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REFUGEE RESCUE

How Select Foods reached into a Twin Cities community of Karen refugees to solve its workforce challenges

Helping Manufacturing Enterprises Grow Profitably SUMMER 2018

HAZARD AHEAD? Do booming sales distract manufacturers from the looming workforce crisis?

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HAZARD AHEAD?

Do booming sales distract manufacturers from the looming workforce crisis?

? $50 OR T ,00 C 0 P ? DO WHY DO PARENTS E R R R O E YE DISLIKE TWORAT WY AR E A YEAR DEGREES? P L O C IT TURNS OUT, CN THEY DON’T. “CO LLE Most manufacturers will tell GE EXP you that more students don’t A ERI M G enroll in tech schools I T ENC S R E” A because parents want E 2-Y BA RIS TA

them to attend universities. We convened a diverse cross section of them to talk about it. Their responses surprised even us.

ARE YOU READY TO EXPLOIT THE IoT? Savvy manufacturers can squeeze a large variety of useful efficiencies by leveraging the Internet of Things.

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2 Questions, Not Answers The State of Manufacturing® triggers an important debate.

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Refugee Rescue

Wunderkind

No Easy Answer

Albert Lea Select Foods, Inc. reached into a Twin Cities community of Karen refugees to solve its workforce challenges.

Manufacturer Jasmine Sonmor finds success way beyond her years.

Manufacturers grapple with smartphone policies.

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

Subscribe to The Weekly Report and Enterprise Minnesota® magazine today! Get updates on the people, companies, and trends that drive Minnesota’s manufacturing community. To subscribe, please visit www.enterpriseminnesota.org/subscribe. SUMMER 2018 ENTERPRISE MINNESOTA /

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bob kill

Questions, Not Answers Public opinion surveys sometimes prove their value by triggering important questions. This 10th anniversary version of the State of Manufacturing® is one of them.

W

hen we first hooked up with pollster Rob Autry to write questions for this 10th anniversary version of the State of Manufacturing® (SOM) survey, we assumed the data would again reveal that Minnesota’s manufacturers feel sky-high levels of optimism about their company’s financial prospects in 2018, just as they did for 2017, when an astonishing 94 percent of them declared enthusiasm about their company. No one is saying that manufacturers are sitting around lighting their cigars with twenty-dollar bills—it’s still a competitive industry—but neither do many refute that times are pretty darn good. We also knew that merely calling attention to that optimism, even though it’s accurate, would provide few insights about manufacturing in Minnesota to the people who care about (and benefit from) their success. Manufacturers, suppliers, community supporters, policymakers and educators look to the SOM to help understand the manufacturing marketplace, employment issues, and cultural challenges that manufacturers face. So, for 2018 we took a deeper dive into the worker shortage, an issue that lurks beneath the surface of that optimism, and whose urgency may be diluted by terrific sales numbers. We all know a worker crisis is making its approach, we just don’t know its dimensions. Katherine Kersten, the scholar and writer from Center of the American Experiment who closely follows the worker issue, recently reported that the number of unfilled jobs in Minnesota’s economy could rise 2

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from 60,000 to as many as 280,000 by the end of 2022. We know why. Boomers are retiring in record numbers, about 8,000 more workers leave Minnesota and relocate here every year, and the younger generations just don’t have the numbers (or interest) to make up the difference. All told, she says, the worker shortage could end up decreasing Minnesota’s GDP some $33 billion in five years, with manufacturers’ ravenous need for skilled workers causing it to absorb much of the brunt. To describe the challenge of the worker shortage, let’s go back to our very first SOM. We conducted our first survey and focus groups 10 years ago, just as the American economy had slipped into the abyss of the Great Recession with an abrupt intensity that left most small and midsized manufacturers in a state of flatfooted disbelief. Not knowing what to expect in the focus groups, we were amazed at the calm resolve with which most participants described how they would get their bearings and proceed. Two phrases popped up in most sessions: “We’ve been through this before; we’ll get through it again” and “a crisis is a terrible thing to waste.” In other words, they’d do their best to mitigate the damage in a way that might create opportunities when the economy recovered. They’d secure their banking relationships continued on page 6 Bob Kill is president and CEO of Enterprise Minnesota.

Helping Manufacturing Enterprises Grow Profitably

Publisher Lynn K. Shelton

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Creative Director Scott Buchschacher Contributing Photographers Colleen Harrison Brooke Kern Jeremy Petrick Copy Editor Catrin Thorman Contacts To subscribe subscribe@enterpriseminnesota.org To change an address or renew ldapra@enterpriseminnesota.org For back issues ldapra@enterpriseminnesota.org For permission to copy lynn.shelton@enterpriseminnesota.org 612-455-4215 To make event reservations events@enterpriseminnesota.org 612-455-4239 For additional magazines and reprints contact Lynet DaPra at lynet.dapra@enterpriseminnesota.org 612-455-4202 To advertise or sponsor an event chip.tangen@enterpriseminnesota.org 612-455-4225

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WORKFORCE SOLUTIONS

Refugee Rescue Albert Lea Select Foods, Inc. reached into a Twin Cities community of Karen refugees to solve its workforce challenges

eff Woodside surprised a recent roundtable discussion of southeast Minnesota manufacturers by announcing, “I have to say, I have the luxury of being fully staffed.” The group of executives had been lamenting its shared workforce challenges: the retirements of valuable long-time baby boomer employees alongside the shrinking pool of skilled workers that might replace them. Not to mention the almost surreally deficient work habits of the newest generation of employees. The enthusiastic Woodside, plant manager at Albert Lea Select Foods, Inc. captured their attention. New union contract agreements helped a lot, he said, but the roots of his optimism lay in Select’s newfound relationship with a Minnesota-based community of Karen refugees who now comprise about half of his company’s 470 employees. The Karen are an ethnic group from Southeast Asia that make up the second largest ethnic group in Myanmar, the country once called Burma. The Karen were brutalized and starved for years by a harsh Myanmar dictatorship, forcing hundreds of thousands into refugee camps along the Thai border, and ultimately into countries like the United States and Canada. Today more than 14,000 Karen people live in Minnesota, making it the largest Karen community in the country. HR Director Charles Newton first considered the Karen as potential employees when an associate casually described them during a golf game. Newton was more than interested in tapping a new source of labor. “Albert Lea has a lot of industrial businesses, and we were all vying for the same

Photos by Colleen Harrison

J

HR Director Charles Newton and Plant Manager Jeff Woodside.

person,” he says. “Albert Lea is a small farming-based community. We have some intelligent people here, but a lot of people who grow up in Albert Lea leave Albert Lea.” After a discussion with the St. Paulbased Karen Organization of Minnesota, he recruited two groups of 30 employees to start working in the plant. If it became a match made in heaven,

it began as an experiment, with more questions than answers. A stark communications gap slowed Newton’s ability to integrate the new workers into the plant’s operation. Only a handful of Karen spoke English and no one at Select spoke Karen. “We needed to find out a little bit about them before we put them to work,” he says. He was not surprised to discover that his Karen recruits had no industrial skills,

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no factory experience, and they were unfamiliar with the pace of production. “They weren’t used to having a regular schedule, and they weren’t toughened up. Their hands were soft,” he remembers. At the same time, Newton noticed the newest workers exhibited a muchadmired work habit: “They came to work every day,” Newton says. “I mean every single day.” Every small and medium-sized Minnesota manufacturer fights an almost frustrating battle with absenteeism, especially in night shifts. Select’s Karen population solved that problem. “They love the night shift,” Newton says. “To this day I haven’t figured it out,” but when a Karen person applies for Select, they most frequently request night hours. “All of a sudden the absentee problem on the night shift was dropping to practically nil.” The communications barrier constrained Select’s management from identifying and addressing potential social barriers, but also safety training and safe quality food handling. With the help of English-speaking Karen, Woodside and Newton explained the work atmosphere and culture and found a willing workforce. “We found out that if we could train people and help them get over the learning curve as far as doing the work and things, we could develop some really good employees,” Woodside says. With the lack of a common language in an unfamiliar facility, the Karen at first stayed among their own, but Select’s employees gradually warmed to the Karen’s natural outward sociability. “They’re really friendly,” Newton says, which increased after Select encouraged English-speaking leaders to encourage mutual understanding. Woodside helped bridge that barrier early on when he’d walk through the plant and acknowledge his new employ-


The Karen host two informal lunch potlucks each day to which all employees are invited.

ees by snapping a casual salute. The Karen quickly responded by smiling and returning the salute, more as a casual fist-bump than a symbol of servitude, Woodside says. Woodside most enjoys the two-a-day potluck lunchroom meals hosted by the Karen, to which all employees are invited. “The first thing the group does when they get out of their truck (from St. Paul) is come into the lunchroom and they have a potluck. People share their food with everybody; you walk through the cafeteria, they offer you food. They say, ‘Here have some, try this, try this, try this.’” “They’re a joy to work with,” Woodside says. “I have grown personally by knowing them. And I know that each and every one of us has grown to respect other cultures. They have a very interesting story to tell. We Americans have had life so good for so long it is hard to grasp what they have gone through, not only in their country, but coming and settling here. It’s been a big transition.” And the Karen are slowly moving south. Initially, they made a three-hour daily commute between St. Paul and Albert Lea in their own Econoline vans. Gradually, some started renting local apartments and returned to the Twin Cities only on weekends. Today, many are relocating to southeast Minnesota, mostly to close-by Clark’s Grove, eight miles north of Albert Lea, where, Woodside says, they are buying homes and sinking roots. Woodside connects Karen employees with a local realtor to help the first-time homeowners acclimate to the culture and responsibilities of home ownership. The Karen have also established several churches in the area, and at least one congregation is in the process of buying its own property, Woodside says.

