Enterprise Minnesota Magazine - Winter 2018

‘VALUES’ PROPOSITION

How Mike Patterson built success at King Solutions on priorities that go far beyond profitability

Helping Manufacturing Enterprises Grow Profitably WINTER 2018

CONVERT YOUR C.A.V.E. MEN (AND WOMEN)

How a commitment to Continuous Improvement will bring surprising long-term strategic stability to manufacturers

Enterprise Minnesota 2100 Summer St. NE, Suite 150 Minneapolis, MN 55413

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WINTER 2018

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CONVERT YOUR C.A.V.E. MEN (AND WOMEN) How a commitment to Continuous Improvement will bring surprising long-term strategic stability to manufacturers

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‘VALUES’ PROPOSITION

REALITY CHECK

How Mike Patterson built success at King Solutions on priorities that go far beyond profitability

With just a half-day’s investment of time, CoreValue software gives manufacturers a quick sense of what their company is worth—and what it could be worth

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2 Collaboration Is Key Manufacturers in Greater Minnesota increasingly confront their challenges by working together

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The Power of People

Will the Door Deliver?

The Wisdom Within

Maxcam is poised to take on its Asian competitors if it can find (and retain) the skilled labor

Gustavus-based student entrepreneurs try to bring security to online deliveries

What you have might be all you need

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

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

WINTER 2018 ENTERPRISE MINNESOTA /

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Collaboration Is Key Manufacturers in Greater Minnesota increasingly confront their challenges by working together

T

here is a lot to commend in the “One Minnesota” theme Governor Tim Walz has emphasized in preparation of his swearing in as our next governor.

I travel around Greater Minnesota—a lot—visiting manufacturers who work with Enterprise Minnesota’s consultants to improve their operations. In every trip, I see examples of the special value small manufacturers bring to their communities and the unique circumstances they face, particularly those located farthest from population centers.

Manufacturers play an increasingly outsized importance as the job-creating engines of their local economies. They provide young people an opportunity to sink roots in their hometowns. They offer satisfying long-term career opportunities through well-paying jobs with benefits.

But in order to embrace “One Minnesota,” manufacturers must recognize their circumstances. Their sometimes far off locations can constrain their abilities to compete in increasingly sophisticated markets. They have less access to pools of qualified employees and increasing challenges related to product transportation. Plus, their size sometimes prevents them from taking on the kind of practices and processes that will boost productivity.

Here is where I see real hope. Manufacturers are realizing the real advantages to working together. On page 8 of this magazine you’ll read about how the Little Falls-based Initiative Foundation (IF) has teamed up with Enterprise Minnesota to provide group services for manufacturing companies that may not have been able to afford it on their own. It is a very encouraging trend that we expect to continue.

I can’t say enough about the value the six Initiative Foundations bring to

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their regions in Greater Minnesota. Formed in 1986 by a partnership of regional leaders and The McKnight Foundation, each foundation was created to independently strengthen its regional economy and communities with grants, business loans, programs, and donor services. Most people believe Initiative Foundation’s structure is unique to Minnesota. No other state has a similar network that unites community and economic development.

Enterprise Minnesota has enjoyed a great relationship with these organizations on a variety of projects, particularly the State of Manufacturing®, our annual survey.

I’d like to personally identify and thank each of the Initiative Foundation presidents: Matt Varilek Initiative Foundation, Little Falls Tony Sertich Northland Foundation, Duluth Nancy Vyskocil Northwest Minnesota Foundation, Bemidji Tim Penny Southern Minnesota Initiative Foundation, Owatonna Diana Anderson Southwest Initiative Foundation, Hutchinson

Helping Manufacturing Enterprises Grow Profitably

Publisher Lynn K. Shelton 9001:2015

Custom Publishing By

Creative Director Scott Buchschacher 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 lynet.dapra@enterpriseminnesota.org 612-455-4202 To advertise or sponsor an event chip.tangen@enterpriseminnesota.org 612-455-4225

Enterprise Minnesota, Inc. 2100 Summer St. NE, Suite 150 Minneapolis, MN 55413 612-373-2900 ©2018 Enterprise Minnesota ISSN#1060-8281.

All rights reserved. Reproduction encouraged after obtaining permission from Enterprise Minnesota magazine.

Enterprise Minnesota magazine is published by Enterprise Minnesota 2100 Summer St. NE, Suite 150, Minneapolis, MN 55413 POSTMASTER: Send address changes to Enterprise Minnesota 2100 Summer St. NE, Suite 150 Minneapolis, MN 55413

Anna Wasescha West Central Initiative, Fergus Falls Bob Kill is president and CEO of Enterprise Minnesota.

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THE SUBURBS

The Power of People Maxcam is poised to take on its Asian competitors if it can find (and retain) the skilled labor

I

f anyone wants to measure the direct impact the skills gap can have on a smallish suburban manufacturer, put yourself in the shoes of Chuck Olson, owner and CEO of Maxcam.

Under Olson’s guidance, White Bear Lake-based Maxcam has developed a niche manufacturing close-tolerance parts composed of difficult-to-machine engineered thermoplastics, ceramics, and metals.

Within that, it specializes in semiconductor prototypes that require extremely short lead times.

Olson bought the company in 2012. By 2018, he’d paid off the note and weathered increases in material costs that were both massive and unanticipated. On top of that, he had hired Bret Bjerken, an expert sales

Olson and Bjerken know their potential to grow is constrained by their ability to find and retain a skilled workforce. and business development professional, to lay the groundwork for expanding the company’s product offerings and growing its overall book of business. The two executives positioned their strategy in part by taking on some of Maxcam’s Asian competitors, emphasizing speed and accuracy.

It was time to take off. Except it wasn’t—two of Maxcam’s 17 employees were unexpectedly wooed away by competitors. The constricting marketplace for employees offered no quick or apparent replacements.

Bret Bjerken, director of sales and business development at Maxcam (left) and Chuck Olson, the company’s CEO and owner.

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“We had the vision for growth,” Olson says. “But when you lose two essential people, you can’t easily take it on. We didn’t have the capacity.”

Olson and Bjerken are not easily daunted, but they know their potential to grow—like all manufacturers—is constrained by their ability to find and retain a skilled workforce.

“There’s no question about it,” Olson says. “There’s work out there. But there aren’t people to do the work.”

Olson can use his own background as evidence that manufacturing offers rewarding careers, even for mid-career employees who didn’t exactly train for them.

His own path into plastics was rather circuitous. A math major in college, Olson began as a high school football coach at Duluth Denfeld and a teacher of autistic students. In 1998, when his wife was offered a significant career opportunity in the Twin Cities, he turned to another Denfeld coach whose father owned a semiconductor test company in the Twin Cities called Prime Yield Systems. “Is your old man hiring?” Olson asked. Two weeks later, he had an offer. That company—or at least its legacy company—remains a significant customer for Maxcam.

3:01 PM It was a big leap. “I didn’t know anything about manufacturing. Didn’t know anything about anything, I just had people skills.” He quickly moved into a supervisory role and devoted the next 18 years of his career to the company, eventually rising to become head of manufacturing for the semiconductor test group, working with top electronics corporations including Apple, Broadcom, Qualcomm, and Texas Instruments. He oversaw facilities in Minnesota as well as in Penang, Malaysia, and Rosenheim, Germany.

In 2012, Olson successfully sought to buy out the four partners in Prime Yield System, all approaching retirement.

Olson brought on two minority partners, shop foreman Mike Gustafson and topproducing machinist Harold Park, at 20 percent each.

Maxcam scours the marketplace for potential employees. “If you’ve heard of it, we’ve tried it,” Olson says. Since processes related to plastics are not the same as aluminum or other metals, Olson defines his optimal recruit as someone who brings a little proficiency and a willingness to learn. Experience has taught him to avoid new employees with too much

experience. “We try to find somebody who might bring good ideas to the table,” he says, but not someone “with the attitude that, ‘I know everything about this because I’ve been doing it for 30 years.’

Many times we’ll find those people don’t make it. They’re sure that their ways are better, but their ways don’t work.”

Olson is content to invest a year or longer to train in a new employee, knowing full well the employee might cash in on that experience and then move to another company.

What does he do if that happens?

“Move on, I guess. There isn’t a whole lot that we can do about that.” One solution, he says, might be to diversify the company’s service offerings into projects with looser tolerances. They don’t pay as well, he admits, but they enable new employees to generate revenue while they get experience. “They can generate revenue right out of the gate without getting thrown into the deep end of the pool.”

Olson recently joined an advisory board at Hennepin Technical College to get more involved, hoping to develop better relationships. As part of that role, he recently delivered a presentation to students about the world of high-performance plastics.

While proud of the machining shops at White Bear Lake High School and Roseville High School (where he is the backfield coach for the football team), he’s disappointed other public schools are lagging in their efforts to provide technical education opportunities.

For his part, Bjerken—also a former high school coach (hockey)—predicts the company’s market differentiators will continue to bolster its bottom line.

Mike Gustafson, operations manager and co-owner.

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Bjerken has worked at 3M, Stratasys and Boedeker Plastics, among other companies. He says Maxcam’s priority on machining plastics gives it a unique market advantage. While admitting that machining is generally a competitive marketplace, his experience has shown him that 80 or 90 percent of machine shops work turning and milling metal.

“Plastics is what they do when they don’t have enough work in the metal area.” Maxcam, he says, is the exact opposite of that. “We’re 90-plus percent plastics. We have a core competency in high-performance, difficult-to-machine, close-tolerance plastics. Go down the street, and you’ll see ABC Machine and think we’re a lot like them, but when you lift the hood, we’re burning our engine completely differently.”

Still, with an eye on workforce challenges, the company is doubling down on its efforts to accomplish more with fewer resources.

“We’re looking at lean, but we’re also looking at technology solutions.

