free time—you get three assignments, and you decide how you’re going to get it done within the timeline. It’s fun to see how you work through and get it all done.

Do your friends know about what’s going on here in this room, and, if so, what do they think?

• I feel like a lot of kids who don’t take this class don’t really know what we do; they think it’s just an engineering class or manufacturing. I didn’t know what to expect when I first signed up for this class. Then, once I got here, it’s different than I thought. It’s a lot more fun than just going to class.

When I got here, I realized it’d be a lot of fun to work on many different machines that I hadn’t been working on before.

• Most people, when we tell them what class we’re taking, view it as just another normal shop class that people would take as something to fill in the gaps in their schedule, and people don’t actually realize that you need some kind of skillset—even though you get trained and learn as you go along. There are people I talk to who know what’s going on here, but there are also people who don’t really know what’s happening or how it’s happening.

• There are people who, when you say you’re in this class, are curious to 149

see what we do. Not a lot of people know what’s going on here, but if you explain to them, a lot of people actually think it’s a fun class, and maybe they’ll go and sign up for it next year. I don’t know a lot of people inside the school, but I know people outside the school and in the community and other schools have at least been interested. Other schools have been interested in what we have here. I don’t think people at the school really realize how it’s rare; these classes with all the equipment and stuff.

How do you plan, and how do you make the decision of what kind of school you will do?

• I’ve already made my decision for schooling. I’m going to (SCHOOL) for Electrical Engineering. I picked that school because it had the major I wanted. My mom, my dad, and two of my uncles went there—same degree. For a while, I was skeptical whether I wanted to be an electrical engineer or not, maybe a chemical engineer, or maybe I could be a machine operator in manufacturing. I’m also taking digital electronics within this facility, this classroom, and having a lot of fun with it.

• Being a senior, I still have no clue what I want to do. I’ve been leaning away from some of the four-year stuff and more towards possibly manufacturing at some kind of technical school or something like that. I’m keeping my options open.

• I’ve honestly been looking at welding. It’s different. It doesn’t seem too exciting, but I’m decent at it. It seems like something that could be a good field to go into.

Would you think about looking directly for a job right out of high school with the experience that you’ve gotten here? Would you think about a technical school?

• I’m planning on going to college, so probably a technical school, but I don’t really know at this point.

• I’m looking towards medical engineering work, but I’m not really sure yet.

• I know for sure that I want to go down an engineering path. I’m leaning towards that way, but I’m not really 100 percent sure. I’ve been looking at colleges, but I’m still not really 100 percent sure which college I want to go to or 100 percent sure what type of field of engineering I’m interested in yet. But I know that’s what I want to do.

• I’m leaning towards the engineering field, and I’m going to check out 150

(SCHOOL) next week—I’m going to go visit.

• I never really thought about doing something with engineering until I took this class. I just wanted to go to the (SCHOOL), economics and finance, but after doing this class and thinking about it, it’s actually opened my eyes. A two-year college, like a technical college, I always thought that was for if you can’t get into a four-year college or you can’t do that kind of sit-down-in-a-classic-desk-job kind of thing. You just go to the two-year colleges to get a job so you have something to do. But seeing what you do in this kind of environment and that this actually applies to the real world and what you could do for a job, it’s opened my eyes that; hey, a two-year college is actually something that’s really good and it’s not your basic sitdown-in-a-classroom-type learning. It’s actually hands on, do-it-yourself, make it, and there are plenty of opportunities for making a living off of it.

• Just being a car engineer, I love working with aerodynamics. I’d just like to design cars, see what works out the best with the mileage, speed— whatever comes my way.

• (SCHOOL) really interests me or (SCHOOL). They both sound interesting, and let me get away from Minnesota.

• Well, my dad owns a manufacturing company, so he’s always wanted me to take it over. After talking to him for a while, it sounds interesting, but it’s a lot.

• I have a lot of things I want to do, I guess. My first plan is to be an astronaut, but that’s kind of far-fetched. I have a back-up of being in engineering or manufacturing at college. There must be some kind of college, I don’t know, somewhere away from Minnesota I guess, somewhere warm—California, Hawaii?

• We have a White Bear grad who’s an astronaut, so it’s possible.

• I have a chance, I have a chance.

What is the process of deciding what school you’ll go to after high school? Who will influence your decision?

• My parents definitely have a big influence on it, but I think for a lot of people, they usually have a pretty good idea of where they want to go and what they want to do. They don’t do a lot of bouncing around between ideas of colleges. At least from what I’ve heard, people have a pretty set idea of between two or three colleges and either wherever they get 151

accepted to, or where they get the most money, is where they want to go. I think the parents feel that way, too, from the money side of things at least.

• I feel like some people have bigger influences on themselves as to what they want to do, but I feel like parents also seem to have a big influence.

But so can friends; sometimes you want to stay together. But for the main part, I feel like you’re the biggest influence on yourself just because it depends on what feels right with you.

• I strongly agree with that. I feel like your parents and friends— everyone—plays a role in potential colleges and places you’ll be going.

But in the end, it comes to whatever you decide.

• My parents obviously influence where I’m going to go, but in the end it’s my final decision where I want to go and what I want to do. You’re the biggest influence on yourself.

• You decide where you want to go, but parents will want you to lean towards somewhere else, but, like (NAME) said, you have the biggest influence.

• My parents’ influence isn’t as strong on me as just my motivation to go to (SCHOOL) for engineering. I just saw it as a school that worked. I toured it. It felt like a great fit for me. I had dreams that night that I was attending the next day.

• I don’t know about my parents’ influence. They’ve talked about it.

There’s a lot of influence on college and where they go, because at that point, if you’re going to a college, more likely than not, you’re going to get a good education out of it. I think my parents’ influence is more on what you want to do with your life, what kind of job opportunities you want, and then, with finding out what you actually think you might want to do. It’s, “Ah, here are good colleges that you have the choice of.” It’s not all, “We had the ambition for you to go to the (SCHOOL).” It’s like, “These are good colleges that have economics or that have engineering. Look at these three, see what you think of them. Look at it more.” It’s more like, “Pick a career path that you want to do and not a college, because you’re only in college for four or five years, depending on what you move into, depending on what you do.”

Manufacturing executives tell us that the challenge they fear most is their ability to attract and retain the next generation of workers and leaders in their companies. Many of them think students don’t get 152

enough exposure to manufacturing opportunities through parents, teachers or counselors. How do you respond to that?

• I think the opportunities are there for people to learn this and get a job like that, but just how they market it to the students and everybody else, it’s not as wide. They’re probably scared that they won’t have people to do that. I’ve talked to my dad and he says, “There’s not enough machinists and people to fill those jobs.” He says there’s not really any way you could hire anybody like that. If schools and the communities market manufacturing as a great career pathway and have the opportunities there for people to get that job, it would help a lot.

What can companies do to remedy that? Tours?

• It’s interesting to see everything that we do here being applied on a much bigger scale and with a higher skill set, but still seeing those basics of what we learn here being applied in a larger work space like that.

• Taking the tours shows you what companies are about and that what we do in class is actually applying to real life. No one sits down all day for eight hours and just does calculus. You come to class, and you work on a machine for an hour. There are people who, for their living, work on those machines. The machines we see out here, we had bigger versions when we took the tour of (COMPANY) that we saw—just a bigger version of that machine and somebody running it, and that’s their job. It’s a fun, active job; it’s totally different than actually being in class—applied to the real world.

I think those are the big things. When you’re in that class, you get a lot of exposure to these tours. People outside still think of manufacturing as kind of a dirty, grungy job when they don’t really know the environment—that it’s changed. If people saw the classroom and knew that this lab is an experience that not many students get access to, I think it would be much more popular and common at White Bear.

• It’s much cleaner than most people would expect, at least.

• Yes, most people think it’s like one of those jobs where, if you’re looking for something to do and you need a job, you want to get something, people go into manufacturing just to do that and they think it’s dirty and boring; just doing the same thing over and over again. But it’s clean, and it pays well.

You’ve done manufacturing days here at school, right?

• We’ve done multiple events, yes. It’s a community exposure on one element. We do a manufacturing and engineering showcase that’s hosted in the evening for the community and students. We also have hosted open 153

houses here in our facility—mostly marketed towards industries and other community members, people of interest who might want to come and tour and see students working during a classroom setting and see what kind of environment they have and what that models.

As manufacturers, what is your takeaway from this?

• Manufacturer: You guys actually seem to be very “in the know.” You seem to understand what types of careers exist in manufacturing—the fact that you do not need a four-year education. You seem to have a good impression of the types of jobs that exist, so I think your teachers are doing a really nice job of exposing you. I think the larger issue is obviously that the program at White Bear’s pretty unique, and this doesn’t happen at every other school. Definitely, we have opportunities for engineers. We have a lot of opportunities for folks who think the two-year route might be good. They love sitting in front of that machine all day. For those who want to come work for us the summer before school, we have an internship program.

• Manufacturer: I’m a person who actually went to a technical school and worked myself through (COMPANY) for 31 years, and I’m in leadership now. I’ve heard a lot of you guys talk about that it’s clean, it’s progressive, it’s a great job. You guys are in the shop, so you see it. But in the graduation class, there are 600 more kids out there who probably don’t know what you guys know. So how do you get that word out stronger in the community so people really understand? They are first-class jobs, and they pay very, very well. There are amazing opportunities, if you put your heart and soul into whatever company you decide to sign up with.

I hope to better educate the community into really understanding what manufacturing is all about. I was a farmer, so very mechanical, and my pathway was more on that mechanical side. I’ve had an amazing career at (COMPANY), and there are amazing opportunities and amazing careers out there. We, as manufacturers, they hit it—we are struggling to have really good, qualified people joining the manufacturing community, especially in machine tools. There are amazing opportunities there.

• I was doing one of these a couple of years ago, and they were talking about how they were driving down to Chicago to find CNC operators, because there just wasn’t anything, and there was a school that was spitting them out down there. It was a long way away, it’s like a five-and-a-halfhour drive from here. Now, do you hear things like that? It wouldn’t have been on my radar when I was your age, so we’re not looking at that, but do you hear things about that, about the kind of amazing job opportunities that are around in manufacturing?

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What more can your high school do?

• Just actual job opportunities. This is engineering. What has especially been really nice with this is our tours that we take; we actually get to see it in real life. We take all the classes, we take our history class, and you take a science class. I mean, you know your generic, “All right, you can be an engineer, you can be a biologist, you can do all these things,” but you don’t see actual job opportunities in places. Okay, “Someone who majors in biology does this for a living. Do you like this? Oh no, you don’t like that, I can see why because you didn’t like biology.” But here, we’re in the class, we’re doing it, and then we see it actually transferred over. I understand classes are important, but you don’t see someone sitting down doing calculus—you see people using these machines. I think just in general more actual real-world exposure when you go to see the kind of jobs that are available in every scenario.

• There are many websites and stuff that kids have access to that we’ve talked about in class. One thing I’ve found when I’m working with industry partners to create this at each of their individual companies is, “What are the types of careers that are available? What is the demand?

What is the pay? What is the training that’s needed?” These companies can actually have a flyer or something for students like this to get a better sense of, “Hey, this is something I can see myself doing. Here’s what it’s going to take to get there.” There are so many opportunities in manufacturing and engineering, it’s such a broad field, I think sometimes it’s hard for these students to understand unless they have something very specific like welding. You can get your head around that, but I think there are a lot of positions they are still learning about and would like more information on.

I’ve talked with especially the older kids and some of the younger kids.

We’re trying to create a summer program that will give experience and exposure to these students, where we’re meeting with local industry— companies for students to go in and do a four-week program, where they can rotate through all four companies, learn the manufacturing cycle, get some hands-on experience. That’s a big thing we’re really trying to put together for this summer. It’s providing more of that experience for kids who really want to learn more about opportunities and get that hands-on experience.

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STUDENTS

FOCUS GROUPS

Brainerd March 24, 2017

Brainerd High School What attracted you to take these kinds of classes?

• I think this might apply to some other people, but it started for me in seventh grade when we began the HAB club. It’s a high altitude balloon club. It was our first engineering club experience, per se, and it kind of really got me on the track of going into engineering and design.

What did you like about it?

• The fact that it was kind of just open-minded. We had a task, but we had no idea how to complete the task. We brainstormed, and instead of regular classes where it’s like, “Here’s the answer,” you didn’t have an answer. You had to figure it out with whatever means you had.

• My grandfather was an engineer. He had his own research company, so I’ve always been sort of inspired by that.

• I guess my dad went to school to be an engineer, and I thought it’d be fun.

And has it been?

• It has been pretty fun, yeah.

Sponsors: Clow Stamping Company, Pequot Tool and Manufacturing

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• Yeah, that was kind of the same for me. My grandpa, especially when I was growing up, he was very mechanically inclined. He always had a little shop in his garage. We got a CNC, a milling machine, and a drill press and all this other kind of stuff. He’s always making something. It’s pretty fun.

Ever since I was a little kid, I’ve kind of been exposed to that.

What kind of career are you thinking about?

• Well, an engineer, but I don’t really know what field yet.

• I’ve been thinking of going into biomechanical engineering. It’s an excellent combination of what I’ve kind of been interested in.

• I planned on going into mechanical engineering with a focus in, probably, design, because I really like the design portion of it.

• Mechanical engineering, robotics—that sort of thing.

• I want to go into the medical field right now, but I haven’t been 100 percent interested in engineering since my freshman year. I could always tie engineering into a medical field, like medical engineering, especially because the field of prosthetics and all that kind of stuff is ever-expanding.

• I want to major in mechanical engineering, and one of my dreams is to work in the oil industry and in natural gas.

• I’m thinking either mechanical or civil engineering.

• Last year, I was pretty set on mechanical engineering, and then this year was the first year that computer science course was offered. I took that, and that caught my interest a little more, so I’m going into computer science next year.

• I’m going to go into an engineering field. I’m not really sure what yet, though.

• I’m going to go into mechanical engineering.

• I’m also looking into a medical field, maybe as a registered nurse.

Anyone who’s thinking about a two-year degree?

• This is my entire plan for what I want to be when I grow up: I was planning on going to (SCHOOL) next year and the year after that, just to 157

get the generals done, and then head off to the (SCHOOL) to specialize.

Manufacturing executives tend to worry about where they are going to find the next generation of employees. What would you say to them?

• I feel that if you’re taking the engineering classes beforehand—already going into the field—you hear all these things. But if you have no exposure to these engineering classes, you won’t hear a thing.

• I agree somewhat, but I find it hard to believe that nobody’s heard anything, because even in seventh and eighth grade we’re required to take two tech-ed courses. They don’t go into depth there, obviously, but it definitely exposes you to the start of “here’s what you could possibly do with this kind of degree” and stuff. Project Lead the Way makes it very easy to hear about the different options. In POE we had three speakers come in and talk for different businesses. And then one of the ones from the student success center came down here and talked to us about the different career options and everything.

• I would say it’s right to a certain extent, but it’s becoming less so, because I know I have a friend who graduated a few years back. He had no idea our high school offered engineering courses. So, when he went into college for engineering, he was not as prepared as we’re going to be having taken those courses, and that was similar for a lot of people around the state. When I was talking with my uncle who does civil work in Bemidji, there wasn’t as much exposure even five or six years ago. The exposure, because people are becoming interested in these fields, has really been on the rise.

Let’s talk about the robotics team. What do you like about it?

• You don’t really have to worry about anything. You just kind of go, and if you have a good idea, you have a good idea. If you have a bad idea, you have a bad idea, and you just kind of deal with it. It’s just a place to go where you can have fun and still get stuff done at the same time. If your friends are on the team, it makes it a lot more fun.

• It’s a learning environment. You get to work with your hands. There’s friends—there’s a lot of friends.

• When can you start being on the robotics team?

• Generally we don’t start promoting it until sophomore year. This is our tenth year, actually. We didn’t do as well as we were hoping, but we’ll take it.

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And how does it work?

• Every year, it’s a different challenge that’s put out. They give us six weeks to build, and then after that the season’s over and you can’t build anymore. Then you go off to a three-day competition and just compete against multiple schools around your region.

• I think there’s about 60-ish teams at each regional, and there’s thousands of regionals across the United States; so there’s quite a few teams.

• They’re getting close to probably 8,000 teams, and it’s not just the United States, like last year.

• It’s global.

• There was a team from Australia.

• Yeah, at our regional.

• At our regional.

• They flew all the way from Australia. Now, this year there’s two.

How did they get into your region?

• It’s open.

• The regionals aren’t like regionals. There’s a regional that happens here, and anyone can sign up for that regional.

• It’s always developing. There’s constantly teams, even in Europe and everywhere.

• They opened up some in China this past year.

• Yeah, and then there were two more teams from Israel that formed this year. Literally anybody can join, too.

Do the local companies get involved?

• Absolutely.

• That’s our only source of money. We don’t get much from the high school, so our only funding, really, is donations. We actually do a spaghetti 159

feed every year, too. They don’t cost anything though. They donate quite a bit to us.

Does it help open your eyes to what these companies do?

• It does, because the trips that I told you about earlier, those are directly through our robotics team. We take a trip every year to a company that sponsors us. It gives them the opportunity to present their company, tell us about job opportunities in the future, and then it’s just a really nice experience that everyone can go to.

How many people are on the team?

• 25-ish.

• 25-ish, somewhere around there. No, as many people who want to join can join. The robotics team especially has a lack of exposure in the high schools, so not many. Even kids in engineering classes, there’s not many that join it. I mean, there’s probably a dozen engineering courses. Out of all of those courses that have 30 kids, there’s only 25 kids in robotics; so there isn’t much exposure. We set up a table in the lunch room the first day of school every year to try to promote it. Whoever wants to join can join.

• But you have to be in high school • Who is a sophomore or higher • A lot of times it’s the time commitment, because I know for that sixweek period, it’s 3:10 when school gets out and we’re not leaving until sometimes 7, 8, up to 9 o’clock at night.

• 11 o’clock. 11 o’clock • Yeah, we were here until 11 o’clock one night.

• Monday through Friday, and then Saturday, we come in at 9 o’clock in the morning, and sometimes don’t leave until 6, 7 o’clock at night still. It’s just that time commitment is off-putting for a lot of people.

• What do the companies get out of it?

• One, they get recognition and exposure because at the robotics competition everyone usually has their sponsors on their T-shirts, or a big banner with their sponsors. When you go into competition, your biggest contributors, or what you see as your most important sponsors, get listed 160

when they announce your team as it’s coming out. It’s a good way to get exposure for the companies and recognition as sponsoring a high school event.

• Also, just from taking the trips to these companies, we’ve seen someone say, “Hey look, here’s one of the old team members that is now working at the company.”

• Yeah, there’s a lot of old team members, and probably current team members, now, who will end up working at one of our sponsors because we go there and we say, “Hey, this is a pretty nice gig. We could do this, and then go to school, and then come back to Brainerd and work for him.”

So, they do get some employees out of it as well.

• Yeah, it helps them find people who are going to turn into those skilled workers they want, and a lot of us really, that’s the only exposure we’re going to get to those types of companies. Because a lot of times, you’ll come out of college, you have no idea what’s a good company or what’s a bad company—you haven’t visited them too often. Robotics is a great way to visit your sponsors and just learn more about different places you could potentially go and find one that suits you.

• You can take all the classes you want, but you’re not going to get an event like that where you’re given six weeks to have this problem solved and then have the pressure you have for robotics, so it’s very similar to what you would have in the real world.

• It really is. It’s a very unique experience. There’s no class where you have six weeks, and as soon as those six weeks are up, you can’t work.

There’s a deadline, and you have to get it done by the deadline.

• It changes every year, like the classes. Your intro to engineering design class—it’s very similar to principles of engineering—it’s just principles of engineering goes one step deeper into it.

• It’s because it’s such a great experience. We’re upset we missed out on a year. But the first year most of us were in it—the seniors, at least—we joked and called it the forklift simulator. It was called recycle rush, and you were stacking recycling totes and putting a recycling bin on top of them; a forklift simulator. You’re just lifting and stacking. That was a really good, real-life problem. Next year it’s called stronghold—completely different.

It was a medieval theme, and you were driving over obstacles, opening doors, lifting gates, and then trying to shoot balls into a tower and climb up 161

the tower—very different. A very fun thing—unlike football, where every year you have the exact same skills to work on, the same plays, you have to get better at. You develop your skills in robotics. You work on those skills, but you’re not applying them in the same way at all. It changes drastically every year; just like it would in an engineering firm if you were given a new design by a different company.

How important was that team to helping you decide what you want to do with your life, professionally?

• You might go in thinking, “Oh, I want to be a mechanical engineer.”

And then you might need to do something not mechanical on the robot, and you realize that was pretty fun. For me and electrical, I was pretty set on mechanical and then I started doing the electrical stuff, and I realized that was pretty fun. It was a coin toss between those two. Then this year, again, I started a computer science class. So I changed my mind a few times, and one of those was due to robotics.

• I feel that the classes offered, they’re really nice, they teach you the basics, but they can’t give you the real-world experience.

• You can’t recreate it in a class.

• Instead of just these classes that tell you what to do, it’s really just openminded.

• It’s not guided at all like class. In class, you have this handbook that you have to do these steps. It’s not guided. It’s very much like the real world.

Did you get it done?

• Yeah, we got it done.

• It works.

• It wasn’t good.

• We never used it.

• Yeah, we never used it.

• It wasn’t cost effective.

• Yeah. As part of the game, we didn’t see that it would give us enough 162

points.

That’s a great way to learn.

• If they work, they work, and we put it on the robot.

• Fail often and fail gloriously.

• There you go.

• We will never tell (NAME) we say this, but I think he’s figured it out. When the first year team members come up to us and say, “(NAME) wanted me to design it like this. I don’t know how to do that.” We’ll look at them and say, “You can ignore (NAME). You realize this, right?”

• You don’t listen to (NAME).

• He will give you a general idea, but a lot of times he’s going off of past experiences. He’s been the coach of the team for 10 years. The game isn’t the same game, so the past experiences will help, but you can’t base it solely off that. So he will give us an idea, like we needed to load the balls into the shooter, and he told me, “I need some sort of rotating hoe.” I came back with my first prototype and he went, “What the heck is that?” He will give you a general idea, but if you don’t think you can make it work the way he wants it to, you can kind of ignore him. So long as you get a design that works, he’s okay with it.

• I think (NAME) and (NAME) did that with the shooter. He was like, “Okay, we need it to be like this.” And they’re like, “No, we’ll just build it like this” and brought it to him, and it worked a little bit. Then we just kept refining it.

• Absolutely. Within the team, we split people up. People can join whenever, we don’t tell them they have to do it. But we split into mechanical, electrical, (NAME) did all our CADing this year, and we split up into four, five different groups within the team. You split up into the different teams within the team, and then you can just join whatever team you want. You’re usually on mechanical, and you want to join the electrical team. You can join the electrical or try it out for a year. You can basically do whatever you want. We do split it up into the different fields, so you can get a taste of everything.

Did anybody change their interest was as a result of being on the robotics team?

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• Well, my first year I was doing programming, and then I realized the challenges of programming and the fact that we had a person who would not teach programming. Our person, the senior, who was doing the programming was doing a horrible job of explaining it.

• He was a good programmer, but he didn’t like working with anyone else, and he wrote his code in a way that no one could understand it but him. He used a programmer shorthand that, when you were reading it, he’d have a limit switch program, but he would have the weirdest names for it—a limit switch could be PQD4M. • And not even the mentors who are experienced in the field could figure it out.

• They had no clue what he was doing.

• “What is this?” And he didn’t teach it very well.

• That highly discouraged me from doing that again, so I went into electrical instead, and found my niche there. Had a good time.

• I’m definitely feeling pretty confident. Just within the computer science class, we actually have a programmer who went to this high school, and he actually got inducted into the hall of fame. We had a pep fest for him, and then he came and talked to our class. He explained this is what he does with a computer science major. Through him explaining that, I felt that I got a very good idea on what my career field will end up being.

• It’s not quite the team where you get your actual job experience and what you’re going to be, it’s through the classroom. With those speakers we had come in, they talk about what they’re going to be doing, as well as the trips that we’ve taken to the companies. Seeing actually what is going on in the company and what people are doing—that’s where we get our exposure.

• Let’s talk about the value of company tours. What’s your favorite part of touring a company?

• They’re usually only like an hour and a half or whatever. You basically run through the whole entire building. When we went to (COMPANY), we saw their assembly line and where their brainstorming office sections are.

It’s really interesting, because you see this is what it’s going to be like if you go into a job for engineering at a plant doing something. You’re going 164

to have your assembly line area. Most of it’s, at least for (COMPANY), was automation from robots, with a couple people working on it, and then their brainstorming area, and how collaborative all of that can be.

• My favorite part is usually just watching the machine, like the CNCs and that kind of stuff just run, because it’s a very unique thing to watch.

You can just see it, especially when it gets cooking on a part, and goes real fast, it’s honestly so fun to watch for me. You can see it go and switch bits, and then come back, and switch bits, and then come back. Like at (COMPANY), it was basically like a big three by three. It would pick up a part, and then it rolls the components, like capacitors and all that kind of stuff. It would pick them up and drop them on. That’s honestly my favorite part, just watching the autonomous robots working on the parts.

How have you decided where you want to go to school when you graduate?

• For me, it wasn’t so much what my friends are doing—obviously that was a minor part of it. Yeah, it’s nice to be there with your friends, but I know a lot of us, we’re just kind of, one by one, we’re like, “Well, maybe we should go to (SCHOOL). Maybe we should go...” Like (NAME) has known since freshman year, because his brother went there. Then sophomore year, I think a couple more of us were like, “Well, that’s a good option.” The next year, more and more of us just kind of gravitated there.

I don’t know whether it was friends for other people, but for me it was just the cost of the school. I know a lot of people who have gone there, it’s a very good education and it’s a very good program overall is what I’ve heard.

• For how good of a program it is at this school for engineering, and it’s so close to home, too. We can go to other schools that are really good, but they’re going to be miles away in a different state.

• When we talk about it we’ll say, “Oh yeah, we’re all going to a (SCHOOL).” And then we’re like, “Oh wait, we’re in North Dakota.” But I think, like (NAME) said, it’s a very nice program, especially for the cost.

• If you’re a person that wants to go far away, like California or what have you, go. But for most people who are like, “I want to get away from home, but still roughly within the region,” it’s one of the greatest schools in the region that offers the best education with such an affordable price, so it just makes sense.

• Yeah, and if you’re in Minnesota, you actually get the state tuition rates 165

there as well. So that helps. I think the out-of-state tuition’s like $26,000, but the in-state’s like $17,000 or $18,000, so it does reduce the cost by quite a bit.

Can I infer that most of you are thinking that you might come back to the Brainerd Lakes area when you get your careers going?

• For me, I’m not going to specifically come back to Brainerd for a job.

If my job happens to take me to Brainerd, then so be it. But I would come back if I was offered a job here. Like right after college, I would come back. But I wouldn’t go out of my way to come back to Brainerd. It’s a nice city, don’t get me wrong, but I just have to get out.

• It’s a nice place to raise a family, but it’s not necessarily a bustling hub for engineering and, say, medical.

• How important are internships in your plan?

• For me, I plan on doing at least a couple internships over the summer after my sophomore year and my junior year—just to get some exposure— and hopefully that will go over well.

• It’s interesting, because in the summer, you can work for money or you can work for experience. Sometimes you have to give that trade-off. If you don’t work for money, work for experience instead. It’s now coming to the point where you get out of college, and places won’t hire you because you don’t possess the experience. You almost need to sacrifice a summer of not getting a ton of money, and you get all that experience, because that will help you get the money eventually, after you get out of college.

• There are a lot of internships that offer money. I’m doing one this summer for (COMPANY), and they’re also doing both the learning experience and the money.

• My brother’s taken a few internships that are all paid positions.

• Obviously some are. Something’s better than nothing, right?

Internships, for me, are very important going into my field.

• I took the civil engineering class, and I want to go into mechanical engineering. But I do still have an interest in civil engineering and architecture. I thought it was a very interesting course, so I’m actually planning to work over the summer at (COMPANY) in Bemidji, because they offer jobs to high school and college students. I think that’d be a 166

great experience, because it is paid, and you are going to get that good real workplace experience, and it will give me a little bit more exposure. It will either change my mind, and I’ll find out before I’m too far into college to change it, or solidify my pre-existing disposition towards mechanical engineering.

Why aren’t more females interested in the engineering?

• I think it’s just the fact that for the longest time, it’s been a maledominated field, and they’re working to try to get more women into the field and get it out that women can do this just like men can. I think the reason why it’s still taking so long is that a lot of women still don’t know how many options are available for them.

How might they find out about the options?

• I think a lot of it is taking classes like this in high school, so you can see what you’re interested in before you go to college, and then you may only be one of two or three women in your classes. But if you do these engineering classes in high school, then you have an idea of what you’re getting into, and you’re more prepared.

• Yeah, a lot of girls that I know, when I start talking about my engineering, they’re like, “Oh I could never do that.” It’s like, “Well you could do it, but you just choose not to.” Just because you think you can’t do it, doesn’t mean you absolutely can’t do it. If they work hard enough, work enough at it, they could become engineers.

• I also feel it’s the stereotype. Women aren’t supposed to do this. Women aren’t supposed to go into this. And I feel as though we don’t get exposed to it because everyone thinks we shouldn’t do this, so they’re not going to take the courses.

• I think a large part of it is the mental block. Just like that, you think, “Nobody does it, so I’m just not going to do it.” And then that’s that for you.

• Yeah, because I’ve certainly tried recruiting both men and women to the team, and the biggest thing everyone says is, “Well, I can’t build a robot.”

• Or they’ll say, “Oh, well I’m not interested in robotics.” But it’s more than just the robotics field. There’s obviously, within that, there’s a mechanical part of it. But they’ll say, “Oh, I’m not interested in that.” Or, “I can’t do that.” But it still would help you discover what you could do, and 167

you never know. If they say, “Oh I don’t want to do that,” and then they go take a couple classes on it, and decide it is going to be pretty fun then they change their minds and go to the same school, there’s multiple programs in every school, obviously.

• It’s definitely a lack of understanding. I know my grandparents came last year for the robotics competition, and they looked at the robot, and said, “Wow, these robots are really different.” Yeah, we built the robot.

“Oh, I just thought you guys got a robot and programmed it, and I didn’t think you were interested in computers.” I spend almost the entire season in the metal shop building prototypes. And people see the robot, and then they usually see, when they see pictures of robotics, they see the big fancy robot, then they see the typical nerdy kid with glasses on the computer typing. They don’t think deeper beyond that into the fact that someone needs to build it. Someone needs to design it. Yes, the programming is a really vital part. The robot doesn’t work if it’s not programmed, but it’s just lack of understanding of the fact that it does need to be built, too.

• You can’t program the robot if it’s not built.

• Yeah. And the robot doesn’t just appear for us.

• All that comes as, basically we get aluminum shaft, and aluminum sheeting and all that kind of stuff.

• ...And a drive face....

• Yeah, and a drive face. But then after that, you got to figure out your drive system, what you want to do for that, and then where you’re going to put all your components. The components of the actual robot don’t really change year by year. Where you place them, how it’s all set up, does.

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FOCUS GROUPS

St. Cloud March 27, 2017

Gray Plant Mooty

How do you feel about the financial prospects of your company in 2017?

• Manufacturers are all optimists. They’ve got to be believers. If you don’t believe, what are you going to do? Give up?

• The election, the way it went, was a big part of it. There’s a lot of controversy around our President, and I get that. From a business standpoint, seeing it go the other direction than it could’ve gone, I think it caused me to hold myself back and ask questions. “Do I want to keep doing this?” was number one. When we talk about regulations over the last seven or eight years, I think there was a race between manufacturing and banking in terms of who could have more regulations applied to them. The hard part when you’re in medical, or anything of that sort, I don’t know a politician out there who’s going to argue for less safety. Regulations are piled on and there’s at least a little light at the end of the tunnel. I don’t know if they could be taken back for certain, entirely with what’s been happening. . . . There’s been some up-side to it, too. It really creates a small barrier of entry for people and companies to get in. Those of us who have invested into the regulatory side: We paid our dues, have our costs into Sponsor: Gray Plant Mooty

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it, and now we’re starting to get some of that back. That gives me a lot of optimism.

Do you feel it in your customer relationships?

• We don’t see it. We’re seeing some movement, yes, definitely. We’re seeing a lot of movement and a lot of positioning just in the last two or three months. I’m hearing it from other manufacturers as well. I have friends who were really dead last year and now they can’t produce enough.

• I think the combination of what you heard in November; as a small- to mid-size manufacturer, listening at about the time of the Presidential run, Trump said, “I’m going to reform the tax bill. I’m going to deregulate banking. I’m going to deregulate EPA.” As I sat there, [NAME] and I shared a couple of conversations. I thought, “This guy’s a loose canon, but it means good things for what we do as manufacturers.” That’s propelling the way, and then the stock market’s reaction to his inevitable election, with those two factors in play . . . I don’t know how a person can’t look at it and say “I don’t think the economy is going to be very strong, at least for the immediate term.” We’re seeing and hoping it works out into August, September, and October. Our typical backlogs, you know, three to four months and we’re getting into that six-, eight-, nine-month range.