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continued from page 2 and endure occasionally opportunistic demands from OEMs. They’d lean up their operations. They’d look to expand product lines or even investigate new ones. They’d roust their sales people back out on the road with instructions to improve customer relationships. And the strongest among them scouted out potential acquisitions. Ultimately, they knew, their success would be measured by how well their reaction to the crisis would enable the speed and depth of their company’s recovery. Fast forward to today. Against the backdrop of almost surreally high shortterm optimism, this SOM survey also foreshadows how manufacturers need to prepare for the potential damage from escalating worker shortage. And I need to emphasize that this chal-

Fast forward to today. Against the backdrop of almost surreally high short-term optimism, this SOM survey also foreshadows how manufacturers need to prepare for the potential damage from escalating worker shortage. lenge is much different than the Great Recession. It is not how we react to it, but how we prepare. This is a prospective crisis. Manufacturers all know it’s coming and that there are things we can do to prepare, but our urgency may be temporarily tempered by booming sales. The key is that we haven’t been through this before. Keep this in mind as you read Rob’s analysis. My conclusion, for what it’s worth, is that savvy manufacturers can use some of the proceeds of today’s booming economy to prepare to compete in new circumstances under different terms. We aren’t suddenly going to find more 6

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The Parent Trap Polling finds that parents are more amenable to tech education than we think they are Most small or midsized manufacturers will usually name parents among the obstacles that prevent young people from planning a tech career. You’ll find those references all throughout the focus group transcripts that appear in our annual State of Manufacturing® book (www.enterpriseminnesota.org to find or request a copy). Parents, they say, are obsessed with seeing their high school graduate pursue a four-year university degree; anything less—a two-year tech degree, for example—would represent setline for second best. They stigmatize. Forget that only one in five American jobs requires a four-year degree (as it has been since the ‘50s); forget that most four-year degrees strap their recipients with a lifetime of oppressive debt; and forget the recent study from Center of the American Experiment that demonstrated how two-year tech grads can earn up to 61 percent more than their four-year counterparts (when you factor in college debt). Curiously, only one focus group this year didn’t reinforce that stereotype: Parents. Just as we added students to the list of our focus groups a few years ago, this year we enlisted a group of Lakeville parents (all with a current or recent high schooler). They disagreed. They agreed almost universally that there is serious career value in pursuing two-year technical degrees, while also admitting they didn’t know enough about the two-year career opportunities that are available in this market. Added to this is an interesting poll question recently fielded statewide by American Experiment (also conducted by Rob Autry). Only 27 percent thought “a four-year degree is necessary to achieve the American Dream”; 66 percent thought that “obtaining the knowledge or skills needed to do a specific job in today’s economy” was valued more than a four-year degree. These leave hard questions for educators, and an obligation from all of us to help supply the answers. Students all said they don’t rely on school counselors (they are too strapped for time, often responsible for 600 students or more). The most positive outcome from schools are those that have invested in manufacturing labs (shop classes); students not only get exposure to a relevant hands-on curriculum, but access to those teachers, who can provide genuinely useful advice.

people. The winners will work from a formal strategy. The company that approaches this worker-stricken market with one-off tactics and an overall approach that’s kept in the owner’s head, will find itself falling behind companies that prepare. An overall strategy must integrate marketing with productive processes and people. Automation and technology will play an essential role, but successful manufacturers will always need to recruit,

train, and retain employees to operate those machines. And community collaboration will reach unprecedented importance. Employers, policymakers and educators (at every level) must plot out an urgent strategy that works to anticipate this rapidly changing marketplace. I readily accept that these are not new concepts, but Minnesota’s manufacturers have never faced greater urgency to make them part of their strategic arsenal.


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

The key is that we haven’t been through this before. us into a new set of thought leaders. Pollster Rob Autry has conducted the survey in each of the 10 years. Rob, the founder of Meeting Street Research, is one of America’s premier pollsters. We draw credibility from his creativity, patience, and keen analytic skills. And Tom Mason, our long-time consultant, has also been with us from the beginning. He has now added another 14 focus groups to the long list he’s done over 10 years. Tom, whose company produces Enterprise Minnesota magazine, also publishes the State of Manufacturing® book, along with creative director Scott Buchschacher.  A special thanks goes to Lynn Shelton, the vice president of marketing at Enterprise Minnesota, who has managed the State of Manufacturing® project since it was nothing more than a concept. It is impossible to overestimate the amount of effort that she and her staff—Lynet DaPra, Constance Fantin, and Chris Morse—devote to quietly completing the detail-laden schedule of tasks that comprise the various elements of this project. Finally, I want to again extend sincere thanks to the manufacturers who take time out of their busy days to talk to our pollster, the many people who participate (often year after year) in our focus groups, and those who will attend the regional events in which we present and discuss the results.

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Photo by Jeremy Petrick

Jasmine Sonmor in her new 35,000-square-foot facility in Fergus Falls.

ENTREPRENEURS

Wunderkind Manufacturer Jasmine Sonmor finds success way beyond her years

I

f you’re impressed that Jasmine Sonmor, at 26, is the owner of a metal fabricating business that just built a 35,000-squarefoot facility where she expects this year to employ 50 people and earn $12 million, you should have met her at 13. As a kid, Sonmor liked to spend summers hanging around White Oak Metals, her father’s metal fabrication business in

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Dalton. She’d take on odd jobs like mowing the lawn or cleaning up and organizing her dad’s office. At 13, she started writing manuals. “I’ve kind of always been an overachiever, so he gave me free rein to just kind of take it and go,” she remembers. “He would always be there as a mentor to help me along because of course I didn’t know

anything at that time.” “I’m kind of an odd person in the sense that I’m mathematically inclined, but I actually excel in English, as well, which is not my dad’s strong suit,” she says. Her overhaul of White Oak’s quality manual got the company certified by the American Institute of Steel Construction. From there, having written the manual, she started conducting the company’s quality audits. “It helped me learn from the inside out because I had to conduct interviews and verify that things were getting done, and if they weren’t getting done, how could we improve things? It really helped me learn the business thoroughly from a young age.” When health ailments forced her father to retire three years ago, 23-yearold Sonmor founded Aura Fabricators,


her own metal fabricating company in Dalton. The new company hired all of White Oak’s employees and repurposed its equipment. And, like her father’s operation, the company would specialize in making ornamental railings, overhead signs, trusses, steel bridge components and other miscellaneous metal products. By that time she had graduated from Underwood High School and achieved a degree in civil engineering from North Dakota State University. She named the company Aura Fabricators in part because the name meant “distinct character,” an attribute she wanted to earn for her products. But also because it started with “A” which would always place it atop alphabetically-arranged bid lists. Just as she started the company—she was still taking her senior-year final exams—a Wisconsin-based competitor filed for bankruptcy. The company, which specialized in fabricating bridge components, was defaulting on contracts all over Wisconsin and Minnesota, jeopardizing a large number of springtime bridge construction projects. Sonmor stepped in. “We pushed everything else aside,” she says, and scored the last-minute deals with contractors whose projects would potentially experience long delays without the parts. The contractors said, “Bail us out, we need these products now so that we can get going on our entire project and so that we’re not in jeopardy for our schedules,” she remembers. No one questioned her age-and-stage or the newness of her company. Within three months Aura had doubled the volume of her father’s business. She asked her employees to dedicate long hours all through the summer. “I kept telling them, ‘We just gotta get through the summer, we’ll figure this out. It’ll get better, I promise.’” They stuck with the new company and its young entrepreneurial chief. “It was a huge headache, but a good headache. Aura Fabricators was really rockin’ and rollin’,” she says. Expediting material for quick-turnaround schedules “was extremely stressful, but it fasttracked me into good relationships with my customers.” “Ever since then, I wouldn’t say that anyone holds my age or gender against

me,” she says. That momentum told her she needed more space to house increased product and personnel. Material handling was becoming a huge problem. “We were tripping over each other. We knew we had to expand,” she says. She explored options in Dalton, but quickly decided to build in Fergus Falls, a much bigger city located just 15 minutes down Interstate 94. With the help of tax increment financing and the Fergus Falls-based West Central Initiative, she broke ground on a new $3.7 million facility in November 2016, just as soon as the farmer could harvest the last ear of corn from the property. Today, Sonmor splits the work evenly between her Dalton and Fergus Falls facilities. Dalton specializes in ornamental products like railings and stairs.

“I wouldn’t say that anyone holds my age or gender against me.”

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Structural items like bridge parts or overhead sign trusses are reserved for the larger Fergus Falls facility, which is also more automated, she says. The company today is working through its biggest backlog ever and looking at a record-setting year, despite the unknown effects of the federal government’s steel tariffs. Like every other manufacturer, she also weighs the effects of the workforce shortage, despite the fact that average hourly pay at her company exceeds $20. Her age and excitement around her new venture initially lured many younger workers to Aura, but employee turnover has become an ongoing problem, Sonmor says. “Nobody really wants to settle in one spot, as far as the younger generation goes,” she says. “People want to go to Fargo or towards the cities, where there is more of a nightlife, more excitement in general. They’re not quite ready to settle down with the family.” “You just have to take it as it is,” she says, “and hope that your company is strong enough and that it’s a good place to work, so they want to stick around. But there is only so much you can do.”