Solutions that can take maybe 10 or 15 minutes of machining time out of a part by using alternate technology that then can be done with somebody other than a machinist—like an inspection person, or a programmer, or an office worker.”

“Robotics in our core business is a little bit more difficult to do because it’s a short run,” Olson continues. “A big order for us might be 10 or 12 pieces. So, our guys are doing multiple setups a day.”

And while “it does take a little bit more babysitting, and the materials are less predictable, I very often say there’s as much art as there is science into what our guys do.”

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Gustavus student Nick Vanek and three partners have developed a door that allows secure home deliveries.

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little over a year ago, Nick Vanek was intrigued by a television news report that described growing anxieties among online shoppers regarding the security of packages delivered to their front stoops every day. Then a junior studying international management at Gustavus Adolphus College in St. Peter, Vanek sat down that night and sketched what would become the first prototype of the Delivery Door, a front-door mechanism that allows packages to be safely delivered inside a home without allowing deliverers access.

Today, he and three partners—two recent graduates and one, like Vanek, still in school—have incorporated Secure Services, a company to produce and sell the Delivery Door, and have already

received a patent for the intellectual property behind their product.

“There is clearly a problem,” Vanek says. “And there are no solutions out there that fully answer the issue.”

Working from a basement workshop in their college home, Vanek and his partners experimented with 10 prototypes before finding the current model. “I’m not a carpenter by any means,” Vanek admits.

“I’ve never really built anything before.”

To help the process, he’s taken metal and woodworking workshops.

The device’s replacement door contains a sliding mechanism that shifts and expands to create a compartment space on the external side of the door, which allows packages up to 80 inches tall by 36 inches

wide to transfer through the doorframe while blocking anyone from physically breaching the security of the home.

A $10,000 check from an early-stage investor paid for the patent process, but the young entrepreneurs are currently looking for other partners to provide manufacturing capabilities and knowledge of distribution models.

There is clearly a market opportunity.

A national survey conducted last year

by Schorr, an Illinois-based packaging company, revealed 41 percent of respondents received packages 3 to 5 times per month. Thirty-one percent stated they had “personally experienced package theft.” On top of that, 41 percent stated they have “avoided purchasing certain items online to prevent package theft.”

“There is clearly a problem,” Vanek says.

“And there are no solutions out there that fully answer the issue.”

For its part, online shopping behemoth Amazon is placing a huge bet on the Amazon Key, an electronic lock that will enable its delivery personnel to gain access to the inside of their customers’ homes. Critics contend this will require a high bond of trust with Amazon’s ability to identify and control potential rogue delivery people.

While initially thinking his market would be through door manufacturers, Vanek now thinks it might be with FedEx, Amazon or the U.S. Postal Service. He hopes to develop a relationship with Amazon after meeting one of the product developers who created Amazon Key at a recent investment conference.

Vanek and his partners are still tinkering with the product, mainly responding to market research that says consumers would like a mechanism that can adapt to existing doors, rather than requiring the purchase of an entirely new door. “We’re still in the development phase. That could very well be the route we go,” Vanek says.

“Doors haven’t changed a lot since the caveman rolled a rock over the entrance to his cave,” Vanek continues. He hopes to change that. “It’s been a real learning process, I must admit. But it’s been a very exciting learning process.”

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Initiative Foundation President Matt Varilek and Dawn Loberg, a business development consultant at Enterprise Minnesota.

COLLABORATION

Public/Private Production IF joins Enterprise Minnesota to help underwrite training for central Minnesota manufacturing

T

he Little Falls-based Initiative Foundation and Enterprise Minnesota recently concluded a first round of reduced-rate consulting sessions designed to enable small manufacturers to become more competitive. In the arrangement, IF grants cut the cost of Enterprise Minnesota’s services by up to 50 percent, which in some cases was lowered even more by the Growth Acceleration Program (GAP) grants funded by the State of Minnesota.

Participants attended sold-out day-long sessions devoted to three subjects: Learning to Lead helped leaders influence the culture and performance of their companies. They learned to improve team dynamics by understand-

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ing behaviors, developing the skills of a change leader, and creating a culture of accountability and engagement. Participants also learned how to: demonstrate the qualities and traits of a leader; evaluate the impact of individual behaviors on team dynamics; exhibit versatility in working with others; display the behaviors of change leaders; develop a culture of accountability; and promote employee engagement.

Principles of Lean Manufacturing (with simulation) provided manufacturers a common language to use for continuous improvement and planning, demonstrating how to generate the energy and enthusiasm needed to

implement improvements. Participants were introduced to: standardized work; workplace organization; push versus pull scheduling; elements of 5S; visual controls; cellular manufacturing; plant layout; quick changeover; total productive maintenance (TPM); batch reduction; and continuous improvement.

5S (with simulation) instructed manufacturers to create and sustain workplace efficiencies through practiced “5S” process improvements: sort, set in order, shine, standardize, and sustain. Enterprise Minnesota adds a 6th “S” to include safety. Participants learned to: reduce time loss looking for an item by reducing the number of items; reduce the chance of distraction by unnecessary items; simplify inspection; increase the amount of items available; properly use space; and increase safety by eliminating obstacles.

Instruction was available to any manufacturer within the Initiative Foundation’s coverage area, which includes Benton, Cass, Chisago, Crow Wing, Isanti, Kanabec, Mille Lacs, Morrison, Pine, Sherburne, Stearns, Todd, Wadena, and Wright counties.

Formed in 1986 by a partnership of regional leaders and The McKnight Foundation, IF is one of six Minnesota Initiative Foundations (MIFs) serving Greater Minnesota. Each foundation was created to independently strengthen its regional economy and communities. It is widely believed that the MIF model is unique to Minnesota. No other U.S. state has a similar foundation network uniting community and economic development.

IF has long collaborated with Enterprise Minnesota. In addition to partnering on the annual State of Manufacturing® survey, IF has provided one-off grants to help individual companies in their region acquire specific skills, typically for companies with between 200 to 250 employees.

“But we knew we were missing a whole other tier of manufacturers who really couldn’t afford to go deep on one particular project at that level,” said Jeff Wig, IF’s vice president for economic and business development. That’s why, Wig said, he was immediately intrigued when approached with the collaboration by Dawn Loberg, a business development consultant at Enterprise Minnesota.

IF primarily funded its commitment, Wig said, through a USDA lending program that allows the foundation to devote

a portion of interest income on technical assistance programs for local businesses.

IF also used proceeds from a grant from Compeer Financial (formerly AgStar).

On top of that, qualified companies could leverage funding from GAP, a direct state investment aimed at helping manufacturing companies of 250 or fewer full-time employees access business improvement services. Since its inception in 2008, GAP has fueled over 245 Minnesota manufacturing companies to invest in their respective organizations.

IF President Matt Varilek said the program fits well with other ways his organization tries to help local employ-

“These days, with low unemployment, we do a lot of work to address the shortage of workers to fill critical positions so we achieve our potential growth. If you can’t find the key people, you can’t grow the way you’d like to.” ers cope with the challenges of the worker shortage. Varilek cited the state demographer’s prediction that by 2024 there will be 3.1 million open jobs in Minnesota and only 2.7 million people available to fill them. “These days, with low unemployment, we do a lot of work to address the shortage of workers to fill critical positions so we achieve our potential growth. If you can’t find the key people, you can’t grow the way you’d like to. And this technical assistance that we have long helped to provide via Enterprise Minnesota has been a great example. This group skills development rounds out the portfolio.”

Varilek said manufacturers are “having to get creative about how they find people to bring into their companies.

And then once they find a person who either has the background they need or at least the potential and the work ethic they are looking for, they then get creative about how to deliver the skills needed to succeed in the position.”

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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).

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

Tony Cremers, owner, Craft Pattern & Mold.

PROCESS EFFICIENCY

What Forecast?

Prototype maker Craft Pattern & Mold uses ISO 9001:2015 to bring order to a stressful production process

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

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f you are a manufacturer who is frustrated by the pressures and inefficiencies of limited forecasts, you should meet Tony Cremers.

Cremers owns Craft Pattern & Mold, a Montrose-based prototype and product development center. His company offers onsite tooling, casting, and machining to help OEMs develop top-secret projects.

Craft has been manufacturing precision prototype plastic and metal parts for commercial and industrial applications for 30 years.

The hush-hush environment typically means Cremers's company receives

projects with little advance notice, demand for quick turnarounds, and the expectation that the orders’ specifications might change several times throughout the process.

“It’s a very fast-paced environment,” Cremers says. “Our workloads change daily.” His typical workload forecast might be two weeks, “and we don’t know what we will be working on after that.”

The customer’s requirements may not be precise when Craft gets the project, and they may evolve during the second and third phases of the project.

Cremers’s team has learned to be agile,

he says. “It definitely takes a certain type of a person to multitask and be prepared for any type of change coming through while trying to keep the original due dates.” Plus, he adds, the quality must always be 100 percent. “The parts are not going to have much value if they’re not meeting the requirements the customer wants.”

Cremers knew he had to fine-tune procedures, so he decided to use ISO 9001:2015. “We needed to get the different parts of our operation on the same page, making sure everything’s complete before it goes to the next department. As we keep growing here, we realize we need to have more structure with our process, so as not to have multiple independent projects running on their own. They need to have a path, a procedure of how they go through the shop.”

The other advantage is that ISO 9001:2015 certification will show clients Craft is “meeting compliances. It gives our customers confidence that we can provide quality parts.”

Creating prototype development parts, Cremers says, was once a “grey area” for certification, but as product developers are increasingly bridging to production, the prototype parts may end up being final products.

“Becoming ISO compliant was a huge step for us,” he says.

Beyond that, Cremers says he knew that getting ISO certification would be necessary to enable Craft’s future growth. “I could see it coming around the corner. I didn’t want it to hit us at a time when we aren’t prepared. I knew it needed to be taken care of so we can continue to grow.”

