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SEVEN SMART STEPS TO REVENUE GROWTH

Helping Manufacturing Enterprises Grow Profitably SPRING 2017

INTERVIEW

Banking Is Still About

Relationships Jeanne Crain, Bremer’s new CEO discusses why personal banking relationships are more important than ever.

Enterprise Minnesota 310 4th Avenue S. Suite #7050 Minneapolis, MN 55415

NONPROFIT ORG U S POSTAGE PAID Slayton, MN PERMIT NO. 22


A whopping 95 percent
of manufacturers who have a formal planning process expect increases in gross revenues and profitability in the coming year. — 2016 State of Manufacturing® Enterprise Minnesota’s expert strategy consultants help manufacturing companies achieve operational excellence and profitable growth.

Call us today at 800-325-3073 or visit www.enterpriseminnesota.org for a free initial consultation on how our formal business strategy process can help your company! Scan here to learn more about how we can help your business. 310 4th Ave So., Suite 7050 • Minneapolis, MN 55415


SPRING 2017

BANKING IS STILL ABOUT RELATIONSHIPS

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7 SMART STEPS TO REVENUE GROWTH

GROWTH INSPIRED BY FAMILY

Strategic growth doesn’t just happen. It can be designed.

Six manufacturing experts discuss how best to conceive and implement strategic growth.

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2 Fix, Don’t Debate, the Challenge This year’s State of Manufacturing® will continue to look at creative solutions.

Confronting Rob the Hoarder IPS Worldwide’s O’Connell recalls the company’s first steps in 5S.

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8 Lead Investments

Nonpartisan, anyone?

Abbey Hellickson says developing your current leaders is essential for attracting the next generation.

The economic benefit manufacturers bring to their communities is something that defies a political party label.

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

Subscribe to The Weekly Report and Enterprise Minnesota® magazine today! Get updates on the people, companies, and trends that drive Minnesota’s manufacturing community. To subscribe, please visit www.enterpriseminnesota.org/subscribe. SPRING 2017 ENTERPRISE MINNESOTA /

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bob kill

Fix, Don’t Debate, the Challenge This year’s State of Manufacturing® will continue to look at creative solutions for the issues confronting Minnesota manufacturing.

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t was with an interesting twist that manufacturing’s skills gap again took a front and center position as we prepared topics and questions for this year’s State of Manufacturing® survey. Along with the usual topics about the roots and applications of the problem, I started to hear about

economists who have concluded that there is no skills gap, that there are a sufficient number of skilled, educated prospective employees to fill any need that might arise among Minnesota’s manufacturers. It’s just that they may not be located in places that need them. In fairness, I don’t know which economists or researchers may have reached that conclusions, but I know enough to suggest that they get out from behind their computers and breathe in the real world experience of manufacturing executives who are trying to cope with the issue. Our State of Manufacturing® survey provides a useful annual snapshot of manufacturing’s reality. Now in our ninth year, we probe the attitudes and experiences of small and medium size manufacturing executives through objective and subjective interviews. 2

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We survey 400 randomly selected executives through traditional telephone interviews. We supplement those findings by conducting focus groups—this year we’ll do 15 events— of those same people all across the state. The phone interviews tell us what manufacturers think; the focus groups enable them to explain why they think the way they do. The skills gap has occupied a good portion of these focus group conversations. We’ve conducted 107 of these focus groups over the years all over the state, from Thief River Falls to Winona, and all through the Twin Cities and its suburbs. At no time in any of these meetings has any manufacturer—not one—ever declared that the skills gap does not exist. The conversations are nuanced, to be sure. Not all manufacturers have confronted their abilities to recruit qualified personnel, but even those executives acknowledge that the challenge exists for others. Our upcoming survey will leave the discussion of whether it exists to the theorists. The focus groups, especially, won’t bother debating whether the skills gap exists. One way we’re doing that is by using our focus groups to engage students themselves. Last year we empaneled three groups consisting of students from local technical schools. The discussions were engagingly candid and provided some eye-opening insights. This year, we’ll continue those groups, adding two focus groups of high school students. We hope to find some insights from the comments of the generations of students whose ultimate decision to find lucrative, challenging careers in manufacturing will ultimately ensure that the skills gap doesn’t exist—in theory or practice. Bob Kill is president and CEO of Enterprise Minnesota.

Helping Manufacturing Enterprises Grow Profitably Publisher Lynn K. Shelton

Custom Publishing By

Contributing Writer Steve Haarstad Photographers Chris Morse Tammy Scheffer

Contacts To subscribe subscribe@enterpriseminnesota.org To change an address or renew ldapra@enterpriseminnesota.org For back issues ldapra@enterpriseminnesota.org For permission to copy lynn.shelton@enterpriseminnesota.org 612-455-4215 To make event reservations events@enterpriseminnesota.org 612-455-4239 For additional magazines and reprints contact Lynet DaPra at lynet.dapra@enterpriseminnesota.org 612-455-4202 To advertise or sponsor an event chip.tangen@enterpriseminnesota.org, 651-226-6842

Enterprise Minnesota, Inc. 310 Fourth Ave. S., #7050 Minneapolis, MN 55415 612-373-2900 ©2017 Enterprise Minnesota ISSN#1060-8281. All rights reserved. Reproduction encouraged after obtaining permission from Enterprise Minnesota magazine.  Additional magazines and reprints available for purchase. Contact Lynet DaPra at 612-455-4202 or lynet.dapra@enterpriseminnesota.org. Enterprise Minnesota® magazine is published by Enterprise Minnesota 310 Fourth Ave. S., #7050, Minneapolis, MN 55415 POSTMASTER: Send address changes to Enterprise Minnesota 310 Fourth Ave. S., #7050 Minneapolis, MN 55415

Printed with soy ink on recycled paper, at least 10 percent post-consumer waste fiber.


Jackie O’Connell, president/owner of IPS Worldwide

SUCCESS STORIES

Confronting Rob the Hoarder

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n its effort to ready itself for an expected growth spurt in its business, IPS Worldwide was confronted by the challenge of an employee who came to be known as “Rob the Hoarder.” The company, which manufactures, refurbishes, and repairs the 2,000 rail-based cranes that are used to maintain the 76,000 bridges connecting 233,000 miles of track in America’s domestic rail network, had just started its 5S journey. A recurring theme in their receiving area was clutter, according to Jackie O’Connell, the 20-year president. “People could not find their parts, they could not put parts away, and they could not get to their parts.” IPS Worldwide still maintains its head-

quarters and parts operation in White Bear Lake, where its 20 employees maintain an 8,000-square-foot warehouse. The company’s repair and manufacturing shop has 25 employees in a Duluth-based facility. IPS is the OEM of American and Ohio Locomotive Cranes, which manufactures new cranes and rebuilds and repairs existing cranes. IPS Worldwide is a complete supplier of quality replacement parts for American crawler cranes and genuine OEM parts for American and Ohio Locomotive cranes. IPS also provides full-scale crane services, including load testing and inspection, boom and component repair, ground-up rebuild, innovative design, and engineering upgrades.

The company divided into small teams to sort everything. “The goal was to clear everything out,” O’Connell recalls. They sorted by immediate throw-out items, holding-area items that they needed reconsidered, items that had infrequent use, and items that needed to be retained after the clean out. Over four days, they filled five garbage dumpsters, one scrap-steel dumpster, and one cardboard dumpster. “We were seriously hoarding,” O’Connell recalls, adding that about an hour into the initial cleanout, the dumpster was already overflowing. “We pulled our forklift around to the dumpster with a large continued on page 4

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PHOTOGRAPHS BY CHRIS MORSE

IPS Worldwide’s O’Connell recalls the company’s first steps in 5S.


Join us for upcoming Manufacturing Workshops and Business Events. www.enterpriseminnesota.org /events/upcoming-events

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weight hanging from the end of it and began compacting the trash so we could fit more in.” They ended up filling ten dumpsters, but most surprising was “Rob,” whose stashes included boxes, packing materials, multiple brooms, shovels, and tools—you name it. O’Connell says Rob referred to Tim Bjorgum, Enterprise Minnesota’s consultant on the project, as a “homewrecker” for making him confront his excess clutter. In the end, however, the team appreciated the improvements. “They were so proud of what they had accomplished,” O’Connell says. Team leaders estimated they saved nine hours per day of lost time, the equivalent of one full-time employee over the course of a year, she says, “just by doing one 5S project and cleaning up their clutter and organizing.” O’Connell says she received an email from the team leader at the end of the week: “Just wanted to say that 5S is going great, and we have awesome participation and buy-in from all involved. Thanks for making this investment in us. I really think it’s going to pay off.”