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Chuck Miller, Winona Daily News

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The Lean Machine Broekema Beltway hopes to ‘lean’ its way out of dependence on its European counterparts, leaving higher margins and better customer pricing

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O

ne of Jeff Eilers’ proudest career milestones has been to improve profitability through lean efficiencies. Eilers, president and CEO at Broekema Beltway, hopes his latest efforts will enable him to become independent of its operational reliance on the company’s foreign counterparts in a way that will leave higher margins and better customer pricing. Broekema manufactures high-end belted chain conveyor belts for root-crop harvest equipment. Its primary U.S. plant houses 70 employees in a 31,000-square-foot manufacturing facility in Pine City that generates about $17 million in revenue. It does another $5 million from a 25-person plant in Woodland, California. The company exports products to more than 40 countries. Its products include rivet rods, rod covering, rod securing to center belting, sprockets and

drive wheels, and many replacement parts. “There’s a lot of different intricate portions that go into it,” Eilers says. “It looks really simple on the outside, but the devil is always in the details.” Founded in Minnesota, Broekema today is owned by the Jäger Group, a privatelyheld German conglomerate. “They are the most personable people I’ve ever met,” Eilers says. He adds that the company is on an aggressive lookout for growth energy, new designs, and developments. “They want to be at the forefront of everything,” he says. Eilers’ plan is to exploit his lean passion to help make his U.S. facilities operationally independent from their European counterparts. Currently, the company relies on Europe for about 30 percent of his needs. That independence will require additional machinery, equipment, skillsets,


usbank.com/smallbusiness and people. “Ultimately, it will improve both margins and the end price,” he says. Eilers grew up in Seattle before enlisting in what would be a seven-year stint in the Air Force. Finding that his expertise in rapid assembly munitions—bomb-making—didn’t knit well with after-service career opportunities, Eilers landed a job as a warehouse supervisor. It was there that he took an “Introduction to Lean Manufacturing” course and had a lightbulb moment. “It clicked,” he remembers. “A lot of what I was doing in the military was lean manufacturing, just using different terminology.” He rode that niche expertise to climb his company hierarchy. “I found that I had a knack for getting people in the right positions with the right skillsets.” He worked in management for 12 years at three other companies before landing at Broekema three years ago, first as general manager, and then in January becoming CEO. “Lean is one of the things that makes me happy,” he admits. When he joined Broekema, he found that his predecessor had created a foundation for lean but was spread too thin to make it effective. “He was trying to wear about 15 different hats. There was a good start, but it never got pushed forward. You can’t drive it from one person. You have to get the baseline floor level employee to understand.” Two years ago, Broekema’s Pine City facility achieved ISO 9000:2015 status; Woodland got certified in 2017. “It set us up. It drove us to look at our processes, and map them out, and understand how we do business. It drove, again, some ‘aha’ moments of, ‘Why do we do it this way?’ If we look at it, you move this over here, it makes sense, we’ll save some time, and energy, and heartache.” Starting last year, Eilers secured the budget to start doing additional training out on the floor. He introduced each employee to the concepts and verbiage of lean, and what they could accomplish with it. They created a baseline and then with the supervision and some of the managers, they did a Kaizen event with 5S, cleaned up one specific area, and set up some of the different 5S boards. Eilers said his counterparts in the Netherlands have seen the success and recruited their own lean consultants.

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Joe Plunger, president and CEO of Midwest Metal Products, recently described his innovations to Representative Gene Pelowski (left) and Senator Jeremy Miller (right).

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S

cott Arndt, director of human resources at Superior Industries in Morris, has a responsibility that must be simultaneously invigorating and mindnumbing. On the one hand, he works for one of the fastest growing privately-held companies in America. The three divisions at Superior, a manufacturer and global supplier of bulk material processing and handling systems, are currently experiencing a first-quarter work backlog that exceeds the total first-quarter backlog of the previous six years combined. The company’s multiple divisions engineer, manufacture, service and sell dry bulk processing and handling equipment, fuel delivery and storage equipment and precast concrete products. Superior is the

largest employer in Stevens County, with more than half of its 1,600-person global workforce located in Morris. On the other hand, he battles the same workforce shortage issues that increasingly afflict other manufacturers—exacerbated by the fact Stevens County, his home base, is in the bottom quintile for population among Minnesota’s counties. His solution: Don’t try to force old work models on new circumstances. “You need to try to understand your workforce population all the way from the boomers through the millennials,” he says. “They all require something a little different to be content and to stick around. You need to try to understand everybody. It will continue to be an

Chuck Miller, Winona Daily News

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Photo by Brooke Kern

employee-driven market. Turnover and retention are going to be a continuous challenge.” He says, “I’ve had to get creative with how we’re going to fill positions. We’ve pulled in a lot of people with just a lot of options.” The first of his two-pronged approach to appeal to the new generation of workers is to accommodate their demands for more scheduling flexibility. He’s added three new types of work shifts, the most visible of which is an 8:30 a.m.-3 p.m. “flex shift” to accommodate employees with school-aged children. “We want to let them get their kids to school and home again,” he says. He’s also implemented a flexible evening shift to accommodate employees who don’t want to work a full deep night. His second approach has been to assign recruiting responsibilities to someone who is more naturally inclined to understand the attitudes and sensibilities of the newest generation of potential workers. For that, he turned to Benson Goins, who is, at 22, the youngest member of his five-person HR staff. Originally from Minnetonka, Goins earned a B.S. in business from the University of Minnesota-Morris and a minor in art history. He spent his final semester interning at Superior and immediately moved over to the company after graduating. Arndt gave him carte blanche. “You know how we traditionally advertise,” he told his young charge. “Give it a facelift, give it a new look. What would attract you? I gave him full-rein.” Goins responded with a social media blitz that has earned raves from his boss, including quick-hit seven-second popup ads. “He’s going places I never would have thought of personally. I’m blown away by the amount of traffic we are getting.” Goins recruits for all three divisions. He said his primary qualification was to be a “fresh set of eyes”—young eyes. He focused primarily on Facebook, with “a little bit of YouTube,” and is now adding Instagram and Snapchat to his recruiting arsenal, in addition to Google AdWords advertising. So far, so good. Arndt estimates that the combined effect of his new programs has attracted 40-50 applicants per week over the past two months.

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Four Questions Katherine Kersten: the realities of the worker shortage

W

hat sparked your interest in this worker shortage? The workforce development crisis was fascinating to me because it presented an intersection of issues that have always been central to Center of the American Experiment. Economic and cultural issues come together in the workforce development crisis. Economically, we’re anticipating a shortage of workers in skilled fields that will have a major negative impact on Minnesota’s future prosperity and its ability to grow and thrive. We’re talking about Minnesota’s economic bottom line here. But there’s also a cultural dimension to this crisis. Paradoxically, at the very time we are seeing such a demand for skilled workers in Minnesota, many of our young people, especially young men, are leaving high school without marketable skills, which means they are unprepared to achieve or maintain middle class status, to marry and raise

It’s not about admiring the problem; this is about really moving the needle. families, and become productive, selfreliant citizens. There’s an educational dimension to this problem, as well. For some time now, we’ve been living with a cultural bias that says a four-year college degree is optimal for all students. A four-year degree is portrayed as a kind of ticket you need to punch to have a successful life. As a result, today many young people end up starting the four-year college route by default because they think they’re expected to, but they end up dropping out, often in very significant debt and lacking marketable skills. Challenging this cultural stereotype is central to Center of the 14

/ ENTERPRISE MINNESOTA SUMMER 2018

INNOVATIONS

American Experiment’s “Great Jobs Without a Four-Year Degree” project. How would you describe the current state of the workforce shortage? It’s a looming crisis, and I think most Minnesotans are completely unaware of that. But the effects are already beginning to hit us. DEED (the Minnesota Department of Employment and Economic Development) says our state’s manufacturers are currently struggling to fill two-thirds of their open jobs. As baby boomers retire, the problem is going to get much worse. And it’s not just manufacturing. Today, 80 percent of construction companies can’t find enough qualified workers. If that doesn’t change soon, we’re likely to see significant increases in building costs and a declining number of construction projects that actually get built. We’re also looking at, say, a 40 percent employment shortfall for technical workers in the utility industry. So, we face a major crisis and it’s only going to escalate as baby boomers leave the workforce. What’s the potential economic impact of the workforce shortage? The figures I’m using here are estimates generated by RealTime Talent, a business-led cross-sector collaborative that uses data to improve the alignment of Minnesota’s labor force. RealTime Talent has very up-to-date numbers, and they calculate that by the end of 2022, we can expect our worker shortage to increase from the current 60,000 or so to as much as 278,000. These are jobs that will go unfilled in backbone sectors of our economy, like medical devices, manufacturing, health care, construction, energy, agriculture, and mining. RealTime Talent has also estimated that the workforce shortfall will likely constrain our state GDP growth by about $33 billion, reduce local tax revenue by about $2.2 billion, and lead to about $12 billion annually in