• We always had some natural delays in some projects, I’ll say, around election years. It’s just because people are hesitant about what either the reform is going to be or if there’s going to be any. It seems like it doesn’t matter who wins because some of those projects always come back. I think the big change for us this year isn’t just that they came back, but that it seemed like a lot of them came back and were saying, “By the way, we want to make it bigger.”

• Stuff that was a four or five big project is now six to eight. It’s almost like it compounded with the election. It was, “Yeah, we’re going to bring it back and we’re going to make it bigger.”

• We asked our former president, who was president of [COMPANY] for many years, “In an election year, is it typical for things to slow down?” He said, “Absolutely. I’ve seen it for years. There’s a dip in that period, and it usually comes back.” People and the uncertainty, I think, is what it . . .

They just don’t know what’s going to happen.

• Most of our sales are to public schools; either universities or K-12.

I don’t know if it was so much the election, but in the last several years, they have been spending more money on their infrastructure, safety, and 170

technology. We’ve had a natural growth for a handful of years from that.

With this election, it seems to have increased.

What do you think about overall economic expansion?

• Before November, there were a lot of people who weren’t doing much at all. Now, like [NAME] said, people are going bigger and we’re seeing our contract hold from X more dollars and then we get a change order rate for about a half more. It’s like, “Wow!” We were on the books before, just as a small contract, and now they’re adding another big chunk, adding a wing or whatever it is to the building, and so we get another big chunk of money.

• It could be the looming threat of interest rates increasing. That’s been talked about for quite some time. If you can get a project and cap off a project today versus six months from now, people might expedite some of those things they’re thinking on.

• My passion is about small and mid-sized manufacturers. I forgot the part I should have said, and that is we’re trying to capture your time you put into this because, when you roll it up, it’s a real rallying cry to some of our elected officials who haven’t necessarily heeded a support for manufacturing as we would have wanted. I’m going to pass around a sheet and ask you to fill it out, just put your mileage and time, and then we’ll consolidate them into a pyramid so we can talk to people like [NAME], et cetera, who, by the way, is a great supporter of manufacture, just to point out the number and the time individuals put in to have their voices heard. I appreciate it. Sorry for the interruptions.

Go back to 2009, the Great Recession. At the time, some manufacturers were predicting that OEM relationships would never be the same in terms of terms, inventory demands, and turnaround time. Is that truly a legacy of the recession?

• In our case, from the terms standpoint, our terms have continued for our vendors. Those who we pay, if we were able to get forty-five, sixty days, or longer terms, we have continued that throughout.

• I’d like to comment about that. It seems like the big guys – we’re small fish – they beat us with terms all the time. What used to be thirty was forty-five and what was sixty is now ninety. I have a large account. They’re doing good business with us and they handle their accounts payable through a bureau; a service. It’s difficult to run your invoices through the service. They effectively gain months of flow just for being difficult.

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What about the sets of collaboration that existed for a long time among people in the supply chain who you worked collaboratively with? Your buyers became part of the team and the legacy of the bad economy. Was it that it became less important, maybe, and price became more important? What’s your sense of that these days? Is price king on things?

• We still believe in relationships, especially if they stood by us when things were tough. There were cheaper guys out there, but we didn’t go there; we stuck with the relationships. That’s what we did and it pays off. It paid off.

• I was going to say, for the type of manufacturing we do, the economy had an impact in 2009, but that was also the trigger year when all the regulations started to change as a result of that election. When we talk about relationships between our customers, we’re dealing with a lot of firsttier in the medical and second- and third-tier in the aviation side of things.

These are large, large organizations around the world. They were using that battering ram: stronger than pushing out, and getting another twenty or thirty days. In other words, we didn’t do implants. We only did them for a few years prior to that, so a 1345 registration. We went to that, and then how I describe it is, if you were an instruments manufacturer before that, surprisingly there just weren’t the regulations on that. The instruments went up to the level of implants, and implants went up to a whole new level.

Then, A.S. 90100 jumped over all of those guys on the aviation side of things. Master validation plans, IQs, OQs, all those things you have to do for the processes; you can’t move your part out of this machine. For us, our customers used that as a battering ram along with the bad economy. Okay, it happened. To me, that was worse than the economy in 2009.

Interviewer: Some say the other relationship is banking, mostly because of Dodd-Frank. True?

• Yeah. If I look back, and I’ve been doing this for almost fifteen years, I think ‘08, ‘09, ‘10, it definitely made us better bankers. I think the relationship piece has changed. We still look at our bank business as being relationship-based. If I’m sitting in my chair looking at it, I feel like there’s a lot about rate. There’s a lot pressure from that side. I want it to be more relationship-based.

Are you more involved on a personal level of wanting to see more transparency in the relationships and the financials of the customers?

• Oh, yeah, there’s definitely that. I think, also to that piece, is we’re more generalist bankers. To be a better banker we’ve learned that we have to understand the industry more. And I think we’re learning. That’s a big deal, 172

too, just to understand the industry more so we can add more value.

How about capital expenditures? Do you expect those to increase this year? Are you going to invest more?

• We’re in the middle of a building expansion. We were talking earlier about jumping in size. We initially planned the 19,000 square foot expansion, and we decided to increase that to a 35,000 square foot addition.

When I started four years ago, what was maybe a half a million dollars will be $1 million this year, with seven of it related to the building expansion and three for just increasing more scientific gear and that sort of thing.

• We have a pretty heavy capital expenditure on an annual basis and trying to keep it . . . those big ears . . . We’ll probably see that when we do some expansion as well. Buildings always cause that but, for us, there’s a couple of million we try to keep steady, and it comes down to availability of capital at this point. If we’re healthy, how much risk do I want to take on? We’ll be spending more capital over the next two years, for sure, at this point.

Let’s do a lightning round of other factors that we test every year.

What’s your sense of how the cost of healthcare impact your ability to do business?

• We hope that we’re going to be talked out. We were sure hoping someone was going to go through in the next month or two; what was supposed to have been gone through.

• You put it as a cost of doing business. Lately we’ve been getting smarter, planning for it from year to year, by saying it’s going to go up ten percent, twelve percent, and expecting that. When you get a five percent like we did this year, we were just ecstatic, feeling good. Yeah, we were just ecstatic. It was like, “Ooh, that’s fine. Let’s sign the paperwork.”

• Or it’s gone up six percent. It was the same scheme. We paid for the health insurance for the employee and their entire family. They don’t contribute anything.

• All of it?

• All of it, yeah.

• We paid fifty percent for family coverage.

• We thought the six percent sounded like a deal.

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• We pay seven percent for our employees and for their families.

Healthcare has been going up for twenty years.

• We’re more or less in the same boat. One thing we’ve been trying to do from a company perspective is pass that cost a little more back to the employees. During the recession time period we didn’t have wage increases of substance and so we didn’t pass any of the healthcare premium increases onto the employees at that point in time. Now we’re trying to right the ship a little bit. We were, I think, doing six-percent and 6.5-percent increases. We got that and we’re happy with them.

• It’s a weird thing. It’s less than double digits.

• Yeah, exactly.

• What do you guys do for healthcare? 100 percent?

• No, I don’t even know. I forgot in my head what the percentages are.

• I think we’re trending towards seventy-thirty in our adjustments this year.

• Yeah.

• Family and dependent care?

• It probably fluctuates around what we pay.

What about your ability to attract and retain skilled workers—or any workers?

• For us that’s the biggest thing. We struggle because we’re in a rural community. We’ve had four engineering positions open from anywhere between two and fourteen months. We just cannot find people because we want them there every day. We find people who have engineering skills and are interested in working for us remotely, showing up once a month or three days a month, or whatever. But nobody wants to live in this part of Minnesota.

Is remote contact a solution that you might have to use to adapt to the situation?

• We’re beginning to consider it, yeah. Other positions . . . from the beginning of this year, we’ve had seven positions open. Some are skilled, some are unskilled, and we’ve been able to fill three so far. It’s a real 174

struggle for us. One of the things is that our benefit package does not meet what has been discussed in here. It’s not only that we are rural but also our benefit package doesn’t meet the competition. We’re working on both ends of that: trying to come up with ways we can work remotely or have people work remotely, and also building up the benefit package for future years.

• At all of our plants we’re probably looking at a three- to four-year window where we’re ten percent to fifteen percent understaffed.

How does that cut into your revenue?

• Especially looking at the backlog we have, they come to us and say “Oh, you didn’t do it.” I sit on a peer-counsel group in [CITY], a bunch of manufacturers for enterprise. The number-one topic every month is people: getting skilled people and people who don’t work. Revenue would be good, but they cannot find the people to do the work, not just skilled, but unskilled people as well. The number-one topic in the last year has been that. We see this huge ramp up coming. I think it’s going to lead to prices going up. I don’t know. You have to steal them from down the street.

I don’t know. If you want to do the work, you’re going to have to get the people from somewhere else.

How much of it is supply and demand and you’ll just have to dig deeper and pay them . . . ?

• You talk capital and a lot of these people in the room who I sit with – they make widgets – they can automate some of this. They’re capital because of the people issues.

• There’s an interesting article in the [CITY] Times. Six months ago it was an article on how few people in this generation are entering the workforce versus the baby boomers. The whole article was really on how companies are going to do more with less. In fact, the CEO of [COMPANY] was on Squawk Box this morning saying, “We have 2,000 jobs that we need to fill, and we can’t.”

• If you look at the deep projections from Minnesota, we’re just going to fundamentally run out of people.

• It isn’t as bad here as it is in the projections for other parts of the country.

• The idea that we’ll chase off immigrants seems sort of bizarre. That’s the new work force. When you hear from the [CITY] presentation it’s, “Meet your new work force.” It’s all the immigrants. Now the question is 175

how to quickly get them educated and up to speed.

• Yeah, and I don’t think it is immigrants. The illegal side of it is what gets confused in the conversation.

• Yeah.

• Illegal immigrants, I think, a lot of people agree on that. Legal immigrants . . . I don’t think that’s a question in this country or state where we need to keep encouraging that. There’s the definition and a difference of perspective that I think clouds the whole issue. For us, years ago it used to be shops and schools and stuff. I hear people talking about that again, but I’m just not a proponent of gearing up high schools because of the cost of technology and the way technology moves so fast. I can give them a fifteen-year-old machine. It’s going to teach them something. There are places doing things, a technical school in [CITY], and they have a program which is backed by the state and it takes the risk off a manufacturer for bringing in a sixteen-year-old student. They have about forty students around [COUNTY] who go into different manufacturing. They’re trying to spread the word. Our president on the board of the Minnesota chamber . . . I’m pushing him to get it. If we can coalesce around supporting our schools in a different venue and then also on top of that we have to take – I’m going to say this and you guys might laugh, but I think there are some simple things as much as having open houses in our businesses. The state of manufacturing in October up in my area . . . there might be a handful of companies who open up their doors. I’m convinced that people don’t know how to do open houses. They get intimidated by them. It does take resources. It takes planning. If we can let the community know who we are and what we do . . . How many manufacturer-type of people are in this state? If everybody opens their doors up once a year, got the public to see what we’re doing in their communities, looked at the impact we’re making, and, on top of that, putting on that training ourselves then we’re getting serious. We all say we train, I got tired of it, and we’re able to. We went out and hired a teacher. We brought her into our HR department because the only time we technically would train over the years is after something happened that was not right. You pull people together, have a few classes, and then you say, “Don’t do this. Do it this way.” You walk away and we call that training in manufacturing. When I get a chance to speak about open houses and training, and then coming alongside in [COUNTY], there’s no reason that can’t be statewide. We can have 300, 400, 500 kids, 1,000 kids, 2,000 kids. There’s no limit to the number, but it just doesn’t get off the ground because our state doesn’t want to take it on and there’s no focal point behind it.

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Who does open houses for students?

• [COMPANY] has done it. No, [COMPANY] has been the big pusher.

• A lot of players in here have been part of that and they’ve signed back up for doing it again this year. That’s a first, to do it two years in a row.

• Was that the first year last year?

• No, we did the first one in 2008, I think it was, or ’09.

• Okay.

• The [COMPANY] guys, they were around in those days. We invented the tour of manufacturing. We had this very issue of nobody knowing what’s going on. “Dark, dirty, dangerous.” Just ask anybody who doesn’t work there. We sat around and asked, “Gee, what are we doing? Gee, those guys have tour of homes. Why don’t we have tour of manufacturers?”

• The tour is growing, getting more companies in it, and then we’ve been working on growing the apprenticeship program. The high-school apprenticeship is real and we have our first one at [COMPANY] where we picked [COMPANY]. They actually had a student who was working there, but he wasn’t an official apprentice. He’s now legal. We got that all settled.

What’s going to happen on [COMPANY] website is that all the forms you’ll need and how to do it . . . There will be a PowerPoint put together.

Here’s what the school has to do, here’s what the company has to do, and here’s the form that’s been filled out so you know what it looks like. It’s sort of the tool kit and so, for the other manufacturers, this should be a really smooth deal. It is blessed by the state. They’re still arguing about it a little bit, but we’ve had a lot of help from the [SCHOOL] guys. They were really good. In fact, they’ll show up in our PowerPoint. At the end, there are a dozen names of the people who will give you support if you have problems. We’ve explained that this whole thing of apprenticeships is not just in manufacturing. That one’s more complicated because of the hazardous issues. You need a Department of Labor blessing to do it.

• I don’t know. They’re going on about changing that law, but the law already has been changed. I’m not sure what they’re doing. I read the new bill. I have to go back and print out the present bill to see what . . . I talked to [NAME] at [SCHOOL]. I asked, “All right, this new bill, is this any different than what we’re doing for it?” The answer is no. I told him there’s smoke down in [CITY]. We just let those guys go down there and do whatever. We have good support from the legislators. Everybody’s saying, 177

“If you need help, let us know.” We just decided we’re the guys in the back room putting together all the paperwork so everybody can have highschool apprenticeships.

Our focus groups with students have been good. I asked one group to give advice to manufacturers about how to attract well-trained employees. They said internships.

• Exactly. They’re making choices but they don’t know what the choices are.

• We’ve hired. No, our interns are coming out of the college, post-high school.

• We just started and hired both of the interns that we’ve had.

• We have high school-, technical college-, and college-level internships, about twelve to fifteen positions throughout the year, and we hire . . .

I don’t know the exact numbers, but I know it’s over fifty percent. It’s probably seventy percent of those we get hired on at some point. It’s a commitment and a cost, but it’s also the generation we’re dealing with, in terms of wanting to be included. They want to do work differently than we’ve done work, and it’s not a “lazy” thing. I have four boys, ages fourteen to twenty-three. They’re motivated. They just . . . I always give the example of when one of my boys was up at our building about four or five years ago. My oldest, he’s about eighteen, was looking around and he asked, “Why did you ever build these offices?” We had some hard old offices. I said, “Bud, we designed this thing about fifteen years ago. Our next building won’t have hard-site offices in it at all.” That was just an innocent question.

• They work differently and we all know that. Tying it in – getting him on an internship, and then the energy they create – that’s probably the biggest payback out of anything. You bring in a sixteen-, an eighteen-, or a twentytwo-year-old kid out of college, a young person, and inject them into your workforce. Just that energy alone is worth anything we put into it.

Other focus groups continue to talk about having to adapt to the work styles of the young generation of employees. Agree?

• Absolutely, but they’re the ones we depend on now. We’re going to have to depend on them and so you have to learn how to work with them.

Does that mean you have to adapt to them?

• Yes! 178

How? • We just have to. You have to reward them and recognize them a lot because they want to know how they’re doing. All the interns we’ve brought in, it’s always been a win-win for the company and the student.

It’s been a great thing. “Man, you want an Excel spreadsheet whipped up?

Here you go.”

• Yeah, you thought they were going to call a customer on the phone?

Oh, not so good. They’ll send them an email and wonder why they haven’t heard back.

• Yeah, they don’t do email.

• The number-one issue we run into is flexibility. There’s a certain amount of time you have to spend at our facility to get our product made, and sometimes that means coming in at 4:30 in the morning. Sometimes that means that you’re going to be there until six p.m. at night. That’s been our biggest hurdle when dealing with that generation. You try to accommodate your crew schedules, stagger your start times, and split shifts. Ultimately there’s only so much you can compromise before it’s either a personality clash and it’s not going to work or it’s the weeding out process of who’s really worth investing the time in; who’s willing to make the sacrifice to get where we need them to be.

• One of our biggest challenges is that we do the internship program with the high school and college. That yields very good, skilled working, but we still see the challenge of the unskilled workers. As we talk about the associated challenges, that’s where I see our biggest hurdle moving forward. The millennial generation comes through, looks at precast manufacturing, and you have to figure out a better way to do this. Yes, to an extent you can, but it’s physical, manual labor. I don’t know if the generation who’s coming out of high school today even wants to do this type of work. To me, that’s going to be a major challenge. Going back to the comment of migrant workers, that’s maybe the direction we need to eventually look toward. If you look at our demographic, I don’t know if we have even five percent migrant workers out of 400 employees or so.

• It definitely changes based on location. [CITY], we were really busy last year. I bet forty percent of our workforce was migrant workers, because that was a refugee location mainly for [NATIONALITY] coming in. No one who’s up there really wanted to move there, so it was a lot of unskilled jobs that need to be filled in the area. There was a lot of incentive for the 179

city, as well as the refugees, to basically board them and employ them.

• How old were the workers?

• Well, we had to drastically change our training program up there, so much that we have actually tripled our locations, because it was much more hands-on. You have not only a cultural issue but also there are certain things which are perceived. If you motion a guy to come over using your finger, they’re very quick to tell you, “Where I come from that can get you killed.”

• Yeah, right.

• It was, “Okay, let’s sit down and talk about not just the cultural aspects.” We hired someone from the community. It was basically the head of the refugee committee who was working with the city and government to bring refugees in and get them boarded and employed. He actually was going around to all the employers and doing kind of a cultural presentation on all the things that are perceived or communicated in their culture if you want them to act a certain way. We didn’t have to bring that level of detail to all of our training programs, but we definitely changed our approach as far as evaluating skills goes. How do you work with someone to get them where they are? To generalize a statement, our candidate pool for unskilled labor was probably two-thirds or three times bigger than what it is today. We just had the conversation yesterday at our [CITY] location.

One of the things we have to do . . . We used to be picky and say As and Bs, right? Or employee skills? Well, now you’re talking about Cs and Bs, trying to work with them to become a grade better, trying to make that plan to make them better, and the only way to do that is training and a lot of handholding. It’s just going to be, to [NAME] point, that’s kind of the future for us, unfortunately, as manufacturers, and it has to do a lot with that generation we have.

I add managerial training to this? A good use of your time?

• You can’t not do it.

• Yeah.

• It’s a Catch-22. I don’t have labor to dedicate to training, and it’s the training needed to meet the demand.

• Yeah, survival.

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• Yeah, because that was kind of the bullet we bit last year. We couldn’t afford not to because we have to.

• We have two full-time people in HR who focus on hiring and training.

Another full-time person deals with the company HR stuff. I have a director of that. To answer your question, it takes a significant investment and a decision. From our perspective, if you look at our growth curve, there are not enough people available and we can’t afford the technology. If I had unlimited funds coming in, then I might be thinking a little bit differently, but I don’t and I don’t know that most people do.

How much of the solution to your workforce issues will be found in automation?

• We don’t look at it as replacement of labor. We look at it as ability to grow.

• You still need skilled operators, even to run to the automated equipment. Even though you’re maybe saving cost by automating, you still need to go through the training programs and you still need that skilled labor to run them.

• Then you need techs to take care of the equipment.

• I think it’s supply and demand. That’s what it is.

• Yeah.

• It’s another major topic in our meetings at the councils; how we’re going to get these folks.

• If you’re good, you’re going to let them go? Let them take off and go someplace else?

• They jump around for a quarter.

• Oh yeah.

• I think it still comes down to talking about the training and the person connection. Is that what you guys are talking about? Those are the decisions we’ve had to make. That’s what people are looking for; that connectedness to an organization. You can still do your studies and wages will still fall, three, four, five, six, seven on this list of what’s what when it comes down to it. You’re going to get a short-term burst, I think, if you 181

want to pay people more, but the question I would have is, “Are they underpaid right now?” That might be the case and they realize that. That’s the only justification I can give from a personal standpoint of going up ten percent. They’ll say, “Then you’re not paying marketable wages right now.”

• But you’re right, though, it’s more than wages.

• Yeah.

• In our new building expansion I never would have dreamed that we’d be building an employee lounge because, knowing that the group coming in, and the workforce, and the people who we need to attract aren’t necessarily akin to sitting in a hard manufacturing or a hard office environment.

• Yeah.

• We’re looking at different ways we can get people in, keep them there, and retain them. We spend enough time and it’s a hard time just to get them in the door. You can’t let them walk out the door. It’s hard to keep them there.

• Exactly.

• We went through a formal wage survey of all of our positions in [CITY] last year and made the number of market adjustments by department just to stay competitive.

How painful was it?

• Not bad. We weren’t in bad shape, but we’re paying adjustments for other things.

• Cost was like six percent, eight percent. It’s not far from the ten percent if you’re going to raise your increases along with that.

Is housing an issue when it comes to attracting and retaining employees?

• I don’t believe so.

How about child care? That seems to be an issue in some regions of the state?

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• We’ve had conversations, and we have a high percentage. We’re around seventy percent females. We’ve talked about it. We actually thought about opening one up across the street from the plant. For legal reasons we decided not to.

• [COMPANY] in [CITY] is teaming up with the local [COMPANY], and basically it’s right across the parking lot, and they’re doing the same thing. They’re putting up the building and letting the [COMPANY] use it. Regulation; it’s for that reason they have retention. They’re the biggest employer in [CITY]. I think sixty percent to seventy percent of the population of [CITY] works there. A big demographic between male and female and that was the number-one complaint amongst the families who had both partners working: child care.

Just a couple more questions. What’s the progress of competition from foreign markets? Still a looming challenge?

• For us, competition isn’t an issue so much. The strong dollar is a problem.

• Yeah.

• We don’t really see the problem, but our customers: They’re seeing more products come back from being offshore and coming back to the U.S. It still seems to be tied to a lot of quality issues.

• We’ve created that niche: the tough work we do and will keep doing.

So a lot of our stuff didn’t get offshore. What has happened is companies, those big AMs, they take their headquarters out of Minnesota and move them to [COUNTRY]. That cost us more. I’ve had customers over the years want me to put plants up in [COUNTRY] and different areas. I never have been up for that. The work at least we do, and the stuff that did leave is stuff that’s going to stay out. The stuff we do didn’t leave. It’s a niche we’ve created. The dollar, I think, has a lot more to do with it.

Last item: ISO. How much has ISO recognition or achievement become part of the culture of your companies, or is it?

• We’re not ISO-certified. In our market we have ten competitors and only one is ISO-certified. It’s not necessary at this point in our market.

• We have a laundry list of certifications and we couldn’t sell if we didn’t have them.

• 2008 was upgraded in 2015 as the baseline for the 9000 series.

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• We’ve done that. We’re in the same boat. We couldn’t do business without all the certifications we have to . . .

Required by customers?

• Yeah, they’re required, and we wouldn’t be able to do the work we do without them.

• No, AS9100 and 1345.

• 1345 is going to be encompassing the 9001 and pulling it in. Just one regulation now, from what I understand.

• I’m not as close to it in the last couple years as I used to be. What I’m hearing from my folks is that the AS9100 is changing so much. If you’re talking to a peer, they would say you need to have two systems to cover them both. We don’t see that, but I’m not educated enough or around them enough to understand the differences. I just know there are some differences coming down which are causing some confusion or are shooting over each other’s bows.

• You have to figure out how to run two quality systems inside the same building. Good luck.

• Well, that was one suggestion which came out and I just said, “Absolutely not. We’re not running two quality systems. Figure it out.”

• You’ll go to the highest one?

• Yeah.

• That’s the way it works.

• That’s what you do.

• Yeah.

• It covers everything underneath it. Whichever is the most stringent; live under that.

• AS now is included. 2015 is included in AS. • So, if you’re AS, you’re also good.

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STUDENTS

FOCUS GROUPS

Minneapolis March 28, 2017

Dunwoody College of Technology

Let’s start with what brought you to Dunwoody. Was it personal, a recommendation, a teacher, a friend?

• I was researching schools from all over the metro, between [SCHOOL] and here. What it came down to was that [SCHOOL] is more involved in 3D printing. I believe that 3D printing is going to be the future of manufacturing and rapid prototyping, especially as the different materials advance. I have invested heavily into prosumer 3D printers for my personal spaces at home because I believe that technology is what will propel America into being industry leaders in manufacturing again.

• I was looking for a better-paying job. I had the skills necessary to advance in the machining industry.

• The [PROGRAM] program. It’s designed for people who have been working and who need to get schooling and a job as quickly as possible because it would be more difficult to endure a full, two-year program. This six-month night school was perfect to get you trained quickly and into the field.

Sponsor: Dunwoody

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• I was a valet driver for a number of years at [COMPANY] and then I worked a couple of other jobs. I was woodworking at the time. If you don’t have a college degree then you are limiting how much earning potential you have. In the last three years I have pretty much doubled my salary from before.

• I already have a degree from [COLLEGE] and was working for [COMPANY]. I randomly stopped here one day after work . . . I don’t even know what brought me here. I stopped in Admissions, asked for a tour, and then I was really excited about what they had to offer. I wasn’t planning on going back to school or anything. I was probably one of the last students who actually applied to [COLLEGE] before classes started . . . within a month of them starting. I think the hands-on is what attracted me here. I already have a theory background. We did a lot of bookwork with math and physics and, now, applying it . . . It’s helped me out a lot in my classes.

What did you do for the school district?

• I worked for an afterschool and summer-school engineering program.

Anything from teaching the students to teaching the coaches to go out and teach the students how to do inventory. A lot of robots, bridge-building, and rollercoaster physics class . . . all the students from kindergarten through eighth grade.

• I came to [SCHOOL] because I looked at engineering schools.

[SCHOOL] was one of my options and the [SCHOOL] was another option. I had friends, or my parents had friends, who have gone to the [SCHOOL] through the industrial program. The instructors were easy to understand and to interpret what they were saying. I never really wanted to go away to college, but if it was what I had to do, I was willing to do it.

I toured [SCHOOL] pretty early; about six months before classes started, and I liked the shop layout. I liked all the machines they had. Not a whole of shearing has to be done, which is nice, as it’s going to give me more experience. I guess the hands-on aspect drew me to [SCHOOL], as well as being able to stay at home and work around where you live. Through high school I was at [SCHOOL] taking generals, but other than that, I have not.

• What drew me to [SCHOOL] is similar to what everybody else said; it’s hands-on. Coming out of the military, I had a general idea of manufacturing, so I was thinking engineering all along. At that point, or the year later, you were starting up mechanical, so I went ahead and did the two plus two. From the beginning it’s been hands-on. All the other colleges around don’t really do that, not to the extent that we do.

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• Everyone seems so certain about their decisions. [SCHOOL] was my last-minute, last-ditch effort choice. I was in robotics and my best friend, as well as my engineering teacher in high school, both pushed me into pursuing a more mechanical career since I’d had a better affinity for programming than any of my other classes. It was at a robotics tournament where I ran into the [SCHOOL] booth and I was pulled in by the very . . . ever so eccentric [NAME]. I talked to him for about an hour. I actually missed one of our tournaments by talking to him. And I just decided I’d come here and check it out because it seemed interesting. I was originally going to follow my friend in [STATE] because we were going to go into engineering together.

And did your friend go there?

• Yeah, she’s there.

She’s there now?

• I keep trying to convince her to come here but she doesn’t want to listen to me.

Happy with your decision?

• Yeah, for sure. This is definitely the better choice for me in the long run.

I have two special-needs siblings, so leaving the state . . . I probably would have been gone for a week and would have come straight back home, so I’m glad I chose [SCHOOL].

What do your friends and your family members think about what you are going to do in manufacturing? Do they get it?

• I work at a restaurant on the weekends and I know a lot of the customers. I’ve been there for five years and they always ask me, “How’s college? What are you doing again?” I used to say, “Engineering drafting and design,” and they’d ask, “What?” You get a very blank smile. “Oh, cool, what’s that again?” “I do this and this.” “Huh?” “3D modeling.” “Oh, cool.”

• “Can you make this?” “Sure.”

• People ask, “What are you going for?” and I reply, “I’m going for machining.”

• “What is that? Are you working with wood?” “Sometimes you can.”

• . . . If you wanted to pursue it. I don’t think a lot of people, unless 187

they’ve taken an interest and done research, really know what’s going on behind our titles.

• People don’t think on a daily basis about where stuff comes from.

You look at this chair. We look at this chair and we’re asking, “How’s this chair made?” [NAME] and I were just talking about these chairs, but your average person is just going to sit in it and it’s just a chair. To us, it’s so much more. I’m in school for product development. I narrow it down to that because, like [NAME] was saying, “engineering drafting and design” . . . They have no idea what that possibly means. I have sought out people who I feel should be here or could benefit from being here. There are two first-year students, the top of their class, who I recruited. I told them, “[SCHOOL]: You should just tour it. I know you don’t want to go to school. I know college doesn’t interest you. I know you didn’t do well in high school because you weren’t challenged. Just check out [School].”

They’re both here and definitely top-of-their-class students. I think that goes for a lot of us. You seek out students where you’re thinking, “Yeah, we should tell them to go here.”

• My father-in-law is [NAME]. He was the leading expert in nonwoven technology for [COMPANY]; recently retired. When I was transitioning from the military and law enforcement, the investigation side of things, as soon as he heard I was entertaining engineering between the [SCHOOL] or going to [SCHOOL], the first thing he did was give me a high-five.

At [COMPANY], from what he told me, engineering and manufacturing positions are so in-demand that they’re willing to pay people from the rank and file to go to school, get educated to execute and run CNC machines, presses, or any of those things. It’s one of those fields that pays well and people don’t understand that because they’re uneducated or they think it’s considered labor. Labor has always been associated with not-high earning.

He was impressed and he was also relieved because it’s good job security for the future. I will always be in-demand and that’s what he was looking forward to: the fact that I now have a life skill which will follow me no matter what the current state of the economy is, because we’re always going to be adapting and growing as a society and those positions will always be in demand. It was literally just a, “Boom! Way to go!” A solid decision.

• Being a toolmaker . . . I think my father always said there was a level of prestige with it. Toolmakers were always very high-skilled. It’s almost like an art form in what they’re doing with these molds. There’s a lot of on-thejob training and Minnesota just happens to have a lot of manufacturing.

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• Especially with medical components.

• I grew up in a manufacturing family. My grandpa was a machinist and a manufacturing engineer. My dad is a manufacturing engineer. As far as my family goes, they all understand the concept of manufacturing and I’m a person who aligns with people a lot like me. My close friends are either machinists, welders, or they’re in the manufacturing trade. As far as that goes, I don’t have to do a whole of explaining to do. I used to coach gymnastics. When I’d go back there to visit, the parents of the kids didn’t quite grasp what machining was. After first year I brought some of the stuff that I made and I said, “Yeah, I took a hunk of metal that was this big and then I made this.” That’s mind-blowing to them and they don’t know what to do with it. It’s something completely different than anything they’ve heard of because their parents sit a desk all day and don’t go out and make stuff.

A lot of manufacturers think that the skills gap is due to the fact that teachers and counselors and parents don’t understand the opportunities in manufacturing. Is that your experience?

• I can speak to that right away. I went for the four-year degree and never even thought about technical college. That wasn’t even an option. You’d just go to a four-year. All my friends went to four-years and, now, here I am back in a two-year. They’re asking, “Are you going for your Master’s degree?” I tell them, “No, it’s my Associate’s degree, and it’s the best thing I’ve done; I’ve learned more here and applied more work here than I ever did in my four years.” As far as students go, these K-through-eight students I work with, they’re really excited about the projects we’re doing, but there’s a fall-off in the high schools. With budget cuts, that’s the first thing to go: your manufacturing and all your hands-on classes, so you never think about going into manufacturing. You think about becoming a teacher or a lawyer or a doctor and the standard positions. It’s not out there for high-school students or middle-school students unless you come from a family that’s into manufacturing, like [NAME] was saying.

What did you think you would do coming out of [COLLEGE]?

• My dream job is to build amusement park rides. Physics: that’s how I got into physics. I wanted to go to grad school for maybe a mechanical . . .

I wasn’t really sure and that was the hold-up. I didn’t know what I wanted to go to grad school for, so I was in a group, a cohort of students, who were all going to grad school and I was the only one who didn’t go. I felt like a failure to the program. Now I talk to the students who did go to grad school and I still think I got the better end of the deal. I got tied in with the school districts because I mentored all four years at [COLLEGE]. Another 189

dream job might be working in education . . . but with the afterschool and summer-school-type programs. Things like that that are still an interest of mine.

Were people pushing you more toward a four-year degree?