Continuous Improvement: Unsung Hero

Tolerance Masters’ RAT blades have been used to save lives If you watched last year’s film Sully, you saw an inspiring cinematic depiction starring Tom Hanks of how a calmly heroic pilot famously landed a disabled jet aircraft on the Hudson River in Manhattan without sacrificing a single passenger. What you didn’t see was how the plane’s ram air turbine gave the pilot enough time to make his crucial decisions. A ram air turbine (RAT) is a small turbine that is connected to a hydraulic pump,

Anne Hed, CEO of Hed Cycling Products

generates power from the airstream, and is used as an emergency power source in an airplane. Circle Pines-based Tolerance Masters manufactures the RAT turbine blades. Modern commercial aircraft are fly-bywire planes now, McPherson says, so if you lose your engines, you lose your generators and then have nothing to control the aircraft. In that case, two of these blades drop from the bellow of the aircraft, spin up from the airflow, and provide hydraulic and electric power so the pilot can control the aircraft, lower the flaps, and call for help. In 20 years, he says, Tolerance Masters’ equipment has been used in 17 deployments, with no casualties. The most dramatic, he recalls, was in the early 2000s, when an A321 took off from the Caribbean with 165 passengers on board headed for Germany. It was leaking fuel. It got about two thirds of the way across the Atlantic when it ran out of fuel at 39,000 feet. The ram air turbine deployed, and the plane

The Next Steps on Your Lean Journey Enterprise Minnesota recently hosted The Next Steps on Your Lean Journey at the Specialty Manufacturing Company in White Bear Lake in which three CEOs related their efforts to make continuous improvement a daily priority in their organizations. They included Anne Hed, CEO of Hed Cycling Products in Roseville; Verne McPherson, CEO of Tolerance Masters in Circle Pines; and Jackie O’Connell, president/owner of IPS Worldwide in White Bear Lake.


glided in for 17 minutes. “It had to have been a long 17 minutes,” McPherson says, before the plane landed in the Azores on a two-mile runway that had been constructed at an alternate site for the space shuttle. “The guy brought it in so hot, he blew all the tires off, but everybody got off the plane, and the plane was saved.” McPherson, a disciplined devotee of continuous improvement throughout his plant, explained how his company is required to achieve AS9100 status, the aerospace version of IS0 9000 standard.

#InnovateMN Manufacturing is key to Minnesota’s economy. That’s a lot of jobs – with a lot of stories to tell. We’re launching a campaign to celebrate the innovative and entrepreneurial ecosystem that is unique to Minnesota. Do you have a story about an innovative product or service? We want you to be part of the Minnesota story!  Tweet using #InnovateMN and we’ll show the world a whole different side of Minnesota!

www.mn.gov/deed/business #InnovateMN

Verne McPherson, CEO of Tolerance Masters

“Think of AS as ISO on steroids,” he says. “We are flight-safety and flight-critical rated, which means every year I get to sign a document that says I personally am liable for $50 million, and/or death, if we fraudulently produce and ship a part that causes an aircraft to crash.” He says the first time he signed that document, the AS representative commented, “You don’t seem very nervous about this.” He asked, “Why would I be? I fly all the time, on my parts. We don’t make bad parts.” He quickly adds, “Of course, we do—everybody makes bad parts—but we would never intentionally make a bad part. It is not like when I worked in the foundry, and we made a part for Caterpillar, if it broke, the machine stopped. If one of our parts, especially the flight-critical ones fails, the plane is going to go down. We are pretty good at what we do.” G ra n i te E q u i ty . co m

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Reserve Dotting the I’s Your Ad Space TODAY! L PROFILE

Liberty Paper attacks the 2015 version ISO 9000 to affirm its already strong management systems.

Helping Manufacturing Enterprises Grow Profitably Inside Enterprise Minnesota® magazine you will find in-depth information and unmatched insights into the latest innovations, business successes, and ingenious company leaders among Minnesota’s manufacturing community. The magazine reaches over 42,000 readers, including CEOs and additional key decision-makers.

Chip Tangen Relationship Manager 651-226-6842 Chip.Tangen@enterpriseminnesota.org www.enterpriseminnesota.org

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iberty Paper, a company already our equipment, we hopefully will never renowned for robust internal controls break down. We run no parts to failure, so and institutional discipline, sees value in we have a process on how and when we are improving along the management-intensive changing out everything on certain hours standards of the new 2015 ISO 9000 and times.” standard. Jack Fiterman founded Liberty “We already operate our system very Diversified, the parent company, 98 years similar to that,” says John Martin, the ago for the purpose of rebuilding and quality environmental health and safety reselling crates and bundles; this activity manager at the company. Liberty already continues today at Liberty Carton, a boxoperates under individually-managed packaging affiliate of Liberty Paper. The process areas, he says, so each process current CEO transformed the Becker plant area manages its way through the overall into a paper mill with a machine called management system. Risk analysis is also the Dream Catcher. Today it is a privately deeply imbedded in the company’s culture. held, family-owned company. “So, [ISO 2015] is not a real far reach for Presentation Packaging was founded us,” he says. “It’s a way to make sure that to cater to the needs of the decorative all the t’s are crossed and the i’s are dotted packaging market and Protecta-Pack as we put our system up to those new requirements.” Liberty Paper’s 151 employees operate three daily shifts, 365 days per year, in their mammoth 240,000 square foot facility in Becker. The plant actually houses two different paper operations: One manufactures brown paper; the other applies coatings and solutions to the paper for different uses. The operation is a fully recycled facility. More than 400 suppliers from across the Midwest deliver 900 tons of old corrugated cardboard (OCC) bales to the plant daily, in bales ranging from 800 to 2,000 pounds. Suppliers range from a local grocery store to Walmart. The company’s commitment to excellence can be seen in the fact that machines run continuously, 24/7, 365 days per year. The only reason we ever shut down our machine is for scheduled maintenance,” Martin says. The way we design our John Martin, quality environmental health and safety reliability and functionality into manager at Liberty Paper.


Systems was founded to serve the needs of the transport packaging market. Jack Fiterman’s son Ben was named CEO in 1966, shortly after the company moved its production into a new facility in Golden Valley, MN. That same year the Fiterman family founded Safco Products, offering wholesale distribution of office products to local and international businesses. In 1970 Mike Fiterman joined the family company and in 1972, Liberty Diversified Industries

was created to handle the marketing, legal, human resources, accounting, information services, and transportation services for its manufacturing and marketing operations. LDI experienced rapid growth with Valley Craft joining the LDI family in 1979 and DiversiPlast in 1983. During this period Mike Fiterman, grandson of Jack Fiterman, was formally named President and CEO of LDI. During the 1990s, LDI continued its growth with the founding of Liberty Fibres, Liberty Paper, Dreamworks Coating Solutions, and the addition of Milltronics CNC Machines. Most recently, LDI welcomed San Diegobased Harbor Packaging into its family of companies in September 2014. Across its diverse companies, LDI consistently aims to maximize the potential of its people to create value and opportunity. “We’re paper makers; that’s what we do,” Martin says. “There’s a lot of passion up here,” he adds, “A lot of people really enjoy what we do. We focus on a lot on process and product, but, at the same time, we somehow find a way to have fun along the way.”

Thinking about your business is a big part of ours. PUT OUR TAILORED INSIGHTS TO WORK FOR YOU. To make confident decisions about the future, you need a different kind of advisor. One who starts by understanding where you want to go and then brings the ideas and insights of an experienced team to help get you there. Experience the power of being understood. Experience RSM. rsm us.com

RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax and consulting firms. Visit rsmus.com /aboutus for more information regarding RSM US LLP and RSM International.

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PEOPLE

The Employee Pipeline Rich Wessels, career counselor at White Bear Lake Area High School, is helping close the skills gap through groundbreaking programs.

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wo years ago, White Bear Lake received a $250,000 grant from the Greater Twin Cities United Way designed to help its two senior high school campuses enhance their tech classes with updated manufacturing-related equipment. The grant included funds for an outside career counselor for students who would specialize in manufacturing-related advice and help students reach out to local manufacturers. Rich Wessels, then finishing his fifteenth year as a school psychologist, took a flyer on the one-year grant and got the job. “I didn’t know exactly what I was getting into, to be honest with you,” he admits today. He had deep experience working in schools, with students as well as with assessments, planning, and goal setting. Yet, he says, “I didn’t know anything about manufacturing.” He also had no idea what the program would look like, which he now says was exciting. “I got to be in on that initial planning and creation of this program from basically an idea of, ‘We have the money, how are we going to make this work?’ I think we’ve accomplished a lot.” What has evolved is considered one of the most forward-looking CTE programs in the Twin Cities, joining the ranks of Alexandria and Fergus Falls. Today, the lab contains a large assortment of high-tech equipment in addition to a computer lab. “Beyond just the actual skills of using

Rich Wessels, Career & Employment Navigator, Manufacturing Careers Pathway, White Bear Lake Area High School

equipment, there are many things that we are learning from our industry partners about what essential skills are needed for the different types of jobs available in manufacturing, so that we really are setting our students up for success,” Wessels says. Soon, Wessels’ White Bear Lake manufacturing lab will host one of five focus groups related to the 2017 State of Manufacturing® survey that will consist entirely of students. Two of them, including the one in White Bear Lake, will involve high school students for the first time. Bob Kill, Enterprise Minnesota’s presi-

High School Students Added to the Roster of Focus Groups The 2017 State of Manufacturing® survey will dig more deeply into student attitudes about careers in manufacturing by talking to students themselves. Five of the survey’s 15 focus groups will consist solely of students, with two devoted to high school students. One of those focus groups will be held in White Bear Lake Area High School.

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dent and CEO, says the focus groups will give manufacturers, educators, and policymakers first-hand insights into the decisionmaking process that students consider when planning post-secondary opportunities. “We all have our opinions,” he said. “We thought it would be helpful to ask the students themselves.” Wessels splits his time between advising students, helping in the classroom, reaching out to the community, and even testifying at the state legislature. He has also been working with policymakers to reduce restrictions on minors who want to work on manufacturing floors. The original United Way grant sought to facilitate paid internships for students, yet current law prohibits minors from working at all on a manufacturing floor. Wessels gathered interested parties in the Department of Labor and Industry and started talking to industry partners and community organizations. The Department of Labor circulated draft legislation that would allow 16- and 17-year-olds to spend 20 percent of their time on machinery, as long as their work is part of an educational program. Wessels then testified about the legislation before a senate committee.