Katherine Kersten is a senior policy fellow at Center of the American Experiment who has taken considerable interest in Minnesota’s workplace shortages. A writer and attorney, she has been a Metro columnist and opinion writer for the Star Tribune. She has written on cultural and policy issues for a variety of publications, including The Wall Street Journal, the Weekly Standard, Christianity Today, Policy Review, American Enterprise, and First Things. For two years, she served as a regular commentator for National Public Radio’s “All Things Considered.” She earned her B.A. from Notre Dame, an M.A. from Yale and a J.D. from the University of Minnesota.

unrealized personal income by the end of 2022. These are very serious numbers. What’s the best response for the state to take? There are some hopeful signs. Lots of people—including educators, government agencies, philanthropies and some employers—understand that action must be taken, and many innovative experiments are underway. But too often they operate in isolation. What we really lack is a coordinated effort, a statewide strategic


plan, like a number of our competitor states have. Some are far ahead of us. They are using long-term strategic frameworks to enhance their state’s economic growth. The key here is that Minnesota needs an industry-led strategic workforce development plan. We can’t look to government to do this for us. Employers simply have to provide many more well-thought-out work-based learning opportunities. They also need to provide educational institutions, particularly community and technical colleges, with much better information about their future workforce needs going forward. The really good news is that a plan of the kind I just described is beginning to take shape here. A number of major Minnesota business organizations have been meeting since early 2018 to draft a five-year, statewide, strategic framework aimed at improving the ability of employers, school districts, higher ed institutions, gov-

A number of major Minnesota business organizations have been meeting since early 2018 to draft a five-year, statewide, strategic framework aimed at improving the ability of employers, school districts, higher ed institutions, government agencies and philanthropies to coordinate much more effectively to achieve cross-sector talent development solutions. ernment agencies and philanthropies to coordinate much more effectively to achieve cross-sector talent development solutions. This will be business-led, and a draft is expected later in 2018. It’s not about admiring the problem; this is about really moving the needle. This is about taking action, and going forward, and the hope is that we will see real grassroots work among employers

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across Minnesota—manufacturers in particular—to make this long-term vision a reality. The plan will include analytics and metrics and other tools to help employers identify short-term and long-term workforce needs in our state’s key industry sectors. That’s been a very important missing piece in our efforts to date. So, the hope is this important new initiative will begin to move the ball forward in a very real way.

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15


E X C L U S I V E

P O L L

HAZARD AHEAD?

Do booming sales distract manufacturers from the looming workforce crisis?

T

aken on its surface, the 10th State of Manufacturing® survey indicates again in 2018 that Minnesota’s manufacturing executives exhibit almost surreally high levels of optimism—all across the state—about their companies’ financial prospects for 2018. But the data also reveal some ominous workforce challenges on the horizon. My company, Meeting Street Research, interviewed 400 manufacturing executives between March 7-28, 2018. We added a 123-person oversample to enable us to provide regional analysis, as well. The margin of error for the main 400 sample is +/-4.9%. My overall analysis consists of four themes. • Manufacturers base their optimism on even stronger underpinnings about the economy than last year’s report. They expect record revenues, record profitability, to invest in their company at a record level, and to increase wages.

• The workforce shortage—for skilled and unskilled employees—looms large as a likely impediment to future growth to manufacturers across the board. • Despite acknowledging workforce challenges, an unexpectedly small number of manufacturers are preparing their operations with leadership training, productivity efforts, and overall strategic planning. • Notably, large and urban companies for the first time are indicating accelerating urgency about workforce issues, possibly signifying employers in Greater Minnesota will face even more intense levels of competition for employees.

OVERVIEW

Manufacturers remain remarkably upbeat about the prospects for their companies, with 93 percent in this year’s poll saying they were “confident” about the futures of their companies, just a point lower than

By Rob Autry

16

/ ENTERPRISE MINNESOTA SUMMER 2018


last year’s 94 percent. That confidence is bolstered this year by surging perceptions about the overall economy. The number of manufacturers who anticipate economic expansion is at 64 percent, exactly twice what it was just two years ago, and a record high number in the history of the State of Manufacturing® project. The data are remarkably consistent across the state,

Manufacturers’ confidence is bolstered this year by surging perceptions about the overall economy. among urban, suburban and Greater Minnesota. More than half (54 percent) say the business climate is better than it was five years ago. This optimism also yielded several other record-high predictions for 2018: • Sixty percent predict higher gross revenues; 36 percent predict those revenues to be at least 10 percent better than last year. • Forty-seven percent predict high-profit margins; 27 percent predict profits will exceed 10 percent. • Thirty-two percent expect to make capital expenditures; 22 percent predict the amount will exceed last year by 10 percent.

SUMMER 2018 ENTERPRISE MINNESOTA /

17


Bigger firms are for the first time more concerned about attracting qualified workers than they are about health care costs.

After last year’s all-time high, financial confidence record After lastremains year’s all near all-time high, high levels. financial confidence remains near record high levels.

“From a financial perspective, how do you feel right now about the future for your company?” “From a financial perspective, how do you feel right now about the future for your company?” Confident 79%

78%

21%

21%

December January 2008 2010

Not Confident 89%

90%

94%

93%

15%

11%

9%

6%

6%

March 2014

March 2015

March 2016

March 2017

March 2018

83%

82%

82%

84%

16%

17%

17%

January 2011

January 2012

March 2013 12

And, manufacturing executives expecting an economic expansion this year is at an all-time high.

And, manufacturing executives expecting an economic expansion this year an all high. economic “Thinking about the upcoming year, is in at 2018, do time you anticipate expansion, a flat economy, or a recession?”

“Thinking about the upcoming year, in 2018, do you anticipate economic expansion, a flat economy, or a recession?”

Economic Expansion 56%

53%

49%

December 2008

19% January 2010

9%

10%

January 2011

January 2012

37%

34%

58%

15% 7% March 2013

/ ENTERPRISE MINNESOTA SUMMER 2018

42% 42%

March 2014 14

18

Recession

54% 46%

32%

26% 8%

55%

40%

34%

Flat Economy

13%

March 2015

64%

48% 32% 15%

March 2016

28% 32% 4%

4%

March 2017

March 2018


KEY ISSUES

We can’t overlook how the escalating costs of providing employee-related health care impact manufacturers. Health care tops the list of issues that concern manufacturers for the tenth time in the 10 years we’ve been conducting the poll, this year topping out at 60 percent, beating “attracting qualified workers” by 13 percent. The slow rise in intensity can be attributed to uncertainty, as manufacturers

Health care tops the list of issues that concern manufacturers for the tenth time in the 10 years we’ve been conducting the poll, this year topping out at 60 percent. face the uncertainty of what’s going to happen in Congress to the Affordable Care Act. Republicans haven’t shown how they plan to replace it, or what impact it will have. My takeaway on health care is, well, still this uncertainty about what’s happening. I diagnose the uptick as uncertainty about how Republicans plan to deal with it. When asked to name the challenges that might negatively impact future growth, “attracting and retaining a qualified workforce” jumped 12 points to 48 percent, making it the top concern for the first time. Most telling, the workforce issue has captured the attention of larger manufacturers: • Companies over $5 million in revenue name it 79 percent, while companies with less than $1 million name it at 26 percent. • Companies over 50 employees state it at 87 percent, whereas companies with fewer than 50 employees call it at 38 percent. • Metro firms have nearly doubled their nervousness about the problem, while Greater Minnesota manufacturers remain the same as last year.

WORKFORCE

Manufacturers statewide are more concerned about finding entry-level

More than ever, these executives expect increases in More than ever, these executives expect increases in gross revenue and profitability this year, though gross revenue and profitability this year, though some expect increases in their capital expenditures. some expect increases in their capital expenditures. Percent Expecting Increases That Year Percent Expecting Increases That Year

Gross Revenue

Profitability

47%

44%

31%

32%

27%

28%

2012

2013

32% 24%

19% 17% 2008

2010

45%

41%

39%

23%

60%

55%

51%

36%

Capital Expenditures

2011

45%

44%

47%

44%

37%

35% 30%

32% 27%

27%

2014

2015

25%

2016

23% 2017

2018

16

The impact of an unqualified workforce is more difficult among larger companies. The impact of an unqualified workforce is more difficult

“What is the impactamong of yourlarger inability to attract qualified candidates companies. having on your company growth?”

“What is the impact of your inability to attract qualified candidates having on your company growth?” 91% 71%

70%

83%

74%

68%

67%

58%

28%

26%

31%

38%

31%

25%

17%

9% Overall

Twin Cities

Greater Minnesota Firms

Under $1 Mill $1 Mill - $5 Mill Difficult

$5 Mill+

Less Than 50 Employees

More Than 50 Employees

Not Difficult 27

employees (33 percent) than employees with formal technical training (27 percent). What’s interesting is that bigger firms, those with more revenue, those with more employees, are for the first time more concerned about attracting qualified workers than they are about health care costs. Just 19 percent of manufacturers “have a structured leadership development program for employees.” Again, larger companies lead the way. Thirty-two percent of companies with more than 50 employees more than doubled the number of companies with fewer than 50

(15 percent). A majority (55 percent) of manufacturers would like local educational institutions to enroll more students in manufacturing programs; 53 percent are looking for them to “develop intern programs with local manufacturers.”