• Not really. At my high school we take a lot of pride in our machine shop, engineering classes, and woodworking. There’s definitely more pride for the woodworking kids but I don’t think my school would ever dare to think of cutting any of the budget for their engineering stuff. In my time, it was more like an, “Ooh, this a fun side-job.” They don’t really think about you going to college for it, and it’s just, “You can do this without college,” and stuff like that.

How about folks that started in the military?

• I’m speaking from the Air Force point of view: I can tell you the doctrine that was fed to me to feed to my troops and also what I personally believed. The Air Force is very educational-driven, so we have extremely good tuition systems benefits. If you were under my leadership and my command, you were maximizing your tuition assistance every year, which was $4,500 a year on top of utilizing your in-house professional military education. By the time you were done with your four-year enlistment, if you did those two things, you were walking away with a two-year degree in whatever your curriculum was. Applied science from the community college of the Air Force, which is fully accredited, and, if you played your cards right, you would take those credits, transfer them to an online school, and you’d have a Bachelor’s degree as well. The downside was that a lot of those military members took the easy way out and they’re going into a pay-for-play style of school. You can Google it yourself; you’ll know exactly what schools those are, but they’re online-based and, basically, as long as you participate in online forums and do the minimum, you’re going to get that piece of paper. Another downside is that piece of paper only goes so far. I’d say a third of those people who I know work in that industry or have any intent to get out of the military and continue that. I was in aerospace medicine, originally, as a flight medic and then to security forces, which is military police, and inventory all combined in the Air Force. My plan was to always be in the criminal justice career field, until my injury, which required me to hit the brakes, evaluate what’s going on around me, and secure my future and my family’s future. That’s how I went about. If I could add quickly to the high-school education . . . I’m from [DISTRICT], one of the better districts in Minnesota, so we were fortunate enough all through middle school and high school to have elective shop classes. In high school I took, not only woodworking, but also metals. I learned to weld in high school, nothing like what we do here 190

at [SCHOOL], but it was an introduction. When I was at my traditional high school, those teachers encouraged trade crafts, especially because they’re going into carpentry or construction and stuff. Those were highly encouraged. During my junior and senior year, which was strictly at the School of Environmental Studies, the expectation was that you were going to be going to a four-year college and then moving on to Master’s so you could further the environmental agenda. What they didn’t know at the time was I was sponsored by [COMPANY], now [COMPANY], and they paid. I was always very against the grain. I mean, I’m all for protecting the environment and everything but, at the same time, I’m all about capitalism and industry and you have to meet in the middle; there is no left or right. It has to be in the middle or you’re never going to advance anywhere. There were definitely two different states and that all, I think, came down to individual teachers and what potential they saw in the individual students.

• My experience is similar in the sense that we had the same benefits as far as the $4,500 and whatnot. I abided by the flight schedule, so my day wasn’t the same every single day. I couldn’t have the schedule to go to school and even online was tough because our average day was twelve to fifteen hours. If I had to abide by the flight schedule and I had a flight that day, I could be working seventeen hours. School wasn’t necessarily discouraged. It was just the reality that we didn’t have time.

• What was your branch of service?

• Marine Corps.

How would you advise manufacturers to find new employees? What piece of advice would you give them to say this is how you’re going to find employees?

• I’ll hit that right now. I’ve had this discussion a hundred times, particularly at the most recent career fair. Entry-level manufacturing should be met with a higher entry-level pay. I talked to several people, whether it’s welding and fabrication, all the way to engineering, because people were trying to grab me early. They associate the fact that I’m new to the game with the fact that I’m automatically going to slide into, say, twelve or thirteen dollars an hour, which is what a lot of these industries were offering. That might be what the industries support, however. The industry cannot support that pay rate with that knowledge base and skill level because I told them point-blankly, “Listen, I’m willing to do this for what you’re offering, I’m willing to come work for you, and I’m willing to start at the bottom . . . as long as I know there’s rapid growth-potential in salary and internal development.” If you’re starting me out at thirteen, fourteen, 191

fifteen dollars an hour in a labor trade, well, no offense, but I can go to any of the fast-food industries and start at or near that level. I can go to Home Depot and get an entry-level position that has the same pay structure. They have the same type of pay-step scales where it’s pay for performance and time-in-grade. I won’t entertain any manufacturing side-job if it doesn’t start out at eighteen dollars or plus and then, within six months to a year, I am in the twenty-three to twenty-five dollars-an-hour range just because that’s what I believe I’m worth and that’s what I believe these skills are worth along with me investing myself and my education. I know that I’m a more valuable employee because I’ve made that effort. I’ve already shown that I’m individually-driven and willing to go above and beyond versus trying to find somebody in that niche. I am the niche and I’m finding you.

Anyone want to comment on that?

• I’d say be willing to train. There were a lot of companies at previous career fairs I’ve visited where they at least understand what you’re actually looking for. A lot of companies I went to stated they wanted engineering drafting and design kids. They all asked the same thing, “Do you know AutoCAD? Do you know Revit?” “No, that’s not what my degree teaches.

I know SolidWorks and I know Creo.” “Well, we don’t want that. Could you learn it?” “No, I don’t get taught that at all, would you be willing to train me?” “No, we don’t want to train you.” “Well, then, why are you looking for me?” A lot of companies tend to do that, too, and it gets a little frustrating at some point because you never know if a company is actually going to want you or not. I had a really good interview with one company and I told the interview team I didn’t know AutoCAD as well as they probably wanted me to. “Will you train me?” “Of course we will, we’re totally cool with that. We understand what you know; that’s fine, we’re willing to train. It’ll only take two weeks. It’s not a big deal.” I didn’t hear from them for a while. I got a call from one of their HR agents who was trying to set up another interview with the manager. I asked her a bunch of questions and she sent me an exam to fill out, which was on AutoCAD. I told her I didn’t know AutoCAD. She said, “We don’t want you then.”

Really?

• “I had a four-hour interview and your team very explicitly told me that I could get training, that it didn’t matter I didn’t know it, and you just flat out said, ‘No.’” I guess they should know what they want and understand that we might need training. That’s okay, because we learn pretty quick.

• I used the programs. We use Mastercam for our machines downstairs but there are a handful of other programs that, if you know one, it’s not too terribly hard to pick up the others. I haven’t run into any problems with 192

them not being willing to train me. They didn’t even want to train me, which was absurd, but . . .

• Even though the team told me, “We’ll train you,” the HR lady said, “No.” • May I ask a question? Would you consider the union trades, like the actual pipe-fitters union and those, as industry? As importers or whatnot to this question?

• Well, some companies are very committed to different unions. I mean, it can certainly be a conduit into those.

• People who are looking forward, a piece of advice I’d give them would be, and this is something I hope [SCHOOL] can work towards in the future . . . in the welding craft; that’s a very union-heavy career field, I’m investing my own time and money into completing what the union would want as their apprentice program. I feel, as an individual, “Okay, if the union wants me, I should be able to say, ‘Hey, I completed this. I meet set standards that have been established by industries.’” I meet the same standards the union wants, I’m just not going through their process, and I believe that is something industry is going to be facing pretty heavily in the future. I won’t entertain a union now because I’m not going to go and redo everything I’ve just done to appease a checkbox, a management, or a preference versus a skillset. I think it’s, whether it be union shop or industry, something that needs to be looked into extensively because you’re not going to . . . It’s a waste of time, energy, and resources to double-train somebody in the same skillset just to appease the status quo of politics.

What’s the value of internships?

• I think it depends on the internship. I think internships should teach you multiple areas of the field. For us, coming in as engineering drafting and design, a little bit of time designing things, a little bit of time, maybe, in the shop, a little bit of time here and there . . . I think there’s value in that; to get out in the field and see because we only learn so much here – but then you go there. I know [NAME] has, and I would say, we’re learning just as much, if not more, at work as what we were learning here to complement.

I think a couple of months here, a couple of months there, getting good skillsets . . .

• Yeah, I started in November and I didn’t know a thing about CNC. I told them that in the interview, “I haven’t touched a CNC. I’ve done Bridgeport work for three months.” They said, “That’s fine. We’ll train you 193

and everything.” They spent a couple of months training me and I learned the ins and outs of a machine. Coming into the second year, I was miles ahead of the rest of the class since I’d been working on it for a year. Being willing to give up their time for it makes me look back on that company and think it was a really good company. While I was there, there was a kid from [SCHOOL] who had an internship through them for the summertime.

He’s actually being hired on and starting there this summer, so, I mean, for them to let him do an internship in the summer . . . it made him go back to the company the following summer after he graduates to get a job there. I think there’s a positive effect on internships. I think they’re a great thing. I think you need them because companies are always looking for experience even if you only have school. They’re asking, “Where’s your experience?”

If you don’t have an internship, or a job through school, you’re only leaving school with a degree and not experience as well. Internships, I believe, have a lot of positive value in them.

• Yes. Actually, with the [PROGRAM] program, we got a paid internship. It was included in the whole package. I had six months of schooling and so I’m going to the job with six months of training, which is pretty great at that point; so you know just enough to be dangerous. It’s good for the company to evaluate your skillset and they have the option to hire you, so it’s not a total commitment for the employer. They have a chance to evaluate what you bring to the table.

At last year’s [SCHOOL] focus group I was astonished at the number of people in this group who had not finished school yet but already had their jobs. Is that true for you, too?

• I’ve seen the potential. I’ve seen it. There’s no shortage of networking potential available to students here. [SCHOOL] puts their best foot forward every week to put the information at your fingertips. If you want it to either do an internship or an actual career development within a specific sector . . . the tools are there if you want to use them.

• I’m already working, so I have the pay news and . . .

• Yeah, I’m not, but I have gotten offers and opportunities. I work for the school, so it’s kind of a . . . Having school paid for is making it. I don’t necessarily have to work to pay for school.

• A little bit more unique, but I’d like to believe that if I was paying for school, yeah, I would be working. Eighty percent of our class is already working.

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Does anyone have any fear at all that you won’t find a good job when you’re done with this?

• I think what [SCHOOL] does with the [PROGRAM] program . . . they actually teamed up with the employers to create the program so it was tailored to the employers. They knew right from the start what they were going to get and the school knew what they were looking for.

• Yeah, [NAME] is a prime example of that. Got hired right away, and I’m not saying that has anything to do with it, but it’s been proven women aren’t different than men. As far as mechanical goes, I feel they’re sometimes better. Companies see that.

What was your biggest surprise at [SCHOOL]?

• I spend a lot of my personal time . . . I come to class an hour early every day just to mentor and tutor some math amongst my fellow students because they’re too ashamed to actually utilize the tools that are here through actual tutors or getting secondary help. It helps that it’s a classmate, which reinforces it for me, which is lucky. I think that question should be subdivided into two sub groups. You have your regular students, who are transitioning from the eighteen-, nineteen-, twenty-year-old range where those skills and knowledge are still fresh in their minds coming from a high-school education, versus myself being thirty-four. The last time I took math, other than an online form, was almost two decades ago, so that was something I had to physically work towards and put effort into.

As soon as I got that ball rolling again, just like riding a bike, I found I just dusted off cobwebs and I was right back in the game. I think it really depends on the individual for that knowledge base.

• It was different, really. The classes are taught way differently. We had a lot of theory, but then we’d turn right around and do hands-on with it right away, whereas, in high school, you just sit there and you learn the theory and you didn’t really get to do hands-on. Compared to the engineering class I had at high school, it wasn’t really that different for me to come here. It was just like every class was my engineering class, save for the generals, but, I mean, those run just like high school. It was just getting to learn the theory and then go into the shop, or sit down with your teacher in a different room, and actually practice the theory we just taught.

• I thought we were going to have a lot more homework and theory work, but it ended up, I ended up being able to get everything done at school. I had a one-hour, two-hour break every day, so the homework or assignments we did have, I was able to get done. The part that was most exciting for me, which I wasn’t used to, was, instead of doing three hours 195

of theory, you had three hours of shop and maybe an hour or two of theory.

It’s completely backwards from high-school education or any typical college. Coming into that, I wasn’t really ready for a three-hour lab. Having that every morning gets you started for the day. You have time to wake up.

You have time to do your own thing before having to absorb theoretical knowledge.

• All the lab time is personal-pace so, for everybody who works faster, you can just move on to the next project quicker. If you go a lot slower, it’s still at your own pace, very relaxed, which is nice because you’re not pressured to do all this work.

Do people wash out of here?

• Yes. • What’s the graduation rate?

• They definitely wash out of here. I think our graduation rate, it’s probably about 60 percent or so.

• Sixty percent?

• It’s not extremely high. I will tell you, though, it’s a little bit of a weird anomaly because it’s not uncommon, it’s becoming less common, but it wasn’t uncommon a few years ago, when we were really short on manufacturing people, for somebody to find a job in their first year. You guys have all seen this. I mean, how many of your classmates have found jobs in their first year? There was a time when I struggled to get students to come back; meaning they found a good job during that first year of the curriculum and the employer said, “Well, when you’re ready, I can start working you forty hours a week plus, and I can make you full-time and get you twenty dollars an hour and you can get overtime.” There were a handful of students who didn’t come back after the summer. It wasn’t that they were bad students. There are some mixed numbers in there. There were definitely people who didn’t pass courses, but then were some who were really good students and just chose not to come back.

• No, I think part of it is that, to me it seems like the high-schoolers struggle more with . . . maybe not to say the high-schoolers, but the kids who didn’t necessarily have a drive to come to college at all and were either getting college fully paid-for or they’re straight out of high school.

They are either done with school altogether, they don’t have the internal drive of having to work hard because they might not have to pay it back, or 196

they’re saying, “Well, I’m putting in my time at school and then I can go goof off and do whatever. . . .” I think there are kids who don’t make it, and wouldn’t have made it anywhere, because they don’t have the right mindset going into school.

Manufacturers like to talk about the changing workplace attitudes of younger workers. Do you notice anything?

• We have a flexible start time at my job. You can start anywhere from 5:30 to 8:30. If you want to sleep in you have the option. If you want to start early, you can do that, too. I’m not in a direct production role. I’m working in the tool room, so we have the flexibility to do that.

• Anyone else? Do you see that behavior? Are they being unfair when they make that observation?

• No, they’re not being unfair. I think, coming from the military, my discipline levels are a lot higher than a lot of other people’s. Accountability, for me, is everything. Whether it be from my perspective looking at, say, the school or the employer, and from the employer looking at me because I’m not an employee, this is a partnership. And it goes both ways, because I work for him and he works for me. It’s definitely a partnership.

Accountability: the school, when it comes to attendance, has their attendance policy. I know firsthand because I’ve seen it in my classes; several people are held to that standard. I appreciate that because, if I’m putting the time and effort in to meet even the minimum standard, and somebody else is going to say, “I can just slide a little bit,” well, that’s unacceptable, because otherwise the only message I’m sending is I don’t need to be held to that standard and so I’m going to go ahead and lower my work ethic just a little bit. I think the same thing goes for industry. A good friend of mine – he is in the plastic industry and he is a project manager – it kills him because he has to fight his human resources department to discipline his employees for being late, for talking on their cell phones, and for walking away from running equipment. He can’t serve them any progressive discipline and I think industry needs to be not afraid to set the standard, and enforce the standard across the board. I don’t believe in exceptions. There’s . . . obviously, they’re going to be had . . . but they’re so few and far between that they don’t really come up on the radar. If you’re late, here’s your free warning. If you’re late again, here’s your writeup. If you’re late again, see you later. I’m perfectly okay with sacrificing somebody to set the tone for everyone else because I think that’s also a reflection on the product you put out. If you want to consider yourself an elite manufacturer, you’re putting out these products, and you have an ISO rating, but, yet, your employee pool is filled with, for lack of a better 197

word, “undesirables,” it reflects on you and how they hold themselves. I’m down with a dress code. I think manufacturers should require uniforms.

I don’t like the idea of individuals being able to choose their own attire because that disrupts the work center and there have been enough studies to show that it does. Again, that’s in the strict manufacturing side of things.

As for cell phone use and stuff like that, again, that’s just employers in manufacturing saying, “Hey, this is the standard,” and being okay with it. I don’t need to be tethered to my cell phone twenty-four/seven. Is it convenient? Hell yeah, it is. But do I need it? No. I think it comes down to safety issues, too, and I think there has to be a fine line between employer expectations and their SOPs and – God, I hate saying this – government regulation in creating that safe work environment, because I believe a cell phone does not create a safe work environment in the manufacturing field.

I think the manufacturer ought to be able to say, “Hey, OSHA says we can’t have cell phones in here, so there are no cell phones.” Employers will hold that standard if they’re also kind of pushed to elevate that standard.

Do you agree with [NAME]?

• Absolutely.

• One hundred percent.

• I think we might see more tech schools start to hold standards like [SCHOOL] holds because all these other tech schools around us are shutting down: getting closed down because they’re not doing things right or they’re not taking the time to get certified in anything, and their students are just coming and going. I think at a tech school your attendance is even less strict than at a normal college because you can do online in tech school and maybe you don’t want to log on for class today. That’s okay, just do your own work. I think if tech schools have any chance of survival, it’ll be the ones that kind of follow closely in [SCHOOL] form of doing things where everything is properly certified, and everything is incredibly strict.

The only way you’re going to get out of the door as fast as you want to is if you’re willing to put your foot down and actually get things done. If you just want to laze about through things, just go to a normal college. Put down money for a four-year degree that you could have spent two years with and get out the door faster.

• I think we’re going to see a dramatic change at the ten- to fifteen-year mark because we’re reaching a plateau in technology and what you’re going to see. If there’s a breakthrough in nanotechnology and processors, you’re going to see companies like [COMPANY], [COMPANY], those larger manufacturers, go back to how this school started. They are going to 198

be corporate-driven technology schools that will probably have to partner for accreditation with a school like [SCHOOL] and they’ll have a satellite at that place of employment . . . teaching those very specific, processdriven skills that’ll result in a . . . It could be a degree program that’s going to be a certificate-style thing in order to fill the gap for manufacturing and the need for that. I also think we’re approaching a threshold where the robotic industry is going to slowly start taking away from the skilled individual. It’s going to be interesting to see how that plays out because you can get robotics to replace that human interaction, but you also need a human behind that robot, so I think you have the machine tool here and you have the machinist. That robot, I believe, in about fifteen, twenty years is going to be doing a hundred percent of all that machining, but the operator . . . instead of being the hands-on to it, now these guys will be transitioning into being the hands behind the machine that’s doing the machining. I think we’re going to see that in the next ten to twenty years for sure.

• Well, I think [SCHOOL] is a leader in tech schools in the [CITY] area.

I think showing up . . . there’s a strict attendance policy, and it’s almost like a part of the program. They’re going to be ready to go into the workforce and have good attendance. If you have a school that’s just online, I don’t think you really get that sort of discipline, and so I think, if you’re not ready for it, you’re not going to pass.

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FOCUS GROUPS

Owatonna March 29, 2017

Southwest Minnesota Initiative

Let’s start about talking about the skills gap and your ability to find and retain quality workers. Even not skilled workers, but just entrylevel workers. How much of a problem is it?

• Some categories are worse than others. You’ll hear there’s a lot of pressure on welders. Lately my biggest problem has been a truck driver with a Class A license. We consider ourselves pretty lucky. We get help because we’ve tweaked our benefits schedule in order to do that; I’m paying 100 percent of employees’ hospitalization and I’ve some profitsharing going on. I have some good things going on that, when we’re looking at it, somebody attracts someone from somewhere else.

• Yeah, we started with that too. The skilled positions are probably the hardest for us, as you can imagine. Finding press operators is a dying art, so it’s a little bit more difficult to find them. We’ve had a little bit of success in the recent past: bringing on some folks who don’t have that experience and doing on-the-job training for it. You can’t go to school for it anymore, so you have to train for it, and you have to find somebody to do that. Bindery positions, which are what I call semi-skilled, those are a little easier to find.

Still, the biggest challenge with some of the employees is getting people Sponsor: Center for Rural Policy & Development

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to want to come to work every day and work for eight hours. We struggle with that from time to time.

• It tends to be a younger-age worker who we see struggle with that a little bit more.

• Yeah, just bodies in general . . . starting employee, operator-type bodies.

Being an injection molder, there aren’t many of us around in my area. For a long time our business model has been to hire operator-level people, recognize talent, and train them inside on-the-job. I don’t have as much trouble finding skilled labor. I just find good, quality workers who I can elevate once we’ve identified who can be elevated.

And how do you find them?

• Bodies?

Yes. • Word of mouth. Trying to find bodies is like trying to find customers.

My employees are happy and I tell them when they’re out, at church, at sports, paid activities and whatever. Just mention to people, if we’re looking for people, just to start spreading the word around.

Is it partly demographic, that there are fewer people?

• Well, [CITY] is a small town; a thousand people, give or take, and twenty miles from just about everything in every direction. There aren’t that many bodies right there. Trying to get people to drive for a starting job at twelve or thirteen dollars an hour can be a little bit difficult. We tend to have a pleasant working environment. That gets around, and people come over from other places if we need somebody.

[NAME], you’re a much bigger company. What’s your view on that?

• Similar to what [NAME] said, we are lucky in the fact that a lot of times we can attract talent from other businesses. For our manufacturing positions we typically hire ground-level. We only require about three months of solid work experience and then we promote from within. We have an internal bidding system from which we’re able to promote up. We definitely face challenges with finding more skilled positions, like forktruck drivers and, especially, our technical trades: electricians, mechanics, and boiler operators. Those can be challenging to find. It’s hard for us to compete against the union trades that are out there which have a lot of the talent. We are getting fewer applications for our positions, and we have been able to fill them, but we are seeing it.

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So, you’re able, you don’t have chronic help-wanted issues?

• We open our hiring about once every month and accept applications for a week every month. We usually get about two to three hundred applications in that week. We sort through, you know, how many of them have worked for us before and exited on bad terms, as we might not want them back. We sort through those three hundred applications to find the people who have the three months of work experience and the skills we’re looking for.

Three hundred . . . What’s the profile that the typical applicant these days? That’s a lot of people.

• We have a very diverse workforce in our manufacturing facility. That’s been helpful, as well as a lot of word of mouth, that we’ve been able to recruit employees so well. We have a good work environment, which helps get friends and families of our workers to apply. I would say we skew a little bit towards younger applicants. It’s not easy work; you’re on your feet a lot, in cold and wet conditions sometimes, and so we skew a little bit toward the younger population. It typically is a diverse workforce.

• We generally have a very low turnover, employee turnover. However, in the area of entry-level manufacturing workers, we do have some turnover. We do our best to talk with the individuals; make sure it’s the right fit as much as possible, and ensure there are the right expectations of what’s happening today and of the possible opportunities going forward.

Still, it seems like it’s hard for us to determine that match up front, and make it stick, at the entry level. As far as the more skilled CNC operators or welders, we don’t have a need for a lot of employees, but we do from time to time. It’s through word of mouth that we usually can find the right person for the right job, and those people stay.

Is housing a challenge?

• I don’t know about low-level housing, if you want to call it that, for the entry-level-type people. [CITY] . . . they’re working to fix it, but, right now, they only have one buildable lot in the entire town. All of us businesses have been pressuring City Hall to do something about it. Maybe they’re taking steps to try and rectify that, but it’s been a problem for a while. The people we have can’t upgrade their housing because there’s no place to go. Freeing up lower-level housing for other people to move into has been an issue.

• I think it’s the tightest real-estate park I’ve seen in my life. There are just a handful of houses for sale and, if something gets on the market, it’s gone anytime within twenty-four hours. My sister-in-law sells real estate 202

and, luckily, she sells in more than one town or I think you’d be struggling to get a paycheck. We have buildable lots, quite a few of them. Building costs are somewhere in the neighborhood of $150 per square foot level for a new home now, so that market has slowed up because of that price. A few years ago there was a section of town, in the southwest side, where some friends of mine did the developing. I’ll bet there were some pent-up people looking for lots because they popped in thirty, forty houses there and freed up a lot of the lower houses. Now we have a situation where nobody’s, or very few, are building because of the cost, and there are no houses on the market.

• The city of [CITY] struggles with rental properties. We have affordable, quality rental properties for our manufacturing employees from our corporate office standpoint. We’ve worked with the [COMPANY] and built some apartments, more for our corporate employees, but it’s just the availability of housing. The city of [CITY] is working on some initiatives to try and address the availability of affordable rental properties geared more towards our plant demographic, but it is an issue in our community as well.

What about childcare? Is that a factor in your ability to find an attract workers?

• Yes, absolutely. In fact, it’s been a very popular topic at [COMPANY].

We’ve seen, similar to a lot of areas in the state, that our in-home providers have been closing and the centers we have in [CITY] have waiting lists.

It’s very hard for, especially people who are relocating into the community from elsewhere, them to get a foot in the door at a daycare. A lot of the daycares . . . if you’re in there and you have a child in there, you get first rights at the openings. When we’re attracting people into the community that becomes a barrier for us, because, if you’re a family and you have young children, that’s a huge consideration when you’re thinking about where you’re going to move. We’ve actually been talking with a lot of the daycare centers, franchise-type daycares, to see if there would be the possibility of attracting a business into [CITY]. The feedback I’m getting from them is that daycare rates the market can afford aren’t high enough to support the wages and expenses which come along with running a daycare center. Quickly into the conversation comes how the business, how [COMPANY], or how the city can help provide some subsidies or financing to help make it a feasible business plan to attract a daycare center into town.

• Most of my people are forty and over, operator-level and up. My younger professionals haven’t had a problem, so for us it hasn’t been one.

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• I don’t hear many issues with it.

• I say we had to be flexible. I remember when I started working in my twenties. If I had told my boss that I had to stay home today because my wife and I are taking turns around a sick kid, he’d have gone off the deep end, you know? That’s something extremely important. You just have to understand those kids are important and you need to make some flexibility for that to happen, especially since the daycare center doesn’t want them there sick either.

Does that disrupt the plant at all? Is there a cost-benefit on having that kind of flexibility?

• They’re pushing more into cross-training, which you ought to do anyway. That’s been a topic for us lately because we had a couple positions where we weren’t cross-trained well. We hadn’t been addressing that, but it sure makes it easier when somebody has to stay home.

What’s your sense of the childcare issue?

• Well, it seems to be fairly universal. Sure, it varies, because obviously you aren’t having a lot of trouble with it. But, when I do presentations in different parts of the state, I get a lot of head nodding and a lot of questions about this and what to do with it. It does seem to be something that everybody is identifying with, especially the issue of infants twelve months and under. It seems to be fairly nonexistent because there aren’t many people who will take children under twelve months anymore. That’s one of the reasons we wanted to do this focus group; to get into a finer grain of conversation. It seems to get a lot of recognition everywhere I go.

• It was so interesting when we started this. This never came up in any of our annual surveys of issues. No one ever said, “Oh, you have to do something on childcare.” One of our board members kept saying, “You ought to look at childcare.” We picked up on that and, as soon as I scratched the surface, it just exploded. A lot of it seems to be about people getting out due to regulations. Greater Minnesota is far more dependent on family, in-home daycares, than it is on daycare centers. As you found out, the economies of scale aren’t there for daycare centers. People can’t afford to pay the rates that daycare centers need just to be able to cover their overhead costs of opening. That seemed to be quite a revelation to people, especially people in the metro area. They have a daycare problem, too, but it’s more of a cost problem than a supply problem. Out here we have both: It’s a cost problem and a supply problem.

So, cost, quality, and proximity. Is cost the primary factor?

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• Cost seems to be the primary issue; it’s why people are getting bumped.

A primary issue as to why in-home providers are getting out seems to be that their families can’t afford to pay the rates they would need to charge just to break even. A lot of them are losing money on it. It’s not worth it when the local company in town will pay you sixteen dollars an hour and full benefits to come and work for them. I had one initiative foundation person tell me, I think it was in the northwest, that a human resources person told her every time a woman accepted a job there she just prayed that the person wasn’t a daycare provider because then she would have eight angry parents calling there saying, “I just lost my daycare.” It’s that kind of an issue. Isolation plays into it, but it seems like the cost and the regulations are big reasons people are getting out, too. The regulations have gotten a lot stiffer in the last five years or so. A lot of that seems to be knee-jerk reactions to things that have happened. They don’t consider if the regulation is necessary or if it needs to be that strict.

Have you thought about building an in-house center?

• There’s been conversation about it. One challenge is the space. We don’t have enough space just for our own employees, more or less to try and acquire some space for a facility like that. Similar to the [COMPANY] experience, it’s not our core competency. We don’t know anything about it. It would be a huge learning curve that we’re not ready to tackle yet.

That’s why we’re going down the road of trying to find a good partner who would be interested in coming into [CITY]. The other aspect is that we don’t want to just solve the problem for [COMPANY], we want to solve it for the community. We don’t want to create an exclusive daycare for just [COMPANY]. Even worse, you have some people saying, “Well, the corporate office can have their own daycare and we don’t.” We don’t want to create those kinds of divides in the community. We’re trying to be part of a solution for the community versus just for us. You talked about the impact on the manufacturing setting. Our HR team at the [CITY] plant said that it’s not uncommon for them to have employees say, “I need to switch shifts or I can’t keep working.” It creates a lot of employee scheduling logistics issues when they’re at second or third shift and maybe they had a family member who was caring for their children. The family-member situation changed and now they’re at a daycare and need to go to first shift or else they can’t work anymore. There are a lot of situations like that where they try to be flexible and do whatever they can. We surveyed our corporate office employees. Some of the feedback we received was that, if they have a spouse staying at home, they either didn’t intend to have a spouse stay at home watching the children, but they felt forced into it because of lack of childcare. Or, they wanted the spouse to stay home, but now the kids are at an age where the spouse is ready to come back to 205

work but they’re stuck at home providing childcare because there are no other options to send their kids to. That was the feeling of being forced into having a stay-at-home parent. Also, the people who have childcare said, “We have childcare. We’re happy with it, but we don’t have any backups.

What if our childcare provider is sick, or what if they close? We don’t have any backups. It forces us to take off work.” Or, they say, “We feel stuck.

We have a provider but there are no other openings. We don’t have any opportunity to change providers or any choice in the matter; we’re just stuck where we’re at.” That’s some of the feedback we heard from our employees.

• One other observation for you, the [COMPANY] in [CITY], it’s a satellite from the [SCHOOL] . . . During the school year there are lots of kids who are “latchkey.” They’ll go down there after school. There’s always some help with reading or . . . In the summer time, when school’s out, it doesn’t cost very much to have your child there because they feed them. It’s cheap daycare.

All right, let’s move on. How’s business? Are you looking for a profitable year?

• My biggest customer is actually down, but we’ve back-filled with new customers and new business from existing customers. That’s due to the international situation with the President, oil, whatever. We expect that to come back as well. We’re getting a ton of inquiries, requests for quotes from new entities. So, yeah, it’s been pretty positive.

Printing has recently had its own issues.

• We just acquired a company, so we’ve added a pretty significant amount of revenue to our business. There are challenges in that: with integration and making sure we can do okay financially on it. I’m under the belief that in our industry, to grow, you have to have acquisition strategy to it. Although the print industry’s big, it’s not growing. It’s mature. You have to look at that and, with that mature industry, it’s a pretty competitive pricing environment, so you have to be . . . Margins are thin, very thin. . . .

• I am optimistic. Half of our business is contract manufacturing into multiple market segments. That, for the most part, seems up. Most of our customers, though not all of them, are seeing that their business is growing and opening more businesses in ’17 than ’16. The other half of the business is egg. It’s our own products to the egg industry. The egg industry has been quite down; since at least ’14. We see ’17 finally being flacked up a little bit, and if you look beyond that, even more.

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• You see ag coming back in ’17?

• A little. Slightly. When you look to ’18, even more so. There a lot of optimism for that. In general, in multiple market sides, we set up a bit. On the egg side, it’s, for sure, not slipping down. It’s flattening out, to going up a bit, with signs it will continue that way.

• I would agree with that. I have a repair shop that does mostly egg work.

When the market’s down they’re always busy because they fix instead of buy. We deal with a lot of dealers around the area also, and they all are saying they really think they’re down here and starting to come back. I would agree with that completely. Ninety percent of my work is production contract work and I would say . . . I wouldn’t be honest with you if I didn’t say that when the election happened the mood changed. There were people who were more optimistic out there in the marketplace than they were and we’re seeing some of that. I can’t say that I am exuberantly confident because I guess that last recession injured me enough to where I don’t have that confidence level yet. I haven’t seen that, but I would say it’s better.

Other groups have talked about how there are residual effects of the Great Recession, especially with OEMs who want better terms or quicker turnaounds. True?

• I just had one of my big customers go to a stock on their site program; where we’re shipping rather than them taking possession on my dock. I’m shipping to their facility and sitting it on their shelves, while I still own it, and I don’t invoice until they take it off the shelf. That’s one of the new programs I’ve run into. Other than that I haven’t really seen much.

• We’re mainly working with our customers on efficiencies. How can we work together better to help either save money or help us both out? We have rarely seen this matter of give and take: “I want more, I want to take.”

We haven’t seen a lot of that, but we have had customers very willing to work with us on, “How do we work smarter?”

What about that sense of collaboration? Is that less important than price these days?

• No. I think our existing customers all know to come and talk to us about their plastic parts, their composite parts, and helping us, or having us help them, optimize those for release. That’s just standard procedure. From the point of release on, they just know that we’re there to try and minimize their costs, as much as we can, and offset any increases in material prices or whatever. That’s just standard procedure for us.

