Enterprise Minnesota Magazine October 2014

Helping Manufacturing Enterprises Grow Profitably

OCTOBER 2014

NONPROFIT ORGU S POSTAGE

PAIDSlayton, MN

PERMIT NO. 22

Enterprise Minnesota310 4th Avenue S. Suite #7050Minneapolis, MN 55415

Company on

FIREHow Rosenbauer’s Kevin Kirvida and his

team transformed their company into an international behemoth.

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OCTOBER 2014

28 COMPANY ON FIREHow Rosenbauer’s Kevin Kirvida and his team transformed their company into an international behemoth.

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

4Manufacturing is ‘sick’And that’s a good thing, apparently.

2The Magic of RelationshipsThe City of Chaska leverages aggressive economic development to become a manufacturing powerhouse.

Final Word: MnSCU Steps UpThe educators work hard to become part of the solution for the skills gap

Super IdeasMidwest Rubber uses ‘Super Bowl’ competition to bolster continuous improvement

8 32

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OCTOBER 2014 ENTERPRISE MINNESOTA / 1

PRIMED TO GROWUsing innovation and aggressive expansion GVL Poly looks for tenfold growth

16

ADDRESSING THE SKILLS GAPA high-powered panel of manufacturing executives discuss how they’re dealing with the shortage of adequately-trained workers.

Q & A WITHJIM ZUEHLKEA corporate governance expert discusses when you need a board, when you don’t, and when you need to make a change.

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s manufacturers struggle with how to cope with skills gap issues among current and future employees, I’ve

taken to advising them that they brag more about their industry.

If they’re going to successfully attract the next generation of smart, well-trained employees that they need, manufacturers must emphasize to students and parents that

modern manufacturing jobs can be long-term, well-paying careers that are creatively satisfying and socially rewarding, concepts that young people care about.

Students today aren’t getting this perspective from teachers or counselors in most high schools, who still seem fixated on a four-year degree as the sole path to a

meaningful work life.But almost anyone who is close to

modern manufacturing or has even toured a high tech manufacturing plant will quickly change their tune.

But only manufacturers themselves can typically instigate this kind of communication.

In short, I say, they need to emphasize that manufacturing is cool again.

Well, that was until I was confronted by Traci Tapani, the well-known owner of Wyoming Machine. Traci was a panelist at a skills gap roundtable discussion at Century College sponsored by MnSCU recently that attracted more than 100 people (covered on pages 24-27 of this magazine).

“Manufacturers have to get better at personal branding,” she said. “It is unfamiliar to us and sometimes we’re a little worried about it. Even using the word “cool” about manufacturing. I have two teenage daughters -- I can assure you that no one uses the word “cool” anymore. We have to use the language that young people are using.”

She’s right, of course. Effective marketers sell products or concepts by promoting why they matter on terms that relate to consumers.

So, someone asked, what would they call it?

“Sick,” was the response.Good enough, at least I’m now cool

enough to understand that today’s manufacturers are sick.

Manufacturing is ‘sick’And that’s a good thing, apparently.

A

bob kill

Bob Kill is president and CEO of Enterprise Minnesota.

2 / ENTERPRISE MINNESOTA OCTOBER 2014

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BUSINESSEVENTS2014-2015

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

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DATE TOPIC CITY

9/17/14 Achieving Office and Production Efficiency the Lean Way - 10 Effective Steps

St. Cloud

11/12/14 Effective Employee Development Strategies – Essential Skills to Accelerate Your Lean Investments

Plymouth

12/10/14 Managing Business Risk Shoreview

1/14/15 Managing Business Risk Alexandria

2/11/15 A Vision of Growth - Strategies for Manufacturers Ramsey

3/18/15 Creating Business Value - Planning for a Prosperous Future

Brooklyn Park

4/22/15 Cultivating Business Internationally - Increase Your Market Share

Owatonna

6/17/15 Leadership Teams- Guidance for Good Business Governance

Shakopee/ Chaska Area

STATEWIDE ENTERPRISE MINNESOTA EVENTS

10/20/14 Statewide CEO Council Meeting Exclusive to Enterprise Minnesota CEO Peer Council Members

Plymouth

5/13/15 2015 State of Manufacturing® Statewide Release

Minneapolis


ometimes the real creativity around continuous improvement can be about how a company

inspires them.Midwest Rubber Service & Supply

Company proved that notion recently when it completed a nine-month long company-wide Super Bowl competition of ideas that yielded 1,185 successfully implemented improvement projects,

with more than 400 still awaiting implementation.