2017 State of Manufacturing® Focus Groups DATE

TIME

CITY

LOCATION

SPONSOR(S)

Thursday, 3/9/2017

10 a.m.

Hibbing

Detroit Diesel Remanufacturing 3895 South Hughes Road Hibbing, MN 55746

IRRRB

Thursday, 3/16/2017

9 a.m.

Edina

G&A Partners 8000 W. 78th St., Ste 190 Edina, MN 55439

G&A Partners

Friday, 3/17/2017

9 a.m.

St. Louis Park

MPMA 5353 Wayzata Blvd., Ste. 350 St. Louis Park, MN 55416

MPMA St. Paul Port Authority

Monday, 3/20/2017

1 p.m.

St. Paul (STUDENT)

Saint Paul College 235 Marshall Avenue, Room 3320 St. Paul, MN 55102

Productivity Inc.

Tuesday, 3/21/2017

11:30 a.m.

Marshall

Marshall - TBD

Southwest Initiative Foundation (SWIF)

Wednesday, 3/22/2017

9 a.m.

Alexandria (Executive)

Alexandria Technical & Community College 1601 Jefferson St., Room 203 Alexandria, MN 56308

Alexandria Area Economic Development Commission Alexandria Lakes Area Chamber of Commerce Alexandria Technical & Community College

Wednesday, 3/22/2017

10:15 a.m.

Alexandria (STUDENT)

Alexandria Technical & Community College 1601 Jefferson St., Room 203 Alexandria, MN 56308

Alexandria Area Economic Development Commission Alexandria Lakes Area Chamber of Commerce Alexandria Technical & Community College

Thursday, 3/23/2017

9 a.m.

White Bear Lake (STUDENT)

White Bear Lake Area High School - So. Campus 3551 McKnight Road White Bear Lake, MN 55110

Wilson Tool

Friday, 3/24/2017

9 a.m.

Brainerd (STUDENT)

Brainerd Sr. High School 702 S. 5th St. - South Conference Room Brainerd, MN 56401

Clow Stamping Co. Pequot Tool and Manufacturing

Monday, 3/27/2017

11:30 a.m.

St. Cloud

Gray Plant Mooty 1010 West Saint Germain St., #500 St. Cloud, MN 56301

Gray Plant Mooty

Tuesday, 3/28/2017

11:30 a.m.

Minneapolis (STUDENT)

Dunwoody College 818 Dunwoody Blvd. - Anderson Room Minneapolis, MN 55403

Dunwoody College

Wednesday, 3/29/2017

10 a.m.

Owatonna

Southern Minnesota Initiative Foundation (SMIF) 525 Florence Avenue Owatonna, MN 55060

Center for Rural Policy and Development

Thursday, 3/30/2017

1 p.m.

Mankato

Greater Mankato Growth/GreenSeam Greater Mankato Business Dev. Center 1961 Premier Drive, Suite 100 - Sakata Room Mankato, MN 56001

AgriGrowth AURI

Friday, 3/31/2017

8 a.m.

Pine City

Pine Technical & Community College 900 4th St. SE - Innovation Center, Room 107 Pine City, MN 55063

Pine Technical & Community College

NOTE: Attendance to the events is by invitation only. They are not open to the public. SPRING 2017 ENTERPRISE MINNESOTA /

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PEOPLE

Lead Investments Hellickson says developing your current leaders is essential for attracting the next generation.

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n an era when most savvy manufacturers realize that their growth plans are directly pegged to the quality and skills of their workforce, Abbey Hellickson maintains that the development of a company’s current leadership is particularly essential for attracting a new generation of skilled employees.

A stronger leadership culture prepares manufacturers for growth. “Your leaders are actually your core component to developing the talent within your organization,” Hellickson says. “When you start with developing your current leaders, it trickles down throughout the entire organization. Once the leaders have been developed, they have the information and skills to manage better. They also have a stronger understanding of what it means to develop the team underneath them.” “That’s the core foundation to bridging the skills gap,” she adds. Hellickson is an Enterprise Minnesota business growth consultant who works with manufacturers throughout the state to help them engage their workforce, maximize productivity, improve company culture, and strengthen their leadership teams. Her mission is to help companies drive performance at all levels of their organizations and develop the effective leaders they need to build and sustain profitable growth.   With a business degree from Winona State University and a master’s degree in human resources and training from the University of Minnesota, Hellickson most recently served as director of busiAbbey Hellickson, a business growth consultant who maintains that leadership development is essential to recruiting new employees.

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ness and workforce education at Rochester Community and Technical College. Before that, she was a corporate training instructor at Fastenal.   Hellickson’s mission at Enterprise Minnesota is to help her clients attract, engage, and retain the workforce they need to maximize a positive/productive work culture and to grow business. Questions she asks: Do you have people ready to step up and become your next supervisor or leader? Are you empowering your employees at all levels to solve problems and make decisions? Are you equipped to manage and develop employees representing multiple generations? She helps determine the competencies that manufacturers need now and in the future and shows employees the

Do you have people ready to step up and become your next supervisor or leader? Are you empowering your employees at all levels to solve problems and make decisions? Are you equipped to manage and develop employees representing multiple generations? knowledge and skills needed to improve productivity, become effective leaders, and help businesses grow profitably. Hellickson says her approach to the Talent and Leadership services at Enterprise Minnesota is customization. Manufacturers all have different approaches of personalities, behavior, the culture, environment, and relevant issues, she says, noting, “We don’t have a one-size-fits-all solution, because organizations are not one size fits all. We design and develop a service based on the specific needs of an individual company.” Her process starts best with a visit to the CEO, she says. She asks CEOs to

identify the nuances of their organizations and then designs solutions that will resonate with the people who are going through it. Often a CEO senses that something is wrong but has difficulty diagnosing a particular gap or prescribing what competencies are needed to remedy it. “They can feel it, or sense it, but they’re not sure exactly what it is. That’s our role,” she says. Hellickson then assesses whether the company’s leadership team models the competencies and behaviors that the CEO wants to see. “If these competencies aren’t being demonstrated, we create a solution to address that,” she says. The ideal assessment enables her to come back with strong data. “It’s really up to me and my team members to come in and be able to have conversations with individuals at different levels, make some observations, and

potentially do some focus groups. Then, we make the assessment based on our observations and, in turn, develop solutions based on that. She says the customized services at Enterprise Minnesota are targeted specifically for manufacturers; it’s not an out-of-the-box program. “I feel like we have a stronger understanding of what the industry means, how it operates, and what the needs are within it,” she says. “We’re able to provide long-term solutions and longterm relationships. We know our clients, we’ve been with them, we’re providing them a holistic view of all the areas of their business, talent and leadership development being among them.” “When we’re finished, clients will use a stronger leadership culture across their organizations, which prepares them for growth,” she says. “We’ll diagnose the company’s skill and leadership gaps and design a path to close those gaps.”

CUT DOWN COSTS WITH MOTOR REBATES. Electric motors are the workhorses of any manufacturing facility. But if they’re not energy efficient, they may be driving up your operating costs. Make the upgrade to energy-saving permanent magnet alternating current (PMAC) motors today and earn rebates from $30–$10,000 per motor* , which will not only lower your up-front costs but also increase the return on your investment. For more information, contact an energy efficiency specialist at 855.839.8862 or visit xcelenergy.com/MotorEfficiency.

*Depending on horsepower.

4.7x4.75_MN-Biz_Enterprise-Print_P03.indd 1

© 2017 Xcel Energy Inc.

2/14/17 8:59 AM

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ATTACKING THE SKILLS GAP

First-Hand Experience Hutchinson prepares to kick off an ambitious community-wide effort to prepare students for manufacturing careers.

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> Two Premier Industrial Parks > 5 to 80 Acre Lots > Shovel Ready Sites > Access to I-94, U.S. Hwy. 10, MN Hwys. 15 and 23 and St. Cloud Regional Airport > Fastest Growing Labor Force in MN and Nation (MN DEED)

Your First Stop for Business Locations, Financing Resources and Development Opportunities St. Cloud Economic Development Authority Cathy Mehelich, Executive Director cathy.mehelich@ci.stcloud.mn.us 320.650.3111

www.ci.stcloud.mn.us

#stcloudgreater

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bout this time next year, Tiger Manufacturing will become yet another addition in Hutchinson, Minnesota, a town that already refers to itself as Minnesota’s Manufacturing City. It will offer a welding and machining job shop; a woods and building-trades division that might produce yard sheds, custom furniture, or doghouses; and a screen-printing division that will use an automated screen-printing machine to create screen-printed apparel. The niche? The company will be run entirely out of Hutchinson High School and will be operated exclusively by high school students. Tiger Manufacturing will be part of an ambitious $1.2 million collaboration of 21 schools, companies, and local organizations to address the local skills gap. “Our story is like everyone else’s,” says Miles Seppelt, economic development director at the Hutchinson Economic Development Authority, and one of the prime forces behind the effort. “We have a real issue with skilled workforce here in Hutchinson, particularly because we think of ourselves as Minnesota’s manufacturing city. Thirty-nine percent of Hutchinson’s work force is directly related to manufacturing, he says, almost three times the state average. “Tiger Manufacturing will be an authentic manufacturing business, based in the high school, making real products for real customers,” he says. Different responsibilities will include welding, machining, and at the CAD lab, with students filling roles of office manager, production manager, and marketing manager.