STRATEGY

Just 53 percent of manufacturers are responding to the worker shortage by using a formal strategic planning process, with large and metro-based companies showing the most interest. Seventy-three percent of companies with more than $5 SUMMER 2018 ENTERPRISE MINNESOTA /

19


million in revenue use strategic planning, in contrast to 39 percent for companies with less than $1 million. Similarly, 76 percent of companies with more than 50 employees use formal planning, as opposed to just 46 percent for companies with fewer than 50 employees. Twenty-eight percent of companies said “strategy is strictly the role of the CEO,” while 27 percent said they had “a 1 to 3 year written plan and all staff know their roles and actions to achieve the plan.” Most companies intend to derive growth through the acquisition of new customers (60 percent), but intriguingly: • Fifty-four percent of companies with revenue between $1-$5 million expect to find growth by maximizing productivity. By contrast, about a third of companies under $1 million (33 percent) and over $5 million (37 percent) consider productivity as a driver for growth. • Forty-one percent of companies over $5 million said that future growth would be driven by “developing company managers and leaders.”

gap between the the Twin and TheThe gap between TwinCities Cities and Greater Minnesota in concern over attracting and Greater Minnesota in concern over attracting and retaining qualified workers has shrunk.

retaining qualified workers has shrunk.

Concern Over the Ability to Attract and Retain Qualified Workers (% Concern 8-10) Concern Over the Ability to Attract and Retain Qualified Workers (% Concern 8-10) 49%

21%

24%

35% Retaining 2018

Attracting & Attracting & Retaining Retaining 2017 2008 Greater Minnesota Firms

30

Only 34 percent of companies said they planned to invest in employee development and leadership training to retain qualified employees. Once again, large companies led the way. Sixty-three percent of companies with more than 50 employees utilize training, more than

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twice the number of companies with fewer than 50 employees (30 percent).

WAGES

Led by large companies, more than half (52 percent) of the executives interviewed said their companies expect


to increase wages in 2018. Ten percent said the increases would exceed 10 percent; 14 percent of them said hikes would be between five and 10 percent; while 27 percent indicated they would be below five percent. Sixty-eight percent of companies over $5 million said they would increase wages.

TAX REFORM

Manufacturers displayed strong acrossthe-board support (67 percent) for the recently enacted Federal Tax Cuts and Jobs Act. The support is strongest among companies with more than $5 million in revenue (74 percent), and among companies with more than 50 employees (71 percent).

Just 53 percent of manufacturers are responding to the worker shortage by using a formal strategic planning process. At the same time, they are not yet ready to declare whether the tax cut has benefited their companies. Statewide they are split: 45 percent say it has helped, 42 percent say it has had no impact, and six percent say it has hurt their companies. Large companies are most upbeat about its impact: 55 percent of companies with revenues greater than $5 million have realized benefits, as have 50 percent of companies with more than 50 employees.

About the pollster

Rob Autry, founder of Meeting Street Research, is one of the nation’s leading pollsters and research strategists. The Meeting Street Research team has over 25 years of combined public opinion research experience and 2,000 research projects under its belt. Autry has conducted all 10 State of Manufacturing® surveys. Before founding Meeting Street, Autry was a partner at Public Opinion Strategies.

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21


Explain This

WHY DO PARENTS DISLIKE

TWO-YEAR DEGREES? It turns out, they don’t.

Most manufacturers will tell you that more students don’t enroll in tech schools because parents want them to attend universities. We convened a diverse cross section of them to talk about it. Their responses surprised even us.

S

mall and medium-sized manufacturers are all fairly tense about where they are going to find the next generation of employees to operate their increasingly sophisticated operations. Some blame teachers and counselors for not telling students about the opportunities in tech fields. Others blame parents for all wanting to push their kids into getting four-year degrees. What do you say to that? • I’ve said for a long time that the average percentage of the population with a college degree is about 25 percent, it may be a little higher in Minnesota. Yet, high schools send darn near 100 percent of their kids on to college. That tells you what? That 75 percent quit. I think it’s a huge problem. I think the high schools don’t track kids; they don’t even offer information about options other than college because they want to say 98 percent of our kids go on to college. • We actually hired an outside company to do our own assessments for a career path for NAME versus relying on the assessments at school. • I have a daughter who did well in high school and goes to an allwomen’s liberal arts college in Boston. I also have a son who would come home and say the school wanted him to take a four-year path. He heard someone from DCTC (Dakota County Technical College) talk about some other career paths and was super charged up about that. We then heard about Iowa Central, and some pretty phenomenal programs. It is a two-year campus, but it has a four-year feel. He can live on a campus. I don’t blame the high school. Sometimes

22

/ ENTERPRISE MINNESOTA SUMMER 2018

you just also have to listen to your children. • My husband went to a two-year school, so he’s been pushing my son to consider that route. But he wants to go to a four-year college. And he’s going to be just fine. Is there a sense among some parents that going after a two-year degree is somehow “settling?” • Absolutely. • I always thought it would be great for me to have gone to a twoyear school, take some business classes and then get trained on top of that. So, I’d have the business acumen along with running a small business, that type of thing. But a lot of times that combination isn’t there, and a person with a small business or a manufacturing business just can’t run it right. • Some of it is messaging. I’ve got a unique perspective in that I do about 100 senior interviews at Lakeville South every year, asking things like, “What do you plan to do after you graduate?” And, “Where do you see yourself in five to 10 years?” I only have about 10 to 12 minutes to give feedback. You can see right away whether there’s a good connection between the courses they’ve taken and where they’re heading. You can see if they haven’t spent much time on the career piece. You can see that some don’t have a plan for next year, and they’re not going to be successful. From the perspective of manufacturers, do students have much exposure to a manufacturing lab, or something we used


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to call shop class? • One of the issues with high schools and trades classes is these classes are electives, and the way the hours work out, there are only so many electives to go around. I think students can choose two electives per semester, and among them are gym, band, you know some of the fun things. And so, sometimes those electives get chosen over the welding elective, and I think that’s the problem. • I want to go back to the last question really quick. You know, March Madness is going around, right? In Wisconsin, you go to a grad party and somebody says, “I’m going to Wisconsin [University of Wisconsin].” And you’re like, “Oh, yeah, you have to go check out this place, and you have to go do this, and it’s all about the experience.” And then somebody else says, “Well I’m going to be a diesel mechanic and by the time I’m 19 I’m going to make $40 an hour.” And you say, “Well, good luck with that.”

EXP ERI ENC E”

• Well, and that’s what we talked about. A lot of us who have four-year degrees, we remember those friendships, living on your own, independence, learning about yourself, and we don’t want our kids to miss out on that. I don’t want them to have to be full adults right away, you know? I want them to keep learning and do what they love, before the time comes when you’re going to be working the rest of your life. • Another benefit of having a manufacturing lab at a high school is that the teachers themselves are advocates for those kinds of jobs. There is a study out there that concludes that the number of unfilled jobs in Minnesota is going to jump from 60,000 to as much as 280,000 in the next five years. That’s going to create a lot of job opportunities in manufacturing. • You asked earlier about the status of a four-year degree. I look around this table and it is likely that everybody has at least one college degree, probably some of us have more than one, and we’re having a conversation about career paths for all kids, not just kids like ours. I think about some of the kids in my husband’s class who don’t even have homes. They don’t know SUMMER 2018 ENTERPRISE MINNESOTA /

23


where their next meal is coming from. And where’s their guidance coming from? A big challenge for high schools is their guidance counselors have 700 children apiece that they’re supposed to provide guidance to. And, of course, their frame of reference is a four-year college. Their teachers’ frame of reference is a four-year college. Everybody who influences them talks about a four-year college. And how do you get those people to think differently?

ing and the counseling, saying, “What do you like to do? What are you good at?” Sometimes, it’s the things outside of school where I see kids’ passions, in things that aren’t offered in school.

• And this high school doesn’t want to lose the funding for the student. So they don’t even tell the kids that these opportunities are available to them, when there are hands-on opportunities out there.

• One small tweak could be done fairly easily. Lakeville South seniors are required to do a job shadow. But it’s required during their senior year and they have a deadline of March 1st. I’m thinking that is so late in their life to be considering a job shadow. If my son would have had that as an eighth grader or a ninth grader, he would already have had opportunities to see a couple different things and be more invested.

• Any kind of resource that can be provided to high school guidance counselors, something they can hand out when they’re meeting with 400 students at a time, would be helpful. Here are some career opportu-

“I think manufacturing has a public image problem. The four-year institutions have worked long and hard at selling themselves and at propping up their public image.” nities. I think it would be great if districts offered Career 101 when kids got into middle school, Career 102 when they were freshmen, and Career 103 when they got to be sophomores. And I think it’s a shift in everybody’s mindset because all of this is being decided by people who have fouryear degrees or more. • Burnsville High School has done some phenomenal things with partnerships with business communities. They have an auto dealer who actually has a garage and works with the kids. They have a credit union that has a location in the school. They have a fab lab, they have lots of business partnerships. It was so eye-opening to me. Every student should try these opportunities. • Students develop an interest and passion in things they’re good it. I think if we looked at it from the kids’ perspective, we might look at it differently. Just providing information is one thing, but the coach24

/ ENTERPRISE MINNESOTA SUMMER 2018

• There are a lot who have fallen between the cracks. I think that’s where we’re failing as parents and schools, if we’re not getting them to a different place as a collective whole, as a village.