Midwest Rubber manufactures, fabricates and distributes high quality rubber products. The 37-year-old company provides belting and conveyor products for food, paper, packaging and distribution industries, as well as die-cut rubber products, such as squeegees, for the global floor care

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Jason Palmer (left), a die cutting supervisor was quarterback of the winning team. He is shown here with James Nelson and Dana Syverson.

Super IdeasMidwest Rubber uses ‘Super Bowl’ competition to bolster continuous improvement

industry. The company’s headquarters and manufacturing facility is located in Plymouth, Minnesota, with additional manufacturing, sales and distribution operations in the Netherlands and China. Their Shanghai facility also includes a state-of-the-art floor care test center. Midwest Rubber employs 80 people with 60 of them at the Plymouth facility and 20 internationally.

The concept was simple enough: The company divided its 55 Plymouth-based employees into 10 teams, each led by a volunteer quarterback (five of whom were established lean practitioners). Teams were then matched in one-to-one monthly competitions through which implemented projects would receive 25 yards (especially valuable projects could receive 50 yards). At the end of the month the team with the most yardage would win. The individual team with the highest score among the 10 would receive a catered hour-long lunch.

The competition was announced at a company-wide luncheon that celebrated

being named 2013 Manufacturer of the Year, sponsored by the Manufacturers Alliance in Minnesota. “We really believe ongoing peer learning, in areas such as Lean Manufacturing, is an approach that will continually improve our business and company, said Doug Turk, company president. “We not only share learning experiences with our peers, but use each other as sounding boards—we’re all in manufacturing and we understand each other.”

The company used the luncheon to draft teams at random, chosen from a hat. Teams were cross-functional, with the only rule being that workers could not be on the same team with their supervisor.

The results were posted in a shop office that contained a window for each team, along with the ideas implemented.

“The ‘really cool part’ was that it involved everybody in the company, including Turk,” according to Jason Palmer, die cutting supervisor and quarterback of the winning team. The competition worked, he said, because it contained equal parts fun, competition, and peer pressure. “It was also partially eye opening,” he said. Employees saw

the effectiveness of their ideas: “People realized, ‘I could have done that a long time ago.’”

The cross functionality, he added, enabled people to get better acquainted. “There had been a lot of silos. This company has been in business for 30-plus years. It is old school in some ways.

“There were some people who didn’t want to play at all,” he said, “but they would sneak their ideas to someone else.”

By the end of the year, he said, there were only two or three people who didn’t put out much effort.”

Palmer said the company is currently preparing the next competition.


Erik Paulsen Tours Midwest RubberEnterprise Minnesota President & CEO, Bob Kill, and U.S. Congressman Erik Paulsen (CD3-R) recently toured Plymouth-based Midwest Rubber Service and Supply Company to honor the company’s achievements. Midwest Rubber, a manufacturer and distributor of high quality rubber products and conveyor belts, has evolved from a small entrepreneurial venture to a swiftly growing family business.

Joining Kill and Congressman Paulsen on the tour were: Adam Schiff, outreach director; U.S. Senator Amy Klobuchar; Jacob Coleman, district outreach coordinator; Congressman Paulsen; Matthew Croaston, constituent services representative; U.S. Senator Al Franken; Joe Mulford, MnSCU system director for education industry partnerships; and Cherie Rollings, associate dean of customized training services, Hennepin Technical College. Doug Turk, president of Midwest Rubber and Ross Anderson, Midwest Rubber’s director of global operations led the tour.

“Midwest Rubber is well positioned for sustainable growth because of its focus on innovation and strategic planning,” Kill said.

The company has received Growth Acceleration Program (GAP) investments to help foster company improvements. GAP is a direct state investment program aimed at helping manufacturing companies of 250 or fewer full-time employees to access business improvement services. Eligible companies must have a business plan for improvements and demonstrate an economic need for GAP. All companies awarded GAP resources must match at least $1 for every $1 of GAP investment. First authorized by the Legislature in 2007, GAP continues to receive bipartisan support for its valuable role in job creation and job retention in Minnesota’s manufacturing industry.