“It’s going to be a real manufacturing business,” including a student run board of directors, he says. The original idea for a student-run manufacturing enterprise was innovated seven years ago at Eleva-Strum High School in Antigo, a small city in Western Wisconsin, where the highly regarded Cardinal Manufacturing program has achieved enough success to enable the distribution of individual dividend checks of up to $2,000 to students. “It’s an amazing operation,” Seppelt says. “We’re going to copy it, amplify it; quite frankly, we’re going to do more.” “It will teach entrepreneurship and business operations, critical thinking, problem-solving and teamwork,” he says. Other components will include: Taking an academy approach in the high school, in which teaching is more closely affixed to small learning communities around career themes. Manufacturing would be among them. They are working with Ridgewater College to establish educational pathways that enable students to earn college credit while still in high school. In addition, they are looking for ways that high school students can achieve industry-recognized certifications in places like the American Welding Society, or become a Certified Production Technician with the Manufacturing Skill Standards Council. They are also coordinating marketing efforts to correct inaccurate stereotypes about manufacturing careers. This will include industry tours and job fairs for student and parents. Finally they are outfitting the high school’s manufacturing lab with highquality 21st century manufacturing equipment.


New Consultant Dan Ball recently joined Enterprise Minnesota as a business development consultant.

B

all brings a strong background in business development, sales, and account management at manufacturing companies throughout the Twin Cities. He serves Anoka and Wright counties, looking to help area manufacturers strengthen operations and grow their businesses.

Dan Ball

“Dan knows how to deliver strategic results for manufacturers,” said Bob Kill, Enterprise Minnesota president and CEO. “His knowledge and track record will make him a valuable resource for leaders who seek to achieve measurable and sustainable business results.” Before joining Enterprise Minnesota,

Ball served as vice president of sales and marketing at Webb Company in Eagan and as national accounts manager for Sign-Zone, Inc. in Ramsey. Ball holds a bachelor’s degree in business communication from the University of Wisconsin-Eau Claire. He lives in West St. Paul.

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Tuesday, May 9, 2017 4:00 p.m. – 7:30 p.m.

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Four Questions

INNOVATIONS

Senator Jeremy Miller, chair of the Minnesota Senate Jobs and Economic Growth Committee

Jobs and economic growth are, of course, very much intertwined. What do you believe is the importance of manufacturing to your local economy and to the state as a whole? Manufacturing is a major driver of economic development in Minnesota. In 2015, manufacturing was the largest private-sector contributor to our GDP. The average manufacturing wage is 15 percent higher than the average for all other industries. If you travel across Minnesota, you quickly realize how important manufacturing is to every community, large or small, in every region of our state. What is your sense of the skills gap that confronts many manufacturers? Can the legislature play a role in closing it? There is definitely a skills gap facing manufacturers, and if we ever want to close it, it is critically important to engage students at a young age and get them interested in manufacturing. Additionally, as manufacturing becomes

more technologically advanced, it’s crucial that our technical colleges are engaged with local employers to provide training and retraining opportunities to ensure employees are prepared to meet the evolving needs of the industry. In some situations, it’s important for the government to get involved, and in others it may not be necessary. The Minnesota Senate Jobs Committee is focused on initiatives to expose high school students to job opportunities in manufacturing. One idea we’re studying this year is Senate File 474, authored by Senator Paul Anderson (R-Plymouth), which would establish a youth skills training program for kids aged 16 and older to increase their readiness for manufacturing jobs. In addition, we have the Minnesota Pipeline Project, which aims to develop employer-driven training programs in targeted industries. These ideas are just the beginning. The Senate Jobs Committee is committed to looking at ways to help address workforce shortages across our state. Are manufacturers adequately understood at the legislature? What could they do to improve their visibility? While I’m confident my colleagues appreciate the challenges facing the industry, manufacturers shouldn’t rest on their laurels. It is vitally important to remain involved at every level of government. Manufacturers should work to have a visible presence at the capitol: actively reach out to local officials and state legislators to let them know what issues are important to you, and set up meetings with elected officials and invite them to tour manufacturing facilities. Legislators appreciate these opportunities. As the chair of the Jobs and Economic Growth Committee, I am focused on innovative, outside-the-box ideas to promote job growth as well as workforce and economic development opportunities for people in the state of Minnesota.

PHOTOGRAPH BY TAMMY SCHEFFER, CREEKSIDE PHOTOGRAPHY

F

rom your perspective, what do you think are the top concerns facing manufacturers? Both from your perspective as family businessman and as chair of the Jobs and Economic Growth Committee? My brother and I are the fourth generation to be involved in our family scrap recycling business. We work with our father and a team of 18 dedicated employees. Many of our customers/ suppliers are manufacturers, so we see first hand the concerns and challenges facing many manufacturers. Workforce shortages are a significant issue in many areas, especially manufacturing. Right now, there are more job openings than there are people to fill those positions. I hear from many manufacturers who have told me they are having difficulty finding skilled workers to fill their open positions, and the lack of interest in manufacturing industries among young people is troubling.

Jeremy Miller is serving his third term in the Minnesota Senate representing Fillmore, Houston, and Winona counties in southeastern Minnesota. He was also recently appointed Deputy Majority Leader and Chairman of the Senate Jobs and Economic Growth Committee. He is the chief financial officer and quality, environmental, health and safety (QEH&S) manager for Wm. Miller Scrap Iron & Metal Co, a family owned and operated scrap recycling business that dates back to 1910. Miller and his brother are the fourth generation of Millers to be involved in the business and work together with their father and a very dedicated team of employees. Miller was born and raised in Winona, Minnesota. He is a 2001 graduate of Winona Senior High School and earned an associate degree in accounting from Minnesota State College – Southeast Technical.

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Q&A with Bremer’s Jeanne Crain

Banking Is Still About

Relationships Bremer’s new CEO describes Bremer’s niche, its strategic position among manufacturers, and why personal banking relationships are more important than ever. You’ve been a banker your entire career but only four years at Bremer. What initially attracted you to Bremer, and how do you think that outside experience has sharpened your managerial attitude at the bank? I love this industry and have enjoyed a long and rewarding career as a banker. Through a variety of transitions I’ve personally experienced due to mergers and acquisitions, I gained valuable insight regarding the significant differences in which banks go to market, make decisions and define a path to success. Initially, I was attracted to Bremer because of its strong reputation within the financial services industry. Once on board, it became abundantly clear to me why the organization was so well regarded. Bremer is a top performer amongst our peer group as measured by a number of metrics, including being highly profitable and well capitalized which is important for driving our future growth. Most importantly, we excel at what we do and it makes me proud that the solutions we provide to our customers make an important impact in our communities and our industry. I understood that about Bremer before I joined the company, and my experience with Bremer has validated those perceptions. I frequently tell people 16

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that Bremer fits like a glove in terms of what’s important to me as a banker working alongside a team to deliver a quality experience to a customer. I believe Bremer has the right approach to meeting client needs through experienced and committed professionals. We have a powerful culture that is focused on developing relationships based on trust, transparency and partnership. Our relationship management strategy has served our clients and our organization well for over seven decades, and I see it serving us well into the future. The various experiences I have had throughout my career have repeatedly reinforced the importance of determining and communicating differentiators in order to define the company’s brand. My tenure in this industry has given me a deeper appreciation for Bremer’s potential as our team works together to provide solutions for our clients. At Bremer, it starts with our people. We have talented, empowered professionals who care deeply about one another, our clients, and our communities. We’re very purposeful about the work we do to help businesses and individuals succeed. The end result is a strengthened community and that’s our “why.” We’re committed to building strong communities where we do business.


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Banking is a topic that comes up frequently in the focus groups in Enterprise Minnesota’s annual State of Manufacturing® survey. I’m struck by the way Bremer is described variously as a community bank but also as having the clout of an $11 billion regional powerhouse. How would you describe Bremer’s market niche? I love the space we’re in because we are large enough to offer significant lending capacity, that being a primary need of clients, and we have the interest and ability to invest in expertise, technology, and tools, all of increasing importance to our customers. When it comes to execution, we are a community bank focused on building long-term relationships with businesses and agribusiness, their owners and employees, along with individuals in the geographies we serve. That absolutely defines our strategy and how we want to be positioned for the long-term in this industry. It’s important to claim your space in banking these days as there are significant forces reshaping the industry every day. Again, our size not only provides us with great capacity to take care of clients’ credit needs, it critically provides us with the ability to invest in resources to meet clients’ changing needs and expectations. Our growth has

Data metrics are certainly helpful for banks to understand clients and the industry, so we have ways to measure performance, but, honestly, the relationship is the key. also driven us to become an employer of choice. We attract talented people because of our commitment to employees, our focus on growth, and our broader mission of how we culturally define our success. Our size is important as it allows us to attract expertise and make the necessary investments to stay relevant in the industry, while at the same time our size allows strong execution of our relationship management strategy as a steadfast community bank. Banking is an industry that always seems to be evolving on a lot of fronts. What are the challenges that you face 18