Cremers admits there was a learning curve in getting full staff buy-in. “I’m not going to lie about that. We all are comfortable in our own ways,” he says.

“But there was a point—probably about three-quarters of the way through our training—when a light came on for most of us. We realized the certification’s value when we started to understand it is more of a management tool than it is how we process things from start to finish. It’s working great now with everyone in the shop, actually. But because this is our first year, we obviously have to stay on top of it. We have to make sure we behave and aren’t taking shortcuts.”

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WINTER 2018 ENTERPRISE MINNESOTA /

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ACHIEVEMENTS

Walking the Talk Enterprise Minnesota achieves its ISO 9001:2015 certification

W

ith a nod to the old adage, “physician, heal thyself,” Enterprise Minnesota recently announced it has achieved ISO 9001:2015 certification.

As Minnesota’s leading consulting organization for small and medium-sized manufacturers, Enterprise Minnesota helps its clients achieve the coveted certificate. ISO 9001:2015 is an internationally-recognized quality management standard that certifies a company achieves high standards in managing its business performance, reduces risk, and ensures client satisfaction.

In the last five years, Enterprise Minnesota has helped over 510 Minnesota manufacturing companies gain access to strategies that increase efficiency and promote growth. As a result of the organization’s work, clients have realized a total positive economic impact of over $696 million in sales, reduced costs by over $131 million, invested over $289 million in capital expenditures and modernization, and added or retained over 6,600 jobs.

Although service companies rarely take on the rigorous steps necessary to receive the 2015 certification, Enterprise Minnesota’s President and CEO Bob Kill required his company to undergo the demanding certification process. “There is no way we can truly comprehend the nuances of the process we’re helping our clients undergo unless we do it ourselves,” he said.

An affiliate of the Manufacturing Extension Partnership (MEP), Enterprise Minnesota is the only member nationwide to be certified to the ISO 9001:2015 standard.

MEP is a national public-private partnership administered by the

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U.S. Department of Commerce that coordinates centers in all 50 states.

ISO 9001:2015 requires manufacturers to introduce ground-breaking concepts of quality management and continuous improvement to its certified organizations.

Advocates say it aligns an organization’s strategic direction with its quality management systems, thereby helping it monitor the company’s performance.

Kill said his clients have enthusiastically embraced ISO 9001:2015 because it enhances management. It also: • Emphasizes targeted management systems • Requires accountability from top management • Underscores risk-based thinking • Aligns common structures On top of that, it relies less on bureaucratic documentation.

“Earning the ISO 9001:2015 certification is about more than documenting your processes; it is about driving and measuring your business performance,” Kill said. “ISO forces us to focus on continuous improvement in all aspects of our business, and it shows Minnesota’s manufacturers we are walking our walk and talking our talk. This is a proud moment for our organization.”

Enterprise Minnesota had previously earned its ISO 9001:2008 certification through a 10-month process under the leadership of the organization’s ISO experts David Ahlquist, Keith Gadacz, Greg Langfield, and Pat Pearson.

To celebrate its ISO 9001:2015 certification, Enterprise Minnesota updated its logo to reflect the organizational achievement.

Enterprise Minnesota serves as the “voice” for Minnesota’s manufacturers by raising visibility and appreciation for the value manufacturers provide our communities and the state’s economy.

Its affiliation with MEP further positions the organization to offer clients leading-edge services to improve manufacturing operations and strengthen business.

GROWTH ACCELERATION PROGRAM

Efficiency for a Bargain Crane manufacturer IPS Cranes uses GAP funds to buy down elements of its continuous improvement strategy

W

hen IPS Cranes deployed its first 5S to unclutter its receiving operation, the company ended up filling ten dumpsters, as well as creating a group of advocates who valued lean processes and continuous improvement.

IPS manufactures, refurbishes, and repairs the 2,000 rail-based cranes that are used to maintain the 76,000 bridges connecting 233,000 miles of track in America’s domestic rail network. IPS Cranes still maintains its headquarters and parts operation in White Bear Lake, where its 20 employees maintain an 8,000-squarefoot warehouse. The company’s repair and

manufacturing shop has 25 employees in a Duluth-based facility. IPS is the OEM of American & Ohio Locomotive Crane, which manufactures new cranes and rebuilds and repairs existing cranes. IPS is a complete supplier of quality replacement parts for American crawler cranes and genuine OEM parts for American & Ohio Locomotive Crane. IPS also provides full-scale crane services, including load testing and inspection, boom and component repair, ground-up rebuild, innovative design, and engineering upgrades.

“The GAP program has enabled us to do some things in our businesses that we

Jackie O’Connell, president and CEO, IPS Worldwide.

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TWIN CITIES 7225 Northland Drive; #300 Minneapolis, MN 55428 Phone +1 763 746 8000

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RISK MANAGEMENT

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Other offices throughout the upper Midwest

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RETIREMENT

WINTER 2018 ENTERPRISE MINNESOTA /

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763.428.5464 // KINGSOLUTIONSGLOBAL.COM LOGISTICS AND FULFILLMENT // DAYTON, MN

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/ ENTERPRISE MINNESOTA WINTER 2018

might not have been able to afford otherwise,” says Jackie O’Connell, president and CEO of IPS. The Minnesota Legislature created the Growth Acceleration Program (GAP) in 2008 to help bring business improvement services to manufacturers like IPS with 250 or fewer full-time employees.

Since its inception, GAP has helped 375 companies achieve eye-popping results.

Generating an average $30-to-$1 returnon-investment, it has created and retained 10,040 jobs in Minnesota, boosted company sales by $1.01 billion, and saved these companies $177 million in business costs.

All funds awarded under GAP must be used to assist an eligible company with business services and products that will enhance the operations of the company. These business services must come directly through Enterprise Minnesota. GAP funds may not be used for financing, overhead costs, construction, renovation, equipment purchase, or computer hardware.

Depending on the size of the manufacturing company, they can get up to a 50 percent rebate for services provided to them. The remaining match must be provided by the company in the form of cash.

IPS has maxed out its GAP account of $50,000 and over the past year has used GAP to help with: • Lean 101, a basic introduction to lean for key employees • 5S Kaizens in its electrical and hydraulic areas to maintain organization, reduce non-value added activities, and also learn a process for sustaining the workplace through an audit process • Enhanced marketing through the Marketing Management System • Implementing a lean “Quick Wins” program that encourages lean improvements from employees closest to the action • Learning to Lead program, a series of five sessions aimed at leadership abilities throughout the organization: communication styles, fostering engaged employees, change management and accountability • Skills Matrix and Accountability, a program that helps inside leaders understand their employees’ skills along with gaps that might need closing

Four Questions Paul Ebnet

I

heard somebody say a couple days ago that the skills gap, or actually it’s more a worker shortage now, is probably going to have an effect on manufacturers similar to the 2009 recession. How do you react to that?

We are already experiencing that situation. I’ve had experience both in Greater Minnesota and in the metro, and I think the shortage of people with appropriate skills is more acute in Greater Minnesota, where the concentration of population is lower. The findings of the State of Manufacturing® survey show us every year this is on many people’s minds.

One of the (workforce) strategies is to connect with places where people are being trained: community colleges, technical institutes, universities, and high schools.

With executive-level experience in Greater Minnesota and in the Twin Cities, can you prescribe a solution or a remedy to manufacturers’ workforce issues?

There is no one magic solution. As W. Edwards Deming used to say about quality, it’s about constancy of purpose. Certainly, one of the strategies is to connect with places where people are being trained: community colleges, technical institutes, universities, and high schools. Anything that can raise the profile of manufacturing and manufacturing careers can be helpful. But it’s a long process.

INNOVATIONS

One solution might be for manufacturers to identify ways they can build more efficiencies into their operations. What’s your take on that?

Our experience as a machine builder is exactly that. Companies can find cost savings from automating their processes, and they can find ways to redeploy their people assets. They are automating the lower-skilled, repetitive-type activities so they can redeploy their people to the highervalue activities. We’ve seen that trend in the U.S., and we’re starting to see it in international environments, as well. When you’re a manufacturing system in the United States shipping to China, you know something is going on.

Does it feel like organizations that offer consulting services about lean and personnel management, like Enterprise Minnesota, fit more essentially into that environment?

Enterprise Minnesota is in a unique position to help manufacturers.

My experience with the organization goes back over 10 years and two different companies. I first got to know them through an ISO certification project, and now we are currently going through a lean manufacturing review. They provide focus and a sounding-board for manufacturing activities on a statewide level. Based on all their touches throughout the state, I think they do an excellent job of disseminating best practices. They provide great work in collecting and circulating information through services like the State of Manufacturing® survey. And they also offer good connections to policymakers and media. They provide a real focal point for Minnesota manufacturers in a variety of ways.

Paul Ebnet, president and CEO of Minneapolis-based Straub Design, has more than 30 years of leadership experience in private and publicly-held organizations with operations in Asia, Europe, and the Americas. Straub is a manufacturer of adhesive tape application systems, web handling, and industrial automation solutions.

Ebnet is the newest member of the board of directors at Enterprise Minnesota. He serves on the board of Bondhus Corporation in Monticello and previously served as president of Louis Industries, Inc. in Paynesville.

Earlier in his career, Ebnet spent 28 years at Stearns Inc. in St. Cloud, most recently as president. Stearns, at that time a division of publicly held K2 Inc. (KTO), supplies water safety and water sport and outdoor accessories for the consumer, commercial, and military markets.

Ebnet holds a B.A. degree from St. Cloud State University and a mini-MBA from the University of St. Thomas.