A school administrator told us that he thinks up to 50 percent of graduating seniors in his area have no idea what they are going to do after graduation. Who is responsible for this? • Students and parents spend a lot of time planning visits to college campuses. Why not make it an opportunity to visit a manufacturing company and see what kinds of opportunities are there? • One other thing might be for students to get jobs when they’re sophomores in high school, help them start on their career pathways while learning? • They don’t work because of activities and the demands of extracurricular activities. • I think high school kids aren’t aware of the opportunities out there. We need career fairs at high schools and private investment in programs at high schools. I know when Farmington built their new high school, they significantly downsized the hands-on programs. The shop doesn’t even have a single welding station in it. It has one table saw and it’s so inadequate. • It’s a challenge for schools because those classes are expensive. They take up lots of space, lots of equipment, and equipment changes all the time. I think that anything the private sector can do to educate high school students or middle school students is going to help them make decisions about their future that

might not include a four-year track. In Alexandria and Fergus Falls, the local manufacturing community donated equipment for those manufacturing labs. And they supplied people to teach, not just to teach students but to teach the teachers. Do you sense there is room for collaboration like that between education and manufacturers? Manufacturers would do just about anything right now, I think. • Absolutely. • I think there needs to be structural change. The senior interview, the job shadowing, and the career jamboree haven’t been successful. Kids are just filling out pieces of paper and copying off each other to get done. It’s not structural change, it’s a one-day event. And how many kids change their mind or get exposed to what they want to do? I’m guessing the latter is a really small number. So what kind of information motivates students when they’re thinking about their career choices? Is it the fun factor? Is it money? • Do they have a clue? • I think it’s, again, connecting what they’re good at and their passions with a job, looking at what that translates into. If you kept talking to kids long enough, you’d find out what they do outside of school that they like to do. Maybe they don’t do extracurricular activities, or they don’t do sports at all. But there’s something out there. There’s something out there that you can see they are passionate about. Or maybe it’s graphics ... or maybe it is gaming. So, it’s graphics or game design, there’s something that’s out there for them. There was a study earlier this year that showed how two-year degrees can be more lucrative than a four-year college degree, sometimes remarkably so, if you factor in the cost of a four-year degree. • I don’t think a lot of parents know that. • In the last 15 years, we’ve seen this unbelievable amount of debt. Because that’s what you’re supposed to do, go to a four-year college and get a four-year degree in a field that isn’t hiring like history or philosophy, whatever. They end up with this tremendous amount of debt, and no real skills behind it. My wife and I both have four-year degrees, but just because


“High school kids aren’t aware of the opportunities out there. We need career fairs at high schools and private investment in programs at high schools.” we did it doesn’t mean my kids should. I think it’d be wonderful to hear about these hands-on experiences for half the price and for double the pay, that when you graduate, you can go do this. I’d be like, “I didn’t know you could do that.” • I don’t think it’s being communicated, either. • My daughter’s a sixth grader and industrial tech is an offering for an elective next year. So, I said to her, “Why don’t you pick that?” “I don’t want to do that.” I asked, “Did they talk to you about what it is?” “Well, no. I just don’t want to do that.” It’s hands-on experience, though. • We do that with our kids for sports and food, right? You have to try it once and if you don’t like it, then we’ll talk. • That way, you know what you like and also what you don’t like. • It would be interesting to have this kind of a conversation with kids in their 20s who are struggling to find their path. And you could ask them some of these questions that you’re asking us because I think of my son, my youngest one and his buddies, all of whom have floundered, and wonder what would have helped them when they were in high school? They’re close enough to it that they could probably remember and tell you. I don’t know. I don’t have those answers. • But they would have those answers. • Because they all went to college but if they had other information, then maybe they wouldn’t have chosen that path. • Right. What would have influenced them to make a different decision? I don’t know. That’s a question for those kids. • And they need to think about how much college costs. Parents are terrible at math.

When it comes to, “Here’s your $1,200 a month student loan repayment for the next 20 years, have a nice day.” But they have a degree that pays them 12 bucks an hour. Wait a minute. Who did the math on this one? Some of those mechanical exercises at the high school level would be helpful, where people actually start to think, “How much money do I need to live on?” • I went to Mankato because ... I have no idea why I picked it. And I picked human resource management because a business degree was the easiest and I thought, if I learn to lead people, that’s what you want to do in business. I wish my parents would have sat down and asked, “OK, what are your goals? What kind of house do you want to live in? Where do you want to live, what do you want to do?” I think that’s the only answer. • I think more so than teachers. I think they have enough trouble just teaching right now. • To a large class. I don’t know that it would be successful if you put it on the schools. Focus more on the parents. Is it because that’s the life experience of those counselors? • There aren’t a lot of counselors that have manufacturing experience. • Or they’re being pushed. Do the schools want a high percentage of their graduating students going to a four-year college? Does it look better? Do they get more money? • And then you have schools saying, “You can go to a four-year college. You can make big money.” And you said only 25 percent are actually getting a job in what they went to college for. • Look at the kids they’re interviewing. I would say 30 percent or more don’t have an engaged parent or parents. • So, when you say put it back on the parents, there is no parent to put it back on. They are overcoming their family situation every day. There are some amazing stories that some of the deans know about. I don’t think we can just say the parents are the answer, either. We’ve got a more diverse population, more diverse than in this room, less engaged parents than in this room, so it does take a village. Actually, if that’s the group you turn as a percentage, then I think

those jobs will be filled. • It’s a diverse population because there is either single or no parent involvement. OK? Where are they going to get the exposure? And some are amazing and they’re probably going to get scholarships because somebody spent enough time with them to reach out to some school or some person to make a connection that is going to change their life. They are the first one in their family to get more schooling, whether it’s college or a two-year school, and be successful. Manufacturing executives also like to talk about what they describe as a lack of soft skills in younger workers. Alarm clock issues. Common courtesy. Do you see that among your kids and your kids’ friends? • I’m an HR person. It’s crazy. First thing out of their mouth is: “How much paid time off do I get?” I’m like, “What?” It’s crazy. The thing that I think manufacturers have been working hard on is trying to adapt to the millennials (Generation Y) by having them work vampire hours that go later in the day, into the evening. Especially the kids who just cannot get up. I’ve got a vampire engineer. He comes to work at 11 o’clock and he’s there till 8 o’clock at night. There’s not a lot of staff when he’s there but the people are on the production floor. Kids today, they march to their own drum. It is difficult, I have to admit. • You are looking for people you can count on to show up or be respectful to each other, or who wouldn’t ask, “Where’s my promotion?” after the first three weeks. • I have a farmer that I’ve had for 38 years and he’s still there 38 years later. • I think manufacturing has a public image problem. The four-year institutions have worked long and hard at selling themselves and at propping up their public image and talking about how people with four-year college degrees earn so much more over their lifetimes, and we’ve all bought into it. And they’ve spent a lot of years doing that. So, I suspect that the manufacturing industry has some work to do on its public image, and there are ways to accomplish that: by talking to kids and talking to them through the kinds of media that they consume when they consume it. And it takes people a lot younger than us to figure that out. SUMMER 2018 ENTERPRISE MINNESOTA /

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Technology

ARE YOU READY TO EXPLOIT THE IoT? Savvy manufacturers can squeeze a large variety of useful efficiencies by leveraging the Internet of Things Editor’s Note: This article was adapted from a presentation made by Steve Haarstad at Century College.

I

s the Internet of Things (IoT) just another fancy buzzword like Ideate, Internet 2.0, Big Data, Agile, or Digital Productivity? Or is it a concept that we can truly benefit from? What I find interesting is the paradox that while only half of the people I talk with have heard of it, when we begin to discuss what it means and could do, nearly everyone understands and most are using and applying the concepts already. What is the Internet of Things? I define it as electronic devices connected to a network so that they can communicate and control (or enable us to control) other things. For example, you can now use a smartphone app to adjust the temperature setting of your house in frigid Minnesota from the cozy sunroom of an Arizona condo. How about smart TVs? Or Apple watches? These all are electronic devices connected to a network that can share and communicate data. That is IoT. What could this look like? I recently watched a video in which a fellow described how an electronic bracelet monitors his sleep cycles. Over time, it discerns his patterns of deep or shallow sleep and determines the optimal time to wake him up. Here’s where IoT kicks

By Steve Haarstad 26

/ ENTERPRISE MINNESOTA SUMMER 2018

in. When it’s about time to wake up, the device begins to vibrate and at the same time, signals his bedside lamp to slowly illuminate the bedroom, so there is no sudden flash of light. It then simultaneously notifies the kitchen coffee maker to start brewing his morning cup of joe. It tells the thermostat to adjust to the day-time temperature. I’m more of an alarm clock guy myself, but you get the point. It’s IoT in action and it can be very powerful in our lives as consumers. The industrial IoT (IIoT) operates from the same basic concept: it connects a network of devices to communicate and control actions and activities. But there is a substantial difference. If the sleep device fails to turn on the lamp or brew the coffee, the sleepy end-user might merely over sleep. He can use his fingers to flip on the lamp and then stumble into the kitchen to push the brew button. Businesses, on the other hand, require better accountability. A failure of an industrial IoT application might shortcircuit production in the best case; in the worst, someone could get hurt. Industry demands stronger security and reliability. Engineers often see the IIoT as a feedback control loop: See. Decide. Act. We see or measure something. We use that input to make a decision, and then act on our decision. This is something we all do every day while driving our cars. We use visual inputs to turn or adjust our speed. IIoT enables us to digitally automate this. So, systems are running the cycle or at least they can provide us the input. Ultimately, it’s a feedback loop.