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About Jeanne Crain Jeanne Crain is the president and CEO of Bremer Financial Corporation. An experienced banking industry veteran with more than 30 years’ experience she joined Bremer in June 2012 as CEO of Bremer Bank Twin Cities. Before that, she was the Minnesota regional president for BMO Harris Bank, N.A (previously M&I Bank). Crain joined M&I through its acquisition of Excel Bank in 2007, where she had been an executive vice president. During her long career in the banking industry, Jeanne has been part of five acquisitions. She started her banking career with First Bank, now U.S. Bank, in Grand Forks, N.D after attending the University of North Dakota, where she received a degree in banking and finance. While completing her MBA at Marquette University in Milwaukee, Crain worked at Marine Bank which became Bank One during her tenure there. In 1990, she joined Marquette Banks and in 1999 became president and CEO of Marquette Capital Bank in Minneapolis.

as a new CEO? What’s going to require some attention? When I think about our challenges and opportunities, I focus on four key areas: customers, growth, talent, and innovation around customer needs. Let’s start with the last item on the list. There is exciting and continual innovation in our industry. The very robust advancement on the

mobile and digital front is something we have to pay attention to so that we can respond to what customers want and need. Finding innovative solutions for clients has always been a priority, but we have to accelerate our efforts around innovation to stay relevant. We need to adopt new technologies and seek a seamless experience across our various


delivery platforms. We’ll continue to advance our growth and drive our success by understanding the shifts in client behavior and preferences. This takes me back to the first item on my list – our customers. Simply said, we have to make sure that our customers are at the center of our decision-making. Understanding how we best help our customers succeed creates the ability for us to make good decisions both strategically and in

We have a strong culture that’s focused on developing relationships based on trust, transparency and partnership. terms of the investments in our business. If we stay focused on helping our customers be more successful in what they’re trying to achieve, we will remain a valued financial partner and that will drive our growth. As I said previously, growth is important in order for us to attract talent and make the investments needed to provide our customers with the best solutions. The external pressures financial institutions are facing are real, and they are forcing banks to evaluate their operating models to find growth and stay relevant. As we invest in talent and technology, we are focused on our commercial and agribusinesses, and the manufacturing industry is of significant interest to us. Our path to growth in this increasingly competitive environment starts by focusing on our areas of strength as a commercial and ag bank. And where does that strength lie within our organization? It always starts with having the right people. We have a great team of people who are knowledgeable and passionate about our clients and who provide advice and financial tools to help them succeed. Investing in talent is truly how we achieve growth and succeed in our mission as a community bank focused on delivering meaningful relationships. It’s been gratifying for me to visit our various markets and talk with our highly engaged employees. We want to be an employer that draws the very best talent by clearly articulating our mission and vision and the opportunities we offer our employees.

How does Bremer’s brand relate to manufacturing? Is that role evolving? When I talk about the Bremer brand, I say it’s our people. Our people bring our brand to life. Our people deliver the client experience. We have an impressive roster of bankers and analysts and support staff who are not only familiar with manufacturers, but rally around our manufacturing clients to create value in meaningful ways. We’ve always had a large portfolio of manufacturing clients, and we have bankers who have developed deep expertise in this industry. The role of a banker has evolved during my tenure in this industry. It used to be that bankers were primarily focused on what they could do to help a client secure a loan. Today, it’s a much broader vision. Our focus is around full relationships; we know that new business opportunities don’t always start with us providing all the financial services a customer needs, however, if we’re going to be a valued business partner, we need to understand the tools the company is currently using to tackle their challenges and objectives. With comprehensive knowledge of the business, we are well equipped to offer solutions at a pace aligned in the best interest of the customer. Manufacturers need to be light on their feet. They need to react quickly to changes in the marketplace as well as to changes with their customers and their vendors. I believe that Bremer, as a partner, is uniquely able to respond to the specific needs of the manufacturing client. We know our customers and we know the communities we serve very well. In addition, our local leaders are empowered to make decisions and that allow us to quickly respond to customer needs. Our approach, in terms of how we operate as One Bremer, i.e. shared expertise to provide a best customer experience, works well with this sector because we encourage bankers who have deep expertise in the manufacturing industry to share their expertise. We also think it’s important that the owner and the management team of the business not only know the banker, but also know our senior management team. Those relationships are especially critical during challenging times. The Great Recession of 2009 forced a reset for many manufacturers that is still being felt. Some manufacturers say that their banking relationships didn’t change at all; others continue to say their banking relationships changed dramatically. How do you account for that?

The recession forced manufacturers to streamline their businesses, to reevaluate the profitability of their customers, reassess their vendor relationships and reduce costs wherever they could. Banks were dealing with the same economic forces and it caused them to change how they did business as well. Clearly, banking organizations that knew their customers well and had weathered the ups and downs of business cycles with them before, were better positioned to work through issues together. There is no question the Great Recession presented challenges to both banks and manufacturers. Again, if the business had a good, active relationship with their banker, then they probably felt like that continued during the recession. However, if they had

We are large enough—we’re approaching $12 billion—so we have enough capacity to take care of clients’ credit needs, and also the ability to invest in the continual changes we find in technology. more limited contact with a banker, they might have felt like the relationship was changing because bankers were asking more questions and requiring more from their borrowers. We were able to approach our clients and say, “Yes, it feels different, and here’s why we’re asking these questions.” That approach allowed us to continue working with customers and present options that worked best for their business and the bank. It was that personal connection—or maybe the lack of one— that dictated the experience, which explains these conflicting reactions. It was also a function of what was happening in the industry. The borrowers who were the most proactive in adjusting their businesses at the onset of the recession likely had better financial results, or had financial results that didn’t require additional action with banks. There’s no question that businesses who were slower to react and had less contact with their banker may have felt like a banker was pushing for more. At Bremer, we take pride in our ability to roll up our sleeves and work through challenging times with our manufacturing cusSPRING 2017 ENTERPRISE MINNESOTA /

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tomers. It’s always important for both parties to be truthful and transparent during those conversations. A communicative relationship with full disclosure by both parties provides the best opportunity to determine the right approach, especially when managing a challenging situation. Some manufacturers say that another legacy of the Great Recession is that lending decisions are increasingly data-driven and not so much based on relationships with their local bankers. How would you react to that? Data and ongoing metrics certainly help banks understand clients and their industries. We use data to measure performance, but honestly, the relationship is the key. At Bremer, we really believe that a company’s management team has the greatest impact on its success. All industries go through cycles. Companies with management teams that can adjust and work through those cycles are the ones that are most successful in the long run. My advice to any manufacturer is to establish a partnership with your bank, inform them of your strategies, your key decisions, and let the bank know when circumstances are changing, either positively or negatively. The more your banker understands your business, the better position you’ll be in to work through those down cycles together. There are certainly differences among banking organizations in how they approach the use of data to run the business. By defini20

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tion, a bank holds a lot of client data, and to some extent, that can provide insight into what’s most meaningful for our customers. We use data to better understand our business and our customers, but I never see that data replacing the interpersonal relationships we have worked hard to establish. So data is just that. It represents information, factors that may be considered in decision-making, but it will never replace the relationship.

change or challenge in their business or industry, the more options we can explore to change course and work through potential obstacles. Again, it goes back to relationship management. Any insight we have into the manufacturer’s business operations can help us plan accordingly; everybody’s going to benefit from that. It’s important for a management team

Another legacy of the Great Recession is how increasing market volatility affects forecasting. For a lot of manufacturers, the 12-month forecast is a relic of the past. Does that indicate the need for even closer interpersonal relationships between bankers and the manufacturers? Appropriate time frames aren’t always easy to determine; however, looking forward is an important part of any business operation. We do that. We need to pay attention to what’s changing as the world changes, and we think that’s important for our customers to do as well. If a customer shares information regarding what they are forecasting for their business growth or challenges, we can be proactive in providing solutions. This can help a business manage their cash flow needs rather than being reactive when there’s a cash shortfall, for instance. More information is always better. The earlier a manufacturer can anticipate a

External pressures are forcing financial institutions to evaluate their operating models so that they stay relevant. to update their forecasting when variables change. For example, a manufacturer might receive a significant order that requires the extension of a different accounts receivable term, or requires them to carry larger inventory levels in order to reduce lead times. There are all kinds of circumstances that can cause greater borrowing needs. It’s important for a banker to understand those drivers and how they relate to risk for both the manufacturer and the bank. That level of business understanding allows the banker to provide the right kind of solution. The skills gap is a very real concern for


manufacturers, particularly in Greater Minnesota. Do you have similar challenges finding bankers who can follow the increasing sophistication of manufacturing? We are focused on identifying and developing talent as a priority at our organization. Our people are the core drivers of our brand promise. We recruit and develop bankers who are skilled at listening, problem solving, and building relationships. We start with those core attributes being aligned with financial and technical expertise, which is also critically important. We have a variety of paths for developing and encouraging those skills. I mentioned earlier, One Bremer, a phrase we’ve developed internally that refers to leveraging expertise throughout our company. If an employee isn’t as familiar with a specific industry or a client need, he or she understands that we have a deep network of expertise within Bremer that can be leveraged to provide the perspective or expertise to help any one of our customers. That’s a very powerful quality of Bremer. We not only encourage it; frankly, we expect it. We have developed a variety of leadership and training programs as part of our ongoing investment in talent and people. It’s also important for us to stay involved in local associations and organizations that support the industries we serve to continue to educate ourselves. We encourage all of our bankers to do that. On a personal level, my involvement with Enterprise Minnesota has provided me with continued learning and appreciation of this industry, not only in terms of the important number of manufacturers in our state but also the important economic contributions they make. As a commercial bank, we want to have deep expertise in the primary industries that drive our core business opportunities. Manufacturing is a critical sector for us. We do have the benefit of highly experienced bankers with a particular focus in this sector. These bankers have worked successfully with a variety of clients, through good times and bad. So it’s really important for us to leverage that specialized expertise more broadly to support clients across our footprint. We have a particular focus on that approach as we grow our organization to add meaningful value to customer relationships in all the markets we serve. Government regulations like DoddFrank put a particular burden on regional banks and smaller banks. Given