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• We do a lot of collaborating. Whatever the customer needs, we have something sitting on the shelf for their comfort. “Take these, we make another batch,” that kind of thing. Maybe they’re used to buying big lots and they’re nervous they don’t have that many sitting on the floor. We try to work that out with them. We always have some pressure on pricing.

I think it’s always there. Sometimes we can, and sometimes we just can’t. If you told me my customer wanted to go to 120 days on a twentypercent discount I’d tell you that he’s really optimistic about margins and manufacturing, because they aren’t there.

Let’s go to some traditional heartburn issues that confront manufacturers every year. How about the cost of healthcare?

• I think our employee benefits team has done a lot of work on analyzing what benefits present the most value to employees; streamlining our benefits package to give employees the benefits they value, and maybe minimizing or reducing other benefits they don’t value as much, to try and control some costs so that you’re not spending money to provide benefits that your employees don’t value or see any value in. Our plans are typically self-funded. We very closely watch the costs and try and figure out if there is any way to structure it differently to help control those costs. The other element is union negotiations. We can’t just change healthcare plans for our union-negotiated employees because it’s controlled by those contracts, those union contracts. It’s always one of the biggest issues in our union negotiations, right up there with wages: the healthcare, and any changes to those. It’s a very sensitive topic.

• We’re really concerned with the continued rise of the cost, not only for the company, but for employees as well. Especially the entry-level employees and the percentage they pay on healthcare versus their salary.

This past year we decided to take on a bit more, what we think is a little bit of risk; and we went with a stacked so we could get the premiums down.

We keep the benefits up and the company would actually take on some risk. We hope that will work out for us. But, if it keeps going this way, I don’t know. We’re running out of options of how you keep it affordable and the care up.

• We made the switch to a HSA, high-deductible plan two years ago. It was a rough transition; it’s a big learning curve for employees.

Health insurance is hard to understand to begin with, and trying to teach employees what an HSA is and what that means, it was challenging. I think that, two years afterwards, people have received it well. With our younger employees I’m hearing more that they’re staying on their parents’ health insurance until they have to leave, you know, at age twenty-six. They stay 208

on there until they have to get off. I think that’s more prevalent than it used to be, just because of the cost of healthcare.

Adding to your employee healthcare benefit package bucks the trend these days. How much of a financial hit did you have to take in order to do it? Did employees appreciate it?

• Yes, in both cases. With the advent of Obamacare we were small Group-S groups, so you hear about these sixty-percent increases, and that’s what we took back a few years ago. In order to combat that we ended up joining a professional employment organization called [COMPANY]. They do some of your HR work because, by law, they have to do your payroll.

They can only pay you with an EIN number, they group your people, and they buy large group rates in order to save you money. We did that and we found it to be a great benefit. The question was if it was going to be a great benefit to my HR work because they, you know, you’re going to hand some of that over to them. They call us employers. Are you handing enough over to where it’s a benefit? If your healthcare rates stayed where they were, that’s great. My rates were about where they had been when they increased originally, but the increases I get today are way smaller, and they control it a lot better. So, I have to tell you, that’s worked for us. It’s taken a tremendous amount of communication on our part to get those guys to appreciate what they’re getting. When we started down the path they didn’t really appreciate what it meant. When we got into the HSAs and HRAs, and they have to have a hand in what’s going on, they appreciate it a lot more now. It’s a big deal to them.

And how do you do that?

• In that case, any healthcare person will certainly come and talk to your people. They might not always believe you, originally, but they keep hearing over and over and over again about how we hardly have anybody paying 100 percent. They’ve heard it enough times to where they understand it’s a benefit they can’t get anywhere. So, when they switch jobs, they take a good look. “Okay, let’s look at the whole package.”

• We just switched out our offer letters. We give offer letters for our jobs.

One of the things we’ve done to help employees see the total package is added a section in there. Before it was more focused around your salary and your vacation, but we put in a pie chart and added up everything: salary, the value of paid time off, the value of your health insurance plan, your pension, and your 401k match. We’re trying to put it all right there in front of them to say, “Here’s the value of the total package we’re giving you.” The health insurance piece is a big portion of the value that can easily be overlooked.

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And it’s less overlooked now, because of efforts like that?

• Yes, less overlooked now. We’re making a big communication effort to put that in front of them. We partnered with a PR firm to try and get some more graphic representation of what the plans are; what an HSA plan means, etc., because we have three different plans. We try to get it more graphic so it was easier for people to understand versus lots of black and white text and big books. That has helped. The other big initiative we have is a focus on wellness and trying to be proactive to keep the health of your workforce there versus having to pay for unhealthy employees.

We do biometric screenings, which means we have a company that comes in and tests blood pressure, cholesterol, tobacco use, and something else.

Depending on your results with that, you pay a little higher premium if you fail some of the categories. We also have educational wellness initiatives to try and make sure our employees are taking care of themselves and preventing some of the medical expenses in the first place. That’s a big initiative to try and help control our costs, too.

Let’s be a little more open-ended. When I say heartburn challenges, what comes to mind?

• Actually, it’s the new business I just . . . I’ve become pretty radical in that I don’t have any sales. I’m doing a pure marketing function over the internet in terms of trying to get noticed and pick up new customers. I don’t have anybody out beating on doors, cold-calling, no trade shows, nothing.

It’s really just constantly working the system and trying to get leads coming in.

New customers or new products or both?

• Yes, and then knowing that my customers . . . It was like ten years ago when I lost a big customer. One of my competitors bought it and then made up for it over time. It’s been moved once and they’re not going to move it back again. So, not knowing if that might happen, constantly trying to keep the funnel filled . . .

• Far and away . . . trying to integrate the company I just purchased in [CITY]. We have about six months to get operations, equipment, people moved to the [CITY], get it under one location, and make sure that goes all well. A very close second to that would be sales and business development; making sure we’re retaining customers and finding new ones so that we don’t lose anybody in the process. We think we have a plan for it, but time will tell.

• I would agree with the new sales. I hired my first salesperson about a year and a half ago. Before that it was just me. In today’s marketplace . . .

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If I call you three times and you don’t want to talk to me, I’m pretty much done with calling you. That’s not how it works anymore; it’s just constant.

I hired a guy who understands that. He’s on the phone, the internet, LinkedIn; he’s using all of the above. He’ll call you and then he’ll call you six weeks later. He won’t wear you out, but, until you say, “I don’t want to talk to you,” you won’t be off his list. That’s a challenge for me, number one, managing a salesperson, which I had never done before. But we’re getting out there and getting our information to more people than we ever have.

Is he having success?

• Yes. I told him I was going to give it a two-year hard look. Two years would be at the end of this year. We’re a year and a quarter into it and we’re starting to see results; parts from new customers and opportunities, so I believe it was the right move for us.

• Yeah, I can start with the new business. Of course we want new business from existing customers, but we’re really focused on new business from new customers. One of our biggest strategic risks is the diversity of our customer base. We want to get new customers but, equal with that right now, in part because of what you said about the employee workforce and the ability or not to get employees, is we’re spending as much time inside as outside getting the business more productive. We have to have a budget every year for new and better machines and processes. We’re in the middle of an ISO cert right now; development insert. We think we have to be in a small company; and by small I mean fifty people. We have to keep the systems up, and bring them up, to allow that efficient growth without just bringing on more, and more, and more people.

What about it? Top concern in the region?

• It’s really a concern to get new business. Additional business from existing customers; obviously, they want to keep cultivating that. Concern about if there is enough new business out there from which I can get from new customers; that’s probably the biggest thing. Second in line ties with the employees: getting and finding new employees. These guys can talk about that, but in terms of new employees or finding some new person to walk in the door, whether that’s a replacement or for additional growth, it’s to keep looking constantly. I realize that some of the front-office people . . . you aren’t going to be hiring them until you have an opening. On the production side, it’s continually looking for somebody. If the right person walks in the door and you say, “Ooh, that’s a really good person you’re going to hire!”, they’re going to think about hiring them, not waiting until they have an opening. Because you may not get him then. It’s more of that 211

urgency to hire somebody if they’re looking good. I think that’s on the people side.

And where does training fall within all this?

• I have a fairly young staff, so I identified what skillsets I want them to try to improve over time without putting it in their face and saying, “Hey, I want you to start working on this.” I led them along at it and I think they’re learning without even knowing they’re learning.

• The best kind, yeah.

• That’s identified what I think I need to fill the gaps. It’s part of my exit strategy. I need to bolster them up to the point where I can be here and it doesn’t matter. They take care of day-to-day stuff now. But there are still skillsets they need to pick up and we’re working on those.

• We’re probably training more than we ever have in our lives, as far as being aware of it. I started a formal program and have some people who want to pick up supervisory experience. Working with [SCHOOL] is working for us and paying their fees. Starting to become more aware of every individual on that floor, and, say, having the conversation about whether they’re doing what they really want to do. I belong to a peer group here in [CITY]; it was here last month, and we talked about this. She lit up like a Christmas tree because people doing what they really want to do in life is a big deal. If you’re happy, you’re productive. But it’s asking people if there are other things they want to learn, if there’s other cross-training, if there’s a machine they’d like to learn to run. Just paying a little more attention and then giving them the opportunity to get some training, and pay for it.

• We’re doing more training than we ever have. It was mentioned at least once before in cross-training, which we’re doing. Now we’re doing more of what I’ll just call the soft-skills training. I had mentioned we’re doing an ISO and I asked, “What kind of training do we need, besides obviously ISO, for this project?” It was influence leadership. It’s, “We didn’t think the project would be successful unless we knew how to work as a team, and we know how to be influence leaders,” from the company. That training to put in, so it’s not just functional or cross-functional training, it’s what I call soft-skill training.

How much is it part of your culture? It’s got to be.

• We have a pretty strong training program. We consistently have a succession planning; where we’re looking at making sure there are no 212

big gaps and that all of our key positions have two, or three, or four people in line who could potentially fill in. You never know when you’re going to lose an employee. We constantly offer training programs, have an L&D team: learning and development team, in-house, that offers and helps training programs for employees. We work hard. Sometimes it’s hard to get supervisors off the floor and get them to training. That can be really challenging, so we’re trying to continually promote the benefit of developing those supervisors and helping the manufacturing superintendents understand it’s important to get them to training. We have training focused specifically for our supervisors on the manufacturing floor, too, because they face unique situations as compared to supervisors in our office setting. We have a curriculum designed just for supervisors. From the time they get hired for their first two years they have a set curriculum of programs they take every so often. We have a pretty big focus on training and improvement and continuous development of people.

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FOCUS GROUPS

Mankato March 30, 2017

Greater Mankato Growth

Manufacturers in Minnesota appear to be overwhelmingly optimistic about their prospects for 2017.

• I would say that business, since October, has started to grow. It’s slow, but it’s capital growth. It seems that everything but agriculture and oil are starting to grow. I would say it was mid-October, or somewhere around that, election time, where people were maybe looking for change or a reason to start spending money again. I don’t have a good reason other than the two years that the sectors we deal in were being depressed, which was pretty long. Companies ran out of inventory and are starting to rebuild again.

• In our case, because of the efforts that were put in with building financial inputs last year. That’s one reason why.

• I would say that a renewed effort on trying to make sure we’re expanding and growing in other industries, and not just focused in a couple, has been helpful. Really putting an effort towards building, not only existing customers, but also going out and trying to find more, helps us feel like we’re nearing that optimistic range.

Sponsors: AgriGrowth, AURI

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• Keep in mind that a lot of feedback I get is more from the public policy standpoint. What do they see as their barriers? A couple of them I was hoping to have come here today, but it just happened to be a bad day scheduling-wise for them. Permitting is a big issue: being able to go through the permitting process if they’re doing expansions or things like that with the state. I’m talking about the ag processors: sugar beets, meat, and ethanol. The thing that I hear consistently, and I did some regional meetings last fall, was feeling like the agencies keep moving the goal posts.

“Here are the requirements, but now we want you to do this, and we want you to do this. . . . ” It gets very frustrating.

State or feds?

• State; primarily the state, yep. That’s probably been the big issue I’ve heard of. I think other things policy-related – workforce issues and immigration reform – are big issues for agriculture, and obviously, we don’t know what’s going to happen federally on that. There are things I never expected that some of you can probably describe as well, but, particularly in the rural communities, access to housing is a big deal. How do you help incentivize that to keep and recruit workers and things like that? Also, there’s the overall retirement of the baby boomers. The work force that is not unique to agriculture is certainly hitting our processors, but ask a REAL one who does it for a living!

• That’s very, very accurate, I think, as is the struggle to find . . . Well, we’re supposed to be focusing on the positives, sorry! [laughter] I just went downhill! Everything was so great, sorry! I think [NAME] hit it on the head; that the parts of the business that I’m involved in, those are the large drivers which we’re concerned about today. Plus, the lack of skill of . . . There’s a wide gap in the skills that we’re looking for, from prospective employees, versus what is readily available out there.

• One of the things I keep coming back to on this . . . We did a clientimpact survey this past year. I was amazed at the current investment, capital investment, and what was expected in five years. It was almost double of what they’ve done in the last five years. It seemed to me there was a lot of optimism for growth, potential growth, with the clients we’ve worked with.

Let’s talk about the agriculture economy in general. There is someone in virtually every focus group who voices concern about ag. Do you agree?

• I don’t. In 2016 there was half a billion dollars invested, or committed to investing, in southern Minnesota with ag companies. Now, farm production 215

– that’s one component of ag – that’s a challenge. Of course, soybean prices are depressed, but not ag.

But those prices alone don’t bring down optimism in ag-related companies?

• Even small equipment-type manufacturers I’ve had meetings with recently – I’m not a manufacturer, but I’ve met with them – all three of them that I have in my head right now are looking for additional engineers of different skill types, and that’s not filling a position for someone who’s retired; it’s new positions. Maybe it’s slower than what they planned, that I can’t tell you, but I do know they’re trying to grow.

• From an equipment standpoint, they’re definitely in the design and prototype development phases. They are not building inventory right now. They are depressed in terms of how many people they’ve laid off over the last two and a half years. From that aspect, if you’re a supplier to the equipment companies on the manufacturing side, we don’t see any growth in ’17 at all. It will probably stay flat. We don’t see it going down any further, but I would assume it will stay pretty flat. Now, if you look at it from the biosciences and food-production sides, and things like that, if we’re including all of agriculture, yeah, we have a lot of opportunities.

There’s also dairy, which never seems to ride the tides of the commodities like everything else does. There are opportunities in different areas of ag, but if you’re in the traditional manufacturing and implement side, it’s still flat.

Have OEM relationships become more demanding?

• I think shorter lead times. It depends on the state of the OEM. We supply the other equipment manufacturers and so it depends on their state of business. But, yes, things have changed. Companies have been bought and sold. They have new ownership, new policies and procedures, and new philosophies. Yes, the Fortune 500s continue to push ridiculous demands onto tiny companies. The 120-day terms, things like that, they’re pretty normal and not unusual.

• That’s just a standard cost of business now.

• Using a [COMPANY] or something in between to try and work things out that they set up for you . . . Nice of them. . . . I think the toughest are the agility and flexibility requirements: quick to market and in smaller quantities. That’s a challenge, and I know it’s a challenge for [COMPANY] as well. We talk about that regularly.

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Is there less of a sense of collaboration?

• Well, it’s hard for me to say because, with our company, we’re more of a custom. They have no choice. We do more custom. I think, if you go back to collaboration and communication, that’s what’s become increasingly more important; just knowing what’s going on.

• Commodity prices in dairy right now are expensive. Whey protein concentrate, thirty-four percent protein, has doubled in the last year. It’s gone from fifty cents to a dollar. For us, because we use it as an ingredient and we sell with a margin . . . Say we’re selling it at a twenty-percent margin; now it’s twenty percent of one dollar, not twenty percent of fifty cents. I don’t care. The ninety-day term thing, the big multinationals . . . it’s not optional. They’re going to pay you ninety days or they’re going to find somebody else. They don’t care. As far as relationships and collaboration, again, I’m not going to mention names, but we have a customer who . . . they’re purchasing people. They cycle them through every eighteen months. They don’t want any kind of relationship with any vendor, ever.

They want to do it all by email. They don’t care about relationships. They don’t want relationships. Relationship selling, as far as I’m concerned, is over; it’s dead. I know a lot of people are not going to agree with that. They don’t want to hear it, but it’s reality. As far as the banking perspective, I like [NAME], he’s a great guy, but we don’t use banks and we have a really conservative . . . We don’t have any leverage, long or short term at all.

We did it on purpose because, at my age, you get scared. What happened in 2009, I don’t want that to happen again! We’ve really spent a lot of money on R&D and research people. We’ve hired several new people.

Our workforce is up almost twenty percent over the last eighteen months.

They’re not production workers, they’re food scientists and things like that.

We want to get rid of high volume, low margin and we want to do valueadded processing. That’s how we think we’re going to weather the storm.

So far it’s been successful. It’s a change in mindset. We’re going to grow organically.

• That is an advantage; the value-added model. It’s the only model we have. It was not advantageous to us twenty-four months ago. It wasn’t.

• We can’t add value as a product. It’s commodities, and we’re not commodities brokers. That’s not what we want to do. There’s . . .

• We’re not big enough.

• . . . There’s just not enough.

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• The margin is too thin.

• It is. You won’t survive. It’s not sustainable and that’s why we’ve done what we’ve done. You sure have a bunch of brand-new, shiny stainlesssteel stuff, though. Hopefully it will make some money someday.

Several people have talked about the skills gap. Is it more of an urgent need?

• In [CITY], what’s the unemployment rate right now? Is it three percent?

• Less than that.

• 3.2 is the last number I heard. I don’t know if it’s right or not. Is there a shortage of workers? We’ve been really fortunate. We have a great group of people here. Our average age of people who are there is seventeen or eighteen. Our wage scale has changed dramatically, but it’s had to. It’s the only way to retain these people. It’s up a lot. We’ve been fortunate. I don’t think it’s really affected us too adversely. Like I said, we’ve grown our work force by about twenty percent in the last eighteen months.

Where are you finding people?

• The food-science people, the people who have a Master’s in food science, we’re going on the internet and finding them on websites that are specific to that. That’s where they’re coming from. As far as our production workers, I don’t think we have one production worker who lives in [CITY].

Not one. It’s too expensive. Housing is too expensive. They live in [CITY] and [CITY]. We have a plant over in [CITY]. We have five buildings on Third Avenue. [CITY], believe it or not, is maybe tougher than it is in [CITY]. I can’t explain that.

Skills gap?

• It’s the biggest problem we’re having right now. It’s always . . . When something’s great, something else is bad. When the energy sector is down the rest of us are buying gas and it’s static because the gas prices are rising.

Yes, the 2009 disaster is over, but now we have virtually full employment and you have a skills gap because the people really can’t get a job. Or, the ones coming in, they don’t last long. It’s quite the revolving door. We have a population gap.

Is it more of a problem to attract or retain for you?

• I would actually put that question out there, if you don’t mind, because I would like to know. How do you keep people for seventeen years? What kind of incentives are you offering? Let me give you a quick example I just 218

read about in our local paper this week. [CITY] has 1600 people and our biggest employer is probably the retirement home. They put it to the City Council this week, because it’s owned by the city, to start offering $500 for certified nursing assistants. These are the people who change the bedpans. $500. Walk in the door and you get $250. If you make it ninety days you get another $250. That’s a pretty big incentive for that job. I’m just wondering what kinds of things people are using to actually bring people in and then keep them? We feel like our pay scale is very reasonable.

• We did an internal survey and I bet a lot that the number-one concern would be pay. It wasn’t. It was time off.

• Flexibility.

• Absolutely unanimous! No question! Time off.

Is that by generation or is that everyone?

• When we looked at the surveys it was very obvious: obvious that they want to make as much money as they can. That’s a given. But time off was more important than anything else; being flexible. We’ve been really flexible with people in that regard. Our 401k is 100 percent matched. If you have a child who goes to college we’ll give $5,000 a year for four years.

There’s a three- to four-percent profit-sharing at the end of the year plus the match. Those types of things have worked for us to keep people; that’s the retention. If somebody comes in, their dog’s dying, and they want to stay home; it’s no problem, stay home. I don’t know, maybe it’s not the right approach, but that’s what we’ve decided to do. It seems to be working.

Retaining? Attracting?

• Both. I think it depends on the different types of positions you’re hiring for. I am working with hiring managers and am saying, “Don’t expect that you’re going to be hiring people who are going to be here for the twenty, thirty, forty years like you had been seeing. I don’t think that’s realistic.” I have a couple of people who are very . . . Well, it takes three or four years for them to get trained up and I need them here for ten years. As much as we’d like to have them, I don’t think that’s the work force coming in with the different generations and where people are at. You don’t get that commitment. I think it’s how you treat them while they’re here and try to get as much value . . . just like you’re looking for your product to have value added. If an employee can come in and add a lot of value for two to four years, you’re better off.

Are you finding that younger employees are a lot less willing to do 219

second- or third-shift work?

• Yeah.

• I don’t think they care what shift they’re on, they just like the flexibility.

That’s a given with the generation.

• Some of it is time off. Yeah, you probably can’t say, “Well, you have to work a year here before you get a week’s vacation” anymore. You might as well just offer some vacation right up front because they want the flexibility. I think flexible start times are somewhat important. Flexibility to go to school and work; so maybe crossing over a couple of shifts.

Flexibility is different to every person, so being aware of whom you’re talking to and how flexible can you be. The way I look at it, the skills gap is still there from a population standpoint. I think for manufacturing we really raised the awareness. I don’t think we should ever stop competing for people. If you look at the technical programs, like the welding programs at [COLLEGE] or mechatronics, things like that, they are fairly full and offer 100 percent placement.

• Not for some of the other technical positions. The machinists . . . I think they had six new people enroll for their program.

• There’s an example of one that isn’t right now. Some of the programs are pretty full and it’s 100 percent placement. You can’t get enough people into the seats in the school. There are more there than there used to be. I keep referring to [COMPANY] and [COMPANY] and how they’re actually approaching a demographic that we’re not reaching out to very strongly, and that’s the immigrant population . . . in terms of employability and helping them assimilate into our culture and workplace. We always expect the immigrants to work to assimilate but, it’s like, “Come on, let’s go, we’ll work together. We’ll show you what we need.” There are a couple of companies, for sure in [CITY], that have done a good job with that, but it’s a big undertaking to be able to do so. It’s a big financial commitment.

It pays dividends, but it’s not going to be the second or third generation who finally learns English and things like that and can now help you along.

Somebody in the mines, I think about the Iron Range and all the languages that were spoken up there, it was second or third generation before English was their language. There were multiple languages in the household and things like that. It has to be faster. It can’t be two or three generations.

• We have been advertising at job fairs.

• There are not enough people out there to do the things that we want 220

them to do. You have to realize most of our . . . [COMPANY] has about sixty-seven employees. [COMPANY] has about thirty. The processing plant is, I would say, seventy percent a packaging line; a very dull skill.

We pay thirteen dollars an hour, which is pretty high for what the area is.

We’ve been very lucky in the past. What has happened is we’ve had many people apply but, out of let’s say ten, only about four will actually be hired.

We would hire them, they last maybe two years, and then they would quit.

They would quit because they move somewhere else. When we took over the company, this facility, I bought a houseboat for my managers. What I did was I bought them, fixed them up, and said, “Live in it. It’s the same amount you pay in rent, which is about $500 a month, and, after two years, half of your rent will go towards the purchase. Then you buy it at contract for deed from me.” The purpose was to keep them from moving away.

We moved in and we had no idea who these people were, or where to buy a paper towel. I needed to stabilize people. I would say one out of three worked. The other two are still . . . I thought that I would basically have something as a . . . They were literally scared to purchase anything. They lived in it for four years or so. I said, “Look, [NAME], why don’t you buy this for the same amount of money that you’re paying rent? I don’t want to be a landlord.” He said, “No, we just don’t want to buy it.”

Because they didn’t think they would stay?

• I truthfully don’t know. I think it’s more than that. There is a level of income where people are very unstable; very scared of everything. They don’t want to give their name out. They don’t want to have anything hanging around, I guess.

• It’s transient. It’s a very transient population. They don’t go far. They won’t leave the county! That’s the flexibility they wanted, is being able to pick up and move to another place if they have a problem with a neighbor or whatever.

• Most of our [NATIONALITY] employees are family-oriented.

Unfortunately, the rest of them come and go. Very transient in a form that their children are out of wedlock. . . . They have three wives or girlfriends in the past. You look at this and think, there’s no way you can fix this life.

You have four kids from four different people and you have to work to pay child support. How are you going to do that? It’s cheaper to go into jail and sit there.

• What about housing as an HR strategy? Housing is so expensive here.

I think of my experience in [CITY], with poor [COMPANY]. They have nothing. They have no housing at all. They can’t build a house for what 221

their employees can pay. One guy said, “I told my wife I was moving to a place that was further north than eighty percent of [CITY], and it’s seventyfive miles to the closest [COMPANY].” That was not something that attracted her to live here! How big a deal is housing here as an HR issue?

Do you have people who don’t come because they don’t want the long commute?

• They’re driving. That’s what they’re doing. They can afford a house in [CITY], [CITY], or [CITY], but they can’t afford a house in [CITY]. The people we have in [CITY], which is obviously more affordable, but not nearly as affordable as some of those other small towns . . . [CITY] is not that far. The cost of housing there is . . . I’d hate to a venture a guess, but I bet it’s thirty or forty percent less.

• Or at least comparable to [CITY]. I’m sure there are comparables in [CITY], but maybe not in a desirable place. Or there’s just not enough of it.

• We see there’s a shortage of rental properties, especially with the distribution center here. After a couple of years of renting, which helps a certain population for a while, now they’re ready to purchase. They have to go to [CITY], [CITY], and, I think, [CITY]. They have to look mid-ring or outer-ring, if you want to think of it in terms of suburbs. The affordability for what they get certainly is different here versus those places. It’s an issue. The city talks about it as an issue all the time.

• I’m familiar with some of the housing data from [CITY] through the River Valley and up to the Metro. There is a shortage of housing at every level of income; the whole swath of land. You go north and west of here, about forty minutes, and everything’s cheap. Everything in this corridor area is high. They’re really tight on housing, I should say, across the spectrum.

Why wouldn’t supply and demand address that?

• I think some of that is back to what you’re hearing at [CITY]. A lot of it is that the cost of new construction versus what most people are making is very high.

• It’s also speed.

• You can’t wait six months to a year. . . .

• You see, all of a sudden, boom. There’s a high need for it. By the time you actually address it, maybe the need has gone elsewhere, and so it slows 222

again. It’s hard to build housing soon enough when you need it, and it’s hard to get rid of it when you don’t need it.

• People don’t build the spec houses they were doing ten years ago.

• I would say developers are scared of that, for sure.

• Another issue is taxes. Right now, only property is a big liability. Even the big guys like [COMPANY], they’re renting their offices. When I asked them why, they said,”We can change it tomorrow if we have to, but if we stay here for twenty years, how are you going to get rid of this?”

Is the availability of child care an HR issue?

• Our employees report that there’s not enough. Where we are there are no child-care centers. They’re all in homes. There just aren’t enough providers. They’ll go to [CITY] or [CITY] and get a job because they can find the child care.

• They never mentioned that, so that I don’t know. It’s really just finding it.

• It’s expensive in [CITY].

• I was just in [CITY] talking with businesses and this issue came up as one of their biggest challenges. The way it came up was that there were actually spaces open in [CITY], but there were not spaces open in facilities with higher degrees of care or amenities. They were comparing [CITY] to [CITY]. They were saying they were short of daycare which has your teacher-level people in a center where you don’t have days that they’re closed because somebody’s sick and things like that. They’re comparing to [CITY] and saying, “They’re short of that in that city.” That was their real example.

• I also think it’s compounded when you look at benefits in general. Health care, especially, depending on the employee’s responsibility in health care.

I know of one employee of ours for sure who, she’s expanding her family by one or two kids. She’s looking at some health care costs. Her husband is self-employed and then two kids with possible daycare. They’re just trying to figure out how they’ll be able to do it. Of course they won’t be able to do anything else. It comes right back to . . . It was a popular question maybe twenty years ago, “Is it worth that second income versus child care?”

That scares me because the age of the person obviously is . . . She’s very talented so we don’t really want to lose her, and we can’t, as a group in this area, afford to lose anyone because of that problem. I’ve been going over 223

and over it in my head. What do we do with this? Something new and a different way of thinking about it. . . .

• The other thing that’s frustrating for us is that, with different regulations tax-wise, especially, things which have happened with the codes and limitations on what you can offer an employee pre-tax. . . . It’s more challenging. That’s too bad. We might go back twenty, twenty-five years ago when a lot of people opted to just go with one income.

Let’s talk about health care for a minute. Still a big issue?

• Our cost has doubled. The deductibles have more than doubled. It was the Affordable Health Care Act that caused it. I’m missing something here!

Our premiums have more than doubled through [COMPANY] and the deductibles have almost tripled!

And it’s not something you just accept as the cost of doing business now?

• What choice do you have?

• It would be great if we all had pass through opportunities like [NAME] group does, but when you’re selling services and you’re in the commodities world, it’s a lot harder to pass it through. It’s a lot harder!

• In the health care thing, [NAME], that’s not passing through. That’s coming right off the bottom line.

• No, I know.

• Last year it cost another $250,000. And that came right out of my share of what the profits would be.

• Right.

• It’s way worse than it was. It’s not even . . . I can’t talk about it. It’s terrible!

• What’s really frustrating at [COMPANY] and [COMPANY], the smaller company even, is all that has been removed from different options for pretax options for employees.

• Like your flexible spending account?

• Flexible spending accounts, things have changed there. But also any kind 224

of benefit offerings that we would do before and could use pre-tax; things like that. Now it’s not. You don’t have that option anymore. Any monies that you give to an employee are taxed. Period. It’s changed that way. It’s just income now. The employees’ mentality about it . . . You bring it up and people on every side of this issue are just as passionate as [NAME] and everyone else in this room. It’s just so frustrating. We had a good program going before and employees loved it. Now it’s just trashed because they’re paying taxes on it and their options aren’t as good. Ours is the same way; tripled.

• I think the ability to offer a variety of different things to meet different employees’ needs is becoming more and more challenging. Some people want this, we evaluate offering a different plan in conjunction with the current one we had, and it does not make sense. You’re paying the same amount and you’re getting a higher deductible. There’s more of a risk than what you’re paying for. Yet, the employees are saying, “But we want to have this option.” It may not make sense for them. It doesn’t make sense for us as somebody who says, “Go try this plan out,” when you’re going to have to pay more for it and have a higher deductible.

• The employees actually now get penalized if their spouse has a better option for health care. Through [COMPANY], from what it was two years ago, now it’s penalizing, taking money out of their pocket. It was an option for them to have before.

What would you like to see happen?

• What I think could help more than anything is to put in some competition. I think the cost of health care is outrageous. That goes back to the [COMPANY] of the world. They need to be kept in check somehow.

Nobody’s a lawyer here, are they? [laughter] Litigation? [laughter] That’s another thing. There needs to be . . . Right now, in [CITY], if you want health insurance, you’ll go to [COMPANY]. That’s really the only option you have here. If there was some competition, true competition, it would change things dramatically. I’m not going to get on the political soapbox, but it has to change. It’s going to cost jobs in the long run because, if we can’t make money on a product, and we can’t afford to have the people there, it’s going to cost jobs. That’s not a threat, it’s a reality.

Is government-run health care the next step? Is it acceptable?

• Well, I know a bunch of people, good friends of mine who are [NATIONALITY], I know them well and I would say, “Absolutely not.”

There’s a reason all the gangs are down here getting health care: because they can’t get it there. If you’re waiting to get health care in [COUNTRY], 225

you’re probably going to die. That’s the way it is. Socialized health care is not going to work.

• My sister and her husband worked in [CITY] a few years ago for a year.

When they came, they explained the universal health care and said, “If your kids have a sore throat or whatever, absolutely, bring them in. But if something serious happens to you, get to [COUNTRY] or [CITY].”

• I have several [NATIONALITY] friends and that’s 100 percent to a T. That’s people from [CITY], [CITY], and [CITY]; they come here. You have to. One of their mothers doesn’t have a kidney anymore because it was cheaper to take it out than to do the biopsy on it. The same thing happened with a friend’s wife with cancer in her uterus; they were going to make her wait for a year but she went to [CITY] and paid the bill. She didn’t want to risk it. The tumor had spread.

• I can tell you our health care costs, this data is two years old now, would be twelve percent less than they were four years ago without the Affordable Care Act. Instead, we see the same kinds of increases everybody else is talking about. For us, we’re neck-deep in the wellness programs and things.

That’s paid off a lot for us.

• The insurance companies all have programs; whether it’s your weight or your blood pressure or your annual checkups, all those things. Coincidence or not, I guess you could argue that one way or another, but we’ve seen the results from that.

Do employees accept it as part of your culture?

• There are financial incentives for them to participate. Most people do it, but not everybody.