WINTER 2018 ENTERPRISE MINNESOTA /

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Interview

‘VALUES’ PROPOSITION How Mike Patterson built success at King Solutions on priorities that go far beyond profitability

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/ ENTERPRISE MINNESOTA WINTER 2018

I

f you’ve driven on Highway 94, north of the Twin Cities about midway between Maple Grove and Rogers, you’ve undoubtedly noticed the massive new 300,000-square-foot headquarters of King Solutions, an asset-based 3PL and freight forwarder located in Dayton, Minnesota with its warehouse in Glendale Heights, Illinois. Since founding the company in 1989, founder and owner Mike Patterson has used innovation, a keen sense of market-awareness and a compulsive commitment to customer service to build a company that employs 150 people and this year expects to earn revenues in the neighborhood of $100 million. To date, the company has transported more than 9 million shipments across the United States and is known for its personal service and customized solutions.

But ask him about the seeds of his suc-

terson imposes beliefs on his employees.

“Hopefully you don’t hear swearing, cursing. You don’t hear, ‘How can we finagle something that isn’t right?’ We want to honor God by doing the right thing. And not everyone feels that way, I get it. But everyone knows where we are; we don’t beat them over the head with that faith thing. We beat them over the head with the values thing.”

P

atterson started the company as a two-person operation in the back of a Minneapolis truck shop.

He began his career in 1971 as a teamster and a truck driver (while also pursuing a degree in art history from the University of Minnesota). After driving truck for five and a half years, he moved up in the operation. He became a dock foreman, then a city dispatcher; he got into sales, and ran

“Everyone knows where we are; we don’t beat them over the head with that faith thing. We beat them over the head with the values thing.” cess, and his answer might surprise you: Christian values. The “King” in King Solutions, he says, refers to the King of Kings. In fact, when visitors first enter the company’s high-tech lobby, two plaques containing Bible verses confront them: Deuteronomy 6:4-5 “Hear, O Israel: The Lord our God, the Lord is one. Love the Lord your God with all your heart and with all your soul and with all your strength;” and Proverbs 16:3 “Commit to the Lord whatever you do and your plans will succeed.”

“King Solutions has always been built on the foundation of God,” Patterson says.

“And that’s driven all of its success over the years. It drives our value system. All our staff have their own personal lives, attitudes and ideas, and that’s great. But as leaders here, we’re pretty much on the same page.

We work hard, we’re honest, and we have to be ethical, not only to the outside, but to ourselves inside, as well.”

The company even employs a chaplain who maintains weekly office hours, but having that kind of culture doesn’t mean Pat-

a terminal, where he started an intermodal operation—moving truckloads of product in trailers on the railroad. Intermodal was made possible after President Jimmy Carter deregulated the transportation industry, defanging the Interstate Commerce Commission’s stranglehold on pricing and style.

“Suppliers and services could rock and roll with different kinds of pricing if they so chose,” he recalls.

Patterson ratcheted his operation to more than $20 million within five years, moving almost 15,000 loads. That success triggered an opportunity to develop an intermodal operation from scratch for a local logistics behemoth, but he left after 18 months, with a disdain for the internal politics that sometimes plague large companies.

So, in 1989, he and his business partner, Meyer Bolnick, decided to open their own operation in the back of a Minneapolis truck shop, with only an administrative person at their side. His plan was to have a third-party, non-asset-based company, which means he would have trailers, but

not trucks, preferring to rely on creativity and not be constrained by the limitations of his own assets. Patterson’s lone initial customer was Palliser Furniture, a Winnipegbased company.

“I thought if we ever did $1,000,000 in a year, that would be an amazing accomplishment,” he remembers. “I just took it an hour at a time. We were going to be an intermodal company, find customers with truckloads and use the intermodal rail system.”

The United States Postal Service presented Patterson with a big break in 1990 when it decided to subcontract the delivery of marketing-type mail, then called “Third Class Mail.” Patterson pounced on the opportunity. “We went from a struggling, generic, commoditized truckload provider, with maybe three staff people, to becoming ‘the mail guy’ here in this market. And that allowed us to build upon the mail.” King Solutions has diversified from mail over the years, he says, “but we’re still ‘the mail guy.’”

The mail contract enabled Patterson to become the “catalog guy” and the “fulfillment guy,” as well, to extend the metaphor.

“Mail allowed us to be modestly prosperous, so we could take the risk of going after other kinds of freight.”

Today, Patterson says, the dominant element of his business is transportation management, which includes mail, but a growing niche is its fulfillment operation, where the company currently has about 40 customers. Minnesota Public Radio is an example: “When someone donates to MPR, they might receive a CD or another gift from them. We are behind that. We fulfill the gift from here, pick it out of the inventory, pack it in a box, and ship it,” Patterson says. “Pick, pack, and ship. We have customers with their own websites or Amazon orders that come to us, and we pick and pack it and ship it to you. The world is moving more and more to online shopping, both commercial and consumer.

It’s just part of life today. I never thought we’d be in fulfillment, ever, but we are.”

This past July, Patterson announced King Solutions opened a distribution operation based in Glendale Heights, Illinois as part of a three-year contract with a local com-

WINTER 2018 ENTERPRISE MINNESOTA /

17

pany. King inherited 22 current employees, as well as its inventory and fulfillment operation that runs Monday through Friday each week.

According to the company, Patterson retained a Chicago-based sales representative to expand the company’s USPS destination entry service offerings within the Chicagoland area.

WORKFORCE ISSUES

While King Solutions depends on carriers to supply the drivers, the current chronic shortage of truck drivers is very much on Patterson’s mind. “Our ability to grow over the last year specifically has more to do with our difference in the marketplace and our business model,” he says. “The biggest people in our marketplace treat the pool of carriers in a much different way than we do. They will go to the open market and try to find the lowest cost. King, from the beginning, has pursued partners that share its high sense of service.”

King’s competitors will take an order and then chase the lowest priced company to carry that load to increase their margin

“King Solutions needs to make money, but we need to make money to support our team, our staff, our community, and grow.” as much as possible. But King, Patterson says, will pay more, “understanding that we can only charge so much, because the industry only allows us to charge so much.

So, while our margin might be smaller, our consistency and our customer service is much, much higher, and our reliability is much, much better. Our sense of partnership with our client base is more established, and we rise more quickly to a trusted advisor role versus just a vendor role. Which is our ideal goal.”

His competitors, Patterson says, are driven by bottom line dollars, but King isn’t. “King Solutions needs to make money, but we need to make money to support our team, our staff, our community, and grow.”

An internal HR area of concern for Patterson in his increasingly high-tech company is recruiting IT candidates. “IT is a very big problem for everybody, not just us,” he says. “We have matched up

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WORKS

MaKING a Difference

King Solutions deepens its roots with community stewardship True to its roots, King Solutions makes a serious commitment to its community, donating more than $1 million to local charities. Through its “MaKING a Difference” program, King Solutions picks a new cause to support every month, from food drives to highway cleanup. And these aren’t initiatives driven only from the top; almost half of King Solutions’ 100 employees are personally involved with the charities and communities the company supports.

In 2012, the company created an environmental initiative called “ThinKING Green.” Through it, King Solutions employs best practices in usage related to paper, water, fuel, biodegradable resources, energy and recycling. As part of the ThinKING Green program, the company is a member of the SmartWay Transport Partnership that helps freight companies improve fuel efficiency, grow environmental performance and increase supply chain sustainability.

The company also collaborates with Opportunity Partners, a group that redefines “disability” through advanced learning, community support and meaningful work. Individuals from Opportunity Partners join the King Solutions’ workforce and contribute their skills and talents in administrative and building maintenance duties. The company’s team meeting rooms have been named in honor of such laudable entities as the Minnesota Ovarian Cancer Alliance and Minnesota Adult & Teen Challenge (a rehabilitation center for life-controlling addictions).

with a couple head-hunters, and they have a unique niche in the marketplace. We’ve been successful working with them.”

In the end, reputation matters, Patterson says. “This community is a big deal. We can’t set a bad example of how to treat others, be it a customer or supplier or a professional. It’s just common sense.”

Patterson jealously protects his company’s reputation as being a great place to work. The Star Tribune four times named King Solutions a top workplace, in part for the company’s positive culture.

“Trust in those you work with,” he says. “If you can do that, people will work because it’s a healthy environment.

It’s a good vibe. But that’s the way it should be. Do unto others as you’d have them do unto you.”

Here’s an example.

In the depths of the 2009 recession, King Solutions’ revenues dropped from $65 million to $47 million in a year, without losing a customer.

He needed to stem the bleeding. So, one morning in April he convened the entire company to the warehouse. “Things are bad, real bad out there,” he told them and announced a 15 percent across-theboard pay reduction, with two months’ notice and two years’ duration. “But I promised them that when we made the comeback, I would repay every nickel that they gave up. So two years later, in June, we restored their compensation to what it was. It took us about four or five years to repay the $800,000 they gave up.

But we repaid it all to them.”

9001:2015

Enterprise Minnesota FY 2019 Manufacturing Workshops and Business Events

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

DATE

TOPIC

CITY

7/10/2018

Strategy

St. Peter

7/26/2018

Continuous Improvement

St. Cloud

8/7/2018

Continuous Improvement

Plymouth

8/23/2018

Leadership/Talent

Inver Grove Heights

9/6/2018

Strategy

White Bear Lake

9/27/2018

Leadership/Talent

Brooklyn Park

10/9/2018

Continuous Improvement

Wyoming

10/25/2018

Continuous Improvement

Shoreview

11/8/2018

Continuous Improvement

Eagan

11/13/2018

Strategy

Anoka

12/6/2018

Leadership/Talent

Burnsville

1/8/2019

Continuous Improvement

St. Cloud

1/24/2019

Leadership/Talent

Winona

2/7/2019

Continuous Improvement

Willmar

2/19/2019

The Value of Peer Councils

Shoreview

3/7/2019

Continuous Improvement

Mankato

3/27/2019

Strategy

North Branch

4/9/2019

Leadership/Talent

Apple Valley

4/25/2019

Continuous Improvement

Eden Prairie

5/22/2019

Continuous Improvement

Bemidji

6/27/2019

Leadership/Talent

Anoka

STATEWIDE ENTERPRISE MINNESOTA EVENTS 5/14/2019

2019 State of Manufacturing® Statewide Release

Brooklyn Center

Earle Brown Heritage Center

For more information and registration, go to www.enterpriseminnesota.org, or email us at events@enterpriseminnesota.org.