that, how do you predict the evolution of banking? What’s it going to look like in 10 years? That’s a tough one. The rate of change in our industry in recent years has been remarkable and it’s difficult to predict how the regulatory landscape will evolve at this juncture. In some cases, it might be more challenging for a business owner to have a geographically close relationship with their banker. I do believe there is a need for financial institutions of all sizes, and I am a strong supporter of small community banks that are committed to their communities and doing the great work that they do to serve their niche. At Bremer, we strive to continually deepen our expertise so that we can readily support the various industries that are present in the communities we serve. Regulatory burden is likely to change, but we don’t know how it will change. Until then, we will maintain the strong relationships we have with our regulators and remained focused on doing what we need to do to run our business well. We must continually manage our business meeting compliance requirements so that we can continue to grow. We avoid surprises and obstacles because we run our business with a focus on enterprise risk management. That takes a real commitment and investment, in terms of staffing the organization in a new way and creating new roles to best manage the threats of our changing world. The overall approach to enterprise risk management has changed dramatically in the years I have been in this industry. We have to grow with those changing needs and requirements. We look at it as a fact of how we need to do business. That cost burden may be extremely challenging for some organizations of a certain size, but not all. There are small organizations that are able to make those investments and figure out how to support their business. All that being said, I do believe that the industry is going to experience continued consolidation. Where it ends up in 10 years is anybody’s guess. I do think that technology advancements are going to be the most rampant changes in this industry. The reduction in transaction volumes at our branch locations over just the past few years is amazing. Customers are using mobile devices; they’re using remote deposit, they’re using tools and solutions that are, frankly, more secure and more

convenient for them. We are paying attention to what our customers need and want in order to meet changing expectations. As much as we have to pay attention to the regulatory demands and prescribed ways of doing business, those factors don’t define how we invest and move forward in growing our business. We focus on our clients, and we work to develop the tools that will help them. I really think technology, more than anything, is requiring us to take a new look at our distribution model and how we best work with our customers to take care of them. You are a board member at Enterprise Minnesota. How has that experience affected your perceptions about manufacturing and manufacturers? It’s been a tremendous help to me. I truly appreciate how Enterprise Minnesota CEO

But there’s no question that those who were slower to react and had less contact with their lender (during and after the Great Recession) maybe felt like a banker was pushing for more. Bob Kill opens up every meeting by reiterating the guiding principles of the organization. The purpose of the organization is to help manufacturing enterprises grow profitably. That resonated with me and continues to provide me with information and tools to make sure that we, as a banking organization, are building our business in the right way to support this industry. The focus of Enterprise Minnesota, to help businesses be well-positioned, to improve productivity and create efficiencies is absolutely critical to how we run our business today. It completely matches up with our goal as an organization: to build a thriving business community. Manufacturers represent a key segment for us in terms of our growth. I couldn’t have picked a better organization to learn and develop my own understanding of this industry, and hopefully bring that back to our organization in a way that continues to reinforce our commitment and our interest in working with manufacturers in the state of Minnesota. SPRING 2017 ENTERPRISE MINNESOTA /

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SMART STEPS TO REVENUE GROWTH Strategic growth doesn’t just happen. It can be designed.

anufacturers have spent the last couple decades using lean and ISO to improve the productivity of their operations. Many of them are now turning their attention outward, and finding ways to climb and to grow and expand. The purpose of this article is to demonstrate that growth can be designed. In 2016, Enterprise Minnesota used the State of Manufacturing®, its comprehensive annual survey of Minnesota’s manufacturers, to ask how executives view revenue growth. When asked to name the most significant future drivers of growth, for example, most manufacturers said “new 22

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customers.” In a related response, only 40 percent said their company chases growth through a formal strategic plan; a little more than 60 percent said they didn’t, or worse (from my point of view), weren’t sure. To me, the operative takeaway from those State of Manufacturing questions is whether the plan is formal. The fact is, no matter how they answered, all companies have some plan for growth, otherwise they wouldn’t be in business. The operative question is “How formal is it?” By that I

By Steve Haarstad

mean, is it documented? Is it communicated? Is it summarized on a poster somewhere in the building? Is it a regular component in employee meetings? In my opinion, the more formal the better. In order to effectively grow through new customers, I believe you need to have a strategy or plan. The reason is that a strategic plan guides and directs what you do. It gives purpose to your action. There is a quote from Sun Tzu that describes the relationship between strategy and tactics (or action). “Strategy without tactics is the slowest route to victory,” he says. “Tactics without strategy is the noise before defeat.” It is important to have both, yet there is


a clear order. Strategy gives birth to and directs our tactics and action. With that said, a strategy or plan to grow your business and customer base should include a way to connect with and influence those customers. And, this isn’t just for new customers. This could be also with existing customers. So the question is, how can I connect with, and how can I influence new or existing customers to partner and do business with me? Taking a deliberate or purposeful approach in connecting with and influencing customers will increase your effectiveness of growing with them. Ok, but how do I do that? In the same way that we use processes to drive purposeful action and results in our operations, we can use a process to connect with and influence customers to grow our businesses. This brings us to the Seven Steps for Revenue Growth. This is a process that we use at Enterprise Minnesota to take purposeful action towards growth in your business. It is a process that can be used to design and execute the actions that support your strategy.

STEP 1 IDENTIFY AND UNDERSTAND YOUR CUSTOMERS

They aren’t all the same The better we understand our customers, the more effectively we’ll pursue their business. To increase understanding, I always operate from two assumptions about customers that aren’t as elementary as they might appear: First, customers are different, and second, customers have choices. Here’s what I mean: Many manufacturers think “all my customers are the same.” It’s true that many customers share similarities, but recognizing their differences is where profitable long-term relationships are born. Some obvious differences are things like their industry, size, business model, or regulatory requirements. Some of the more subtle differences lie in their approach to business and relationships. Maybe they focus on price, delivery, exceptional quality, customer service or ease of doing business. It goes without saying that all customers want all those things, to be sure, but they inevitably prioritize one over the others. When we more fully understand these differences, we enable ourselves to connect with new prospects in a more relevant and meaningful way because ultimately, those differences influence what our customers care about, which drives their choices. SPRING 2017 ENTERPRISE MINNESOTA /

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Steve Haarstad is a business growth consultant at Enterprise Minnesota who specializes in strategy. He holds a BS in mechanical engineering from Michigan Technological University and an MBA from the University of Nebraska-Lincoln.

When it comes to choice, we often think that the power of choice resides with the customer. They make binary choices every day between product A and B or service C and D. With that in mind, we strive to ensure our product or service is better than our competitors. However, the power of choice does not end there. As providers of products and services, we also have the power to choose and our choices look different. It is not whether to serve this customer or that but rather what mix of customer profiles best suit the products, services and profit potential of our business. Another way to think of it is which customers perceive the most value in the products and services we offer? For example, If I produce round holes, I want to pursue customers that have round pegs because I know that the perception and transfer of value goes both ways. What I don’t want 24

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to do is invest my scarce resources in the pursuit of square peg customers because I know there is not good value in either direction. What this means is that we want to prioritize and pursue those best fit customers which will maximize the result of our growth efforts.

STEP 2 ESTABLISH OBJECTIVES

Specific targets provide focus and direction Now that we know our target customer(s), we can establish our business objective. The power of doing this is that it provides focus and direction; it establishes boundaries and reduces distractions. In fact, the more narrowly we define our objective, the more likely we are to really get the

results we are looking for. Plus, if your entire management team is focused on the pursuit of well-designed objectives, they (or you!) are less likely to get distracted by the shiny objects that appear along the way. One way to create your objective is by answering a few basic questions. What are you trying to accomplish? What results are you looking for? Is it an increase in sales? More brand awareness? Breaking into a new industry? You can also ask some more focused and customer-oriented questions. What do you want the customers to do? How can you influence them towards action? Then drill deeper. What action do you want customers to take? Do you want them to call, email or visit your tradeshow booth? If that’s it, what are you doing to get that accomplished? With the objective set, the next step is to strengthen it by making it SMART: specific, measurable, attainable, relevant, and time-bound. SMART objectives bring clarity to what needs to happen and when. It is easy to know when it is accomplished. For example, let’s say your objective is to increase sales. A SMART objective will say, we want to increase direct market sales by five percent this year. It is measurable, relating to the goal (relevant), and time-bound. At the end of the year and throughout the year, you and your team can assess your performance against hard numbers and make adjustments as needed.