• I’m just curious . . . Does anybody know if, in Minnesota, any taxes which are related to medical devices, medical care, does that all go into the general fund, or does that go into a dedicated fund?

• Isn’t the challenge, though, that our Minnesota state budget, and the two things which eat the budget, are health care and education? Those are really the two big buckets I hear legislators refer to when you talk about the general fund. It’s those two.

• There’s lot of mystery meat that goes into the general fund and I don’t like that. I don’t want to hear that we couldn’t fix a bridge which needed to be fixed because we don’t take the taxes that are on auto leases or 226

something like that and put them where they need to go. I’m not arguing with what you’re saying, it’s just that is one thing that might help this whole mess. The competition is absolutely . . .

One of the challenges with the state is that their hands are tied by the feds.

• That’s what they tell us.

• We had a really good plan, before Obamacare, in Minnesota and it went away. We were probably the best in the nation.

• It went away because a lot of states like [STATE] and [STATE] . . . they had nothing.

How are regulations as a cost of doing business?

• Huge.

• It gets worse every day. They never take away. They just add, add, add.

• In my business it’s more federal, but the state does, too. We see it with the FDA. We see it with the MPCA. We see it with EPA, with the USDA. • There’s duplicity. I would say some of the working relationships we had with some of the regulatory agencies have changed from a partnership to a, “We’re here to find something that you’re doing wrong and hang you by it.”

• That’s what they’re getting paid for. They’re getting paid to find something wrong.

• Right, and that’s how they . . . Their organization is there to find you.

• One of the observations that I’ve made in talking to other processors is that there’s so much technology which processors are putting into their operations. They are more efficient and better for the environment, but it’s almost as if there’s a playbook that the regulators have and, if it’s outside that scope, they don’t want to do it. I could tell you stories from a member of mine in an ethanol plant; a CEO. While evaluating their purveying process and thinking of installing more efficiencies to reuse water in the plant so they’re not discharging it, up to the point they’re not discharging water anymore, they thought it would be a great technology. I met with the PCA, explained this, and the person across the table said, “If you have a 227

discharge permit from us, you cannot not discharge.” The CEO said, “I’m doing the right thing and it’s often times the regulator’s the worst enemy.”

There are other examples of that as well, and it creates a lot of frustration when people think they’re doing the right thing, spending the money, and getting that sort of response.

Does it matter who’s in charge of government? Does it really matter who the President is or who the Governor is? Or are you at the mercy of bureaucracy, of regulators?

• Look what’s happening to coal right now. Do you think that’s going to change? Absolutely that’s going to change. Where does that come back to?

The guy who just wrote the Executive Order. I’m not saying I’m in favor of or against coal, but that’s where it’s coming back to. Does the person in charge have control? Absolutely! An Executive Order is an Executive Order. He signs that thing and coal is going to take off like that again. I have friends with ranches out in [STATE]. They can’t wait for this coal thing to fire up again. It’s hurt them so badly, around the [CITY], [STATE] area. Their economy is in shambles because of coal. The whole coal thing just shut down. I’m all for the environment, but if they’re polluting, they shouldn’t be using it. Period. If they can fix it, then use it. Natural gas is so cheap now. They do so much of it. I’m not for or against coal, but, to answer your question, absolutely it does, in my opinion.

• I would agree that it does matter, especially from a charismatic standpoint, positively or negatively. I think it really matters. I think something we talked about yesterday with the [ORGANIZATION] is that a lot of us are really interested in politicians, people in government, who aren’t so married to the platforms. That might be one reason why our President is who our President is. He’s not quite as married to a platform and he doesn’t care. It certainly seems to be where we all live. We also have to understand that people who will be voting for our Presidents from now on, in other words, more people than the baby boomers have to vote.

It’s going to be a whole different landscape soon. It does matter who’s in that position of leadership. If that didn’t matter, it wouldn’t matter who ran our companies, either.

• You’re going from an educator/lawyer/lifetime politician to a business person. That has to provide optimism to the business world, no matter who that is. That shows it matters, the background the person has going into it.

That’s my personal opinion.

• I think that having confidence is very important. We’re all on the bus and there’s a driver out there. If you think he’s drunk, then you have problems.

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• If he doesn’t do the job very well, then the perception becomes a major problem. The second thing is that we have a major problem right now with lawsuits. In [STATE], people think if it’s natural, then it’s not GMO. So, therefore, come sell with us; otherwise we’ll take you to court. We sat down and said, “Okay, it’s going to take us about $50,000 to go to court and we’ll win.” How much do they want? Just $20,000. It’s pretty obvious that we’ll write off the $20,000. Five minutes later and we’ve got another one. Right now the biggest thing is in [STATE]. Were you guys hit by the non-Prop 65? If you’re producing lead and you’re a supplier, they try to write the lawsuit at packaging. If that doesn’t work, they try the manufacturing. They come and sue us as [COMPANY]. What we do is . . . we come back and sue you because we just bought the protein from you.

Who wins?

• I was talking to [NAME], and [NAME] said it would be good to mention this: We really need some sort of consortium of manufacturers who will all pay into a fund. That fund would basically be able to protect us against various lawsuits or letters.

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FOCUS GROUPS

Pine City March 31, 2017

Pine Technical and Community College

Is your ability to attract and retain workers better or worse than it was at this time last year?

• I would say we’re better than we were, but we’re also worse than we were. We retired twenty and twenty-four machinists in the last two years, consecutively. That’s a very large demographic. Our average machinist is fifty-three years old. We have a few folks who are coming up through the ranks, and we’re doing internal training, scholarships, and that kind of thing. Still, we’re going to be retiring more people than we can fill.

We have to get very creative with how we go about it. I’m happy with the progress, but I’m also really nervous because business is picking up.

We wrestle with . . . [COMPANY] is a large corporation. There are 300 manufacturing facilities. Where do you build stuff? If they don’t get ahead of it, and if we want to grow and develop, we’re still going to be potentially running out of resources. I think the biggest thing we’re finding out is that you can go outside and you can do all kinds of work, but you really have to tear up in to the diamonds in the rough who are in your building right now that are . . . they’re twenty-five, thirty, forty, fifty, whatever. There are all kinds of people who have a lot of skills. Getting them to take the next step is the challenge we’re probably faced with the most.

Sponsor: Pine Technical and Community College

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• Let me add on to that because I deal with trying to find machinists. It’s probably the worst recruiting experience I’ve ever had during twenty-five years of working in manufacturing. It is so hard to find a good, qualified machinist in town. We have done everything: from trying to develop our own internal training programs, up to using up to five or six different staffing agencies, headhunters. We’ve tried everything. Four years ago we were working with this company. Four years later and I’m still trying to find . . . Our business has now, of course, been growing in the last quarter and we’re expecting a real strong 2017. We’re in the same position; we have an aging population of machinists. Retirements in 2015 and a few more coming up in 2018. Our fear is that, even when we find someone who’s good, with experience, the certifications, and the schooling, it takes so long to train them and get that craft and art perfected. Our frustrations with the young ones coming out of school . . . I have a [SCHOOL] intern right now who started three weeks ago. He’s doing very, very well. Our frustrations with the young generation, are that . . . I’ve had conversations about their attitudes and their work ethic being so different. They come in the door with such high expectations, as though they’re going to be running these multi-million dollar machines and doing the toughest work right out of the starting gate. They get very frustrated and very impatient.

They leave us, often, too fast, because they don’t want to take the time to learn the equipment. Learn the craft, be patient and do it the hard way; as many of our best machinists have done in the past twenty years. They started out at the bottom and worked their way up. The young machinists coming in, they think they can be at the top of the pay scale and doing the toughest work that goes along with it. There are adjustments in the attitudes and expectations we have to deal with on the younger side. We are doing everything we can to try and find them good experiences, just to keep them motivated, so we don’t lose them.

Which is the bigger challenge for you? Attracting them or keeping them?

• Yes. [Laughter ] • I think, just to build on what [NAME] said earlier, to try to find a solution where it’s not just trading people. We continue to see that where, you know, even the placement firms we use . . . A lot of times we have to because that’s the only way we can find anybody. The same firms that are placing with us are sometimes taking people from us to send them elsewhere. That gets a little bit difficult. Having people come through the door who have the skills we need, as far as a laser operator or a press brake operator, it’s virtually impossible to do. We’ve changed our attitude about that when people come in who have the soft skills. They come to work, 231

they come to work on time, and they seem like they want to grow and develop. We’re doing everything we can to grow those people internally.

We’re using our systems and our training. People are literally going in to the conference room and they’re taking classes. Last night I left work at 5:30 and there were two people from the floor who are on first shift. They must have been in some class last night. It’s the new norm that, if we have an opening in forming, we won’t get somebody who’s skilled. I shouldn’t say that. We just got one new employee, a young woman, and she’s skilled in forming. It’s not really getting better for us; we’re just looking at it differently.

• I’d say the same thing. We’re really committed to finding people who have potential, are training them, and then building on people who are demonstrating skills in our shop. We have a lot of people going through the program, the classes through [COLLEGE]. One of the things which would be helpful for us on that, I think, would be if there was a way we could do some more technical training. Through that, I mean, I think there are a lot of good things in there with the math courses and things, and just the basic work and manufacturing classes. Those are all valuable for us and we’re sending a lot of people through those. If there was a way we could give some of the theory and technical training with machining and welding and some of those kinds of things, maybe with some external labs or something . . . to get some more technical training tied in to that would be helpful.

How easy is it for you to inspire employees to want to take advantage of those opportunities?

• We definitely have some who don’t want to do it, but I think we pitch it as part of their opportunity to advance. For us, that’s part of our identification process: Who are the people who really want it? Those are probably going to be some of our most valuable people going forward.

There are definitely some who don’t want to do it. In some cases we say, “For the position you’re in, we want you to take this class, or you need to take this class.” Or, “If you want to aspire to whatever the next step is, this is part of the process.” We have more people who respond well to it than those who don’t.

• I would say it’s one of our challenges. We’ve talked about it over here.

We try to attract young guys because it’s fairly physical work that we do, but, you bring in young guys and they really have a high expectation of what they . . . They think they’re worth a lot more than they are. They need some experience, you know? They need that. The other challenge is keeping them. You bring in some people, train them, give them some skills, and then they want to look for the next opportunity. Keeping them once 232

you get them trained is a challenge for us as well.

Where’s the biggest need? Is it in entry-level employees?

• I would say, for us, it would be on the technical level. Problemsolving, kind of a two-year, technical-type degree program, is where we see the biggest gap. With entry-level it doesn’t seem to be an issue. We’re looking for people with the right attitude, the right drive and work ethic, and the right culture fit. We’re taking the approach of, “We’re training those folks to get them to develop.” The four-year technical college, the manufacturing, industrial process engineers . . . It’s really not an issue finding those folks, either. It’s the piece in the middle that we’re struggling with.

• I would say the same thing. In our plant, we just hired a new accountant this last year and also, recently, a plant manager. It was easier to fill those two positions. We thought those were going to be more difficult than, say, a press-brake operator.

• I’m going to add to [NAME] point. If you guys haven’t met with [NAME] and [NAME] over there, I would highly suggest it. We find the same thing. That two-year program is one of the toughest. They created a customized program for us, where Year One is in your building, so they don’t even have to leave to get year one. Year Two, they have to come to [SCHOOL] for machining, but that, in itself, makes it awfully convenient and cost-effective, and, again, flexible. We have employees just like yours who may have a class at ten a.m. They work from six to ten, they take a class, and then they go back to work and make up their time. We’re finding success with tapping into our internal workforce and giving those types of opportunities. We didn’t have them a couple of years ago. Again, I keep trying to lead the horse to water. I’d love to have fifteen people in there right now. I think we have three, maybe. We have some graduates. That, to me, is a really cool thing which we didn’t have. It’s a great opportunity.

• Having the system and moving in to that sphere kind of opens up your mind to new possibilities. We’ve even thought that welding is another area.

If somebody comes out and has a technical degree in welding, the actual act of getting their skill level to where it would need to be for the kind of work we do in welding, it’s still going to take them a couple, two, three years to get to the point where they can weld our more complicated things.

We’ve even asked, “Could we partner, and have the theoretical book part, so to speak, on the system of welding?” We literally do the hands-on kind of lab work in our company. I think we’re always having to look outside of the box: flexible thinking, because it’s hard. It’s a barrier for people to go to 233

a class at night. People have a lot of things going on in their lives and, even though they might want to advance, it’s not like they’re going to work all day and then go to college at night for us.

• For us, they’re on the clock taking the class, so we’re paying them to take the class.

An economist told me not long ago that there would be no skills gap if manufacturers would pay more. What’s your reaction to that statement?

• I would agree. It’s become a lightning-rod issue in our company. We are beginning to find out that, as the media has blanketed the country with fifteen, sixteen bucks an hour to make tacos, there’s an expectation to come in as a press operator at our facility, and that should become more commonplace. It has put a ton of pressure on us at entry-level positions.

Obviously that just continues to collide as you go up the skills. I think the other thing we’re challenged with is that the younger talent we’re bringing in . . . you don’t have as many roles to move them horizontally. They want to keep learning. They don’t mind learning horizontally. I think my generation wanted to learn vertically; to climb. I don’t always have the flexibility to move somebody from this role to this role to this role to this role because each one of them might be a tad more customized. I also don’t have the time. But, yeah, we’re feeling the pinch.

• In our company we have just a couple of examples. What I notice, especially with some of the younger generations, is that it wouldn’t make any difference if you paid them more or not. You know what I mean? We have people who struggle to want to work forty hours in a week. We have a young person who runs a laser and he has four children. If I looked, I don’t know when he would have ever worked forty hours. Last summer we had a young man who was doing a good job. He came in one day and said, “You know, this is a lot harder than I thought it was going to be and, you know, forty hours a week is actually kind of hard. I’m actually making more money than I need to make and my parents might make me start paying rent. I live in their basement.” We talked to him about potentially giving a two-week notice and he said, “No, I’m going to quit today.”

“What?” He was doing a good job but he just . . . There was a feeling like, “I don’t really want to work forty hours a week. I’m good with where I’m at financially.”

Would you say then that flexibility is a bigger issue than money?

• Definitely. Where we can, we have. We try to do that. It used to be, twenty-four years ago when I started doing this, you started at 6:00 and 234

work until 4:30. There was no variation in that. I think, if you can come to the table working with people as individuals who have issues . . . I started out my career as a CPA. As you know, many CPA firms lose women at the manager level because of the nature of what the work is and the schedule.

There’s no flexibility. They’ve had to change a lot of what they do in order to retain that talent. I think being open to flexibility . . .

• We don’t lose people because of pay pressure. We have a unique schedule and a twenty-four/seven operation working twelve-hour shifts.

Our people physically come to the plant 170 days a year; half the time.

Right? They get seventy-one more days off than most people who work Monday through Friday. That flexibility, I think, is key. I would say for us, if they make it through the first year, they’re pretty much with us for the long haul. But, once again, it’s just, how do you take those folks? How do you train them and get them where they’re functioning as a technical or a process tech? Those types of things, tooling . . . We’re just not finding them as we’re recruiting them.

• We’ve had to re-evaluate. We have, right now, twenty-five temporary employees. We keep temporaries depending on business cyclicality. We have changed. We’ve upgraded their compensation twice in the last year because we’re competing. We had a guy who brought in an ad from [COMPANY], I think it was, or some fast-food chain. He was asking, “Why wouldn’t I make tacos versus come in and assemble parts for you?”

We cannot get fully staffed on temporary employees. That is a work force which is really hard to attract and retain. Some of the people, they don’t even show up with a pulse. I’m serious. To get decent, quality people, we’ve had to pay more. Once they’re full-time, kind of like [COMPANY], we tend to keep them. They get benefits, pensions, and all those things.

The temporary work force is such a vital part of our business because we don’t like to lay off full-time people. We haven’t had to, even in the downturn. I’d almost . . . You guys have had a better luck with temps.

We’ve really struggled.

• I would. I find the staffing . . . Over the last four years which I’ve been searching so hardcore . . . I, maybe, accept that comment. I can’t even begin to think that anybody could think there’s not a skills gap. It’s not just a numbers game with retiring workers who are leaving right now. It’s a mentality-difference training gap. I deal with what you were just talking about and the younger generation. Their lines between their personal lives and their work lives are so blurry. They think they need to be conducting their personal lives during working hours. I was shocked at the work ethic difference when they put their phones down. I could go on and on about 235

the examples of . . . It’s just a different mentality. I had a conversation with one of our more skilled machinists. He’s in his early forties. I’m older than that, but it’s not that old. I laugh because a comment, “You know, back in my day” . . . He’s only in his early forties! It used to be the sixty-yearolds who would make that kind of, “Back in my day, we would have never allowed that.” Now I have this forty-year-old man saying, “Back in the day, we would have never allowed that.”

• “Back in the day.”

• I had to walk uphill backwards with no shoes on.

Our student focus groups have said that internships are especially attractive to them. Do you offer them?

• I can. I’m really glad we’re doing them. A young man had good potential to be a good machinist. It really slows the individual to do the mentorship. The impact on efficiency, when you’re growing and your schedules are so loaded, is tough. I would love to have three, four more of them. But my work force has basically said, “Don’t give us more than one at a time.”

• Yep, slows them down.

• Very hands-on with some of the interns.

• It is, but what’s worse, not having people, or having that intern and having a little extra burden on those individuals?

• Yeah.

• Right.

• I kept trying to . . .

• That’s the trade-off.

• You have to take the time.

• It’s an investment.

• Painful, but take the time.

So you’ve had luck?

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• We don’t do . . . and it’s an interesting concept. I hadn’t really thought about it before. We do it at the engineering level with the four-year. I think there’s a lot to say about doing that at the technician-type level, too. It’s something we’ll certainly look at now. I hadn’t even thought about it.

• We’re doing a scholarship program for two-year machining students.

I’ve had . . . I don’t even know how I would call this a program. . . . It’s so frustrating to me that you can offer a high-school graduate tuition, books, tools, the whole works. You come over here and learn, work on holidays, and part-time on summers. We’re going to have our first graduate. We’ve been doing this for a couple of years. We’ve had, I think, four drop out for a variety of reasons. One kid got engaged and moved to Tennessee or something. Another kid didn’t like to work forty hours, thought it was too much, and didn’t like his sixty-year-old mentor. We had one kid who wasn’t going to school anymore but told us that he was. “Dude, just tell us this is a lot for you. We’ll partner with you. We’ll extend this out.” I mean, that’s reality. You can offer free tuition and all those programs. You may get twenty-five percent who will actually make it all the way through. We’re doing it. I still promote it. What we’re doing is working with more high schools and casting a wider net. Last year we didn’t even get anybody in the program. We went to three high schools and we didn’t even get one kid to sign up for it. That was frustrating as heck for me that they didn’t want to take me up on the deal. If somebody has cracked that code, to try and get entry-level, you know, high-school kids to go to school and pay for it . . .

I’d love to see it, because it’s an awful struggle.

You mentioned early that a great many students do think about their futures at all in their senior years.

• Oh, yeah. I shared with people that, just as an example, it gets in to that generational stuff where it’s just different than what it was. Sometimes it’s hard. I’m sure that for all of us in this room, we’re not Type Cs. We’re Type As and Bs. Some people are just wired differently. The stat that [NAME] talking about is, you know, in the small towns, of course you get the newspaper with pictures of all the seniors who come out every year. That’s like a marketing list for a college. We look at those going “undecided” and I run around getting people to make phone calls. Last year [CITY] came out. A friend of mine’s actually the principal there. I called him up because . . . Of 110 or 112 kids who were seniors, and this was about the first week in May when the paper came out, there were around forty students listed as “undecided” or just “kind of work.” It was some of those vague terms.

That really surprised me. This light bulb went on. I’m asking, “Are we seriously getting kids three weeks from one of the biggest milestones in their lives, and they don’t have an idea of what . . . ?” Again, if they go in 237

to the military, go to college or university or whatever, that’s their path.

They just are “undecided.” I was never wired that way, but that was not uncommon. I started talking to [CITY], talked to [CITY]. I’m asking, “Is this just [CITY], or is this an anomaly?” He said, “No, that’s about right.”

I’ve been spending a lot of time this year talking to principals about how we get people more engaged earlier on. I mean, I get whatever path they choose, just choosing something. It was just shocking to me. I don’t know.

How much is automation a solution to the skills gap problem?

• We joke around all the time, “Let’s just keep buying robots and that kind of stuff, and we don’t have to hire people.” But, I mean, you must have people who can program. It’s definitely part of our strategy moving forward, more automation and just becoming more efficient, so that you can get those growth gains by not having to add more people.

• The fact is there aren’t as many people. The younger generations are not . . . there aren’t as many of them to replace the boomers.

• There’s a whole industry booming from this exact conversation.

Collaborative robots are a thing of the future. We’re actually getting one in the next week. You can literally put it in and you don’t have all the guarding, white curtains, and all that. It can be a part of your work force.

If it runs into you, it stops. Collaborative robots, as they pitch, “You have a skills gap. We have a solution.” I’ve heard multiple pitches for this.

That’s what they’re doing. It goes to your point. It’s not quite as flexible as you think it is. Days I’ve had them, I’ve spent a whole day writing one program. You literally can grab this robot, pretend like it’s your arm, hit “go,” and it will assemble stuff for you. We have to go after that kind of thing.

• I think it puts a little bit – but it’s good – it puts a lot of pressure on maintenance resources, right? Skillset there; which we find is a gap too. It’s like some of the technical folks. I group maintenance in that same category.

We’ve done some things that many of the other plants... I’ll tell you our capital equipment for window and door assembly lines gets higher, right?

There are benefits, but it puts a lot of pressure on our maintenance staff.

• We bought a 250-ton press brake with an automated tool changer on it, so all of the tooling for the press brake is in the machine. It can do any set-up in two minutes. Typically you’re looking for somebody who’s highly skilled and knows about tooling. They have to walk over to where the tooling rack is and know exactly how to put it in. This machine does it by itself. It was a significant investment, but it allowed us to send a young 238

man who’s relatively new, has some manufacturing experience, and is pursuing something computer-related in a two-year program. He’s doing a phenomenal job of operating this machine. He’s done all the programming in the engineering room. You just send the programs and away you go.

I think that, for us, it’s a thing we’ll continue to do as we move forward.

Right now, even though it’s a relatively new piece of equipment, we see that we could probably go around with two or three less people in our forming department.

This morning I heard someone on public radio announce that he’s going to begin a three-week daily segment on how manufacturers are using automation to put people out of work. How do you react to something like that?

• I just heard a recent article on that. The study which was done really wasn’t an all-encompassing study. It was simply, “What does the automation do to replace?” You know . . . they’re losing, say, 6.2 jobs on average for automation; for robotic equipment, but the study really isn’t all-encompassing when you read it. It needs to be . . . I don’t believe the 6.2 number because you get technical people to run the machine, for one, so you’re not losing that. Also, you get growth with the business by doing things faster which you may not have been able to achieve prior to being automated. That growth in business is actually going to help acquire people to work within the business as well, too. I think that, yes, it does replace, and that’s probably where he’s going with it: the hand-die automation-type of a thing, because we’re losing jobs in America and that whole story. You have to be careful when you read those numbers.

• Yeah.

• I would ask what his argument is. I mean, we don’t build roads with shovels anymore either.

• Right.

• Right.

• It’s going to change. It has to change or it’s not going to work.

• Yeah, if you don’t change with it the competitor’s eating your lunch for sure.

• I think I’d have him come up to one of our weekly staffing meetings.

Not so much in [CITY], but down in [CITY], where you have several 239

people in a week. You get six, right? “What other options do we have?”

Working on some of the strategic projects and things like that I’ve done in the past, we always used to say, “You know, let’s automate for safety or quality reasons.” Right? Repetitive motion, ergonomics, work environment-type things; more highly precisioned, where quality is highly critical, error-proofing, and those types of things. That mindset for many people, including myself, is starting to change just because of that, right?

We have to do a job, but we don’t have the bodies to do it, so what are the alternatives?

• Yep. • Well, the harder it is to have an employee, too. Employees are expensive. We’re under a constant cost pressure. We’re always going to need employees. That’s not going to change, but, we always need to be able to get more done per hour than we’re paying someone to get something done. I think looking to stop the automation cycle is not a long-term solution. That’s short-term thinking in my mind. There seems to be more of an emphasis, not necessarily in skills acquisition, but to help companies train their managers going up through, and there seems to be pretty good demand for that. How many of you have a formal program designed to help train the future generations of managers from within?

Anybody? Everybody?

• Yeah, we do.

• I think we start on a couple of different levels. I’d say on one front, it’s building, right? Kind of our lead-type level . . . We’re working with [NAME] and with others to build what that program looks like. We also do a two-year rotation program with new graduate technical engineers.

They do a rotation between supply chain engineering, strategic projects, and then one of their choice. It could be design. It could be procurement. It could be. After that two years, there are four six-month rotations. They’ve seen a lot more, but then we’ve started a few more people in leadership types. Production supervision is one of those four rotations. They start to get a taste of that. It’s pretty difficult to get into that. Ultimately, what we’re seeing is those folks who have gone through that program, at the four-year mark; they’re definitely leading people at some level.

• One of our biggest skills gaps is the line lead, production supervisor group. We do well with engineers. Actually, you know, managers, valuestream managers, are pretty good. For example, we have twenty-one line leads right now. We have a four-year requirement to become a production 240

supervisor. Not one of them has four year-degree, nor do they want one.

They do really well leading people at a tactical level, but they’re happy doing what they’re doing. They’re going to do this for five, ten years, and they’re going to retire. Production supervisor’s a whole other thing. A lot of ours were grandfathered in and they didn’t have a four-year degree, either, but they do the job pretty well. Getting well-qualified, four-year production supervisors who have leadership experience and all that is really tough.

We’re struggling with that right now. We have openings and those are also very hard to fill.

• Our company would benefit from a more formalized training program because it’s changed. How I was taught in my earlier years at [COMPANY], how you manage people versus how managers today have to look at millennials, is completely different. Even for our existing managers, who are pretty skilled at the softer side of reading people, they don’t . . . They’re good managers, but, I can sit across from a guy today and he’s going to say, “I just don’t get that guy. I don’t understand. I don’t understand how they look at the world.” We would benefit, honestly, from supervisory training, lead training, management train . . . anybody who is managing people. Our company would benefit from it because it’s changing.

• We put every one of our leads through [PROGRAM]. You can buy that out of the box. [COMPANY] is a big company, so we had every lead in the entire corporation do it. It very much helped on the soft skills, but there are better leaders on the floor. It didn’t solve the fact that they want them to take that and go on to the next level.

Let’s shift gears a little bit. Manufacturers, especially the entrepreneurs, tend to be an optimistic lot. How do you feel about your company’s prospects in the coming year?

• Our business is very good right now. We’re backlogged for several months. Our sales people are very busy. Our industry is really strong right now. Yeah, we’re part of that ninety-four right now.

Anyone else?

• In 2015 we saw a softening. 2016 kind of, you know . . . 2017 forecasts expectations right now. A lot of our customers are staying positive and saying they’re seeing opportunities for production. They go if we go. There’s a lot of confidence. All of our locations; eight locations across the area, are in the same situation.

• I think it’s helped on the consumer confidence side, right? In terms of 241

just, in our business, windows and doors, in a lot of cases, discretionary-type spending . . . Remodels, they build a new house, or do they . . . ? I think a lot of the growth we’re seeing is based on the decisions and the work that was done during the recession, right? It would be interesting to see how many of those businesses were . . . I think we lost a lot of manufacturers during that time, right? The ones which survived are the ones who continued to invest and continued to design changes- things like that. That’s one of the things which is driving the positivity now. It’s not an election or things like that.

There’s some consumer confidence, but it’s all based on the work that was done during that recession and during that slow period.

• We saw a big jump right away in January. Not to get political, but I believe in the Trump bump. Hands down. The industrial sector, oil and gas, and a lot of those markets we played in went right up, I mean, substantially up. It was very uniquely timed. Ag is still slowly coming back.

• What I saw, and I know I talk with a lot of big partners of ours, was that corporate America hunkered down big time during that recession and didn’t hire a lot of people. They, maybe, invested in some capital, but almost to the point that you want to cry uncle and say, “Hey, come on, we still have to run a business!” As a publicly traded company who reports to Wall Street, we were screaming. Suddenly doing all of these consolidations . . . We come out of it and, guess what? We’re lean and mean and highly profitable. That’s a good thing, but at the same time, we’re not a private company who can say, “Hey, you know what? Too bad, we’re going to keep everybody, and life is good here.”

Two of you have already mentioned the legacy of the recession. Are OEM relationships markedly different since the recession?

• Yeah, there have been a lot of changes. Our largest customer sent a letter that said, “We want a fifteen-percent price reduction, and we’re going to change our terms to seventy-five days.” We actually went there, made our case, talked about the value that we bring, and I get paid ACH every day. They didn’t do any of the things they said they were going to do. That was a good meeting.

• Good for you, yeah.

• Me? I love getting paid ACH every day! For sure, the things keep coming and I don’t think that’s going to go away.

• I’ve only been at the company for about a year and a half. The previous CEO of the company, as he said, “I tried to guilt the OEMs in to working 242

with me.” He was there for twenty years. He’d built relationships from the ground up. I came from a bigger company, so, stepping in to it, I’m thinking, “I was on the other side of the coin, and I was always beating up guys like you.” I’m used to it, but the culture inside our company is, “Why are you putting so much pressure on us, [NAME], to reduce costs?” I’m telling them, “Because we compete in the global economy, and we’re going to get crushed.” Everybody’s saying, “Nah, we don’t. When [NAME] was here, it was fine. You’re freaking out on us here.” To me, the new normal was the company I was at, where we didn’t treat our suppliers poorly; we just had higher expectations. We’re going through a massive cultural change inside our company right now. One of the things I was going to comment on, as we were talking about millennials, is that I’m noticing the competition factor is not that high. If they have the skills, do they realize when they come in to the workplace that we’re actually competing day in and day out, maybe against other local companies or on a global scale as we supply a large OEM that compete around the globe? I’m asking, “Do you guys understand global competition?” They say, “I just come to work, dude.” I’m astonished. “Wow, maybe you’re part of that ‘everybody got a ribbon’ generation and the competition factor’s not high.” Honestly, it’s not high.

You talked about May and the “undecideds.” What did the principals have for you? How do you get to the front of that? It seems too late.

The parents are, and we’ve talked, doing a lot of influencing – the student counselors and those types of things. What is the right timing?

What is the right approach to try and steer them? Did you approach that subject with those principals?

• That’s where this got to be like a personal piece for me; because I’ve lived in this region. For folks who don’t know me, I’ve lived in [CITY].

My wife’s from there. We’ve been in this, and this is my home. On a personal level for me, we’re not doing a good job. Some of that is, when you have 120 kids in a class and one counselor for the whole high school, just bad math. What I started doing this year, and I’ve had a chance to do it at a few schools, is that I did a presentation. I went out and talked to the kids, just talk about the process for making decisions, you know? I told them that life is probably not going to be overly kind if you’re undecided; just kind of cruising. I’m going to use that line at some time; that’s a great one. It’s about starting earlier in their senior year. That’s their goal. They have to start making decisions at that point. For the school districts, I’m really trying to open them up to think about the fact that you don’t have to think about 120 kids, because forty of them are already decided at the end of their junior year. They’re taken care of. It’s starting to funnel that down to who are the higher-risk kids. Really, it’s about having them do 243

some fundamental things. We advise them and take a look at three schools.

“Don’t just go look at one. If it’s a bad experience, that might be what you think it is.” We might not be the right school for a [CITY] kid because it’s right down the street and they want to go to a place that has baseball and football teams and whatever “norms.” Go look at three schools and all of those things. The districts should really be calling in the resources that are available, while getting kids more engaged in the process around it because they’re not always getting that at home. We give them a nudge.

You know, another legacy of the recession, was not economic. It was market related, but was legislative, and it was Dodd-Frank. Banking relationships changed a lot because of that it seems. Did you see? We can start with you to talk about, has Dodd-Frank changed the way you deal with your customers? I mean, the greatly restrictive, and more transparency. Are you more involved with the day-to-day transactions of your customers?

• We have to communicate with people, “Why are we asking for so much information? Why are you doing it this way?” It takes longer and it’s costing us more internally. Obviously that would then relate to, you know, the higher interest rates we have to pass on to people. We’re still doing business the same way. You’re still going to underwrite the same way and hopefully pay bills the same way you did before.

• I wanted to comment on one thing [NAME] said about parents. I think for us to be successful, we have to figure out how to get to not just students, but also parents, and influence them to get involved with their kids, because . . . I’ll give two examples. One or two are dropouts. It’s a small town. Part of our process is that I go to senior graduation. We shake hands and take a picture. It’s a big deal in the community. One of the parents took a proactive role. His kid decided, “I’m not showing up for work anymore.

I’m done with this.” He accompanied his son to my office and said, “I want you to look this man in the face, who’s willing to pay for your education, and say ‘I quit’. You’re going to have that experience right now. I want you to do that. You’re not going to just not show up. You’re not going to go play video games in the basement. You’re going to tell him, ‘I quit. I’m giving up this education. I’m not sure what I’m going to do with myself.’”