Sponsorship opportunities are available. Please call Chip Tangen at 651-226-6842 or email chip.tangen@enterpriseminnesota.org.

9001:2015

Enterprise Value

REALITY CHECK With just a half-day’s investment of time, CoreValue software gives manufacturers a quick sense of what their company is worth—and what it could be worth

F

or manufacturers, knowing the value of their companies goes beyond preparing to put out a “For Sale” sign.

While many are looking to sell or transition leadership from one generation to the next, or one owner to the next, there are others, according to Steve Haarstad, looking beyond to assess the functionality of their operations through “value check.”

Haarstad, one of the business growth consultants at Enterprise Minnesota, oversees a program called Enterprise Value that uses CoreValue software to analyze a company from the perspective of 18 operational “value drivers.”

“They can use the software to help define the strategic direction the business needs to take over the next few years,” Haarstad says. “They can put together a strategic game plan to increase their company’s value. Then they’ll see where they’re strong and where there are opportunities to improve.”

CoreValue was developed over the years by two MIT professors who initially created it for the financial sector. As it gained traction, they refined it for use in other sectors, such as manufacturing. Enterprise Minnesota’s consultants deliver CoreValue to clients through a licensing agreement. It is currently utilized by more than 50 percent of America’s Manufacturing Extension Partnership (MEP) Centers.

Taking less than a half-day time commitment to gather inputs about revenue, profitability, employee headcounts and a

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/ ENTERPRISE MINNESOTA WINTER 2018

Casey Mahon, president and CEO of St. Cloud Window.

variety of other perspectives, the software uses algorithms to compare a company’s performance against a massive database of existing information about other companies.

It then produces a company’s value, along with an extensive list of factors that could increase that value.

Haarstad has advised several clients who have also received a formal valuation from an accounting firm or a broker. “The output of this CoreValue system has often been within 5 percent of other valuations,” he says. “Its accuracy is pretty reliable.”

The standard price tag for the Enterprise Value project is $5,000.

Enterprise Value involves three steps, Haarstad says. The first is typically a 30-minute phone call to set expectations and

who should be involved. The second is a three-hour session to gather inputs that will assess the operational performance of the business—such as revenue, profit, zip codes, etc. It consists of a series of best practice questions in which respondents self-assess against 18 value drivers (see sidebar). The final session reveals the results.

Haarstad is intrigued by the innovative questionnaires through which company executives provide information. Instead of asking respondents to compare the performance of their companies to best practices on, say, a one-to-five scale, the CoreValue program uses casual words and phrases one might use in conversation with a friend, neighbor, family member, or an acquaintance.

For example, an initial question on

growth states: “We have grown faster than our competitors in the past up until now. And we have projections that suggest we will grow faster than the market in the future.” Manufacturers can then respond with: “Yes, our business is on fire,” or “We’re growing at a pretty good clip,” or “Our growth is steady, we’re doing okay.” The bottom of the scale is something like, “We’re really not growing right now.”

The program then assigns a potential financial value to each of the 18 drivers and shows where the company can optimize its value. “Companies recognize they’re not perfect in all 18 areas, so they have something to work toward,” Haarstad says. “The current potential enterprise valuation might be $12 million. But based on their answers, the current value is maybe $8 million. So, there’s a gap of $4 million to work on.”

The software uses algorithms to compare a company’s performance against a massive database of existing information about other companies. It then produces a company’s value, along with an extensive list of factors that could increase that value.

Casey Mahon is the perfect example of a company chief executive who wants to use the CoreValue snapshot to guide strategic planning. Mahon is president and CEO of St. Cloud Window, a company that manufactures custom-made, commercial-grade aluminum windows and door products.

The company—founded by Frank Grundman in 1956—is owned in equal measures by his five daughters, who inherited the company in 1991. Mahon married one of those daughters and joined the company in 1990.

“No two people usually agree on value, let alone five. At the annual shareholder meeting, we talk about value, but no one is ever really sure what that value might be. I think from my perspective in

WINTER 2018 ENTERPRISE MINNESOTA /

21

my position, it’s important that we manage expectations.”

The company isn’t for sale, Mahon says, but it is markedly different from the one the sisters inherited in 1991. Today the company has a 32,000-foot facility and leases another 7,500-foot facility. It employs 48 full time employees and nine temps. And, he says, he could hire another 10 employees if he could find them.

“Times are very good. Our lead times are such as we’ve never known before. Historically, our lead times have run from eight weeks on the short side to 12 or possibly 14 weeks on the long side. Now we’re running steady 25 weeks.”

Even the nature of the business is rapidly evolving. “In the early 2000s, contracts that we thought were big contracts are not big contracts today,” Mahon says. “The sales volume that my father-in-law enjoyed was substantially less in volume, dollar value I

“It [CoreValue] gives you a good way to benchmark where you are with your business and how you can improve things.” guess, during his tenure, but the economics were different. It was a very successful, nice little company.”

The industry has also changed. All of the component expense categories have changed. “We’re all aluminum in our business. The cost of aluminum is substantially different today than it was 30 years ago.

Glass is different. Everything is different.

Labor is hugely different.”

“Everything goes up proportionally,” Mahon continues. “Those are the differences. It’s just the escalation of materials, labor, taxes, and regulatory influences. The cost of a window test today for us is 10 times what it was seven years ago. We used to be able to do it in an afternoon. Now it takes almost a month or more to complete.”

The primary driving force of using CoreValue was to determine the value of the company in a very active market. “Construction is crazy. There is a fair amount of M&A going on in our industry. There’s a prospect of what if, what if somebody actually made an offer, would we be prepared to determine if that was a good offer or not? It was one of those days of reckoning where we decided we should really find 22

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18

‘Value Drivers’ that contribute to a company’s worth

GROWTH

COMPANY OVERVIEW

Strong top-line revenue is determined by a history of consistent growth greater than its competitors, coupled with projected, future revenue growth above the market’s rate.

Manufacturers benefit when customers can easily understand what the company is about.

LARGE POTENTIAL MARKET

FINANCIAL Financial matters should be well ordered.

Expanding markets represent growing opportunities, although leading in a smaller specialty market is also valuable.

SALES AND MARKETING

DOMINANT MARKET SHARE

OPERATIONS

A company should strive to dominate a high portion of the available market relative to its competitors.

RECURRING REVENUE Business value is affected by how well a company can generate recurring, profitable revenue.

BARRIERS TO ENTRY Significant obstacles (which could include legal, capital, and/or market barriers) facing a new entrant into your company’s market can increase the value of your business.

PRODUCT DIFFERENTIATION Unique product characteristics will encourage recurring sales.

BRAND A recognizable and relevant brand can reinforce a company’s presence in the marketplace.

MARGIN ADVANTAGE Profit margins measure how efficiently a company makes money.

CUSTOMER DIVERSIFICATION Valuable companies benefit from serving a diversified customer base.

out our worth for ourselves, for our own satisfaction, because one shareholder might have just a pie in the sky expectation of the company’s worth. Another one might think, ‘Well, it’s really not worth much of anything

Successful companies systematically drive sales by using a strategic marketing plan.

Prosperous companies consistently deliver on their sales promises.

CUSTOMER SATISFACTION Companies generate value when they develop and measure long-term customer satisfaction.

SENIOR MANAGEMENT Your company value is increased if it has a leadership team/individual in place to carry on the company’s vision and mission while helping the owner achieve his/her objectives.

You should be able to execute a plan to run the company effectively for an extended period of time if the business owner is not available.

HUMAN RESOURCES A manufacturer’s value increases by its ability to recruit and retain employees.

LEGAL Legal issues should follow best practices.

INNOVATION A culture of innovation contributes to a company’s competitive advantage.

considering how we do business,’ for whatever reason.”

Mahon says the valuation came in almost exactly where he thought it would. “I’m not a big finance guy, so it was fun to speculate

and then be validated.” He was surprised, though, that the potential value of the company was higher than he expected.

“Knowing the valuation makes the decision-making process much more comfortable,” he says. “You don’t lay awake at night trying to weigh a decision on the scales of balance. You have a good sense of what the value is, and you have a good sense of what your management decisions are going to do to that value short-term. It makes it very comfortable for you to operate given where you are on your revenue stream and where you think you’re going on your future revenue. To me, it’s a good reality check.”

Steve Palmer, president and CEO at North Central Door, had a similar motivation for using Enterprise Value. The Bemidji-based company has been manufacturing residential and commercial garage doors for 50 years. He used the valuation exercise to give his four partners a snapshot of their company’s value and what they could do to maximize it, all while enjoying a record-setting sales year.

Although he engaged a local CPA firm to assess the company’s value, Palmer was attracted by how quickly and easily the CoreValue software could prescribe factors to increase the value of the company.

“A lot of it made pretty good business sense,” he says. And while he can’t benchmark against other companies, “it gives you a good way to benchmark where you are with your business and how you can improve things.”

Palmer says the software confirmed some of his own judgments about the company. It identified areas for improvement, he says, such as in marketing and sales.

He then reached out to Enterprise Minnesota to help map out a strategic plan that would maximize company value.

“It’s an action-oriented tool,” Palmer says. “It’s a great resource for a smaller business to set a baseline of where you’re at now, and what activities you can do to try and make your business more valuable.”

Todd Sparrow, president of Hawleybased Rapat Corporation whose 85 employees manufacture material hauling equipment for world-wide distribution, used the CoreValue software to provide an objective snapshot of where his company could improve.

“We’re not for sale,” he says. “We weren’t looking to get a value of the company to take to creditors or to banks or to potential buyers.” He says he was intrigued

Steve Palmer, president and CEO of North Central Door.

by how the software assesses a company on the 18 diverse value drivers.