“GAP is a tremendous help to medium- and smaller-sized manufacturers like Midwest Rubber as it enables companies to take advantage of business growth strategies needed to compete in today’s global economy,” Kill added.

“Over the last two years, Midwest Rubber has worked with consultants from Enterprise Minnesota to assist in a key marketing strategy and our strategic planning process,” said Doug Turk, president of Midwest Rubber. “It was the financial support of GAP that provided Midwest Rubber the resources to move forward on addressing these two strategic initiatives that otherwise would have been delayed.”

Company president Doug Turk with Congressman Eric Paulsen and Bob Kill, president and CEO of Enterprise Minnesota.

The National Association of Manufacturers recently hosted a supply chain forum at 3M’s international headquarters in St. Paul that featured a Who’s Who of regional supply chain leaders. The day-long session featured a wide variety of speakers and perspectives. It included the following presentations.

“THE 3M STORY - SUPPLY CHAIN TRANSFORMATION”Chris Holmes, 3M’s senior vice president, supply chain, showcased why supply chain is a critical part of the 3M growth strategy and how the company transformed its journey to a strategic organization that is focused on customers and competition. “DRIVING GROWTH & COMPETITIVE DIFFERENTIATION THROUGH SUPPLY CHAIN OPTIMIZATION”Understanding how the entire value stream impacts the customer is critical to a manufacturer’s growth. They can optimize and improve their operation by understanding the entire value stream from suppliers to the final customer. Successful companies look to apply Lean principles and remove waste across their plants and beyond. They also know their customers and understand why and how their competitors may gain market share. They look to meet unarticulated customer needs through areas such as sustainability programs, source of supply continuity and resiliency, variable lead times, customized product offerings, and unique distribution models.

“EXTERNAL CHALLENGES TO SUPPLY CHAIN EFFICIENCY AND UTILIZATION” Manufacturers are facing growing demands

for global supply chain information and accountability from governments and non-governmental organizations. Supply chain regulations such as REACH and RoHS in Europe and conflict minerals in the United States are proliferating rapidly around the world, imposing new costs and presenting a significant strategic risk for businesses large and small, up and down the supply chain and in nearly every manufacturing sector. Reporting and certification requirements associated with these regulations are challenging the ability of compliance officers and supply chain managers to obtain and develop information that may reach a dozen or more levels into their supply chains.

“HOW TECHNOLOGY IS CHANGING SUPPLY CHAINS” Advances in both software and reporting continue to change transportation. Manufacturers must understand how software and big data are changing the supply chain and improving efficiency. They must know how the latest trends in Transportation Management Systems (TMS) are impacting market visibility and how freight is tendered, assigned and managed.

“BENEFITS OF DEVELOPING A SOLID SUPPLY CHAIN STRATEGY” Strategy is driven from the top of an organization. To out-maneuver competitors it is critical for the various businesses and functions to band together and align with and advance a single strategy. Supply chain is no exception to this rule. Back office functions can easily lose sight of the customer. However, having a clear understanding of why “you” exist and how supply chain adds value for the customer can provide a new way of thinking and a new energy in the organization. Supply chain includes many functions such as sourcing, EHS, engineering, manufacturing, sustainability, logistics and operations. Developing a supply chain strategy that leverages the cross-functional expertise helps build the scale and strength which can be a winning formula.


Supply Chain Summit

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NAM hosts the region’s best and brightest in St. Paul to dissect and discuss top supply chain challenges and opportunities.

The City of Chaska has been a model for economic development in the Twin Cities Metropolitan Area. Our goal is simply to ensure the development of thriving businesses---from small family owned businesses to corporate campuses---that invest in the community and provide jobs for the region. This goal is evident in the streamlined development and public approval process. We consistently utilize a variety of local incentives to help write-down development costs and also work with County and State agencies to seek additional funding to locate businesses to Chaska. Contact us and learn how the City can help your business thrive.

Jeffrey Dahl Economic Development Director

City of Chaska 952-448-9200

[email protected] “A Quality Small Town”

arlier this year, Ken Carney, owner of Exactec, a manufacturer of retail

displays and store fixtures was weigh-ing whether he could best accommodate projections for his company’s growth by staying in his leased facility in Chaska, or by finding a different location.