Some companies have been doing this for years. Back in the ‘90s, it was more like the intranet of things. Companies performed these functions on their internal networks. UPS, for example, for years has digitally monitored its trucks and deliveries. Emerson, a company I used to work for, innovated a concept back in the ‘90s called Plantweb™, an internal network that enabled managers to make smarter and quicker decisions by simultaneously capturing and connecting data all throughout the plant. It was local to the intranet of their business. Today, the internet enables companies to share data outside their walls. As an example, an oil and gas refinery in Minnesota could be controlled from a company command center in Houston. Those operators can monitor what’s happening at their facility in Minnesota and make decisions affecting the process like opening and closing valves, or turning systems on and off. An effective application of the IIoT depends on two essential features. The first is its ability to “sense” data. What can be sensed or measured? We can measure all kinds of things: position, looping, temperature, moisture, humidity, sound, acoustics, chemicals, gas, flow, pressure, liquid levels, electricity, acceleration, vision, optics, and light. Second, we have to apply it to our businesses. But how do we do that? Enterprise Minnesota approaches manufacturing in four ways: Strategy for Growth, Continuous Improvement, ISO Management Systems and Talent and Leadership. Every critical function in your business lives somewhere in this diagram. It doesn’t stretch the imagination to see that the tighter, the better aligned, the better fit there are between the different pieces of the

Steve Haarstad is a business consultant at Enterprise Minnesota. He helps manufacturers understand how to grow their top-line revenue and strengthen their leadership culture. Before joining Enterprise Minnesota, Haarstad served as global customer support manager, global education manager, and marketing training manager for Emerson Automation Solutions in Eden Prairie and Rosemount. He holds a B.S. in mechanical engineering from Michigan Technological University and an MBA from the University of Nebraska-Lincoln.

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puzzle, the stronger the business. Using this framework, the best place to start is with Strategy. Strategy for Growth is where your overall business strategy, revenue growth strategy and other growth resources live like finances and customer management. I always start with strategy because it is the way you discover why you’re doing something. Trying to exploit the capabilities of the latest, greatest super technology won’t be worth much until a business can find alignment to its strategic goals. We need to connect an innovation like this to things like growth, cost reduction, quality improvement, personnel safety or a myriad of other goals that you might have for how your business operates and to make sure it’s performing well. A great quote from the Art of War by General Sun Tzu suggests the importance of starting with strategy. He says: “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” We need strategy and tactics. However, this suggests a definite order. Could we get lucky by diving in with the IIoT concept in a random part of our process? Sure. However, if we want to ensure a successful outcome, we will start with an alignment to our strategic goals. Continuous Improvement involves lean processes, increasing productivity and reducing waste. IIoT can apply broadly to lean principles and applications. It might help increase productivity, reduce wastes of time, energy, people, materials, equipment, or motion. I want to focus our thoughts on a couple of ideas for automating and controlling our processes. Specifically, think about how IIoT can help increase production capacity by automating repetitive tasks. The days when automation displaced workers are well behind us. Today, automation is needed to supplement our workforce so we can grow and reach the next level. This is emphasized in a couple statistics that were recently released. For every one job that is currently open in Minnesota there are 1.1 people available to fill those jobs. And that’s not 1.1 skilled people. Another report predicts that there are 60,000 unfilled jobs in Minnesota today. That number is predicted to climb to as many as 280,000 within five years. When we automate repetitive tasks, 28

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Continuous Improvement Automate and Control Continuous Improvement • Automate – supplement your workforce by automating

Automate and Control repetitive tasks, increasing production capacity • Automate – supplement your workforce by automating repetitive tasks, increasing production capacity

Continuous Improvement: Automation Impact Automate and Control Yesterday

Today Automation Impact • Control – monitor performance; decrease waste and increase Displace workforce Supplement workforce Yesterday Today output Decrease costs Increase job satisfaction Displace workforce Supplement workforce Increase capacity Decrease costs Increase job satisfaction Control Impact Increase capacity Yesterday Today Manual process Automated process Post-production Real-time monitoring Manual or Automated response options

Business Management Monitor and Predict Business Management • Monitor – track energy consumption across machines, areas, or

Monitor and Predict departments; identify waste and increase efficiencies • Monitor – track energy consumption across machines, areas, or departments; identify waste and increase efficiencies

Business Management

Monitoring Impact

Monitor and Predict

Yesterday Today • Predict – monitor critical equipment to proactively maintain or Monitoring Impact Monthly utilities Real-time monitoring replace; increase uptime, minimize downtime, reduce Yesterday Today Lost or wasted energy Recognize and correct maintenance costs Monthly utilities Real-time monitoring inefficiencies Lost or wasted energy Recognize and correct Predicting Impact inefficiencies Yesterday Today Scheduled maintenance Maintain when required Predictable expenses Increase time between maintenance

we not only increase our productivity, we also improve job satisfaction of our workforce because they don’t have to do that manual task anymore. We can also use IIoT to decrease waste and increase output by monitoring the performance of our processes. This is over simplified, I know, but in the past, we controlled our processes at intervals or maybe through a QC check, certainly not in real time. We’d run X number of our products or do X number of our processes, and at some point later on, we check it out. Today, IIoT might enable us to automate some of that control in a way that provides real-time monitoring. We can immediately detect when we go out of spec; we can pause, fix and continue. We increase our output and decrease

our waste by implementing this type of control. So, what are some ways that we can use IIoT to automate control? Robotics is one answer and utilizing more sensors is another. Sensors can help measure things like temperature, pressure, depth, shape, and light—you name it. Measuring things related to our processes will provide critical information to help us make quality decisions. What do we do with that data? Many manufacturers use Manufacturing Execution Systems (MES)—JobBOSS is one example—to connect the business program to machines. Dashboards can provide real-time data, reports, and feedback so we can make those real-time decisions. A smaller-scale concept is Su-


Talent Safety and Environment Talent • Safety – monitor safety equipment; faster response and reliable

Safety and Environment metrics • Safety – monitor safety equipment; faster response and reliable Talent metrics Safety and Environment

Safety Impact • Environment – monitor and react to environment for safety and reporting; maintain healthy work environment and minimize Yesterday Today Safety Impact negative regulatory impact Delayed response Instant first responder alerts Yesterday Today Manual recording and reporting Reliable incident reporting Delayed response Instant first responder alerts EnvironmentalReliable incident reporting Impact Manual recording and reporting Yesterday Today Delayed response to spills or leaks Manual recording and reporting Fines levied from last recorded observation

Instant alert to spills or leaks Automatic recording Fines limited to recorded times

pervision Control And Data Acquisition (SCADA), a closed loop system that connects machines and controls designed for remote control. Both examples allow us to gather data into a system that enables us to exert control over our process.

ISO Management Systems, at least the new 9001:2015 standard, emphasize essential management tools and risk mitigation. It explores how we measure, monitor and manage our businesses as well as how we identify risks that

CUT DOWN COSTS WITH MOTOR REBATES.

could jeopardize the business. Business management systems like ISO provide a comprehensive view of our entire business. I’m going to focus our thoughts here on monitoring and predicting. From a monitoring perspective, let’s look at how we use energy in our businesses. And for predicting let’s talk about how that might affect the maintenance work that we do. In the past, our monthly utility bills provided about the only way to track our energy consumption. And of course, that would alert us if we were using or wasting more energy than we expected. We could then investigate and might find that we are wasting energy through a leak in the system. Today, IIoT sensors can monitor energy usage in real time, enabling us to recognize when we are losing, wasting or leaking energy. And that can save a lot of money. IIoT also provides significant improvements to the way manufacturers maintain their equipment in ways that increase uptime, decrease downtime, and reduce

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overall maintenance costs. Previously and maybe today, we perform weekly, monthly, quarterly, or annual preventive maintenance on our machines according to the manufacturer’s recommendations. This is great because it is predictable. We can forecast costs for labor and parts and plan for downtime. Today, we can monitor critical components of our machines through IIoT. We can replace maintenance parts when they need to be replaced, rather than because a maintenance schedule suggests it. What would the positive impact be if we can reduce one maintenance circuit out of the whole year? Sensors again provide significant enablers for the IIoT. Sensors can measure temperature, pressure, flow, and vibration. They can also work in tandem with an asset management system, a software program that allows all these signals to be fed into dashboards with real time reporting, allowing management of those devices from a central location. This can work with a wide variety of devices, including motors, bearings, air compres-

sors, and control valves, among others. By continuously measuring the vibration of a motor, for example, we can identify when it starts to deviate from its standard state. Using IIoT, we can measure the standard temperature of a bearing; when it spikes upward, it’s time to replace it. It can also monitor the pressure of a compressor or the position of a valve. These are all measurements that can be monitored. It helps avoid unnecessary maintenance, and also prevents the critical failure of a component that can take down an entire line. The idea of monitoring critical components is a key focus of ISO 9001:2015’s objective of mitigating risk. Talent and Leadership is all about how we attract, invest in and retain people, the lifeblood of our business. The IIoT can affect people in a myriad of ways. Employee safety and keeping a safe environment are a couple of things that jump out at me with some immediate value. An eye wash station is an example of

a piece of safety equipment common to many manufacturing facilities. With that said, this is a piece of equipment that you always want to have yet hope never gets used. If an employee is using an eye wash station it is because something bad happened to them. In the past, we may only know if this is happening or happened if we are lucky enough to have a co-worker witness the problem and jump to their rescue. The potential delay in medical attention could significantly hurt this employee. What if we have a sensor on that device and get an alert, multiple alerts maybe, in a lot of different ways so that we can react quickly to that need? We can get them the medical attention they need. In addition, how does this affect our safety records or recording system? In the past, we may have used a manual system. We record the incident in a spreadsheet or something and because a human is doing it, there’s an opportunity for error. But what if we’re doing that digitally? Now we’ve got an automatic recording and reliable safety