“I liked that I had the ability to look at the organization, from top to bottom, and identify its strengths and weaknesses. In the end you almost get a SWOT analysis of the company. You see areas where you’re strong, but it also outlines areas where you may be vulnerable.”

And CoreValue identified areas he hadn’t thought much about, such as trademarks, intellectual property, and contracts. “We don’t have a lot of formal contracts from key suppliers to key individuals that work here,” Sparrow says. “Realizing those things was kind of eye opening.”

The software analysis also caused Sparrow to expand his view of succession planning beyond his top people. “It occurred to me that several of our main positions are kind of covered, but you get below that top line management, and we don’t really have the supervisory plans in place for succession planning.”

Sparrow limited his Enterprise Value team to himself, his controller, and his operations manager. “I think that worked out

really well. To include the whole management team would have been overkill,” he says. “It would have taken too long. There would have been too much discussion on certain points, and we’d have probably gone off on tangents.”

“It was a nimble enough group,” he adds.

“We got through the whole process in about four hours, which was nice. I didn’t want to dedicate two days to it.”

He said the smaller team also resisted the temptation to manipulate the inputs with rosy scenarios. While Rapat is currently experiencing robust sales, Sparrow’s team decided to plug in financial averages to provide a more realistic assessment. “I wanted to take a more conservative approach,” he says. “You can manipulate the inputs to make the output look however you want. If I were to put in numbers from this year, it would have looked substantially better.”

Sparrow’s advice to other executives who go through the Enterprise Value process is “to act on it. You can’t just put it in a drawer and say we’re a better company now. You’ve got to go out and use the information.”

WINTER 2018 ENTERPRISE MINNESOTA /

23

Roundtable

CONVERT

YOUR C.A.V.E. MEN (AND WOMEN) How a commitment to Continuous Improvement will bring surprising long-term strategic stability to manufacturers

L

et’s say I’m a manufacturer who has heard about continuous improvement and lean for years, but I’ve never really taken the time to see how it could benefit my plant. What do you say?

John: Manufacturers, like most other organizations, are process oriented. And those processes are the critical components that help them move through what they want to deliver to their clients. There is always a customer at the other end of that process, and the customer defines its value: what they are willing to compensate for versus not. Meaning, every step inside that process is either valuable to the customer or not valuable. And once we identify those basics, we can act to either promote the value or eliminate the waste.

David: In my mind, lean has two sides. Part of it is about being efficient, but as important is the velocity—how you are flowing value to your customers. That’s what’s going to help you stay ahead of the competition.

How do you define value?

David: The customer defines value. It is the fundamental level that they are willing to pay. To service our customers well, we need to understand what they value.

Sam: Lean has the transformative power to get the full engagement of the people moving in a single direction, improving the company. Companies that have fully engaged 24

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employees are far more profitable than those without fully engaged employees.

John: Lean drives competitive advantage. All of our manufacturers need to keep continually getting better, being stronger than the competition. Many of them are successful where they are at. Their competitors are also successful but keep trying to improve. This is the basis for our manufacturers to follow—continually improve to maintain that competitive advantage.

Sam: Lean is a simple philosophy that anyone at any level in the organization can understand. It is continually doing your best, which is deceptively simple. Everyone knows their job; they know how they struggled yesterday, and they know how to do things better tomorrow. It’s easy for workers on the floor to explain to you the key elements in having a good day. We want them to transform their thinking into asking,

This article is an edited transcript of roundtable conversation about Continuous Improvement from the perspective of four of Enterprise Minnesota’s most knowledgeable consultants. They are David Ahlquist, Sam Gould, Greg Hunsaker, and John Connelly. The discussion was part of a daylong staff retreat.

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“What does it require to have a better day?” And that’s looking forward to improvement. There is a house of lean that includes value-stream mapping, sometimes plant layout, looking at cell layouts, the 5S strategy—sort, set in order, shine, standardize, and sustain— so that’s where most people go. But the thing to look at is how you express out the waste of the non-value added activities going on in your business, the ones that don’t contribute to delivering your product, or delivering value to the customer as they perceive value.

David: Maximizing value starts with an operating strategy—how we optimize and manage the value streams, the way we do business. Just as important, we must engage the people who are involved in the process to continually improve the utilization of our existing resources to minimize non-value added activities.

Talk about how that contributes to competitive value.

John: Continuous improvement is the crux of that. Every organization gets better little by little every day.

Sometimes, they do it unconsciously.

We want our clients to be as conscious and aggressive and successful as they can be because we know all their competitors are also working on getting better. We do processes, we know who customers are, we want to be more efficient, do better and add value, and we want to do it faster than any of the other alternatives our customers have.

Greg: One element, too, is that the company knows what’s essential to being profitable and communicates it to the people on the floor—who are doing the value add—so they know what to improve. So, communicating as a strategy is vital for continual improvement.

And a lot of times it gets missed.

THE SKILLS GAP How is continuous improvement an essential strategy in the battle for employees?

Sam: Strategy sets the stage of where the company wants to go, and the tactics from 5S are what we use to express out non-value added activities, and to create higher value, whether it’s through people or the process. It’s 26

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David Ahlquist is a business growth consultant who helps manufacturing companies build cultures of continuous improvement that contribute to overall operational excellence. Before joining Enterprise Minnesota in 1996, David served as a manufacturing engineer for Westin Automotive, a manufacturing systems consultant for AMCI Computers, and as an operations manager for Gunnard Company.

David earned an MBA from the Carlson School of Management at the University of Minnesota. He also has a B.S. in mechanical engineering and industrial engineering operations research from the University of Minnesota. He is NIST/MEP certified in Lean 101, office value stream mapping, 5S, value stream implementation, ISO certification, internal lead auditing, and lean product development.

Sam Gould is a business growth consultant at Enterprise Minnesota who brings vast experience in new product development, advanced manufacturing processes, value engineering, automated manufacturing test equipment, and project management to Minnesota manufacturers. Sam provides services that help clients improve productivity and increase employee development. Before joining Enterprise Minnesota, Sam served as a process development engineer for Union Carbide, a director of engineering and manufacturing at Mallinckrodt, Inc., a senior technical manager for Lockheed Martin, a plant manager at Tyco Healthcare (now Covidien), and as a senior engineering manager for Nellcor Puritan Bennett. Sam also spent over ten years at the Oak Ridge National Laboratory in Oak Ridge, Tennessee utilizing lean development and six sigma practices.

Sam earned a master’s degree in electrical engineering at the University of Tennessee, Knoxville, a master’s degree in management technology from the Carlson School of Management at the University of Minnesota, and a B.S. in electronics technology and applied mathematics from the College of the Ozarks in Point Lookout, Missouri.

usually the standard way in which we deliver a predicted outcome. And the company that can predict its outcome regarding on-time deliveries, and the value of what’s delivered to the customer, they win in the marketplace, especially if they can get there at a lower cost.

The great strength of the Toyota production system is it makes everyone a problem solver. Best practices set a

standard for creating work instructions on the floor. Job instructions express out the rework and the scrap and those things that come from that. Transforming workplace relationships is another way to get employees to create higher value for the company.

And we do the same thing with all of our processes: best methods pick apart your processes into their smallest components and put them back together in

Greg Hunsaker is a business growth consultant with a strong track record of helping manufacturers transform their operations and build cultures of continuous improvement. His 20 years of experience as a manager and supervisor leading production, assembly, and lean initiatives makes him a valuable resource for any Minnesota manufacturer looking to eliminate waste, reduce lead times, and boost productivity.

Before joining Enterprise Minnesota, Hunsaker served as continuous improvement and learning manager for Entegris in Chaska. He completed coursework in science studies at the University of Minnesota. In addition to being a six sigma black belt, Greg earned a lean bronze certification from the Association for Manufacturing Excellence/Society of Manufacturing Engineers.

As Enterprise Minnesota’s vice president of consulting, John Connelly oversees the organization’s consulting services. John also manages Enterprise Minnesota’s connection to the Manufacturing Extension Partnership (MEP) national system and its nationwide network of industry resources.

Through his connection with NIST/MEP’s national system of 51 independent centers and 1,200 field staff, John is well positioned to understand the challenges and opportunities facing manufacturers. This combination of experience and resources enables Connelly to refine and add to Enterprise Minnesota’s service offerings and methodologies so that Minnesota manufacturing companies have the strategies they need to compete and grow.

John is a frequent speaker at industry events and a published writer on manufacturing trends and best practices. He started his career as a regional sales manager and sales/marketing manager for a manufacturer of automotive wheel service equipment. He has served as a regional sales manager and customer service manager for a manufacturer of engineered motion controls, a director of program management for a gear systems manufacturer serving the aerospace industry, and as a general manager for a tooling and machining company.

John earned a B.A. in business administration from Penn State. He also earned a mini-master’s in business administration from the University of St. Thomas.

ways that create higher value for the company. Each one of these tactics can build a better competitive advantage.

David: Everyone is having to do more with fewer employees. It’s harder to attract employees, and a poorly-organized workplace, with a lot of waste

in it, turns off workers.

The frustrating part of a worker’s day is the time he or she spends fixing things and putting out fires, the waste.

The subtle advantage of an effective lean program is employees can enjoy a quieter, more stable workplace. I’ve

had companies describe how after candidates take a plant tour, they’ve come back and said, “No, thank you.

This just doesn’t look like a place I want to work. It’s not organized, and it doesn’t look professional.” It can make a big difference when trying to hire new staff.

Does the urgency of workforce challenges make your clients think more about continuous improvement as a strategy rather than a series of one-off tactics?

John: That’s a connection we want to help them make. One is through efficiency: we have to achieve better

“When you’re elevating a person’s ability to perform, instead of poking him or her in the eye with a sharp stick, he or she will become more engaged. And that is contagious for the rest of the workforce.” results from the same resources. Next, we have to establish a culture that helps retain employees because they’re actively engaged in what we do. And third, we take the chaos out of processes. We stabilize them to the point where we can consider automation to replace some of those basic functions.