That was a really tough and that’s probably exactly what I would have done. That would have been my approach. I ran into the other father who said, “Eh, he doesn’t care. I don’t know what he’s going to do. Whatever.

He’s living.” Same thing. Living in the basement is kind of a theme: “He can live with us for a while, get on his feet, whatever.”

• What did the kid say?

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• I never heard from him. The first kid was shocked, remorseful, and had a real hard time looking me in the eye. The second kid quit and I never saw him again. I just saw the dad at a luncheon. I see parents who, you know, as I go to the school and work with them, are very hands-off. They frankly don’t care. I don’t know how to affect that, but I would love to, because I think this forty-percent thing, it’s commonplace now.

• This was a few years ago, but it was a day where we had, I think a total of 165 students come through. We published that we were going to have an open house in the paper. We invited people from the community to come.

It really is powerful if you can get parents because a lot of people have no idea what goes on in a manufacturing company. That resulted in us, you know, even having an adult who had been there for the open house, call us later and say, “You know, hey, my son, I was telling him about the tour I went on. Could we come for another tour?” I definitely think opening our doors to the community and letting people come in and see what we have going will help.

• Back to that banking question . . .

• It’s still there. It’s a very traditional kind of banking. The part you were talking about where the scrutiny that’s done to the business is far more intense than what it was years ago. You’re not just forecasting one or two years out. They want a five-to-ten-years plan. They’re far more invasive in your analysis and your assumptions. They’re questioning and challenging before they go further with the finances. I think, in general, it’s harder.

It’s harder to prove the need for the funding and how you are going to use the money in any ways. I think it probably . . . regulations and a lot more caution. . . .

• I think they told us anywhere from, like six to ten million bucks a year, more of a cost for us. Just in the regulatory stuff, I mean, how do you . . . ?

That’s a several-point interest rate increase for a customer.

• It’s a lot.

One last question, as we deal with things, healthcare. When we ask, what’s the biggest source of heartburn? The challenge for a manufacturer? Every single year, even when the economy went off the cliff, was the cost of healthcare. It’s less now. It’s less intense now, but it’s still the top concern among manufacturers. Do you sense that there’s light at the end of that tunnel, or that it’s just a cost of doing business that you have to cope with and you really can’t affect?

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• We just had our healthcare guy out yesterday and he gave us some good news that the rates weren’t going to go up, but the benefits are going down, so . . .

• . . . so good news, bad news. It’s a challenge for us. The Affordable Healthcare Act, for our guys, it’s kind of a joke. They talk about the penalties if you don’t have it. They ask, “Well, how much is it going to be? How much does it cost me to have insurance? I’ll just pay the fine because it’s such a . . . the fine is nothing.” For me, when we were going through that, as a country when we were going through that healthcare reform stuff, I just looked at my crew guys. They all have access to it. We contribute to their healthcare as a benefit and they still don’t want it. It’s not . . . it’s available . . . I guess what was frustrating for me was to see all this time, effort, and money being spent at the federal government level for something like that and they missed the point on it. That is a challenge. We have a forty-some people. Other than management who participates in it at a decent rate, the shop side of it is minimal.

• We’re trying to attack things by launching wellness programs for our folks and getting them to be a little bit more in tune with their health.

We’re trying to attack smoking, mostly, within our ranks these days. It was amazing . . . With all the resources and all that’s known – I’m not picking on folks who are in this room who might smoke and don’t really care. At the end of the day, one person out of 650 said, “Yeah, maybe I’ll try to quit smoking.” We have our insurance guys saying, “You know, if you had a healthier organization, that could affect your premiums and it could affect . . . “ The organization’s wellness journey is going to take years because it’s never been in place during our fifty years of existence. We want to attack it. I want a healthier workforce. I want people to come to work, feel safe, and to lead healthy lives. It’s another part of the cultural change, and that’s really the only way we’re going to impact the rising cost of healthcare. We can’t pass it on to our customers.

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SELECTED CROSS TABULATIONS Table 3-1 QUESTION 1: From a financial perspective, how do you feel right now about the future for your company...

REGION

BASE=TOTAL SAMPLE **D/S (CONFIDENT - NOT CONFIDENT) TOTAL CONFIDENT TOTAL NOT CONFIDENT VERY CONFIDENT SOMEWHAT CONFIDENT

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 85% 88% 83%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 80%

$1 MILL$5 MILL 125 95%

$5 MILL+ 105 93%

UNDE R 10 300 81%

11-50 127 96%

51+ 90 83%

PROC PRECI ESS SION METAL 69 58 104 88% 90% 89%

OEM 60 88%

1-15 YRS 147 89%

16+ YRS 374 84%

92% 7% 55% 37%

94% 6% 57% 37%

91% 8% 54% 37%

89% 10% 49% 40%

97% 2% 63% 34%

96% 4% 61% 36%

90% 9% 51% 39%

98% 2% 61% 37%

91% 9% 61% 31%

93% 5% 50% 43%

95% 5% 48% 48%

95% 5% 54% 41%

94% 6% 59% 35%

94% 5% 57% 36%

92% 8% 54% 38%

NOT VERY CONFIDENT

6%

5%

6%

8%

2%

3%

7%

1%

9%

5%

3%

3%

6%

5%

6%

NOT AT ALL CONFIDENT

1%

1%

2%

1%

-

1%

2%

1%

-

-

2%

3%

-

-

2%

1% -

-

1% -

1% -

1% -

-

1% -

1% -

-

1% -

-

-

-

1% -

1% -

DON'T KNOW/UNSURE REFUSED

Table 4-1 QUESTION 2: Thinking about the upcoming year, in 2017, do you anticipate economic expansion, a flat economy, or a recession?

REGION

BASE=TOTAL SAMPLE ECONOMIC EXPANSION A FLAT ECONOMY A RECESSION DON'T KNOW UNSURE REFUSED

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 56% 61% 51% 35% 28% 39% 4% 4% 4% 6% 6% 5% -

-

-

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 54% 35% 5% 6%

$1 MILL$5 MILL 125 59% 32% 1% 7%

$5 MILL+ 105 56% 39% 4% 2%

UNDE R 10 300 55% 33% 5% 7%

11-50 127 63% 33% 2% 2%

51+ 90 51% 40% 5% 4%

-

-

-

-

-

-

PROC PRECI ESS SION METAL 69 58 104 55% 60% 52% 42% 32% 45% 7% 1% 3% 2% 2% -

-

-

OEM 60 69% 22% 1% 8%

1-15 YRS 147 63% 30% 5% 2%

16+ YRS 374 53% 36% 4% 7%

-

-

-

Table 5-1 QUESTION 3: How well do you feel your firm is prepared to handle [an economic expansion/a flat economy/a recession]? Would you say you are very well, somewhat well, or not well prepared to handle it?

REGION

BASE=ANTICIPATES ECONOMIC EXPANSION/FLAT ECONOMY/RECESSION

REVENUES

REST TWIN OF TOTAL CITIES STATE 494 213 281

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 224

$1 MILL$5 MILL 115

$5 MILL+ 103

UNDE R 10 278

11-50 124

51+ 87

PROC PRECI ESS SION METAL 67 57 102

OEM 55

1-15 YRS 144

16+ YRS 348

**D/S (WELL PREPARED - NOT WELL PREPARED) TOTAL WELL PREPARED VERY WELL PREPARED

87%

89%

85%

83%

94%

91%

82%

96%

91%

88%

84%

82%

89%

90%

86%

93% 51%

95% 57%

92% 46%

91% 41%

97% 53%

96% 66%

90% 44%

98% 56%

96% 63%

94% 43%

92% 39%

91% 55%

93% 50%

94% 45%

93% 53%

SOMEWHAT WELL PREPARED NOT WELL PREPARED DON'T KNOW/UNSURE REFUSED

43%

38%

46%

49%

44%

29%

46%

42%

32%

51%

53%

36%

44%

49%

40%

6% 1% -

5% -

7% 1% -

8% 1% -

2% 1% -

4% -

8% 1% -

2% -

4% -

6% -

8% -

9% -

5% 2% -

4% 1% -

7% 1% -

BASE=TOTAL SAMPLE **D/S (WELL PREPARED - NOT WELL PREPARED) TOTAL WELL PREPARED VERY WELL PREPARED

523 82%

227 84%

296 81%

239 78%

125 87%

105 89%

300 76%

127 94%

90 87%

69 86%

58 82%

104 80%

60 82%

147 88%

374 80%

88% 48%

89% 53%

87% 43%

85% 39%

89% 49%

94% 65%

84% 41%

96% 54%

92% 61%

92% 42%

90% 38%

89% 54%

86% 46%

92% 44%

86% 49%

SOMEWHAT WELL PREPARED NOT WELL PREPARED DON'T KNOW/UNSURE REFUSED

40%

35%

44%

46%

40%

29%

43%

41%

31%

50%

52%

36%

40%

48%

37%

6% 1% -

5%

6% 1% -

8% 1% -

2% 1% -

4% -

8% 1% -

2% -

4% -

6% -

8% -

9% -

4% 2% -

4% 1% -

6% 1% -

-

247

Table 6-1 QUESTION 4: Thinking about the business climate in Minnesota compared to say five years ago, would you say the business climate has gotten better, gotten worse or stayed about the same?

REGION

BASE=TOTAL SAMPLE **D/S (BETTER - WORSE) GOTTEN BETTER GOTTEN WORSE STAYED ABOUT THE SAME DON'T KNOW REFUSED

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 23% 32% 16% 41% 47% 37% 18% 14% 20% 39% 36% 41% 3% -

3% -

2% -

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 25% 42% 17% 37%

$1 MILL$5 MILL 125 28% 43% 15% 38%

$5 MILL+ 105 23% 41% 18% 40%

UNDE R 10 300 20% 38% 18% 40%

11-50 127 32% 48% 16% 36%

51+ 90 18% 38% 20% 38%

4% -

3% -

1% -

3% -

1% -

3% -

PROC PRECI ESS SION METAL 69 58 104 20% 14% 19% 41% 40% 39% 21% 25% 20% 37% 33% 40% -

2% -

OEM 60 36% 40% 5% 50%

1-15 YRS 147 33% 47% 14% 37%

16+ YRS 374 19% 38% 19% 39%

5% -

2% -

3% -

2% -

Table 7-1 QUESTION 5: Looking ahead to this year for a moment...

As you look to 2017, do you project your company's gross revenues to... increase or decrease compared to 2016, or will they probably stay the same?

Do you expect your gross revenues to (increase/decrease) by more than 10% or less than 10%?

REGION

BASE=TOTAL SAMPLE **D/S (INCREASE DECREASE) TOTAL INCREASE TOTAL DECREASE INCREASE BY MORE THAN 10% INCREASE BY LESS THAN 10% DECREASE BY LESS THAN 10% DECREASE BY MORE THAN 10% STAY THE SAME TOO SOON TO SAY/DON'T KNOW REFUSED 3/3 2/3

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 48% 53% 44%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 42%

$1 MILL$5 MILL 125 58%

$5 MILL+ 105 60%

UNDE R 10 300 42%

11-50 127 63%

51+ 90 48%

PROC PRECI ESS SION METAL 69 58 104 49% 43% 44%

OEM 60 64%

1-15 YRS 147 56%

16+ YRS 374 44%

55% 7% 34%

58% 5% 35%

52% 8% 33%

50% 8% 33%

62% 4% 40%

66% 6% 36%

49% 7% 32%

65% 3% 38%

58% 10% 36%

56% 7% 32%

53% 10% 30%

50% 6% 30%

67% 3% 41%

61% 5% 41%

51% 7% 31%

20%

23%

19%

17%

22%

30%

17%

28%

22%

24%

23%

20%

26%

20%

20%

1%

1%

2%

2%

1%

1%

1%

1%

3%

3%

-

3%

-

2%

1%

5%

4%

6%

5%

3%

5%

6%

2%

7%

4%

10%

4%

3%

3%

6%

36% 2%

34% 3%

38% 2%

42% 1%

32% 3%

27% 1%

41% 2%

29% 2%

29% 3%

33% 3%

36% 2%

42% 1%

26% 3%

31% 2%

39% 2%

-

-

-

-

1%

-

1%

-

-

-

-

20% 25%

20% 23%

21% 27%

26% 23%

21% 23%

9% 30%

26% 21%

16% 26%

8% 37%

15% 32%

22% 25%

23% 26%

18% 22%

19% 18%

-

21% 28%

Table 8-1 QUESTION 6: And, as you look to 2017, do you project your company's profitability to increase or decrease compared to 2016, or will it probably stay the same?

Do you expect your profitability to (increase/decrease) by more than 10% or less than 10%?

REGION

BASE=TOTAL SAMPLE **D/S (INCREASE DECREASE) TOTAL INCREASE TOTAL DECREASE INCREASE BY MORE THAN 10% INCREASE BY LESS THAN 10% DECREASE BY LESS THAN 10% DECREASE BY MORE THAN 10% STAY THE SAME TOO SOON TO SAY/DON'T KNOW REFUSED

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 36% 42% 32%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 38%

$1 MILL$5 MILL 125 43%

$5 MILL+ 105 37%

UNDE R 10 300 35%

11-50 127 46%

51+ 90 26%

PROC PRECI ESS SION METAL 69 58 104 47% 31% 31%

OEM 60 44%

1-15 YRS 147 51%

16+ YRS 374 30%

44% 7% 26%

48% 6% 30%

40% 8% 22%

43% 5% 26%

46% 4% 24%

48% 11% 28%

42% 7% 27%

49% 3% 24%

40% 14% 25%

48% 1% 22%

41% 10% 29%

41% 9% 24%

47% 3% 32%

54% 4% 35%

39% 9% 22%

18%

18%

18%

17%

22%

19%

16%

25%

15%

26%

12%

17%

15%

19%

17%

3%

3%

2%

1%

1%

5%

2%

1%

8%

1%

1%

3%

3%

-

4%

5%

3%

6%

4%

2%

6%

5%

2%

6%

-

8%

6%

-

4%

5%

47% 2%

43% 2%

49% 2%

50% 1%

49% 1%

39% 1%

49% 1%

43% 3%

41% 2%

48% 1%

47% 2%

50% -

45% 5%

41% 1%

49% 2%

1%

-

1%

-

-

2%

-

1%

2%

1%

-

-

-

-

1%

248

Table 9-1 QUESTION 7: And, as you look to 2017, do you project your company's capital expenditures to increase or decrease compared to 2016, or will they probably stay the same?

Do you expect your capital expenditures to (increase/decrease) by more than 10% or less than 10%?

REGION

BASE=TOTAL SAMPLE **D/S (INCREASE DECREASE) TOTAL INCREASE TOTAL DECREASE INCREASE BY MORE THAN 10% INCREASE BY LESS THAN 10% DECREASE BY LESS THAN 10% DECREASE BY MORE THAN 10% STAY THE SAME TOO SOON TO SAY/DON'T KNOW REFUSED

REVENUES

REST OF TWIN TOTAL CITIES STATE 523 227 296 11% 11% 11%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 14%

$1 MILL$5 MILL 125 11%

$5 MILL+ 105 4%

UNDE R 10 300 14%

11-50 127 8%

51+ 90 6%

PROC PRECI ESS SION METAL 69 58 104 14% 11% 11%

OEM 60 14%

1-15 YRS 147 24%

16+ YRS 374 6%

24% 12% 14%

23% 12% 15%

24% 13% 14%

24% 10% 13%

23% 12% 17%

23% 19% 15%

25% 12% 15%

20% 13% 12%

22% 16% 14%

27% 14% 16%

22% 11% 17%

24% 13% 14%

20% 6% 15%

32% 8% 20%

20% 14% 12%

9%

8%

10%

11%

7%

7%

10%

9%

7%

11%

5%

10%

5%

12%

9%

5%

4%

5%

4%

6%

6%

4%

5%

5%

2%

5%

3%

1%

4%

5%

8%

7%

8%

5%

7%

13%

7%

8%

11%

11%

6%

10%

5%

4%

9%

62% 2%

63% 2%

61% 1%

65% 1%

63% 1%

59% -

61% 2%

66% 1%

59% 2%

58% 1%

65% 2%

63% 1%

69% 3%

59% 1%

63% 2%

-

-

-

-

-

1%

-

-

-

2%

-

-

Table 10-1 QUESTION 8-16: Now, I would like to read you a list of factors that some companies are concerned about. For each one, please rate how concerned your company is about that particular factor using a scale from 1 to 10, whe The (FIRST/NEXT) one is...

SUMMARY OF CONCERNS - RANKED BY % 10 REGION

BASE=TOTAL SAMPLE THE COSTS OF HEALTH CARE COVERAGE GOVERNMENT POLICIES AND REGULATIONS ATTRACTING AND RETAINING QUALIFIED WORKERS

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 34% 31% 37%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 35%

$1 MILL$5 MILL 125 41%

$5 MILL+ 105 20%

UNDE R 10 300 36%

11-50 127 37%

51+ 90 24%

PROC PRECI ESS SION METAL 69 58 104 42% 43% 35%

OEM 60 25%

1-15 YRS 147 30%

16+ YRS 374 36%

18%

16%

19%

16%

21%

12%

16%

20%

20%

20%

17%

14%

18%

20%

17%

12%

10%

14%

9%

15%

14%

11%

16%

12%

7%

13%

18%

12%

11%

13%

11%

13%

10%

10%

13%

6%

13%

10%

9%

8%

17%

11%

11%

9%

12%

7%

7%

7%

6%

7%

3%

8%

6%

5%

7%

9%

8%

6%

8%

7%

7%

7%

7%

7%

7%

3%

7%

6%

6%

5%

11%

9%

3%

10%

5%

COMPETITION FROM FOREIGN SOURCES THE SHIPPING AND LOGISTICS OF GETTING YOUR PRODUCTS TO MARKET

6%

3%

8%

4%

7%

6%

6%

7%

5%

8%

5%

8%

8%

7%

5%

5%

4%

6%

4%

9%

2%

4%

8%

4%

4%

6%

8%

5%

7%

4%

MANAGING SUPPLY CHAIN RELATIONSHIPS

3%

4%

2%

2%

3%

3%

3%

3%

2%

1%

5%

2%

-

5%

1%

CURRENT AND FUTURE LEADERS ECONOMIC AND GLOBAL UNCERTAINTY COSTS OF EMPLOYEE SALARIES AND BENEFITS, NOT INCLUDING HEALTH INSURANCE

Table 11-1 QUESTION 8-16: Now, I would like to read you a list of factors that some companies are concerned about. For each one, please rate how concerned your company is about that particular factor using a scale from 1 to 10, whe The (FIRST/NEXT) one is...

SUMMARY OF CONCERNS - RANKED BY % 8-10 REGION

BASE=TOTAL SAMPLE THE COSTS OF HEALTH CARE COVERAGE GOVERNMENT POLICIES AND REGULATIONS ATTRACTING AND RETAINING QUALIFIED WORKERS

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 58% 50% 64%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 55%

$1 MILL$5 MILL 125 64%

$5 MILL+ 105 55%

UNDE R 10 300 55%

11-50 127 67%

51+ 90 55%

PROC PRECI ESS SION METAL 69 58 104 63% 70% 66%

OEM 60 43%

1-15 YRS 147 51%

16+ YRS 374 60%

32%

29%

34%

30%

36%

26%

31%

31%

35%

35%

28%

33%

32%

30%

32%

31%

24%

37%

24%

35%

43%

26%

35%

44%

27%

37%

43%

31%

27%

33%

CURRENT AND FUTURE LEADERS COSTS OF EMPLOYEE SALARIES AND BENEFITS, NOT INCLUDING HEALTH INSURANCE

26%

25%

28%

25%

28%

25%

26%

21%

35%

25%

34%

28%

27%

25%

27%

19%

19%

19%

15%

21%

20%

16%

23%

26%

18%

19%

25%

11%

21%

18%

ECONOMIC AND GLOBAL UNCERTAINTY COMPETITION FROM FOREIGN SOURCES THE SHIPPING AND LOGISTICS OF GETTING YOUR PRODUCTS TO MARKET

18%

16%

19%

16%

21%

14%

18%

16%

20%

14%

26%

16%

21%

16%

18%

12%

10%

14%

9%

16%

10%

10%

15%

13%

16%

16%

15%

17%

11%

13%

12%

9%

13%

11%

14%

9%

10%

16%

11%

9%

12%

14%

12%

13%

11%

MANAGING SUPPLY CHAIN RELATIONSHIPS

10%

13%

8%

10%

10%

11%

10%

12%

8%

11%

17%

7%

9%

12%

9%

249

Table 12-1 QUESTION 8-16: Now, I would like to read you a list of factors that some companies are concerned about. For each one, please rate how concerned your company is about that particular factor using a scale from 1 to 10, whe The (FIRST/NEXT) one is...

SUMMARY OF CONCERNS - RANKED BY MEAN REGION

BASE=TOTAL SAMPLE THE COSTS OF HEALTH CARE COVERAGE GOVERNMENT POLICIES AND REGULATIONS ATTRACTING AND RETAINING QUALIFIED WORKERS

REST TWIN OF TOTAL CITIES STATE 523 227 296 7.21 6.86 7.48

REVENUES

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 6.86

$1 MILL$5 MILL 125 7.80

$5 MILL+ 105 7.21

UNDE R 10 300 6.97

11-50 127 7.83

51+ 90 7.08

PROC PRECI ESS SION METAL 69 58 104 7.46 8.17 7.43

OEM 60 6.61

1-15 YRS 147 6.77

16+ YRS 374 7.37

5.99

5.73

6.19

5.68

6.30

6.05

5.76

6.25

6.43

6.13

5.96

6.07

6.31

5.78

6.06

5.78

5.27

6.17

5.02

6.36

6.72

5.23

6.47

6.66

5.58

6.07

6.61

5.94

5.32

5.95

CURRENT AND FUTURE LEADERS COSTS OF EMPLOYEE SALARIES AND BENEFITS, NOT INCLUDING HEALTH INSURANCE

5.33

5.32

5.34

4.99

5.64

5.43

5.11

5.51

5.83

5.28

5.79

5.41

5.57

5.06

5.42

5.08

4.80

5.30

4.71

5.17

5.42

4.76

5.42

5.66

4.97

5.24

5.42

4.72

4.86

5.15

ECONOMIC AND GLOBAL UNCERTAINTY MANAGING SUPPLY CHAIN RELATIONSHIPS THE SHIPPING AND LOGISTICS OF GETTING YOUR PRODUCTS TO MARKET

4.90

4.71

5.05

4.54

5.02

5.24

4.64

5.18

5.45

4.68

5.48

4.91

5.09

4.78

4.96

4.00

4.05

3.97

3.61

3.99

4.75

3.75

4.32

4.42

4.20

4.15

3.76

3.95

3.93

4.02

3.79

3.42

4.07

3.44

4.05

4.14

3.52

4.27

4.14

3.50

3.83

3.91

3.91

3.59

3.84

COMPETITION FROM FOREIGN SOURCES

3.70

3.53

3.83

3.23

3.98

4.02

3.43

3.97

4.09

3.91

4.01

4.01

4.19

3.43

3.82

Table 13-1 QUESTION 8: Now, I would like to read you a list of factors that some companies are concerned about. For each one, please rate how concerned your company is about that particular factor using a scale from 1 to 10, whe The (FIRST/NEXT) one is...

COMPETITION FROM FOREIGN SOURCES REGION

BASE=TOTAL SAMPLE 10 8 - 10 5-7 1-4 10 - VERY CONCERNED 9 8 7 6 5 4 3 2 1 - NOT AT ALL CONCERNED DK/REF MEAN

REST OF TWIN TOTAL CITIES STATE 523 227 296 6% 3% 8% 12% 10% 14% 26% 27% 24% 62% 62% 61% 6% 3% 8%

REVENUES

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 4% 9% 23% 68% 4%

$1 MILL$5 MILL 125 7% 16% 26% 57% 7%

$5 MILL+ 105 6% 10% 29% 61% 6%

UNDE R 10 300 6% 10% 26% 64% 6%

11-50 127 7% 15% 24% 61% 7%

51+ 90 5% 13% 27% 60% 5%

PROC PRECI ESS SION METAL 69 58 104 8% 5% 8% 16% 16% 15% 23% 24% 29% 59% 61% 56% 8% 5% 8%

OEM 60 8% 17% 23% 60% 8%

1-15 YRS 147 7% 11% 20% 69% 7%

16+ YRS 374 5% 13% 28% 58% 5%

2% 5% 5% 4% 17% 7% 11% 13% 31%

1% 6% 5% 5% 17% 6% 11% 13% 33%

2% 4% 5% 4% 16% 7% 11% 13% 30%

1% 4% 2% 5% 16% 6% 10% 12% 40%

3% 6% 4% 4% 18% 7% 9% 12% 30%

1% 4% 11% 18% 11% 16% 15% 19%

1% 4% 3% 5% 18% 5% 9% 12% 38%

3% 6% 6% 3% 15% 9% 12% 14% 26%

2% 6% 10% 2% 15% 9% 16% 16% 19%

1% 7% 6% 7% 10% 4% 11% 9% 35%

2% 9% 5% 19% 16% 11% 10% 24%

2% 5% 4% 4% 20% 5% 11% 8% 32%

5% 5% 6% 3% 14% 8% 15% 16% 21%

1% 3% 6% 4% 10% 7% 10% 15% 38%

2% 5% 4% 4% 19% 6% 11% 12% 29%

1% 3.70

1% 3.53

1% 3.83

3.23

1% 3.98

4.02

1% 3.43

3.97

4.09

3% 3.91

4.01

4.01

4.19

3.43

1% 3.82

Table 14-1 QUESTION 9: Now, I would like to read you a list of factors that some companies are concerned about. For each one, please rate how concerned your company is about that particular factor using a scale from 1 to 10, whe The (FIRST/NEXT) one is...

MANAGING SUPPLY CHAIN RELATIONSHIPS REGION

BASE=TOTAL SAMPLE 10 8 - 10 5-7 1-4 10 - VERY CONCERNED 9 8 7 6 5 4 3 2 1 - NOT AT ALL CONCERNED DK/REF MEAN

REST TWIN OF TOTAL CITIES STATE 523 227 296 3% 4% 2% 10% 13% 8% 34% 31% 37% 54% 56% 52% 3% 4% 2%

REVENUES

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 2% 10% 29% 60% 2%

$1 MILL$5 MILL 125 3% 10% 34% 54% 3%

$5 MILL+ 105 3% 11% 46% 43% 3%

UNDE R 10 300 3% 10% 30% 57% 3%

11-50 127 3% 12% 38% 49% 3%

51+ 90 2% 8% 44% 48% 2%

PROC PRECI ESS SION METAL 69 58 104 1% 5% 2% 11% 17% 7% 34% 29% 34% 53% 53% 59% 1% 5% 2%

OEM 60 9% 38% 52% -

1-15 YRS 147 5% 12% 32% 56% 5%

16+ YRS 374 1% 9% 35% 53% 1%

2% 6% 7% 7% 21% 6% 13% 13% 21%

3% 6% 6% 8% 16% 7% 13% 13% 23%

2% 5% 7% 6% 24% 6% 13% 14% 20%

2% 5% 4% 5% 21% 6% 10% 18% 26%

1% 6% 7% 7% 21% 6% 15% 9% 23%

2% 7% 13% 11% 22% 5% 20% 12% 6%

2% 6% 4% 5% 21% 7% 10% 16% 25%

3% 6% 6% 9% 22% 7% 15% 11% 16%

6% 15% 10% 19% 4% 21% 10% 13%

1% 8% 11% 11% 12% 9% 11% 13% 19%

2% 11% 3% 5% 20% 5% 14% 10% 24%

2% 4% 4% 7% 23% 9% 14% 15% 21%

1% 8% 8% 5% 26% 2% 19% 14% 18%

3% 4% 4% 5% 23% 5% 13% 13% 24%

2% 6% 8% 7% 20% 7% 13% 13% 20%

2% 4.00

4.05

3% 3.97

2% 3.61

2% 3.99

4.75

3% 3.75

1% 4.32

4.42

3% 4.20

2% 4.15

3.76

3.95

3.93

3% 4.02

250

Table 15-1 QUESTION 10: Now, I would like to read you a list of factors that some companies are concerned about. For each one, please rate how concerned your company is about that particular factor using a scale from 1 to 10, whe The (FIRST/NEXT) one is...

GOVERNMENT POLICIES AND REGULATIONS REGION

BASE=TOTAL SAMPLE 10 8 - 10 5-7 1-4 10 - VERY CONCERNED 9 8 7 6 5 4 3 2 1 - NOT AT ALL CONCERNED DK/REF MEAN

REST TWIN OF TOTAL CITIES STATE 523 227 296 18% 16% 19% 32% 29% 34% 41% 39% 42% 26% 31% 23% 18% 16% 19%

REVENUES

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 16% 30% 39% 31% 16%

$1 MILL$5 MILL 125 21% 36% 40% 23% 21%

$5 MILL+ 105 12% 26% 50% 21% 12%

UNDE R 10 300 16% 31% 37% 30% 16%

11-50 127 20% 31% 47% 22% 20%

51+ 90 20% 35% 44% 19% 20%

PROC PRECI ESS SION METAL 69 58 104 20% 17% 14% 35% 28% 33% 36% 44% 43% 29% 24% 23% 20% 17% 14%

OEM 60 18% 32% 43% 25% 18%

1-15 YRS 147 20% 30% 37% 32% 20%

16+ YRS 374 17% 32% 42% 24% 17%

6% 8% 12% 9% 20% 6% 5% 6% 9%

4% 8% 11% 9% 19% 7% 6% 9% 9%

7% 8% 13% 8% 21% 6% 4% 4% 9%

5% 8% 10% 7% 21% 5% 7% 8% 11%

6% 10% 12% 8% 20% 8% 3% 4% 8%

7% 7% 16% 13% 21% 5% 5% 5% 6%

6% 10% 10% 7% 21% 6% 6% 7% 11%

4% 8% 15% 11% 20% 7% 5% 4% 6%

11% 4% 14% 9% 20% 4% 2% 6% 6%

8% 6% 16% 8% 12% 8% 4% 4% 14%

5% 6% 16% 11% 17% 5% 1% 5% 13%

5% 15% 12% 6% 24% 8% 5% 3% 7%

9% 5% 14% 16% 12% 5% 9% 9% 1%

4% 6% 11% 7% 20% 7% 8% 6% 11%

6% 9% 13% 9% 21% 6% 4% 6% 8%

1% 5.99

1% 5.73

1% 6.19

5.68

1% 6.30

4% 6.05

1% 5.76

1% 6.25

2% 6.43

6.13

3% 5.96

1% 6.07

6.31

5.78

1% 6.06

Table 16-1 QUESTION 11: Now, I would like to read you a list of factors that some companies are concerned about. For each one, please rate how concerned your company is about that particular factor using a scale from 1 to 10, whe The (FIRST/NEXT) one is...

THE COSTS OF HEALTH CARE COVERAGE REGION

BASE=TOTAL SAMPLE 10 8 - 10 5-7 1-4 10 - VERY CONCERNED 9 8 7 6 5 4 3 2 1 - NOT AT ALL CONCERNED DK/REF MEAN

REST OF TWIN TOTAL CITIES STATE 523 227 296 34% 31% 37% 58% 50% 64% 24% 29% 20% 17% 20% 15% 34% 31% 37%

REVENUES

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 35% 55% 21% 23% 35%

$1 MILL$5 MILL 125 41% 64% 26% 9% 41%

$5 MILL+ 105 20% 55% 31% 13% 20%

UNDE R 10 300 36% 55% 22% 21% 36%

11-50 127 37% 67% 23% 10% 37%

51+ 90 24% 55% 30% 16% 24%

PROC PRECI ESS SION METAL 69 58 104 42% 43% 35% 63% 70% 66% 17% 23% 16% 19% 6% 17% 42% 43% 35%

OEM 60 25% 43% 32% 20% 25%

1-15 YRS 147 30% 51% 27% 21% 30%

16+ YRS 374 36% 60% 22% 16% 36%

9% 15% 8% 5% 11% 2% 3% 5% 8%

7% 13% 10% 4% 15% 2% 4% 6% 8%

10% 17% 6% 5% 8% 2% 2% 4% 7%

8% 11% 6% 3% 12% 1% 3% 8% 11%

5% 18% 9% 6% 11% 1% 4% 4%

14% 22% 13% 6% 12% 5% 3% 4% 3%

7% 12% 6% 4% 12% 1% 3% 5% 11%

12% 18% 10% 3% 10% 1% 5% 4%

9% 22% 10% 10% 11% 4% 1% 8% 2%

1% 20% 8% 1% 8% 4% 4% 4% 6%

16% 11% 9% 3% 11% 1% 3% 2%

12% 19% 5% 3% 7% 3% 2% 5% 7%

3% 15% 17% 5% 11% 2% 1% 6% 10%

8% 14% 9% 2% 16% 2% 2% 8% 9%

9% 15% 8% 6% 9% 2% 3% 3% 7%

1% 7.21

1% 6.86

1% 7.48

2% 6.86

2% 7.80

7.21

2% 6.97

7.83

7.08

1% 7.46

8.17

1% 7.43

5% 6.61

1% 6.77

1% 7.37

Table 17-1 QUESTION 12: Now, I would like to read you a list of factors that some companies are concerned about. For each one, please rate how concerned your company is about that particular factor using a scale from 1 to 10, whe The (FIRST/NEXT) one is...