STEP 3 DEVELOP A MESSAGE

Tell your story in a way that influences customers OK: you know what you’re trying to accomplish, and you’ve identified the type of customer you want to target. So, what do you tell them? Effective sales narratives have been guided since the late 1800s by a concept called AIDA. It’s been around so long because it works. It stands for these concepts. Attract Attention Create Interest. Awaken Desire. Call to Action. These elements are particularly important in developing new customer relationships. You want to attract their attention,


so they know you exist. You want to create interest, so they perceive you might provide something of value for them. You want to awaken some desire by maybe giving them a quote with us. And your call to action might be to persuade them to do something with you. The best way to do these elements is through a compelling message or story. What is there about who you are, what you sell and how you sell it that will resonate

with customers? Maybe your narrative presents a solution to a problem through the experience of a different customer. Maybe it embodies a differentiator: “We’re better because .... “A compelling story can communicate value, resonate with the customer, present a solution, or differentiate you from the competition. In the end, a compelling story answers the basic question: ‘Why should I buy from you?’” As you formulate your message, it is

important to include benefits and values, not just features. Consider this example: Apple’s iPod was introduced as having one gigabyte of storage. Awesome, right? Not exactly. Customers didn’t really resonate with the value of a gigabyte until Apple’s product narrative explained that it meant you could put 1,000 songs in your pocket. “Wow! The experience I’m going to have! OBJECTIVE I don’t even have 1,000 songs! I’m never 1 going to fill this thing up! Or, I can hit play

SUSTAIN 7 OBJECTIVE 1

LEARNING 6

CUSTOMER 2

IMPACT 5

MESSAGE 3

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and just have songs going forever, right?” That is a story of value. The lesson? Talking about features is a good start, but emphasizing values or benefits is even better. To take it one step further, a story that makes a promise is even more powerful. Promises attract attention. A guarantee establishes a comfort level and trust because customers know it lowers their risk. On top of that, promises help you inwardly formulate the kinds of things you really want to deliver and forces you to confirm that you have the ability.

STEP 4 CONNECTION

Determine effective ways to connect with customers Communication channels are pathways to connect your message with your customer. The options are almost limitless, which is good and bad. They could be passive like a billboard, flyer, website or direct mail. They could be more active like email, phone calls, or search engine marketing or they could be in person through direct selling methods. In any case, choosing the right combination that is best for the customer and the business is where you’ll derive the ultimate value. How do you choose? One method is to think about it from the perspective of the customer. Does the customer have a preference in how they get information? Do they prefer person-to-person conversation? Email? Phone? Something else? Another way to think of it is to try and discover your customer’s watering holes—those places your customers go for information they use to make decisions. Is it a trade journal, website, networking forum? The answer to these will likely require some research. However, there is an easy way to get started. The next time you’re on the phone with that customer, ask them! They will tell you. Also, be mindful of how they connect with you over the next several weeks. That may give you an indication and some insight into what their preferences are. Another method in prioritizing channel selection is something called the Four Cs Model. The first one is credibility. What is the trust factor you and your customers assign to a given channel? How credible it is and how does it compare to other options. When I hear or read something from that source, do I know it is true? The second is clout. How much power 26

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or influence does that channel hold? Is it a national journal or paper read by millions or is it smaller and limited to a readership in the local county? What name recognition does it carry and again, how does it compare to another option? Next is cost. What’s it going to cost to utilize this channel? If you already have all the resources to use it, it’s effectively free, involving just an investment of time. Conversely, do you have to invest in some software, or hire a person in order to use it? Weigh that out. Control is the last thing to think about. Does a particular channel have value only to a group of targeted customers, or could it broadcast your message to everyone?” There’s not necessarily a right or wrong answer, it’s just knowing what you’re trying to accomplish, and thinking about the right channel. Finally, because you’ll likely utilize multiple channel options, consistent messaging is essential to connecting and influencing customers. Consistency drives clarity and builds trust. When customers hear different messages from your salesperson, your customer service person, your website, and your paperwork (invoices or quotes), the only result is confusion, which erodes trust.

STEP 5 MEASURE IMPACT

Analyze success through thoughtful measurements Measuring impact consists of two components. One is through action. It’s the meaningful act that we want our customer to take; it’s a win-win action that is beneficial to you and your customer. Maybe you want to move them from awareness

to action, or to get them to request a quote. It could be a click on your website, or a simple phone call. Hey, call me.” Whatever. Are they doing something? Is my message influencing them to do something? The other way to think about action is through tracking measurable results. You can maintain the levels of performance in sales and marketing efforts using the same

“You can maintain the levels of performance in sales and marketing efforts using the same principles with which you track operational metrics used to measure inventory, warranty, scrap, cycle times, or on-time delivery.” principles with which you track operational metrics used to measure inventory, warranty, scrap, cycle times, or on-time delivery. How you measure results depends on your channel and your objective, and maybe other elements as well. It is important that what you measure is relevant to your objective and is actionable. Let’s say you’ve used a direct mail piece to try to increase the number of quotes you get from customers. In that case, you’d measure the number of RFQs that you get every week. Establish a baseline measurement before the mailing and then track the changes. It is that simple. You may not always be able to track


and measure customer activity. In that case, measure internal activity that you intuitively know is helping achieve the objective. For example, if you are focused on using your sales channel, you can track the number of sales calls made each week. In addition, if the message that is being carried by the sales channel includes a call to action, you can measure how many of the customers positively respond. The point is to identify ways to track activity that is relevant to the objective and communication channel. If you can measure more than one thing, all the better, because more input gives you a better picture. If, for example, you’re trying to increase your quotes, it’s probably irrelevant to measure your social media hits. If you’re trying to build brand awareness, social media likes might be relevant. Just remember two things here. What is the action that I’m hoping my customer will take? And how can I measure it?

insights have come through failure not success. It is important to reward experimentation. If employees don’t experiment, you’re not going to improve. Lastly, learning-oriented organizations take time to reflect. This can be difficult because we need to pause in order to reflect. We have to be purposeful about taking time and individuals and groups to ask questions like: Why did that happen? What

their odds of success in sustaining. First, they identify a team or a champion who will take ownership of the initiative and move the ball forward, no matter what. Ownership implies accountability. The champion will commit to pursue it and be accountable to the team, accountable to the objective that they’re pursuing, that they own. They’re not always going to make a 50-yard gain, maybe it will be

if we tried this? Why did they respond in that manner? By doing this, organizations discuss their experiences and find ways to improve. They appreciate the sentiment of John Foster Dulles, who once said, “The measure of success is not whether you have a tough problem to deal with, but whether it’s the same problem you had last year.” And they understand business guru John Maxwell, who said, “Reflection turns our experience into insight.” Insight is what helps us do it better the next time around and it comes from the powerful practice of reflection.

just one yard at a time, or frankly, maybe there will be the occasional two-yard loss. The key is, they don’t give up. Second, the champion is empowered to focus and stay accountable to the initiative. And, the rest of the organization is made aware so that they don’t make inadvertent attempts to derail the champion. Third, the champion meets with a project team or business leader regularly with the purpose of reviewing actions taken, discussing results, and establishing new sets of actions. This is critical in establishing and maintaining positive momentum. Don’t get me wrong, I don’t like the idea of meetings any more than you; however without them, people won’t know what’s happening, and you’ll lose momentum. It may start out as longer meetings at first but over time, the team can develop some muscle memory and eventually turn them into five or ten minute stand-up meetings. So, the next time you are thinking about growing your business, be purposeful about it. Start with your overall strategy to set a direction and then use a process like the one above to be effective with your resources and the actions you take to connect with and influence your customers. When you do, you’ll see that you will be able to manufacture growth in your business.

STEP 6 LEARN FROM YOUR EXPERIENCE

Take time to reflect Learning is where savvy organizations turn up the volume; where they start to derive improvements. Being purposeful about learning is how they get better. Organizations that exhibit effective learning skills share some some common traits. First, they take time to make and capture observations. They capture experiences, information and knowledge into a system so that it can be retrieved and shared. The system enables organizations to move from powerful individual learning to more powerful organizational learning. The system can be as simple as a shared notebook or as sophisticated as integrated online analytics. The form matters less than the fact that information is captured and accessible, so that six months down the road they can go back and relearn from their experience. Learning organizations experiment frequently. They recognize that making a decision or taking action are part of a fluid process. They experiment, test results and experiment again. They reward success and failure. It’s easy to high-five an employee who generates an innovation that pays dividends. But it’s just as important to recognize the employee who failed yet learned from it. In my experience, some of my most valuable

STEP 7 SUSTAIN

Keep your initiatives moving The last step of this model is to sustain. Admittedly, this step in some respects is the most challenging. This is especially true in small businesses, where managers and employees tend to wear many hats. Adding new revenue growth projects or initiatives on top of your day-to-day responsibilities can become a burden, no matter how important it is. Successful managers have developed some useful workarounds that increase

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Profile

Growth Inspired

FAMILY

by

Western Spring’s impressive growth has been fueled in part by family involvement

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A

s Joe Altstatt surveys the lot on which he and his sons intend to build a new 37,000-square-foot warehouse, he has to admit this level of success wasn’t part of a grand plan when, as a 25-yearold, he took over Western Spring Manufacturing from his father in 1974. “I was just looking to make a dollar,” he says now. A school teacher at the time, he learned the business by spending weekends and vacation time working alongside his father in the shop. “I recognized there were all kinds of opportunity coming in the doors. My dad stepped away, and I just showed up and started doing stuff,” he recalls. “I made a job for myself. We were a momand-pop at best.” One of seven siblings, he took over a business that had started as a blacksmith shop and had evolved into a general machine shop that did a lot of machine maintenance and repair. The operation included a building near the Lowertown neighborhood in St. Paul, some tools, some equipment, some customers, but no employees. “We had more or less deteriorated at that point,” Joe says. “There were ups and downs, like any business.” His sons’ recollection of the circumstance is a bit more pointed. “My grandpa didn’t like to have people issues, meaning employees,” says Ben Altstatt, who today supervises the operations of Western Spring along with his brother Alex. “He thought it would take him ten times longer to explain something to somebody than to actually do it himself.” Says Alex: “He was a pretty hard-headed German,” when it came to business. “His way or the highway,” Ben adds. Family lore has it that Grandpa Ray wouldn’t extend credit terms to even his best customers. “You want this, you pay for it now.” Nonetheless, Joe kept his father on the payroll until he was 89 years old. “There was never any flip of the switch” on ownership, he says. “My father was absent, but he was the owner. I was his source of income.” Joe says it was an amicable arrangement. “I was fine with that, because I understood the rules,” but he also admits the arrangement handicapped his flexibility in the business. There were things I couldn’t do because I couldn’t risk his retirement.” Ray lived independently until age 92. Every two weeks, Joe would personally deliver his paycheck until one night in 1998, when his 89-year old father looked across the table and said, “Joe, this is the last check you’ll ever have to bring me.” Joe responded, “That’s fine, dad. I’m not going to argue with you.” Joe gradually grew the business with nothing more than an ad in the Yellow Pages and the realization that “your reputation’s