Greg: Engagement is important. Upand-comers want a sense of belonging.

They don’t want to just walk in the door, punch a clock, and then stand in front of a machine. They want to feel like they are part of something.

Giving them that can be a strategy to retain people and maybe even acquire new employees who will stay with your company for extended periods of time. Ultimately, lean is a valuable way to show respect for your people.

They live on that floor for 8 to 10 or 12 hours a day. We should use our power to show their ideas mean something.

We don’t want them to check their brains at the door. We want them to be productive, lean advocates for the company.

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Sam: Respect is a crucial element.

Let’s say you have a new worker who is struggling. You can say, “You’re not meeting the consistency we’re looking for, you’re not doing this right, so out you go. We’re going to find you a dust mop somewhere.” Or, you can look to find the full potential of that employee.

And when you use that tactic, you’re looking to see what value that person can bring to the organization. That’s a conversation that will help you make a low performer a 90/100 percent person.

That same tactic can help your high performers increase their value.

Lean can engage employees by treating them with respect. When you’re elevating a person’s ability to perform, instead of poking him or her in the eye with a sharp stick, he or she will become more engaged. And that is contagious for the rest of the workforce.

This is a nicely done segue from Lean 1.0 to 2.0. Describe the process of that evolution.

John: We all talk about Lean 1.0 being method and tool focused. So, there’s a lot of content, there’s a lot of knowledge about those methods and about those processes. And what I hear in my colleagues’ comments right now is that it’s more important how people apply those concepts, apply that knowledge.

The significant difference is moving from knowledge and methods and tools to people who are engaged. They are developed. They can see waste. They understand problem-solving. They are committed to making change and empowered to put those changes in place.

Lean 2.0 provides a framework to engage more of the staff and manage improvement on an ongoing basis.

Does the strategic emphasis on people make it more or less relevant to CEOs and managers?

David: Many companies have been frustrated by lean not taking hold and expanding within a company. It sounds simple, but getting everyone pushing in the same direction can be challeng28

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ing. Lean 2.0 provides a framework to engage more of the staff and manage improvement on an ongoing basis.

We’ve got to get them an environment that supports and drives improvement with daily feedback, and the recognition and support of management—which can take a little bit of time. We just don’t want to say, “You’re underperforming;” we want to give them a toolset, understanding, and a little time so they can move forward and slowly chip away at those non-value added tasks.

Sam, you’ve talked about the institutional “C.A.V.E. man” attitudes at companies that can subvert continuous improvement. Is it still a problem?

Sam: The C.A.V.E. man is the “Citizen Against Virtually Everything.” If they are not converted to the value of the rising generation, they will be run off. It’s even a greater divide today than before. When managers see the churn of the rising workforce, they find that the older generation is reluctant to invest time and transfer knowledge to the new employees due to the high attrition rate.

I heard one crusty old fellow ask a new person: “Is there anything you know how to do?” The new person didn’t come back from lunch. When I talked to him about it, he said, “Okay, so we hire a top person who just graduated from a technical training program in welding. He gets to the floor here, and he doesn’t know how to use a tape measure. It’s just impossible.”

I said, “Are you telling me, that this top graduate is no good because he doesn’t know how to use a tape measure? Couldn’t you teach him how to

use one? How hard is that?”

It’s a matter of looking at their potential, not their inadequacies. It’s the same thing in processes. Most people think that 90 percent of their problems are their people. That’s not right; 95 percent of their problems are the processes, not the people.

Lean 2.0, instead of looking at tools and methods to express out waste, looks at how we can create higher value by counting on the people in the process.

We focus mostly on people because they are the ones who will create that value, and we have to build that culture. It is crucial, for example, to make a culture around job safety. If the rising generation feels unsafe, they won’t stay. So, the important thing is to set the hook where we have near misses—our factories are pregnant with near misses. We have to help them see and prevent a near miss. That way, they feel like they can make their workplace safe, not only for themselves but for everybody. Yes, they get paid the same as everybody else, but the day’s a lot more fun. The rising generation has to understand the value that they can bring, or they’re not going to be there very long.

That’s a key component: lean allows them to see their value, how they fit into the organization and how they can sustain the growth of the organization.

David: Worse than a C.A.V.E. person is someone who is disengaged and no longer cares. They’ve given up. I find the reason a lot of C.A.V.E. people push back is because they actually care about the process. They’ve seen things that work, and they’re worried that change is going to create more significant headaches and more waste for them. Change

is always hard, and we’ve always had this problem. People don’t naturally embrace change. Change isn’t always managed well; there isn’t follow on, there isn’t accountability. An effective lean program understands that. Like in a good Kaizen event, you get people involved, you address the roadblocks, you address all the problems that C.A.V.E. people bring up. If you can engage the C.A.V.E. people—Sam loves to say this—you can turn your biggest detractors into your biggest supporters. It’s not easy to do, but we need to set up an environment where we make it easy for changes to happen.

Sam: When I was taught lean, I was told that you want to jettison the C.A.V.E. man as quickly as you can. I thought that was disrespectful because I’m a C.A.V.E. man. This isn’t going to work if I have to get rid of myself first, okay. But it allowed me to think about C.A.V.E. men more deeply. They’re the ones asking the questions that you’re not ready to answer, and that can be frustrating. But what they’re really getting to is, what value are you trying to deliver through this activity? They’ve been through a lot of activities that didn’t perform. They know that just saying it doesn’t mean anything. They won’t see value until they feel it, smell it, hold it, and see it in action. I’ve learned that you don’t jettison the C.A.V.E. man. In fact, you don’t leave on your journey without one, because they’re the ones who will bring the ballast to the lean journey conveyance.

These people tend to be natural leaders. They interface with a lot of people; they have connections that are both political and social. A converted C.A.V.E.

man will deliver ten times the value of an early adopter. Not only that, they will do something you might not be able to: they will convert the other C.A.V.E. men. So, that crusty group at the top?

Don’t ignore them and hope they retire, because when they do retire, they’re going take along a lot of value you will have a hard time recovering.

John: It’s interesting because the passion behind that resistance probably came from a commitment to the success of the current state. So, without seeing the reason and the value for the future state, they hold onto the current state.

That’s different than people who just oppose things.

The thing to look at is how you express out the waste of the non-value added activities going on in your business, the ones that don’t contribute to delivering your product, or delivering value to the customer as they perceive value.

What about measurability? I suspect many manufacturers want to know how to measure the value of lean. Is that sometimes difficult? For example, in safety, how do you measure an accident that didn’t happen?

John: That specific example may be a challenge, but more broadly, lean is one of the more measurable aspects of our four puzzle pieces. I think actual measurement in continuous improvement is one of the simpler things to get to, compared to other improvement opportunities.

It’s because we’re taking a look at what resources go into a process and those resources have value attached to the dollars of materials or the dollars of time. When we come to the output of the process we can take a look and say, “What did we save here?” More importantly, what value did we add back to the customer at the end of the process?

Sam: It’s very measurable. You do

your charter that actually talks about the business case and what the return on investment is going to be. I then use that charter as a contract. So, at the end of the three days, they sign up for it through their signatures. Just an example: there was a company where one element was that this event would improve their profit margin by a half percent. That’s huge. They had the hardest time putting their name to that.

That’s what I’m going to guarantee, right? But we heard them express themselves recently, that right now it’s at one and a half percent. It’s three times what they previously could hardly swallow.

Well executed.

Greg: Another person stood up and said, “I would die for that.” She was from another company that was there, and she was impressed they got that much out of that improvement. She said, “I would kill for that.”

How do you respond to manufacturers who say they don’t have time for lean, they are spending all their time trying to keep up with capacity?

David: It’s a challenge, but we want them to understand whether they’re using their employees and equipment to the best extent possible. When I go to a company that has a machining center that’s constrained, we ask, “How well are you using it?”

“Oh, we’re using it, we’re scheduling, we’re paying attention.”

I then ask, “How well are you really using it?”

We’ll do a simple analysis: What’s the green light time? When is the machine spindle turning? When are they making parts? It’s very common to discover the machine is only producing value less than 50 percent of the day. So, we ask, are we using our resources, or are we waiting for setups, for information from the office, or for materials? The first thing we want to do is make sure we’re using our current resources the best we can before we talk about a new plant, adding new equipment, or trying to hire new employees who are really hard to find these days.

Sam: Productivity is the creation of value at a lower cost. We’re looking at increasing productivity. Any increase in productivity yields capacity, so you’re regaining your capacity. Efficiency is a result. What we’re looking at is producWINTER 2018 ENTERPRISE MINNESOTA /

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tivity that delivers to that result.

John: There’s an important tangent here. The measurements within continuous improvement and the efforts to make the process as productive as possible can also evaluate the mix of work.

Which components are the most profitable? If we can identify some segments that aren’t as profitable as we want, that’s a way to free up capacity. We can switch to the more valuable components of what we offer.

Greg: I’ve gone on tours when clients have said, “I wish I had two more of these machines.” I said, “So you have a machine constraint?” When I asked how many hours the client ran the machine each day, he said, “We only have one shift.” That identified some of the confusion. If you’re not running 24/5 or 24/7, you don’t have a machine constraint, you have a labor constraint.

Sometimes they focus on the machines when it turns out to be labor. How do they measure that? They may not even use that for scheduling purposes because they genuinely don’t know what the capacity is.

Explain the concept of the standard work mode concerning continuous improvement.

David: If we don’t have standard work, we can’t improve the process.

The classic lean quote from Taiichi Ohno is: “Where there is no standard there can be no kaizen (improvement).”

To get people up to speed on best practices, we need to understand what these key elements are and share them.