His company and its 70 employees make products for a Who’s Who of retailers like Target and Sears as well as working for individual brands through marketing and design firms.

He had purchased the company in 2000, which at the time was a small family-owned contract manufacturer that specialized in laser cutting of sheet plastic. He later transformed it into its current specialty.

“The business was here when we bought it,” he says. “We stayed in the same building, but we expanded quite a bit and have grown the business. It is probably four to five times the size it was.”

Carney admits he didn’t have “a whole lot of connection” with the city before he realized he needed more space and approached the city to help defray costs associated with a 20,000 square foot expansion for manufacturing and distribution.

The expansion would double the company’s production capacity in terms of square footage.

The city responded quickly with a package that included $100,000 in tax abatement over 20 years.

“It made a difference in terms of our decision to go ahead and expand here in Chaska,” Carney says. On top of that, he was impressed with the speed with which the city got it done.

After talking to people in other cities, he says, he realized it can be a long and drawn out process. “They knew we were on a tight schedule to make a decision and they really accelerated the whole process.”

“They are very interested in seeing businesses expand here in Chaska. In fact,

it didn’t take long at all.”In fact, he says, the city offered Carney

“a very good deal” on a piece of property, if he preferred to build a new building from scratch.

With the deal done, Carney says, “now we’re here for the long term.”

Jeffrey Dahl, assistant city administrator for Chaska, said that Exactec’s experience reflects the city’s commitment to jobs.

“The city and the council have maintained a key objective over the past many decades that they want good jobs in the community,” he says. “With that, we want people to work here, live here, spend their time here -- to build community here.”

He admits that Chaska might try a little harder because of its location.

“It is a little bit more challenging when you are more of a third-ring suburb, far


The Magic of RelationshipsThe City of Chaska leverages relationships and aggressive economic development to become a manufacturing powerhouse.

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Jeffrey Dahl, Chaska’s assistant city manager says his city has a three-part formula for economic success, all revolving around personal relationships.

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Ken Carney, owner of Exactec, recently secured $100,000 in tax abatement to help with a much needed building expansion.

from the urban core,” he says. As a result the city invests a lot of time and investment in terms of attracting industries “that have a lot of good quality jobs, where the businesses are part of the community, where the people that work there live in the community and take part in the community.”

Chaska’s three-part formula for economic success, he says, revolves around relationship building.

The first is with the businesses that are already located in Chaska. “We have a proactive business retention and expansion plan. We value those relationships. We make time to meet and have relationships with key businesses through Rotary, the Lion’s Club or by making company visits. We want to see how they’re doing. They can call us at any time and talk about their needs and have a good relationship, so there are no barriers. We want to stay ahead of the game as far as their plans in the community.”

The second, he says, is to continually develop relationships with other economic development partners, such as the State of Minnesota, Carver County, and Greater MSP, the regional economic development entity.

These relationships, he says, are vital. “We try to be close to the ground and know what new businesses are looking for.

“As a result, we’ve been very successful both getting grant money, and at being the first ones to market ourselves to businesses that might be coming to the state or from a different part of the country.”

The third leg of the strategy has been to be “very aggressive” in providing incentives to attract businesses through tax abatement, tax increment financing and other areas.

“Our council sees the value in that,” Dahl

says, adding that “it is quantifiable” how those development costs are offset by long term gains in job creation, increased tax revenue and improvements in infrastructure.

“If a couple medical manufacturing device firms in town get to be by each other, it all kind of snowballs,” he says. “It creates a strong business environment and economic base.”

One of the biggest recent success stories was when Beckman Coulter was able to leverage direct economic development assistance spearheaded by the city to help bring a hundred new high-paying jobs to Chaska.

The Beckman Coulter Chaska facility is part of a company based in Pasadena, California that manufactures biomedical laboratory instruments. Worldwide, the company reportedly has revenue of more than $3.6 billion and more than 12,000 employees.

The Chaska-based branch approached the city for help offsetting some development costs related to locating a new line of manufacturing into the plant. “They came to us and asked if there were any programs. With our relationships with the state and the county we were able to provide them with more than $700,000 in funds to help.

And it worked. Ultimately, Dahl says, the Beckman Coulter effort will bring a hundred new jobs, averaging $70,000 per year – a home run in any economic development playbook.