COSTS OF EMPLOYEE SALARIES AND BENEFITS, NOT INCLUDING HEALTH INSURANCE REGION

BASE=TOTAL SAMPLE 10 8 - 10 5-7 1-4 10 - VERY CONCERNED 9 8 7 6 5 4 3 2 1 - NOT AT ALL CONCERNED DK/REF MEAN

REST TWIN OF TOTAL CITIES STATE 523 227 296 7% 7% 7% 19% 19% 19% 44% 39% 48% 35% 41% 30% 7% 7% 7%

REVENUES

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 7% 15% 42% 40% 7%

$1 MILL$5 MILL 125 7% 21% 44% 34% 7%

$5 MILL+ 105 3% 20% 51% 28% 3%

UNDE R 10 300 7% 16% 42% 39% 7%

11-50 127 6% 23% 46% 31% 6%

51+ 90 6% 26% 47% 26% 6%

PROC PRECI ESS SION METAL 69 58 104 5% 11% 9% 18% 19% 25% 43% 50% 46% 37% 31% 28% 5% 11% 9%

OEM 60 3% 11% 50% 38% 3%

1-15 YRS 147 10% 21% 33% 44% 10%

16+ YRS 374 5% 18% 49% 32% 5%

2% 10% 12% 8% 25% 6% 8% 8% 12%

2% 11% 7% 7% 26% 7% 9% 11% 13%

3% 10% 16% 9% 24% 5% 7% 6% 12%

2% 6% 12% 8% 22% 6% 7% 7% 21%

2% 13% 9% 9% 26% 5% 12% 9% 8%

4% 14% 15% 11% 26% 7% 6% 12% 3%

1% 7% 10% 7% 25% 6% 9% 7% 17%

4% 12% 12% 8% 26% 8% 8% 9% 6%

2% 18% 15% 11% 21% 6% 4% 10% 6%

13% 7% 12% 25% 9% 9% 8% 10%

2% 6% 7% 12% 32% 3% 12% 9% 6%

5% 11% 10% 6% 30% 3% 4% 11% 10%

8% 14% 6% 29% 8% 11% 7% 12%

3% 8% 8% 4% 21% 9% 9% 10% 16%

2% 11% 13% 10% 26% 5% 7% 8% 11%

2% 5.08

1% 4.80

2% 5.30

2% 4.71

5.17

5.42

3% 4.76

5.42

5.66

1% 4.97

5.24

1% 5.42

1% 4.72

3% 4.86

1% 5.15

251

Table 18-1 QUESTION 13: Now, I would like to read you a list of factors that some companies are concerned about. For each one, please rate how concerned your company is about that particular factor using a scale from 1 to 10, wher The (FIRST/NEXT) one is...

ATTRACTING AND RETAINING QUALIFIED WORKERS REGION

BASE=TOTAL SAMPLE 10 8 - 10 5-7 1-4 10 - VERY CONCERNED 9 8 7 6 5 4 3 2 1 - NOT AT ALL CONCERNED DK/REF MEAN

REST TWIN OF TOTAL CITIES STATE 523 227 296 12% 10% 14% 31% 24% 37% 38% 38% 38% 29% 36% 24% 12% 10% 14%

REVENUES

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 9% 24% 34% 39% 9%

$1 MILL$5 MILL 125 15% 35% 45% 20% 15%

$5 MILL+ 105 14% 43% 39% 18% 14%

UNDE R 10 300 11% 26% 35% 36% 11%

11-50 127 16% 35% 45% 20% 16%

51+ 90 12% 44% 36% 20% 12%

PROC PRECI ESS SION METAL 69 58 104 7% 13% 18% 27% 37% 43% 42% 40% 38% 30% 24% 16% 7% 13% 18%

OEM 60 12% 31% 43% 25% 12%

1-15 YRS 147 11% 27% 35% 37% 11%

16+ YRS 374 13% 33% 39% 26% 13%

7% 12% 14% 8% 17% 5% 6% 6% 12%

5% 9% 10% 11% 18% 7% 9% 6% 14%

8% 14% 16% 5% 16% 4% 4% 6% 10%

4% 12% 12% 5% 17% 5% 7% 8% 20%

10% 10% 15% 9% 21% 6% 3% 6% 4%

13% 16% 17% 12% 10% 5% 4% 3% 5%

4% 11% 9% 6% 20% 5% 6% 7% 17%

8% 11% 23% 8% 14% 4% 4% 5% 6%

14% 18% 16% 8% 12% 6% 7% 2% 4%

8% 12% 8% 17% 16% 8% 5% 6% 10%

6% 18% 13% 11% 16% 3% 5% 3% 13%

9% 16% 13% 4% 21% 3% 3% 4% 7%

8% 11% 16% 10% 17% 6% 2% 3% 14%

6% 10% 13% 5% 16% 7% 5% 8% 17%

7% 13% 14% 8% 17% 4% 7% 5% 10%

2% 5.78

2% 5.27

2% 6.17

3% 5.02

6.36

6.72

3% 5.23

6.47

6.66

1% 5.58

6.07

3% 6.61

1% 5.94

1% 5.32

2% 5.95

Table 19-1 QUESTION 14: Now, I would like to read you a list of factors that some companies are concerned about. For each one, please rate how concerned your company is about that particular factor using a scale from 1 to 10, wher The (FIRST/NEXT) one is...

ECONOMIC AND GLOBAL UNCERTAINTY REGION

BASE=TOTAL SAMPLE 10 8 - 10 5-7 1-4 10 - VERY CONCERNED 9 8 7 6 5 4 3 2 1 - NOT AT ALL CONCERNED DK/REF MEAN

REST TWIN OF TOTAL CITIES STATE 523 227 296 7% 7% 7% 18% 16% 19% 44% 42% 45% 39% 43% 35% 7% 7% 7%

REVENUES

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 6% 16% 40% 45% 6%

$1 MILL$5 MILL 125 7% 21% 41% 37% 7%

$5 MILL+ 105 3% 14% 55% 31% 3%

UNDE R 10 300 8% 18% 38% 44% 8%

11-50 127 6% 16% 52% 30% 6%

51+ 90 5% 20% 48% 32% 5%

PROC PRECI ESS SION METAL 69 58 104 7% 9% 8% 14% 26% 16% 42% 40% 46% 44% 35% 38% 7% 9% 8%

OEM 60 6% 21% 40% 40% 6%

1-15 YRS 147 8% 16% 41% 43% 8%

16+ YRS 374 7% 18% 45% 37% 7%

2% 9% 10% 10% 24% 6% 10% 8% 15%

2% 7% 9% 9% 23% 7% 9% 10% 16%

2% 11% 11% 10% 24% 6% 10% 6% 14%

2% 8% 9% 6% 25% 6% 10% 7% 20%

2% 11% 8% 9% 24% 8% 7% 10% 12%

1% 10% 15% 18% 22% 8% 13% 5% 6%

1% 8% 7% 7% 24% 6% 10% 9% 19%

3% 7% 13% 11% 28% 6% 6% 8% 11%

15% 15% 18% 15% 7% 14% 4% 6%

4% 4% 6% 18% 17% 7% 12% 9% 16%

3% 13% 9% 14% 16% 10% 11% 5% 9%

1% 7% 13% 8% 25% 6% 9% 9% 14%

14% 7% 13% 20% 11% 14% 6% 9%

1% 8% 11% 7% 22% 8% 12% 6% 16%

2% 9% 10% 11% 24% 5% 9% 9% 14%

4.90

4.71

1% 5.05

4.54

1% 5.02

5.24

4.64

1% 5.18

5.45

4.68

5.48

4.91

5.09

4.78

4.96

Table 20-1 QUESTION 15: Now, I would like to read you a list of factors that some companies are concerned about. For each one, please rate how concerned your company is about that particular factor using a scale from 1 to 10, wher The (FIRST/NEXT) one is...

THE SHIPPING AND LOGISTICS OF GETTING YOUR PRODUCTS TO MARKET REGION

BASE=TOTAL SAMPLE 10 8 - 10 5-7 1-4 10 - VERY CONCERNED 9 8 7 6 5 4 3 2 1 - NOT AT ALL CONCERNED DK/REF MEAN

REST TWIN OF TOTAL CITIES STATE 523 227 296 5% 4% 6% 12% 9% 13% 26% 23% 29% 61% 67% 57% 5% 4% 6%

REVENUES

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 4% 11% 21% 67% 4%

$1 MILL$5 MILL 125 9% 14% 29% 57% 9%

$5 MILL+ 105 2% 9% 36% 55% 2%

UNDE R 10 300 4% 10% 23% 65% 4%

11-50 127 8% 16% 27% 57% 8%

51+ 90 4% 11% 37% 52% 4%

PROC PRECI ESS SION METAL 69 58 104 4% 6% 8% 9% 12% 14% 25% 23% 23% 66% 65% 61% 4% 6% 8%

OEM 60 5% 12% 32% 55% 5%

1-15 YRS 147 7% 13% 19% 67% 7%

16+ YRS 374 4% 11% 29% 59% 4%

1% 5% 6% 6% 15% 6% 13% 14% 28%

1% 4% 5% 6% 13% 7% 12% 15% 33%

2% 6% 7% 5% 16% 6% 14% 14% 23%

1% 5% 5% 3% 13% 7% 12% 13% 34%

1% 4% 6% 7% 15% 6% 7% 20% 25%

1% 6% 7% 11% 19% 8% 22% 12% 13%

1% 6% 6% 3% 14% 7% 9% 15% 33%

4% 4% 8% 6% 14% 7% 17% 12% 21%

6% 3% 13% 21% 4% 17% 15% 16%

5% 7% 10% 8% 6% 16% 7% 37%

6% 3% 3% 16% 8% 20% 19% 17%

2% 5% 4% 5% 13% 8% 9% 18% 26%

3% 5% 5% 3% 24% 6% 8% 17% 24%

1% 5% 6% 2% 11% 8% 10% 15% 35%

1% 5% 6% 7% 16% 6% 14% 14% 25%

1% 3.79

1% 3.42

1% 4.07

1% 3.44

4.05

4.14

2% 3.52

4.27

4.14

3.50

3.83

2% 3.91

3.91

3.59

1% 3.84

252

Table 21-1 QUESTION 16: Now, I would like to read you a list of factors that some companies are concerned about. For each one, please rate how concerned your company is about that particular factor using a scale from 1 to 10, wh The (FIRST/NEXT) one is...

CURRENT AND FUTURE LEADERS REGION

BASE=TOTAL SAMPLE 10 8 - 10 5-7 1-4 10 - VERY CONCERNED 9 8 7 6 5 4 3 2 1 - NOT AT ALL CONCERNED DK/REF MEAN

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 11% 13% 10% 26% 25% 28% 38% 41% 37% 34% 34% 34% 11% 13% 10%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 10% 25% 33% 41% 10%

$1 MILL$5 MILL 125 13% 28% 43% 28% 13%

$5 MILL+ 105 6% 25% 45% 30% 6%

UNDE R 10 300 13% 26% 34% 39% 13%

11-50 127 10% 21% 50% 28% 10%

51+ 90 9% 35% 36% 29% 9%

PROC PRECI ESS SION METAL 69 58 104 8% 17% 11% 25% 34% 28% 41% 32% 40% 33% 33% 31% 8% 17% 11%

OEM 60 11% 27% 42% 31% 11%

1-15 YRS 147 9% 25% 38% 37% 9%

16+ YRS 374 12% 27% 38% 33% 12%

4% 11% 10% 6% 22% 6% 7% 8% 14%

5% 7% 9% 7% 25% 5% 7% 8% 14%

3% 14% 11% 6% 20% 6% 7% 7% 15%

4% 11% 8% 4% 21% 6% 9% 8% 17%

3% 11% 9% 7% 26% 6% 7% 8% 8%

4% 15% 16% 10% 19% 5% 3% 10% 13%

4% 10% 7% 4% 22% 5% 7% 9% 18%

3% 8% 15% 7% 29% 8% 5% 6% 9%

5% 20% 13% 9% 14% 4% 7% 6% 11%

5% 12% 11% 14% 16% 5% 5% 4% 19%

2% 15% 10% 8% 14% 10% 6% 5% 13%

4% 13% 11% 4% 25% 3% 4% 11% 14%

3% 13% 13% 1% 27% 5% 13% 6% 7%

4% 12% 6% 6% 26% 6% 8% 6% 18%

3% 11% 11% 6% 21% 5% 7% 8% 13%

1% 5.33

5.32

2% 5.34

1% 4.99

1% 5.64

5.43

1% 5.11

1% 5.51

5.83

1% 5.28

2% 5.79

5.41

5.57

5.06

1% 5.42

Table 22-1 QUESTION 17: What would you say are the one or two biggest challenges your firm is facing that might negatively impact future growth? Is it...

REGION

BASE=TOTAL SAMPLE UNFAVORABLE BUSINESS CLIMATE, SUCH AS TAXES, REGULATIONS AND POLICY UNCERTAINTIES

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 36% 39% 33%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 35%

$1 MILL$5 MILL 125 37%

$5 MILL+ 105 34%

UNDE R 10 300 38%

11-50 127 30%

51+ 90 37%

PROC PRECI ESS SION METAL 69 58 104 45% 33% 37%

OEM 60 37%

1-15 YRS 147 37%

16+ YRS 374 35%

ATTRACTING AND RETAINING A QUALIFIED WORKFORCE

35%

33%

36%

24%

41%

59%

24%

48%

51%

32%

43%

36%

39%

34%

35%

RISING HEALTH CARE AND INSURANCE COSTS

34%

32%

36%

33%

37%

32%

31%

44%

32%

35%

33%

41%

22%

35%

34%

WEAK ECONOMY AND LOWER SALES FOR YOUR PRODUCTS

21%

22%

20%

21%

20%

14%

23%

11%

24%

25%

23%

17%

26%

14%

23%

RISING COSTS OF ENERGY AND MATERIALS FOR YOUR PRODUCTS

18%

18%

18%

22%

14%

13%

20%

15%

14%

15%

19%

11%

17%

24%

15%

OTHER DON'T KNOW/NOT SURE REFUSED

3% 1% -

4%

2% 2% -

3% 2% -

1% -

4% -

3% 2% -

2% 1% -

4% -

3% -

-

4% 3% -

3% 2% -

2% 1% -

3% 2% -

-

Table 23-1 QUESTION 18: Thinking ahead...what would you say are the two or three most important drivers of your firm's future growth? Is it...

REGION

BASE=TOTAL SAMPLE NEW CUSTOMERS NEW PRODUCTS DEVELOPING COMPANY MANAGERS AND LEADERS

REVENUES

REST OF TWIN TOTAL CITIES STATE 523 227 296 71% 75% 68% 39% 41% 37% 22% 24% 21%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 71% 39% 15%

$1 MILL$5 MILL 125 74% 32% 25%

$5 MILL+ 105 70% 41% 37%

UNDE R 10 300 71% 35% 16%

11-50 127 70% 42% 26%

51+ 90 71% 48% 37%

PROC PRECI ESS SION METAL 69 58 104 76% 79% 62% 40% 45% 33% 22% 18% 31%

OEM 60 67% 52% 28%

1-15 YRS 147 74% 41% 19%

16+ YRS 374 70% 38% 23%

ENHANCING SUPPLY CHAIN RELATIONSHIPS ACHIEVING OR UPGRADING TO NEW ISO 9001:2015 STANDARDS

17%

16%

18%

17%

13%

25%

17%

15%

20%

13%

16%

14%

18%

21%

15%

8%

9%

8%

9%

8%

6%

9%

6%

11%

4%

14%

12%

8%

7%

9%

OTHER DON'T KNOW/NOT SURE REFUSED

5% 3% -

5% 2% -

5% 3% -

5% 3% -

4% 2% -

3% -

7% 4% -

2% 1% -

2% 2% -

5% 1% -

5% 2% -

5% 4% -

3% -

5% -

5% 4% -

253

Table 24-1 QUESTION 19: Now, turning our attention to wages...

Have or will wages for your employees increase for 2017, or will they decrease or stay about the same?

REGION

BASE=TOTAL SAMPLE **D/S (INCREASED DECREASE) INCREASED DECREASE STAY ABOUT THE SAME DON'T KNOW REFUSED

REST OF TWIN TOTAL CITIES STATE 523 227 296 43% 44% 43% 45% 1% 50% 3% 1%

45% 1% 50% 3% 1%

45% 2% 51% 3%

REVENUES

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 28%

$1 MILL$5 MILL 125 49%

$5 MILL+ 105 69%

UNDE R 10 300 33%

11-50 127 51%

51+ 90 68%

31% 2% 62% 5% -

50% 1% 48% 1% 1%

69% 30% 1%

35% 2% 57% 4% 1%

51% 1% 46% 1% -

68% 32% -

PROC PRECI ESS SION METAL 69 58 104 51% 53% 46% 51% 47% 1%

53% 47% -

OEM 60 43%

1-15 YRS 147 36%

16+ YRS 374 46%

45% 2% 51% 3% -

38% 1% 57% 4% -

47% 2% 48% 2% 1%

47% 1% 51% 2% -

Table 25-1 QUESTION 20: And, what percentage do you expect wages at your company to increase for 2017?

REGION

BASE=INCREASED WAGES UNDER 5% 1% 2% 2.5% 3% 3.5% 4% 5%-LESS THAN 10% 5% 6% 7% 8% 10% OR MORE 10% 15% 18% 20% 85% 100% DON'T KNOW/NOT SURE

REST TWIN OF TOTAL CITIES STATE 234 102 132 51% 2% 9% 1% 29% 1% 9% 27% 23% 2% 1% 2% 16% 9% 2% 2% 1% 7%

46% 4% 9% 1% 26% 2% 6% 32% 24% 3% 2% 3% 14% 6% 1% 1% 4% 3% 7%

54% 1% 10% 1% 31% 11% 22% 21% 1% 1% 17% 12% 3% 1% 1% 7%

REVENUES

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 73

$1 MILL$5 MILL 62

$5 MILL+ 72

UNDE R 10 106

11-50 65

51+ 61

36% 7% 24% 1% 4% 26% 24% 1% 1% 33% 18% 4% 1% 6% 4% 4%

42% 2% 9% 15% 1% 16% 38% 33% 3% 3% 17% 11% 3% 1% 1% 3%

73% 3% 12% 4% 47% 8% 19% 17% 2% 3% 3% 5%

38% 1% 8% 23% 1% 5% 28% 23% 3% 1% 1% 28% 17% 3% 1% 5% 3% 6%

57% 12% 1% 30% 1% 12% 26% 22% 1% 1% 1% 7% 3% 3% 1% 10%

64% 3% 10% 3% 38% 11% 27% 23% 3% 3% 3% 6%

PROC PRECI ESS SION METAL 35 31 49 55% 5% 7% 37% 5% 24% 21% 3% 16% 11% 3% 2% 5%

46% 6% 6% 27% 6% 24% 15% 3% 6% 24% 21% 3% 6%

OEM 27

1-15 YRS 55

16+ YRS 177

40% 4% 3% 23% 3% 7% 28% 25% 3% 7% 4% 4% 24%

43% 11% 23% 9% 23% 17% 2% 2% 3% 32% 17% 5% 2% 5% 3% 2%

53% 3% 9% 2% 30% 1% 9% 28% 24% 2%

57% 15% 30% 2% 9% 30% 21% 5% 4% 10% 4% 4% 2% 4%

1% 11% 7% 1% 2% 1% 8%

Table 26-1 QUESTION 21: Are you currently investing in employee development or leadership training in order to attract and retain qualified employees and managers?

REGION

BASE=TOTAL SAMPLE **D/S (YES - NO) YES NO NOT SURE REFUSED

REST OF TWIN TOTAL CITIES STATE 523 227 296 -32% -30% -34% 33% 34% 32% 65% 64% 66% 2% 2% 1% -

REVENUES $1 MILL$5 MILL 125 -45% 27% 72% 1% -

UNDE R $1 MILL 239 -57% 20% 77% 3%

EMPLOYEES

$5 MILL+ 105 38% 69% 31% -

UNDE R 10 300 -60% 18% 79% 3%

11-50 127 -12% 44% 56% -

YEARS IN OPERATION

PRIMARY BUSINESS

51+ 90 38% 69% 31% -

PROC PRECI ESS SION METAL 69 58 104 -50% -11% -15% 25% 45% 42% 75% 55% 57% 1% -

OEM 60 -29% 34% 63% 1% 1%

1-15 YRS 147 -33% 33% 65% 1% 1%

16+ YRS 374 -31% 34% 65% 2% -

Table 27-1 QUESTION 22: Generally speaking, would you say that as a percentage of payroll your company will invest MORE in employee skills, talent, and leadership development or LESS next year compared to 2016, or will it stay a REGION

BASE=TOTAL SAMPLE **D/S (MORE - LESS) WILL INVEST MORE WILL INVEST LESS STAY THE SAME DON'T KNOW REFUSED

REST OF TWIN TOTAL CITIES STATE 523 227 296 17% 17% 17% 20% 20% 19% 3% 4% 3% 76% 74% 78% 1% 2% 1% -

REVENUES UNDE R $1 MILL 239 11% 15% 4% 79% 2% -

$1 MILL$5 MILL 125 21% 23% 1% 76% -

EMPLOYEES

$5 MILL+ 105 32% 34% 2% 64% 1%

254

UNDE R 10 300 11% 15% 4% 79% 2%

11-50 127 23% 24% 1% 74% -

YEARS IN OPERATION

PRIMARY BUSINESS

51+ 90 27% 29% 2% 69% -

PROC PRECI ESS SION METAL 69 58 104 18% 19% 14% 21% 22% 18% 3% 3% 4% 75% 75% 76% 1% 1% -

OEM 60 20% 23% 3% 71% 3% -

1-15 YRS 147 18% 19% 1% 79% 2% -

16+ YRS 374 16% 20% 4% 76%

Table 28-1 QUESTION 23: Does your company have a formal structured leadership development program for employees at all levels at your company?

REGION

BASE=TOTAL SAMPLE **D/S (YES - NO) YES NO DON'T KNOW/UNSURE REFUSED

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 -66% -66% -66% 16% 16% 16% 82% 83% 82% 1% 1% 1% -

UNDE R $1 MILL 239 -79% 9% 89% 2% -

$1 MILL$5 MILL 125 -58% 20% 78% 1% -

EMPLOYEES

$5 MILL+ 105 -48% 26% 74% -

UNDE R 10 300 -81% 9% 90% 2% -

11-50 127 -50% 24% 74% 1% -

YEARS IN OPERATION

PRIMARY BUSINESS

51+ 90 -36% 32% 68% -

PROC PRECI ESS SION METAL 69 58 104 -72% -69% -61% 13% 16% 20% 85% 84% 80% 1% -

OEM 60 -54% 22% 76% 1% -

1-15 YRS 147 -58% 20% 79% 1% -

16+ YRS 374 -69% 15% 84% 1% -

Table 29-1 QUESTION 24: Next, let's look at your company's workforce...

Is your company using automation to enhance your workforce or production?

REGION

BASE=TOTAL SAMPLE **D/S (YES - NO) YES NO DON'T KNOW/UNSURE REFUSED

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 2% 1% 3% 51% 51% 51% 49% 49% 48% 1% 1% -

UNDE R $1 MILL 239 -26% 37% 62% 1% -

$1 MILL$5 MILL 125 8% 54% 46% -

EMPLOYEES

$5 MILL+ 105 54% 77% 23% -

UNDE R 10 300 -22% 39% 60% 1% -

11-50 127 29% 65% 35% -

YEARS IN OPERATION

PRIMARY BUSINESS

51+ 90 39% 70% 30% -

PROC PRECI ESS SION METAL 69 58 104 31% 12% 18% 65% 56% 59% 35% 44% 41% 1% -

OEM 60 6% 53% 47% -

1-15 YRS 147 49% 50% 1% -

16+ YRS 374 3% 51% 48% 1% -

Table 30-1 QUESTION 25: And, in the next five years, how much do you expect automation to increase in your company? Would you say...

REGION

BASE=TOTAL SAMPLE **D/S (A LOT/SOME - LITTLE/ NOT AT ALL) TOTAL A LOT/SOME TOTAL LITTLE/NOT AT ALL INCREASE A LOT SOME ONLY A LITTLE NOT INCREASE AT ALL DON'T KNOW/UNSURE REFUSED

REVENUES

38% 62% 16% 22% 30% 32%

$5 MILL+ 105 9%

UNDE R 10 300 -46%

11-50 127 -22%

51+ 90 13%

33% 67% 11% 22% 33% 34%

26% 73% 11% 15% 29% 44%

31% 69% 8% 23% 37% 33%

55% 45% 18% 37% 35% 11%

27% 72% 10% 17% 28% 44%

39% 61% 13% 25% 42% 19%

57% 43% 21% 35% 28% 16%

43% 55% 11% 33% 32% 24%

40% 60% 20% 20% 33% 27%

1% -

-

-

-

1% -

1%

-

1% -

-

1%

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 -47%

REST TWIN OF TOTAL CITIES STATE 523 227 296 -30% -24% -34% 35% 64% 13% 22% 31% 33%

EMPLOYEES

$1 MILL$5 MILL 125 -39%

PROC PRECI ESS SION METAL 69 58 104 -12% -20% -35%

OEM 60 -17%

1-15 YRS 147 -25%

16+ YRS 374 -31%

32% 67% 13% 19% 34% 33%

42% 58% 20% 21% 24% 34%

37% 62% 15% 22% 32% 30%

34% 65% 12% 22% 31% 34%

1% -

-

1% -

Table 31-1 QUESTION 26: Thinking about your company's potential advisors, who do you turn to MOST for advice when it comes to making business decisions for your company.

Are there one or two other advisors you turn to MORE for advice?

FIRST CHOICE REGION

BASE=TOTAL SAMPLE BUSINESS PARTNER FAMILY ACCOUNTANT FINANCIAL ADVISOR OR BANKER LAWYER IT CONSULTANT OTHER NONE OF THE ABOVE DON'T KNOW/REFUSED

REVENUES

REST OF TWIN TOTAL CITIES STATE 523 227 296 29% 35% 24% 22% 19% 24% 16% 16% 16% 10% 5% 15% 3% 3% 7% 8% 2%

4% 2% 8% 9% 1%

3% 4% 6% 7% 2%

EMPLOYEES

UNDE R $1 MILL 239 22% 33% 15% 11%

$5 MILL+ 105 42% 13% 13% 7%

UNDE R 10 300 23% 29% 16% 11%

11-50 127 34% 14% 18% 10%

51+ 90 45% 7% 15% 11%

3% 3% 6% 7% 1%

2% 4% 9% 12% 2%

6% 3% 6% 5% 4%

3% 3% 7% 9% 1%

6% 4% 8% 6% 2%

3% 3% 5% 6% 4%

255

YEARS IN OPERATION

PRIMARY BUSINESS

$1 MILL$5 MILL 125 30% 9% 19% 14%

PROC PRECI ESS SION METAL 69 58 104 33% 36% 23% 18% 20% 22% 21% 19% 18% 7% 11% 12% 3% 3% 4% 12% -

2% 8% 5% -

3% 3% 8% 8% 4%

OEM 60 32% 20% 16% 11%

1-15 YRS 147 35% 21% 15% 11%

16+ YRS 374 27% 22% 17% 10%

6% 3% 8% 3% 1%

6% 3% 4% 5% -

2% 3% 8% 9% 2%

Table 33-1 QUESTION 27A: I am going to read you a few different roles within manufacturing and I would like to know how well you feel your firm is prepared to handle the departure of someone in that role. Would you say you are very w The first/next one is...

THE CEO OR OWNER REGION

BASE=TOTAL SAMPLE **D/S (WELL - NOT WELL) TOTAL WELL VERY WELL SOMEWHAT WELL NOT WELL DK REFUSED

REST TWIN OF TOTAL CITIES STATE 523 227 296 22% 28% 17% 58% 60% 56% 27% 31% 23% 31% 29% 32% 36% 32% 39% 5% 6% 5% 1% 2%

REVENUES UNDE R $1 MILL 239 7% 48% 26% 22% 41% 10%

$1 MILL$5 MILL 125 19% 59% 18% 42% 41% -

EMPLOYEES

$5 MILL+ 105 45% 71% 28% 42% 26% 2% 2%

UNDE R 10 300 18% 55% 28% 27% 36% 9%

11-50 127 15% 56% 19% 37% 41% 1% 1%

YEARS IN OPERATION

PRIMARY BUSINESS

51+ 90 37% 67% 30% 38% 31% 2%

PROC PRECI ESS SION METAL 69 58 104 18% 35% 48% 56% 63% 17% 17% 34% 31% 38% 30% 48% 38% 28% 4% 6% 8% -

OEM 60 16% 56% 18% 37% 40% 4% -

1-15 YRS 147 12% 54% 27% 27% 42% 4% -

16+ YRS 374 25% 59% 27% 32% 34% 6% 1%

Table 34-1 QUESTION 27B: I am going to read you a few different roles within manufacturing and I would like to know how well you feel your firm is prepared to handle the departure of someone in that role. Would you say you are very w The first/next one is...

MEMBERS OF YOUR MANAGEMENT TEAM REGION

BASE=TOTAL SAMPLE **D/S (WELL - NOT WELL) TOTAL WELL VERY WELL SOMEWHAT WELL NOT WELL DK REFUSED

REST TWIN OF TOTAL CITIES STATE 523 227 296 56% 57% 55% 75% 74% 75% 28% 32% 25% 47% 42% 50% 19% 16% 20% 6% 8% 5% 1% 2% -

REVENUES UNDE R $1 MILL 239 46% 67% 27% 40% 22% 10%

$1 MILL$5 MILL 125 64% 82% 30% 52% 17% 1% -

EMPLOYEES

$5 MILL+ 105 65% 82% 20% 62% 17% 1%

UNDE R 10 300 48% 68% 26% 42% 20% 11% 1%

11-50 127 60% 80% 28% 52% 20% 1%

YEARS IN OPERATION

PRIMARY BUSINESS

51+ 90 74% 87% 31% 57% 13% -

PROC PRECI ESS SION METAL 69 58 104 57% 59% 54% 76% 76% 72% 17% 20% 32% 59% 56% 41% 20% 18% 19% 3% 6% 9% 1% -

OEM 60 55% 74% 20% 54% 20% 6% -

1-15 YRS 147 58% 76% 32% 44% 18% 5% 1%

16+ YRS 374 55% 74% 26% 48% 19% 6% 1%

Table 35-1 QUESTION 27C: I am going to read you a few different roles within manufacturing and I would like to know how well you feel your firm is prepared to handle the departure of someone in that role. Would you say you are very w The first/next one is...

A MANAGER OR SUPERVISOR REGION

BASE=TOTAL SAMPLE **D/S (WELL - NOT WELL) TOTAL WELL VERY WELL SOMEWHAT WELL NOT WELL DK REFUSED

REST OF TWIN TOTAL CITIES STATE 523 227 296 57% 60% 54% 74% 75% 74% 28% 33% 25% 46% 43% 49% 18% 15% 20% 7% 8% 7% 1% 2% -

REVENUES UNDE R $1 MILL 239 41% 64% 31% 33% 23% 12%

$1 MILL$5 MILL 125 65% 82% 29% 53% 17% 1% -

EMPLOYEES

$5 MILL+ 105 79% 89% 17% 72% 10% 1%

UNDE R 10 300 41% 64% 30% 34% 23% 12% 1%

11-50 127 69% 84% 27% 57% 15% 1% 1%

YEARS IN OPERATION

PRIMARY BUSINESS

51+ 90 87% 93% 23% 70% 7% -

PROC PRECI ESS SION METAL 69 58 104 54% 59% 52% 73% 76% 72% 17% 15% 29% 55% 61% 43% 18% 17% 20% 8% 5% 9% 1% 2% -

OEM 60 68% 82% 26% 56% 14% 4% -

1-15 YRS 147 59% 76% 35% 41% 16% 8% 1%

16+ YRS 374 55% 74% 26% 48% 18% 7% 1%

Table 37-1 QUESTION 28: How much of an impact do you anticipate retirements having on your company in the next couple of years? Will it have a...