Too much documentation is worse than no documentation because people don’t pay attention to it. We want to break it down to the key points and then train to those key points. Then we can have training go a little more smoothly, and now we can have continuous improvement because we can see how it’s working.

John, you talk about a concept of “seeking the abnormal.” What do you mean by that?

John: First of all, I enjoy the reaction that I get from clients when I suggest they seek the abnormal as a strategy. I’ll either get a smile or a wrinkled-up face. One client related it to Abby Normal in Young Frankenstein, the brain in the jar—I love 30

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being remembered no matter how it happens. The concept here is we want lean leaders to go where the process is performed. Don’t wait for reports; go where the process is completed and look for the abnormal. And the only way you can see abnormal is to know what normal is. And the only way to know normal is to be familiar with the measurements of the process. When you know normal, you can stand in front of a process and reach only two conclusions about abnormal. One is performance below normal, and then we jump right into how fast we can problem solve to return the process to normal. The other abnormal condition is we might actually see performance above normal. And the fantastic part about that is we can capture what made this above normal and make that the new standard, the new normal. Which is why I love the idea of seeking the abnormal because both of the two reactions put us in a better position.

If you can’t see abnormal, you’re satisfied, and progress is not happening.

So, we try to develop lean eyes, the ability to see.

On top of that, describe what you mean by your clients should think about continuous improvement regarding how customers feel.

John: Here’s an example. I was with a client who was telling me about how they would 5S their truck garage. I asked, “Why would you bother 5Sing the truck garage?” expecting an indignant response. What I got was excitement. “If we deal with that, we’ll get truck repairs and truck inspections in and out faster, and that will wholly support our commitment to turn around the delivery time to our clients.” That’s exactly what we’re after. When you can see a process—and more important than an initiative is when the customer for that initiative says, “Wow! This is better!”—I think that’s an excellent indicator of the prioritization you did for your initiatives.

Sam: Taiichi Ohno once said, “The worst waste is the waste that you don’t see.” Someone else said, “Progress

stops when you’re satisfied.” If you can’t see abnormal, you’re satisfied, and progress is not happening. So, we try to develop lean eyes, the ability to see. That’s what we’re trying to do with lean really—it is the skill and ability to look at the things you think are normal and ferret out those things that are not normal.

How difficult is it to empower employees to see waste?

Greg: They may see it, but they may not know that it’s a waste because they don’t want to come to work and have a stressful day. So, they may create hidden factories within the factory that make their day easier but tell no one.

That allows variation in the process.

First shift does it one way; the second shift does it another way. And the third shift comes in, and says, “What the heck did first and second shift do?

They’re doing it all wrong.” So, they make hidden factories to make their days easier and better, but they don’t communicate. There’s no engagement throughout the entire company. They already do it, but they don’t understand what they’re actually doing.

Sam: I was working with quite a large company, and it’s not a clean place by any means, so at the end of their shift, the employees were blowing themselves off. But from a safety standpoint, you’ll blow something in your eye or in somebody else’s eye.

That’s dangerous, but I couldn’t get anybody’s attention. When they were looking at buying another compressed air system because the one they had could not keep up, we taught them how to find out when it runs out of capacity. Well, when do you think it runs out of capacity? At shift change, because they’re using that resource. And then they’re at a teachable moment. You teach them it takes seven electrical horsepower to create every pneumatic or compressed air horsepower. You’re squandering something that people think is free. It’s not free. They’ll turn the lights off, but they’ll leave a hose hissing in the corner—and they’re just hissing away money. It’s costing $3,000 to $5,000 a year.

John: You’re asking how to know what to look for. You can’t be where it always happens, and yet there’s a mindset about this. We talked about

measurements. I can’t see an error if I don’t know what to compare it to. I have to know what it’s supposed to be.

And then, we add visual management on top of it because we can’t always be there to check the measures, but if we’re continually reporting the critical components where everybody can see them, then it’s much easier to go where the process is performed and observe whether it’s operating normally or not.

David: There can be challenges with employees appreciating what’s value added because most employees get paid the same whether they’re doing value added or non-value added work.

They just see it as part of the day.

When we have bad quality, everyone understands that’s non-value added, but there are a lot of subtle things like setups, filling out paperwork, and staff meetings, which are currently necessary, but non-value added. So, we need to train staff on the different types of waste and provide timely

feedback on area performance. With visual feedback, we want anyone to be able to walk up to a work area and in six seconds or less understand how we are doing today on cost, quality, and service. Now we can have a discussion about addressing what is getting in the way of staff doing the real work—the eight deadly wastes. If we’re all going to make tomorrow better than today, our staff needs feedback to tell us how we’re doing today.

Looking more inwardly, how does continuous improvement help leverage the other puzzle pieces?

Sam: One is talent development.

With business systems, your quality system integrates directly into it. And we should be doing this at a strategic level, seeking a competitive advantage.

It’s key to the other puzzle pieces.

David: Business management systems require setting objectives at relevant functions. Good business man-

agement is to have aligning, cascading measures that go all the way down to the shop floor supporting our strategic objectives, as well as continuous improvement.

Sam: That strategic plan and the tactical tools we use to get there align all the way to the production floor. Instead of having your corporate dashboard in the leadership team room, you want to have that same model down on the production floor. You have what I call the quick wins: safety, quality, productivity, talent development, and continuous improvement before every shift.

Greg: So, that’s taking the strategic intent and tying it down to the bottom floor where all the rubber meets the road, where the real value is generated.

I mean, the people on the production floor, they pay everybody’s salary. So, you’d like for them to support a bigger salary, and you’d want to pay them a more substantial salary because they’re bringing higher value to the company.

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Final Word

The Wisdom Within What you have might be all you need

I

n case you missed it on page 24, Sam Gould, a longtime consultant at Enterprise Minnesota, likes to tell the story about a manufacturing client who expressed repeated frustration with a young employee who consistently underperformed minimum expectations on the production floor. He told Sam he was about to tell the young man, “Why don’t we find you a dust mop somewhere?”

Sam suggested the manager reconsider.

Rather than reject (and lose) the employee, Sam asked the client to consider the enormous investment of time and treasure it would take to identify, recruit and retain that employee’s replacement, presuming you could even find one. Why not step back and figure out how to develop the full potential of the employee you have?

A Bemidji-based engineer, Sam is a lean pioneer who’s been teaching continuous improvement to Minnesota’s manufacturers from its earliest days. He has achieved an iconic stature at Enterprise Minnesota because he wraps his cutting-edge knowledge of manufacturing processes in old-fashioned common sense (and delivers it with an often-hilarious sense of humor).

Within the increasing sophistication of lean, he says, “Respect is a crucial element.” You can dismiss a struggling employee, or you can look to find the full potential of that employee. “And when you use that tactic, you’re looking to see what value that person can bring to the organization. That’s a conversation that will help you make a low performer a 90/100 percent person.” What’s more, he adds, “that same tactic can help your high performers increase their value.”

Sam was one of four Enterprise Minnesota consultants who used a roundtable discussion during a recent daylong staff retreat for our employees to analyze how empowering people has become a bedrock principle of increasing relevance in lean manufacturing and continuous im32

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Lynn Shelton is vice president of marketing at Enterprise Minnesota.

provement.* That conversation was then edited into the cover story for this issue of Enterprise Minnesota.

My takeaway from their presentation— “What you have might be all you need”—should hold particular relevance to manufacturers who are entering 2019 with ever-higher levels of apprehension about where their next generation of employees is going to come from.

At the other end of Sam’s employee worldview are the often-grizzled longtime production employees who can be somewhat set in their ways. Sam calls them the C.A.V.E. men, “Citizens Against Virtually Everything.” These are folks whose long tenure on a plant floor often breeds a certain skepticism about what they might consider the latest shiny objects thrust upon them by their managers.

Far from dismissing their input when

trying to create a lean culture, Sam advises managers to embrace them.

“They’ve been through a lot of activities that didn’t deliver,” Sam told us. “They know just saying it doesn’t mean anything. They won’t see value until they feel it, smell it, hold it, and see it in action. I’ve learned that you don’t jettison the C.A.V.E. man. In fact, you don’t leave on your journey without one, because they’re the ones who will bring the ballast to it.”

Early lean instructors once advised clients to jettison C.A.V.E. men from the process of implementing lean because it was not worth the hassle of enduring their questions. “I thought that was disrespectful because I’m a C.A.V.E. man,” Sam says. His view is that the C.A.V.E. man could be the most important cog in leaning up operation. “They’re the ones asking the questions that you’re not ready to answer, which can be frustrating,” he added. But the reason behind their questions has ultimate value: what value is the activity trying to accomplish?

In other words, they’re strategic.

The roundtable discussion left a lasting impression on the staff, not only for its insights but for the wisdom and subtle discernment of the panelists who presented those ideas. The Bible may teach us you can’t be a prophet in your own tribe, but that doesn’t mean you can’t impress your colleagues. It showed me the end of 2018 presents an excellent time to assess—and appreciate—the value of your colleagues. Chances are you are surrounded by some really talented folks whose importance shouldn’t be taken for granted. (If you aren’t, think about finding another team. I’m told the job market is quite good these days.) *Not for nothing, the meeting was hosted by the folks at Olsen Thielen, our newest State of Manufacturing platinumlevel sponsor! Thank you very much.

9001:2015

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These are times that demand professional affect your portfolio and work toward minimizing guidance. to that learndemand more. professional its impact.Meet with These are me times

James H. Lannan Wealth Advisor James H. Lannan 8300 Norman Center Drive Wealth Advisor Suite 1150 8300 NormanMN Center Drive Bloomington, 55437 Suite 1150 952-841-6454 Bloomington, MN 55437 https://fa.morganstanley.com/ 952-841-6454 james.lannan https://fa.morganstanley.com/ james.lannan@morganstanley.com james.lannan james.lannan@morganstanley.com

guidance. Meet with me to learn more.

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MAR002 CRC 2327195 12/18 CS 9435041 11/18