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metrics. When OSHA [Occupational Safety and Health Administration] comes to visit us the next time, it’s probably better to have a reliable set of data where we know what happened than data that maybe isn’t so reliable. The IIoT can also help monitor, react to and report on things about the environment from a safety perspective. It is a given that we all follow the rules to maintain safety around hazardous chemicals or gases we use in our facilities. By using the IIoT we can react faster and minimize negative regulatory impacts. Think about how we use pressure relief valves. Several years ago, I heard about a facility that monitored a safety relief valve by putting a sock on it. A supervisor would walk by once every eight-hour shift and see if the sock was still on there. If it wasn’t, they’d mark it down. Well, the Pollution Control Agency is going to come in, and they’re going to say, “Let’s see. So, at eight o’clock, you said it was good, but then you didn’t at four o’clock. We have to assume that for eight hours it was off.” This will equate to a significant fine. The IIoT technology can help connect and monitor the device that will determine how long a pressure relief valve was open. In the previous example, we have to assume eight hours while in reality, it may have been only 45 seconds or less. The monitor provides proof. Sensors, again, are key to this success. I heard that someone described their plant by four safety measurement points, the Four Ds: distant, dangerous, dirty, and dull. These are useful categories for thinking about how to deploy the IIoT. We can invest in a $1,000 sensor to keep track of the activity and data and let employees be more productive and safer. To summarize, the IIoT is more than just a fancy buzzword. It is a powerful concept that can have a significant impact on the bottom line of our business. Start with your strategy and make sure it aligns with your goals. From there, think about ways to automate control, monitor risk, and keep your people safe. I would wager, if you put your mind to it, you can find dozens of ways to apply this powerful idea to your business.

Join us for the

Southeastern Minnesota Manufacturers Gathering to network and highlight the great careers available in the region. Exclusive to manufacturers! Date: Wednesday, June 27, 2018 Time: 7:00 a.m. – 11:30 a.m. Place: International Event Center, Rochester Register at: www.enterpriseminnesota.org

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Final Word

No Easy Answer Manufacturers grapple with smartphone policies

A

friend of mine likes to describe how two teenaged nieces vigorously clicked away on their iPhones all through Christmas dinner. “Who could you possibly be talking to?” asked their incredulous mother. “It’s Christmas Day! Can’t your friends give it a rest?” It turns out they weren’t talking to friends. They were texting each other; each while wedged so tightly into folding chairs around the table that their elbows actually touched while they typed. We all have similar anecdotes. Smartphones have become an artificial, semi-permanent appendage to the palms of every young person in America (and, let’s be real, to most of the rest of us, as well). I’m sure even sci-fi visionary Gene Roddenberry would have gawked at this

Smartphone policies provide an educational symbol of how managers are approaching their employees. ubiquitous real-world take on Star Trek’s “tricorders” he first introduced some 50 years ago. To manufacturers, smartphones have become more than a cultural sensation. Our 2018 State of Manufacturing® focus groups have revealed how smartphones have come to symbolize a workforce challenge that’s becoming very real. Let’s set the stage. 1. Manufacturers are dealing with an unprecedented challenge of finding workers to help them cope with the production demands of a booming economy. That challenge is getting worse by the fact that baby boomers are starting to retire in large numbers and the 20-somethings behind them have neither the population nor, it seems, the inclination to take their places. 32

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Lynn Shelton is vice president of marketing at Enterprise Minnesota.

One study projects that the number of unfilled jobs in Minnesota will go from 60,000 today to possibly 280,000 in just five years. Whew. 2. I’ll risk drawing a stereotype to make a point: focus group participants almost universally agree that the new generation of workers show little similarity to the boomers they’re replacing. They are more transient; gone are the days of the cradleto-grave welder. These folks are going to change jobs. A lot. They want flexible work hours, work weeks, and time off. They want a career path they can see; they want to know the tangible benefits of staying with a company for two or three years. And they’re more demanding. They know they are in a seller’s market. They can get in their car and drive away from Company A

during their morning break and be working at Company B the next day. And they want their smartphones. Smartphone policies provide an educational symbol of how managers are approaching their employees. The focus group discussions have been lively. Some execs still draw a black line. No smartphones on the floor. None. Zero. They get secured in lockers, or they stay in cars; one manufacturer provides a bin into which they all must be dumped before entering the manufacturing floor. Another manager, frustrated with the growing number of 20-minute bathroom breaks—presumably taken with a smartphone in tow—joked about installing equipment to jam cellular and WiFi signals in his facility’s restrooms. (In fact, that technology exists, using a mesh made of a grounded metal screen to block electric fields which include mobile transmissions. I looked it up on The Google. Using my iPhone.) Other executives are taking the opposite approach. What if they’re using it as a calculator, they ask, or using it to track productivity? Still, another described embracing the cellphone as an engagement tool that enhances an employee’s quality of life. His company has recently inaugurated a policy that enables employees to listen to music or books while on the job. Another owner quoted an industry statistic that younger workers will actually quit their jobs if separated from their smartphones. “We’re not going to fight it,” she said. “We’re going to find a way to make it work,” adding, “I own the company. No one is taking my iPhone from me!” As for me, I have neither the expertise nor wisdom to take sides in this debate, other than to watch with fascination. And I can observe that like Gene Roddenberry, our grandpas—managers and line-workers alike—would be astounded by realities of 21st-century labor relations.


Fifty-three percent of manufacturers say they have a formal strategic plan to achieve profitable growth. Is your company one of them? Call us today at 612-373-2900 or reach us at enterpriseminnesota.org for a free 90 minute consultation with one of our strategy experts.

We can help you grow profitably! Scan here to learn more about how we can help your business. 2100 Summer St. NE, Suite 150 • Minneapolis, MN 55413


You’re Invited Preparing for the Sale of Your Business & Retirement, Estate & Charitable Gift Planning If you’re a business owner with plans for retirement or selling your business, this program is tailored for you, as it will cover:

• • • • •

Transaction Planning: steps necessary to ready your business for a sale Private Equity & Investment Banking: buy-side vs. sell-side perspectives Asset vs. stock sale, seller notes, & installment sales Sophisticated legal solutions for exiting and succession planning Scenario Modeling: Understand how the structure of the deal intersects with asset allocation, investment & estate planning • Tax & Charitable Gift Planning The program will be led by our distinguished group of panelists:

• • • • • • •

Maxwell J. Bremer - Principal, Corporate Transactions Group at Gray Plant Mooty Steven Beck - Managing Director at Hennepin Partners, LLC Paul J. Meyering - Senior Managing Director at Spell Capital Partners Bill Garrison - Executive Director, Consulting Group at Morgan Stanley James H. Lannan - Financial Advisor at Morgan Stanley Chad R. Ellman - Financial Advisor at Morgan Stanley Sheryl G. Morrison - Principal, Trust, Estate & Charitable Planning at Gray Plant Mooty

Date: Tuesday, October 23RD

Time:

Venue: Gray Plant Mooty

Reception: 5:30 - 6:30 PM

500 IDS Center - 5 Floor 80 S. 8TH St Minneapolis, MN 55402 Parking Validated: Marquette/IDS Ramp

3:00 - 5:30 PM

TH

Spouses, CFOs, and guests welcome RSVP

james.lannan@morganstanley.com or (952) 841-6454

Morgan Stanley | 8300 Norman Center Drive, #1150 Bloomington, MN 55437 The guest speaker(s) is neither an employee nor affiliated with Morgan Stanley Wealth Management. Opinions expressed by the guest speaker(s) are solely their own and do not necessarily reflect those of Morgan Stanley. (Add if applicable) Individuals should consult with their tax/legal advisors before making any tax/legal-related investment decisions as Morgan Stanley and its Financial Advisors do not provide tax/legal advice. © 2018 Investments and services offered through Morgan Stanley Smith Barney LLC. Member SIPC.

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Profile for Enterprise Minnesota

Enterprise Minnesota Magazine - Summer 2018  

The 10th annual State of Manufacturing survey revealed that despite booming profits Minnesota manufacturers must prepare for a worsening wor...

Enterprise Minnesota Magazine - Summer 2018  

The 10th annual State of Manufacturing survey revealed that despite booming profits Minnesota manufacturers must prepare for a worsening wor...

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