Editor’s Note: Since everyone quoted in this story shares the last name Altstatt, we attribute all quotes by first name.

always on the line.” He “did everything,” Ben says, from sales to production to shipping. “I applaud him for that. He was a one-man band.” Ben and Alex got involved as youngsters, watching and helping as Joe would bring products home to work on. “We got our hands dirty,” Ben says, acknowledging that there was no expectation that they would join the business, “but it was always a possibility.” The company grew gradually, with Joe adding and personally training a couple employees in the late ‘90s; they are still with the company. “The trade schools don’t teach spring making,” Joe says. In 1998, a company called Midwest Spring shuttered its St. Paul plant and freed some experienced spring makers, some with 30 years’ experience. Without yet having the business to support them, Joe hired five and kept three. “It turns out there was a reason that company went out of business,” Joe says. Throughout, the I always told the boys company kept to its springmaking niche. Joe says the that I didn’t have company initially acquired any problem if they that market specialty, didn’t want to join the despite relatively low because it was business, but if you do, margins, reliable business that didn’t the pie needs to grow typically necessitate the drop-everything urgency so everybody can of machine maintenance make a living. and repair. “Joe would say if you’re going to start a business from scratch, a spring isn’t where you’re going to start,” Ben says. Western Spring’s customers range across a wide base that includes agriculture, defense, firearms, and medical, among others. In 2004, Western Spring moved its operation from downtown St. Paul to Hugo, a growing exurb on Highway 61 just north of White Bear Lake. “We were at a crossroads,” Joe says. We were successful downtown. The building was paid for even before I got there, so we didn’t have the kind of rent that kills a lot of businesses. It was timing. I always said to the boys that I didn’t have any problem if they didn’t want to join the business, but if you do, the pie needs to grow so everybody can make a living. A 6,000 square foot building in St. Paul limited that growth potential, the loading dock was low and parking was at a premium. “Going to Hugo was part of a strategic plan,” he said. That strategy worked. Now, with 18 employees working in a 17,000-square-foot plant, the company has achieved 15 to 30 percent annual increases in revenue, with proportional increases in profit in each year since the move. “There wasn’t really one year that was off the chart,” Alex says.

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Alex and Ben Alstatt, Western Spring

It’s been pretty steady. The company There was no special strategy for growth, he adds. The company has never been continues to serve the five-state shy about adding upper Midwest, with occasional work from Canada and Mexico. equipment that There is no over-reliance on improves and one client or one industry. The company added a contract streamlines salesperson, but marketing is still their processes, largely due to repeat customers and word-of-mouth referrals. because increased Western Spring’s largest customer business always is responsible for just eight percent follows. of the company’s revenue. The attitude has always been “put your head down and just keep on plugging away and do order after order. And so, as that’s happening we’re getting some more employees, we’re getting some more machines.” The company even posted 30 percent growth in the recession of ‘09. Ben speculates that Western Spring’s competitive pricing and timely deliveries have been the keys to success. Ben says the company has “kicked the tires” of a couple momand-pop-sized acquisitions but none have come to fruition. The company is considering taking on related activities that it 30

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currently outsources, such as painting or powder coating parts. Mostly, they are contemplating what they can expand when they finish their new plant, just across the street from the existing facility. It is currently being laid out with the help of David Ahlquist, a business growth consultant at Enterprise Minnesota. “We can imagine things in our head but it will become clearer when we put it down pencil on paper,” Alex says, adding that the company has already ordered a new piece of equipment that could be accommodated only in the larger space. Ben adds that the company has never been shy about adding equipment that improves and streamlines their processes, because increased business always follows. “But, investing back into the company is probably contributing to our growth year after year.” Joe admits that his company’s growth has “exceeded my expectations.” We had to grow the business—grow the pie—in order for everybody to make a living. I guess that’s pretty much where we’re at now, with basic customers and the type of work we’re able to do now. But it’s time to step up again. “I’m exaggerating now, but you can’t do $20 million worth of revenue in 18,000 square feet. We are a job shop. We need space. We’re tight now, and it would limit growth or opportunity if we didn’t have the space, which equates, to a certain extent, to the horse power that’s required to grow. He says the property has been for sale since he first moved the Western Spring operation to Hugo. “We’ve always had our eye on the property, but the (owner) was holding out for the big payday.”


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Discovery Hopefully, this new property and the current space we’re in, everything will kind of blend together and become part of our estate, so to speak. “I’ll be stepping away, but I don’t have any formal plans of when that’s going to play out,” Joe says. “Timing just kind of happens. Obviously, the boys are of the right age now. I think I still have to have some role, in terms of making peace or keeping peace. He says he reads a lot about preserving family businesses. “It’s important to me not to make the same mistakes that others have made,” he adds. “I don’t know if I can put my finger on it, but a lot of time it’s about egos and entitlements. I don’t necessarily want to control or pull all the strings, but I do want to guide the ship, so to speak.” And the next expansion? “It depends,” Alex says. “It’s all about timing and whether we have a next generation that’s interested. We have young children—not saying that we won’t force our hand to be in the business, but maybe they want to. We’re not going to deny them, I guess.”

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Final Word

Nonpartisan, Anyone? The economic benefit manufacturers bring to their communities is something that defies a political party label.

I

have devoted a lot of space in this column over the years in praise of small and medium-size manufacturers who take the time and initiative to invite local elected officials to tour their plants. (We at Enterprise Minnesota have coordinated more than 200 of those events). The dividends of these tours become more evident every year as Bob Kill (Enterprise Minnesota’s president and CEO) and I make our annual visits with Minnesota’s legislators and their staffs. They increasingly like to tell us how they’ve learned about their local manufacturers during their visits. This is great. Please keep it up. Some savvy perceptive manufacturers have also seen the value of expanding the tours to include other community

Chamber executives experience first-hand how manufacturing’s multiplier effect—that manufacturers create 1.9 jobs for every person they employ— benefits their entire membership. members, as well, who might benefit from the sometimes eye-opening revelations in their tour. Local economic developers learn how having solid manufacturers in their economic base make their communities more attractive for other kinds of businesses. Chamber executives experience first-hand how manufacturing’s multiplier effect—that manufacturers create 1.9 jobs for every person they employ—benefits their entire membership. Teachers, administrators, and school counselors see the kinds of rewarding, challenging, and well-pay32

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Lynn Shelton is director of marketing and legislative relations at Enterprise Minnesota.

ing careers that are available to students who are willing to invest in the kind of technical education necessary to join that workforce. There is just no downside to hosting these events. Some manufacturers also tell us that the community awareness and praise that results from these tours can also give a nice bump to employee morale. But still, it occurs to me that much tribute should also be paid to our elected officials who go out of their way to ensure that manufacturers are well-appreciated members of their constituencies. Here is a valuable case in point: Bob and I met recently met with 6th Direct Congressman Tom Emmer, David Fitzsimmons, his ubiquitous chief of staff; and Stacy Morse, the congressman’s district office director. We have long appreciated

that the congressman and his chief made a point of attending the statewide rollout of last year’s State of Manufacturing® survey data, and the congressman will participate on the panel that analyzes the results at this year’s event. During our meeting, we provided a list of small and medium-size manufacturers in the 6th District, which he and his team perused. They looked at and checked off the companies they had already visited, usually mentioning an anecdote or lesson they have learned along the way. Then, without prompting, the congressman dived into a long and wellinformed monologue about how communities—manufacturers, educators, and business advocates—have got to band together to address the challenge that too few students are being directed toward educational paths that lead to really good careers in manufacturing. “Not everybody is going to be a doctor or a lawyer,” he said. “They have got to learn that there are jobs out there that will pay $40,000 to $50,000 after just two years of school.” We left the meeting thinking, first,that here is a member of Congress who really knows his district and who is unafraid to speak uncomfortable truths if they lead to a constructive end. And, second, we discussed how having your manufacturers’ backs represents a policy priority that transcends politics. Our meeting with Congressman Emmer is no different than the numerous sessions, for example, that we’ve had with Senator Amy Klobuchar and her staff members. These are two elected officials whose political philosophies probably don’t intersect a whole lot. But, in addition to being genuinely nice, approachable people, they share a commitment to learning a lot about their manufacturers and what they can do—together—to help manufacturers support their communities.


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Profile for Enterprise Minnesota

Enterprise Minnesota Magazine - Spring 2017  

Strategic growth doesn’t just happen. It can be designed.

Enterprise Minnesota Magazine - Spring 2017  

Strategic growth doesn’t just happen. It can be designed.