REGION

BASE=TOTAL SAMPLE **D/S (SIGNIFICANT/MODEST - MINOR/NOT AT ALL) TOTAL SIGNIFICANT/MODEST TOTAL MINOR/NOT AT ALL SIGNIFICANT IMPACT MODEST IMPACT ONLY A MINOR IMPACT NO IMPACT AT ALL DON'T KNOW REFUSED

REST OF TWIN TOTAL CITIES STATE 523 227 296 -40% -40% -40%

REVENUES

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 -46%

$1 MILL$5 MILL 125 -63%

$5 MILL+ 105 -2%

UNDE R 10 300 -47%

11-50 127 -44%

51+ 90 -6%

PROC PRECI ESS SION METAL 69 58 104 -29% -29% -44%

OEM 60 -25%

1-15 YRS 147 -61%

16+ YRS 374 -32%

29% 69% 13%

29% 69% 11%

30% 70% 15%

26% 72% 15%

18% 81% 7%

49% 51% 16%

25% 73% 14%

28% 72% 12%

47% 53% 15%

35% 64% 17%

35% 65% 15%

28% 71% 12%

37% 62% 20%

19% 80% 7%

34% 65% 16%

16% 24%

18% 19%

15% 27%

11% 17%

11% 29%

33% 33%

12% 20%

16% 28%

32% 27%

18% 16%

21% 21%

16% 27%

17% 19%

12% 22%

18% 24%

46% 1% -

50% 2% -

43% 1% -

55% 2% -

52% 1% -

18% -

52% 2% -

44% -

26% -

48% 1% -

44% -

45% 1% -

43% 1% -

57% 1% -

41% 1% -

256

Table 38-1 QUESTION 29: How difficult is it to attract qualified candidates for your firm's vacancies? Would you say it is...

REGION

BASE=TOTAL SAMPLE **D/S (DIFFICULT - NOT DIFFUCULT) TOTAL DIFFICULT TOTAL NOT DIFFICULT VERY DIFFICULT SOMEWHAT DIFFICULT NOT TOO DIFFICULT NOT DIFFICULT AT ALL DON'T KNOW REFUSED

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 42% 28% 53%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 35%

$1 MILL$5 MILL 125 44%

$5 MILL+ 105 69%

UNDE R 10 300 36%

11-50 127 47%

51+ 90 56%

PROC PRECI ESS SION METAL 69 58 104 49% 74% 59%

OEM 60 31%

1-15 YRS 147 24%

16+ YRS 374 49%

70% 27% 28% 41%

62% 34% 20% 42%

75% 22% 35% 40%

65% 30% 31% 34%

71% 28% 32% 40%

85% 15% 24% 60%

65% 29% 31% 34%

74% 26% 30% 44%

78% 22% 18% 60%

74% 25% 35% 38%

86% 12% 40% 46%

79% 20% 33% 45%

63% 32% 21% 42%

61% 36% 23% 38%

73% 24% 30% 43%

14% 13%

18% 16%

11% 11%

11% 19%

16% 12%

11% 4%

11% 18%

13% 13%

22% -

13% 12%

5% 8%

12% 7%

19% 14%

16% 20%

13% 11%

3% -

4% -

3% -

5% -

1% -

-

6% -

-

-

1% -

2% -

2% -

5% -

3% -

3% -

Table 39-1 QUESTION 30: For what reasons have job candidates not taken a job or followed through with an interview?

REGION

BASE=TOTAL SAMPLE THE SKILLS REQUIRED FOR THE JOB DIDN'T MATCH THE CANDIDATE'S

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 51% 48% 54%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 49%

$1 MILL$5 MILL 125 54%

$5 MILL+ 105 55%

UNDE R 10 300 48%

11-50 127 59%

51+ 90 52%

PROC PRECI ESS SION METAL 69 58 104 52% 48% 66%

OEM 60 42%

1-15 YRS 147 45%

16+ YRS 374 54%

COMPENSATION IS NOT HIGH ENOUGH LONG COMMUTING TIME OR DISTANCE WORK SCHEDULES NOT FLEXIBLE ENOUGH OR DON'T FIT THE APPLICANT'S DESIRE

24%

27%

21%

19%

26%

34%

19%

29%

30%

30%

18%

18%

24%

22%

25%

17%

13%

19%

11%

16%

31%

11%

17%

33%

15%

26%

20%

17%

13%

18%

14%

13%

16%

16%

6%

23%

14%

14%

18%

15%

9%

9%

12%

13%

15%

THE PERCEIVED LACK OF UPWARD JOB MOBILITY

13%

14%

12%

13%

16%

15%

12%

15%

15%

13%

14%

11%

6%

13%

13%

9% 12% 1%

11% 13% 2%

8% 10% 1%

11% 16% 1%

7% 9% 3%

7% 2% -

11% 16% 1%

9% 7% 1%

3% 3% 2%

5% 9% 4%

11% 13% -

8% 10% -

11% 17% 2%

11% 11% 2%

8% 12% 1%

OTHER DON'T KNOW REFUSED

Table 40-1 QUESTION 31: What would you say is the biggest challenge your firm faces in attracting qualified candidates? Is it...

REGION

BASE=DIFFICULT ATTRACTING QUALIFIED CANDIDATES

REVENUES

REST OF TWIN TOTAL CITIES STATE 364 141 223

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 155

$1 MILL$5 MILL 89

$5 MILL+ 89

UNDE R 10 196

11-50 93

51+ 70

PROC PRECI ESS SION METAL 51 50 82

OEM 38

1-15 YRS 89

16+ YRS 273

APPLICANTS DO NOT HAVE THE NEEDED SKILLS OR EDUCATION

46%

55%

40%

42%

46%

52%

42%

46%

57%

41%

45%

46%

49%

38%

48%

LACK OF APPLICANTS OR INTEREST COMPANY TOO SMALL TO COMPETITIVELY RECRUIT

37%

39%

36%

32%

35%

47%

32%

44%

45%

38%

29%

38%

41%

27%

41%

35%

32%

36%

43%

40%

18%

43%

30%

20%

36%

35%

34%

26%

35%

35%

COMPANY LOCATION OR GEOGRAPHY INABILITY TO OFFER COMPETITIVE WAGES LACK OF CHILD CARE OPTIONS SOMETHING ELSE DON'T KNOW REFUSED

23%

8%

33%

20%

22%

33%

18%

25%

36%

26%

27%

25%

24%

21%

24%

19%

25%

16%

20%

14%

20%

18%

13%

30%

24%

15%

11%

32%

19%

19%

7%

8%

6%

8%

5%

6%

8%

3%

9%

14%

4%

3%

3%

4%

8%

3% 2% -

4% 1% -

3% 2% -

5% 2% -

2% 1% -

1% -

5% 2% -

3% 1% -

1% -

3% -

2% 2% -

3% 1% -

7% -

3% -

3% 2% -

257

Table 41-1 QUESTION 31: What would you say is the biggest challenge your firm faces in attracting qualified candidates? Is it...

REGION

BASE=TOTAL SAMPLE APPLICANTS DO NOT HAVE THE NEEDED SKILLS OR EDUCATION

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 32% 34% 30%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 27%

$1 MILL$5 MILL 125 33%

$5 MILL+ 105 44%

UNDE R 10 300 28%

11-50 127 34%

51+ 90 45%

PROC PRECI ESS SION METAL 69 58 104 30% 38% 36%

OEM 60 31%

1-15 YRS 147 23%

16+ YRS 374 35%

LACK OF APPLICANTS OR INTEREST COMPANY TOO SMALL TO COMPETITIVELY RECRUIT

26%

24%

27%

21%

25%

40%

21%

32%

35%

28%

25%

30%

26%

16%

30%

24%

20%

27%

28%

29%

15%

28%

22%

15%

27%

30%

27%

17%

21%

25%

COMPANY LOCATION OR GEOGRAPHY

16%

5%

25%

13%

16%

28%

12%

18%

28%

19%

23%

19%

15%

13%

17%

INABILITY TO OFFER COMPETITIVE WAGES LACK OF CHILD CARE OPTIONS SOMETHING ELSE DON'T KNOW REFUSED

13%

15%

12%

13%

10%

17%

12%

10%

23%

18%

13%

9%

20%

12%

14%

5%

5%

4%

5%

4%

5%

5%

2%

7%

10%

3%

3%

2%

2%

6%

2% 1% -

2%

2% 2% -

3% 1% -

1% 1% -

1% -

3% 1% -

2% 1% -

1% -

3% -

2% 2% -

3% 1% -

5% -

2% -

2% 1% -

-

Table 42-1 QUESTION 32: When looking to hire new employees, where is your need greatest?

REGION

BASE=TOTAL SAMPLE ENTRY LEVEL EMPLOYEES EMPLOYEES WITH TECHNICAL TRAINING EMPLOYEES WITH TECHNICAL TRAINING AND EXPERIENCE EMPLOYEES WITH FOUR YEAR COLLEGE DEGREES OTHER DEPENDS DON'T KNOW REFUSED

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 30% 29% 30%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 28%

$1 MILL$5 MILL 125 34%

$5 MILL+ 105 26%

UNDE R 10 300 26%

11-50 127 31%

51+ 90 35%

PROC PRECI ESS SION METAL 69 58 104 47% 17% 19%

OEM 60 21%

1-15 YRS 147 30%

16+ YRS 374 30%

27%

23%

29%

30%

26%

24%

29%

21%

27%

22%

30%

33%

31%

25%

27%

34%

37%

31%

30%

35%

43%

32%

43%

29%

27%

48%

42%

30%

34%

33%

4%

5%

2%

3%

4%

3%

4%

3%

5%

1%

3%

1%

14%

4%

3%

3% 2% 2% -

3% 1% 2% -

2% 3% 3% -

3% 2% 4% -

1% 1% -

1% 4% -

3% 2% 4% -

1% 1% -

4% -

1% 1% -

2% -

4% 1% 2% -

1% 1% -

1% 2% 3% -

3% 2% 2% -

Table 43-1 QUESTION 33: What types of manufacturing jobs or positions are in most demand at your company?

REGION

BASE=TOTAL SAMPLE MACHINE OPERATOR ASSEMBLER WELDER FRONT OFFICE OR ADMINISTRATIVE HELP ENGINEER SUPERVISOR SENIOR LEADERSHIP POSITION OTHER DON'T KNOW REFUSED

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 35% 35% 35% 20% 22% 19% 11% 7% 15% 6% 9% 4%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 33% 17% 9% 7%

$1 MILL$5 MILL 125 36% 24% 13% 5%

$5 MILL+ 105 42% 24% 14% 4%

UNDE R 10 300 31% 18% 9% 8%

11-50 127 42% 27% 12% 3%

51+ 90 41% 20% 16% 5%

PROC PRECI ESS SION METAL 69 58 104 53% 67% 33% 20% 11% 12% 5% 3% 38% 1% 5% 4%

OEM 60 17% 24% 13% 12%

1-15 YRS 147 27% 21% 12% 7%

16+ YRS 374 39% 20% 11% 5%

4% 2% 1%

7% 3% 1%

3% 1% 1%

3% 2% 1%

5% 4% 1%

6% 1%

4% 1% 1%

6% 1% 1%

4% 4% -

3% 4% -

6% -

2% 1%

15% 6% 1%

5% 3% 1%

4% 1% 1%

15% 4%

14% 3%

16% 6%

21% 7% -

10% 1% -

8% 1% 1%

21% 7%

6% 1% 1%

9% 1% -

11% 3% -

6% 2% -

8% 3% -

6% 3% 1%

19% 5% -

14% 4%

Table 44-1 QUESTION 34: Will the shortage of qualified workers affect your company's bottom line and ability to meet your growth plan in the coming year?

Will it affect your company A LOT or just A LITTLE? REGION

BASE=TOTAL SAMPLE **D/S (YES - NO) TOTAL YES YES, A LOT YES, A LITTLE NO MAYBE/TOO SOON TO TELL DON'T KNOW REFUSED

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 -23% -26% -20% 38% 36% 39% 14% 12% 16% 23% 24% 23% 61% 62% 59% 1% 1% -

1% -

2% -

UNDE R $1 MILL 239 -40% 29% 14% 15% 69%

$1 MILL$5 MILL 125 -5% 46% 12% 34% 51% 1%

1% -

2% -

EMPLOYEES

$5 MILL+ 105 49% 16% 33% 50% 1% -

258

UNDE R 10 300 -32% 33% 15% 18% 65%

2% -

YEARS IN OPERATION

PRIMARY BUSINESS

11-50 127 -7% 46% 10% 36% 52% 1%

51+ 90 -8% 46% 19% 27% 54% -

1% -

-

PROC PRECI ESS SION METAL 69 58 104 -20% -12% -16% 39% 43% 42% 15% 14% 17% 24% 29% 25% 59% 55% 58% 3% -

2% -

-

OEM 60 -12% 43% 12% 31% 54% -

1-15 YRS 147 -35% 32% 12% 20% 67% 1%

16+ YRS 374 -19% 40% 15% 25% 58%

3% -

1% -

1% -

Table 45-1 QUESTION 35: What could local educational institutions do to help manufacturing companies like yours?

REGION

BASE=TOTAL SAMPLE DEVELOP INTERNSIP PROGRAMS FOR LOCAL MANUFACTURERS

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 31% 30% 33%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 29%

$1 MILL$5 MILL 125 33%

$5 MILL+ 105 34%

UNDE R 10 300 29%

11-50 127 36%

51+ 90 31%

PROC PRECI ESS SION METAL 69 58 104 39% 27% 32%

OEM 60 36%

1-15 YRS 147 31%

16+ YRS 374 32%

DEVELOP MORE AND BETTER TRAINDED TWO-YEAR GRADUATES

25%

27%

23%

24%

28%

24%

25%

28%

20%

12%

50%

29%

30%

24%

25%

PROVIDE IN-HOUSE/ COMPANY-SPECIFIC TRAINING

18%

17%

18%

17%

14%

24%

15%

15%

31%

21%

14%

13%

14%

20%

17%

PROVIDE EQUIPMENTSPECIFIC TRAINING OTHER DON'T KNOW REFUSED

10%

11%

10%

14%

9%

7%

12%

11%

5%

10%

3%

13%

10%

11%

10%

7% 9%

5% 10% -

8% 8%

5% 11% -

8% 9% -

9% 2% 1%

7% 12% -

5% 5% 1%

9% 4% -

6% 12% -

3% 3% -

10% 3% -

3% 6% 1%

4% 10% -

8% 9%

Table 46-1 QUESTION 36: On a different topic, does your company have a succession plan for when the President/Owner/CEO or top management positions retire or move on?

REGION

BASE=TOTAL SAMPLE **D/S (YES - NO) YES NO DON'T KNOW/NOT SURE REFUSED

REST TWIN OF TOTAL CITIES STATE 523 227 296 -5% 8% -16% 46% 54% 41% 52% 45% 56% 2% 3% -

REVENUES UNDE R $1 MILL 239 -40% 30% 70% -

$1 MILL$5 MILL 125 8% 53% 45% 1% -

EMPLOYEES

$5 MILL+ 105 39% 68% 29% 4% -

UNDE R 10 300 -30% 34% 64% 2% -

11-50 127 14% 56% 42% 2% 1%

YEARS IN OPERATION

PRIMARY BUSINESS

51+ 90 45% 72% 26% 2% -

PROC PRECI ESS SION METAL 69 58 104 -8% -22% 15% 45% 38% 57% 54% 60% 41% 1% 2% 2% -

OEM 60 -9% 45% 53% 2% -

1-15 YRS 147 -22% 38% 60% 2% -

16+ YRS 374 2% 50% 48% 2%

Table 47-1 QUESTION 37: Changing topics again, in general, do you think free trade agreements help manufacturers like your company, hurt manufacturers like your company, or not make much of a difference either way?

REGION

BASE=TOTAL SAMPLE **D/S (HELP - HURT) HELP MANUFACTURERS HURT MANUFACTURERS MAKE NO DIFFERENCE NOT SURE REFUSED

REST TWIN OF TOTAL CITIES STATE 523 227 296 -1% 5% -5% 17% 21% 14% 18% 16% 19% 58% 54% 61% 6% 7% 5% -

REVENUES UNDE R $1 MILL 239 -4% 13% 17% 63% 7% -

$1 MILL$5 MILL 125 -1% 20% 21% 55% 4% -

EMPLOYEES

$5 MILL+ 105 2% 17% 15% 62% 4% 1%

UNDE R 10 300 -4% 14% 18% 61% 7%

11-50 127 3% 21% 18% 56% 5% -

YEARS IN OPERATION

PRIMARY BUSINESS

51+ 90 4% 23% 19% 54% 3% -

PROC PRECI ESS SION METAL 69 58 104 -5% -3% -7% 23% 17% 8% 27% 21% 15% 41% 55% 70% 9% 5% 7% 2% -

OEM 60 17% 30% 14% 56% -

1-15 YRS 147 3% 19% 16% 57% 9% -

16+ YRS 374 -2% 17% 19% 59% 5%

Table 48-1 QUESTION 38: Thinking some more about your business...

Have you gained new OEM business from customers wanting to have suppliers closer to their location?

REGION

BASE=TOTAL SAMPLE **D/S (YES - NO) YES NO DON'T KNOW/NOT SURE REFUSED

REST TWIN OF TOTAL CITIES STATE 523 227 296 -32% -17% -44% 32% 39% 27% 64% 56% 71% 3% 4% 3% -

REVENUES UNDE R $1 MILL 239 -40% 28% 68% 4% -

$1 MILL$5 MILL 125 -25% 37% 61% 2% -

EMPLOYEES

$5 MILL+ 105 -23% 38% 61% 2% -

259

UNDE R 10 300 -44% 26% 70% 4% -

11-50 127 -23% 37% 60% 3% 1%

YEARS IN OPERATION

PRIMARY BUSINESS

51+ 90 49% 49% 2% -

PROC PRECI ESS SION METAL 69 58 104 -45% -17% -39% 27% 38% 30% 72% 55% 70% 1% 7% -

OEM 60 -4% 47% 50% 3% -

1-15 YRS 147 -24% 36% 60% 4% -

16+ YRS 374 -35% 31% 66% 3%

Table 49-1 QUESTION 39: And, what would you say is the main reason why your supply chain relationships changed?

REGION

BASE=GAINED NEW OEM BUSINESS

REVENUES

REST TWIN OF TOTAL CITIES STATE 168 89 79

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 67

$1 MILL$5 MILL 46

$5 MILL+ 39

UNDE R 10 78

11-50 47

51+ 44

PROC PRECI ESS SION METAL 19 22 32

OEM 28

1-15 YRS 52

16+ YRS 115

SHORTER LEAD TIMES TOTAL COSTS VERSUS ONLY PRODUCT COSTS CLOSER RELATIONSHIPS/ REGIONAL SUPPLIERS

34% 25%

38% 23%

30% 27%

36% 25%

34% 18%

34% 31%

36% 21%

23% 25%

44% 31%

30% 20%

42% 17%

30% 35%

26% 24%

38% 28%

33% 23%

21%

20%

22%

18%

22%

19%

21%

25%

15%

36%

4%

17%

27%

14%

24%

BETTER INVENTORY MANAGEMENT BY THE OEM

12%

9%

15%

11%

18%

10%

10%

17%

11%

9%

20%

12%

14%

14%

11%

DON'T KNOW/NOT SURE REFUSED BASE=TOTAL SAMPLE SHORTER LEAD TIMES TOTAL COSTS VERSUS ONLY PRODUCT COSTS CLOSER RELATIONSHIPS/ REGIONAL SUPPLIERS

8% 523 11% 8%

10% 227 15% 9%

6% 296 8% 7%

9% 239 10% 7%

8% 125 13% 7%

6% 105 13% 12%

12% 300 9% 5%

9% 127 8% 9%

90 21% 15%

5% 69 8% 5%

16% 58 16% 7%

6% 104 9% 11%

10% 60 12% 11%

5% 147 14% 10%

9% 374 10% 7%

7%

8%

6%

5%

8%

7%

6%

9%

7%

10%

2%

5%

13%

5%

7%

BETTER INVENTORY MANAGEMENT BY THE OEM

4%

4%

4%

3%

6%

4%

2%

6%

5%

3%

8%

4%

6%

5%

3%

DON'T KNOW/NOT SURE REFUSED

3% -

4% -

2% -

3% -

3% -

2% -

3% -

3% -

-

1% -

6% -

2% -

5% -

2% -

3% -

Table 50-1 QUESTION 40: On a different topic, does your company have a formal strategic plan for profitable growth?

REGION

BASE=TOTAL SAMPLE **D/S (YES - NO) YES NO DON'T KNOW/NOT SURE REFUSED

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 5% 12% -1% 52% 55% 49% 47% 43% 50% 1% 1% 1% -

UNDE R $1 MILL 239 -26% 37% 63% 1% -

$1 MILL$5 MILL 125 14% 56% 43% 1% -

EMPLOYEES

$5 MILL+ 105 51% 75% 25% -

UNDE R 10 300 -21% 39% 60% 1% -

11-50 127 30% 64% 34% 1% 1%

YEARS IN OPERATION

PRIMARY BUSINESS

51+ 90 55% 78% 22% -

PROC PRECI ESS SION METAL 69 58 104 4% -10% 16% 52% 45% 58% 48% 55% 42% -

OEM 60 23% 61% 39% -

1-15 YRS 147 12% 56% 43% 1% -

16+ YRS 374 2% 50% 49% 1%

Table 51-1 QUESTION 41: Which ONE of the following best describes most of your firm's customers and potential customers' expectations about ISO certification?

REGION

BASE=TOTAL SAMPLE MOST REQUIRE YOUR FIRM TO HAVE ISO CERTIFICATION

REVENUES

REST OF TWIN TOTAL CITIES STATE 523 227 296 6% 10% 3%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 2%

$1 MILL$5 MILL 125 4%

$5 MILL+ 105 18%

UNDE R 10 300 2%

11-50 127 10%

51+ 90 16%

PROC PRECI ESS SION METAL 69 58 104 4% 25% 3%

OEM 60 3%

1-15 YRS 147 6%

16+ YRS 374 6%

MOST REQUEST THAT YOUR FIRM HAVE ISO CERTIFICATION, BUT DON'T REQUIRE IT

13%

13%

12%

7%

11%

27%

8%

16%

25%

9%

21%

14%

12%

8%

14%

MOST DON'T CARE ABOUT ISO CERTIFICATION

30%

30%

30%

25%

36%

32%

27%

34%

31%

23%

31%

43%

38%

23%

33%

ISO CERTIFICATION IS NOT APPLICABLE IN OUR CASE

50%

46%

53%

64%

48%

24%

61%

40%

29%

60%

23%

40%

47%

61%

45%

DON'T KNOW/NOT SURE REFUSED

1% -

1% -

2% -

3% -

1% -

-

2% -

1% -

-

4% -

-

-

-

1% -

2% -

260

Table 52-1 QUESTION 42: How well do you feel your company is prepared to meet the demands of the new ISO 9001:2015 Standard? Would you say you are very well, somewhat well, or not well prepared to meet these new deman REGION

BASE=TOTAL SAMPLE **D/S (WELL PREPARED - NOT WELL PREPARED) TOTAL WELL PREPARED VERY WELL PREPARED SOMEWHAT WELL PREPARED NOT WELL PREPARED DON'T KNOW/UNSURE REFUSED

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 7% 14% 1%

UNDE R $1 MILL 239 -7%

$1 MILL$5 MILL 125

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

$5 MILL+ 105 36%

UNDE R 10 300 -4%

11-50 127 12%

51+ 90 33%

PROC PRECI ESS SION METAL 69 58 104 10% 15% 15%

OEM 60 -15%

1-15 YRS 147 6%

16+ YRS 374 7%

43% 19% 24%

47% 24% 23%

40% 16% 25%

36% 13% 23%

40% 13% 27%

59% 35% 24%

36% 13% 23%

48% 18% 29%

60% 43% 18%

36% 17% 18%

51% 22% 29%

52% 23% 30%

32% 14% 19%

43% 18% 24%

44% 20% 24%

36% 19% 1%

33% 18% 2%

39% 20% 1%

44% 19% 1%

41% 16% 3%

24% 16% 1%

40% 22% 1%

36% 14% 2%

28% 12% -

26% 32% 6%

36% 13% -

38% 10% -

48% 20% -

37% 19% 2%

36% 19% 1%

Table 53-1 QUESTION 43: Now, I have just a few more questions for statistical purposes only...

How many people does your company employ in all its facilities in Minnesota?

REGION

BASE=TOTAL SAMPLE UNDER 50 50-150 151+ UNDER 10 11-25 26-50 51-100 101-150 151 TO 250 MORE THAN 250 DON'T KNOW/NOT SURE REFUSED TOTAL 50+ LESS THAN 100 TOTAL 100+

REVENUES

REST OF TWIN TOTAL CITIES STATE 523 227 296 82% 77% 85% 13% 15% 11% 5% 6% 4% 57% 57% 58% 16% 15% 16% 9% 5% 12% 8% 11% 7% 4% 4% 4% 1% 1% 2% 3% 5% 2% 1% 1% 2% 17% 90% 9%

21% 88% 10%

15% 92% 8%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 98% 2% 92% 5% 1% 2% -

$1 MILL$5 MILL 125 92% 7% 2% 40% 43% 9% 2% 5% 2% -

$5 MILL+ 105 39% 40% 21% 3% 10% 26% 29% 10% 7% 14% -

UNDE R 10 300 100% 100% -

11-50 127 100% 64% 36% -

51+ 90 73% 27% 49% 24% 9% 18% -

2% 98% 2%

8% 94% 6%

61% 69% 31%

100% -

100% -

100% 49% 51%

PROC PRECI ESS SION METAL 69 58 104 80% 80% 80% 11% 15% 15% 3% 5% 4% 51% 57% 56% 17% 15% 15% 13% 8% 9% 8% 12% 9% 3% 3% 6% 1% 3% 5% 3% 3% 3% 2% 14% 89% 6%

20% 92% 8%

19% 89% 9%

OEM 60 73% 19% 8% 41% 18% 13% 8% 11% 2% 6% -

1-15 YRS 147 90% 8% 2% 67% 17% 6% 4% 4% 1% 1% -

16+ YRS 374 78% 15% 6% 54% 15% 10% 10% 4% 2% 4% 1% 1%

27% 81% 19%

10% 94% 6%

20% 88% 10%

Table 54-1 QUESTION 44: What are your annual business revenues? Just stop me when I get to the category that includes your company's total annual revenues.

REGION

BASE=TOTAL SAMPLE **D/S (UNDER $1 MILLION MORE THAN $1 MILLION)

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 2% 1% 2%

EMPLOYEES

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R $1 MILL 239 100%

$1 MILL$5 MILL 125 -100%

$5 MILL+ 105 -100%

UNDE R 10 300 55%

11-50 127 -69%

51+ 90 -78%

PROC PRECI ESS SION METAL 69 58 104 -9% -8% -6%

OEM 60 -20%

1-15 YRS 147 27%

16+ YRS 374 -8%

UNDER $1 MILLION MORE THAN $1 MILLION MORE THAN $20 MILLION

46% 44% 8%

43% 42% 7%

47% 45% 8%

100% -

100% -

100% 37%

73% 18% -

11% 80% 2%

4% 82% 41%

39% 48% 8%

43% 51% 7%

41% 47% 10%

33% 53% 8%

59% 32% 1%

40% 49% 10%

MORE THAN $10 MILLION TO $20 MILLION

6%

6%

6%

-

-

29%

-

7%

24%

3%

8%

7%

7%

3%

7%

MORE THAN $5 MILLION TO $10 MILLION

7%

5%

8%

-

-

33%

1%

21%

6%

8%

11%

7%

8%

4%

8%

MORE THAN $1 MILLION TO $5 MILLION

24%

24%

24%

-

100%

-

17%

50%

12%

28%

25%

23%

30%

23%

24%

DON'T KNOW/NOT SURE/ REFUSED

10%

14%

7%

-

-

-

9%

8%

14%

13%

6%

12%

14%

10%

11%

261

Table 55-1 QUESTION 45: Which one of the following best describes your company's primary business? Is it...

REGION

BASE=TOTAL SAMPLE METAL FABRICATION PROCESS MANUFACTURING

REVENUES

REST TWIN OF TOTAL CITIES STATE 523 227 296 20% 16% 23% 13% 14% 13%

EMPLOYEES

UNDE R $1 MILL 239 18% 11%

$1 MILL$5 MILL 125 19% 16%

$5 MILL+ 105 25% 13%

YEARS IN OPERATION

PRIMARY BUSINESS

UNDE R 10 300 19% 12%

11-50 127 19% 16%

51+ 90 21% 11%

PROC PRECI ESS SION METAL 69 58 104 - 100% 100% -

OEM 60 -

1-15 YRS 147 17% 11%

16+ YRS 374 21% 14%

AN ORIGINAL EQUIPMENT MANUFACTURER, OEM

11%

14%

10%

8%

14%

13%

8%

15%

18%

-

-

-

100%

12%

11%

PRECISION MANUFACTURING PLASTICS ELECTRONICS COMPONENTS INFORMATION TECHNOLOGY, IT SOMETHING ELSE DON'T KNOW REFUSED

11%

14%

9%

10%

12%

14%

11%

11%

13%

-

100%

-

-

9%

12%

5% 3%

4% 6%

5%

3% 2%

4% 2%

9% 6%

3% 2%

5% 1%

9% 6%

-

-

-

-

4% 2%

5% 3%

1%

1%

1%

2%

1%

-

1%

2%

-

-

-

-

-

2%

1%

36% -

31% 1%

39% -

45% -

32% -

20% -

43% -

31% -

20% 2%

-

-

-

-

41% 1%

34% -

Table 56-1 QUESTION 46: How many years has your firm been in operation?

REGION

BASE=TOTAL SAMPLE LESS THAN 1 YEAR 1 - 3 YEARS 4 - 6 YEARS 7 - 10 YEARS 11 - 15 YEARS 16 YEARS OR MORE DON'T KNOW REFUSED

REST TWIN OF TOTAL CITIES STATE 523 227 296 1% 1% 4% 4% 3% 6% 10% 3% 9% 8% 10% 9% 7% 11% 71% 70% 72% -

REVENUES UNDE R $1 MILL 239 1% 7% 8% 11% 11% 63% -

$1 MILL$5 MILL 125 1% 2% 6% 10% 10% 72% -

EMPLOYEES

$5 MILL+ 105 1% 5% 5% 88% -

UNDE R 10 300 1% 5% 7% 10% 11% 67% -

11-50 127 1% 2% 6% 10% 9% 73% -

YEARS IN OPERATION

PRIMARY BUSINESS

51+ 90 4% 6% 5% 84% -

PROC PRECI ESS SION METAL 69 58 104 2% 9% 3% 1% 1% 6% 9% 5% 2% 8% 8% 13% 6% 76% 75% 76% -

OEM 60 1% 1% 6% 13% 9% 69% -

1-15 YRS 147 13% 22% 33% 32% -

16+ YRS 374 100% -

Table 57-1 QUESTION 47: And, in what year were you born?

REGION

BASE=TOTAL SAMPLE 18-34 35-44 45-54 55-64 65+ REFUSED

REST TWIN OF TOTAL CITIES STATE 523 227 296 7% 6% 8% 12% 9% 14% 21% 23% 19% 36% 36% 36% 18% 17% 19% 7% 9% 5%

REVENUES UNDE R $1 MILL 239 8% 12% 21% 34% 21% 4%

$1 MILL$5 MILL 125 7% 13% 23% 41% 13% 3%

EMPLOYEES

$5 MILL+ 105 4% 12% 19% 35% 20% 8%

UNDE R 10 300 8% 10% 21% 35% 20% 7%

11-50 127 6% 20% 20% 35% 16% 3%

YEARS IN OPERATION

PRIMARY BUSINESS

51+ 90 6% 6% 20% 42% 13% 13%

PROC PRECI ESS SION METAL 69 58 104 5% 5% 6% 13% 7% 12% 23% 11% 25% 37% 59% 36% 16% 19% 15% 5% 6%

OEM 60 12% 8% 18% 36% 12% 14%

1-15 YRS 147 11% 21% 26% 26% 8% 8%

16+ YRS 374 5% 8% 19% 40% 22% 6%

Table 58-1 QUESTION 48: GENDER REGION

BASE=TOTAL SAMPLE **D/S (MALE - FEMALE) MALE FEMALE

REST OF TWIN TOTAL CITIES STATE 523 227 296 47% 58% 38% 74% 79% 69% 26% 21% 31%

REVENUES UNDE R $1 MILL 239 42% 71% 29%

$1 MILL$5 MILL 125 53% 77% 23%

EMPLOYEES

$5 MILL+ 105 57% 79% 21%

262

UNDE R 10 300 45% 73% 27%

11-50 127 38% 69% 31%

YEARS IN OPERATION

PRIMARY BUSINESS

51+ 90 62% 81% 19%

PROC PRECI ESS SION METAL 69 58 104 46% 62% 59% 73% 81% 79% 27% 19% 21%

OEM 60 75% 87% 13%

1-15 YRS 147 42% 71% 29%

16+ YRS 374 49% 75% 25%

$15.95

Lifted by their perceptions of positive conditions in the U.S. economy and their own business circumstances, a whopping 94 percent of manufacturers feel confident about the futures of their companies, the highest number we have registered in the history of our survey. In record numbers, manufacturing executives are optimistic about the economy and bullish on their companies’ projections of revenue and profitability for 2017.

—Rob Autry, pollster, State of Manufacturing®

Inside, you’ll find:

• Topline results from a survey of 500 Minnesota manufacturing executives • Detailed analysis from pollster Rob Autry, president, Meeting Street Research • Full transcripts from 15 manufacturing focus groups conducted across the state • Selected cross tabulations

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