“The executives know that they can call us to get things done,” Dahl says. “And they also know the relationships we have with the state and the county folks that partner with us.”

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nterprise Minnesota’s President and CEO Bob Kill used a recent

appearance on Greater MSP Business to underscore his organization’s mission to extol the value of manufacturing to Minnesota’s culture and economy.

Greater MSP Business is a weekly television show on Sundays that profiles diverse aspects of Minnesota business. Hosted by Cyndy Brucato, a former longtime news anchor of KSTP TV, it is an offshoot of Greater MSP (Minneapolis Saint Paul Regional Economic Development Partnership), a private non-profit organization that seeks to coordinate and engage economic growth in the 16-county Minneapolis-Saint Paul region.

Kill said the financial optimism from manufacturers is the highest ever, according to Enterprise Minnesota’s State of Manufacturing® survey research poll.

“They feel good about the economy,” he said, adding that they’re also challenged to find qualified workers. “And health care costs are a concern, but they are starting to manage it. They know that it is important for current employees and for recruiting new employees.

When Brucato asked about solutions to the worker shortage, Kill recommended working with MnSCU’s technical colleges.

“It’s not always simple, but I always say that the manufacturer has to have a relationship with one or two of our great

technical schools,” he said. “Almost 50 percent of the (employee) demand within manufacturing is in a technical degree with some experience.”

What’s more, he said, manufacturers should open their doors to community supporters and allies.

“The power of public and private

partnerships is something I’ve learned later in life,” he said. “You get very busy in your business and you forget that you are a job creator. Reach out to the academic institutions that might be training your next workforce. Reach out to the economic development folks. It might help you, if you are building a new facility. Reach out to your elected officials. And reach out to high schools and middle schools. Talk about the careers that you develop.”

“There are 7,400 manufacturers in our great state; 5,200 of them are relatively small. But 12 percent of the payroll creates 15 percent of the wages. We need to tell more parents to at least look at this as an opportunity.”

When Brucato asked about the top priority of manufacturers, Kill said “it is staying on the journey of continuous improvement.

“We’re competing in a global world today,” he said. “The concept of homesourcing or reshoring is a reality.

It is not a fad. Wages have changed dramatically in some of the overseas markets. Inventory is not something companies should want. So really getting your operation on a continuous improvement journey is No. 1.”

Lean manufacturing principles apply to every operation, he said. “You’ve

got to cut out the waste. Ninety percent of an operation is almost wasted to the company.

“But then take that over and figure out how to grow your business,” he said. “There are companies that are happy with just getting better. But let’s convert that to real growth to drive the economy.”

His second recommendation for manufacturers, he said, is to “market yourself. Whether you are a precision manufacturer of small parts or whether you build a finished product, you need to go out and market yourself – and have a workforce plan so you’ll have the people you need to drive that growth.”

When asked to reflect on key lessons of having spent 40 years as a manufacturing executive, he said that manufacturing is becoming popular again. “Manufacturers today need to brag more. I could go back 40 years and say, we never did. I think the trend is simple: take advantage of your advantages, because today manufacturing is being appreciated.”


Bob Kill is interviewed on Greater MSP Business with Cyndy Brucato.

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Manufacturers Must Reach OutBob Kill touts Minnesota manufacturers in appearance on Greater MSP Business.

“Manufacturers today need to brag more. I could go back 40 years and say, we never did. I think the trend is simple: take advantage of your advantages, because today manufacturing is being appreciated.”

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uffalo-based Von Ruden Manufacturing, Inc. recently

commemorated 25 years under the ownership of Al Anderson with a month-long celebration of weekly events, culminating in a hog roast that included civic leaders as well.

Von Ruden is a $9 million company whose 43 employees design and manufacture mechanical power transmission and hydraulic drive components, including driven tooling for the machine tool markets.

Al Anderson (CEO) puts the company’s current achievement into perspective. “I’ve been 42 years old now for 25 years. Can that be true? It’s a great feeling to know that we can endure, change and succeed over that time.”

Von Ruden has a long history in Minnesota. The original company was founded in 1946 in Claremont, MN. In 1973 the company was purchased by Washington Scientific Industries (WSI) and was integrated into their Power Components Division, based in Long Lake. Anderson joined the company in 1980 as a division manager and bought out the division in 1989, using grants from the State of Minnesota and Wright County. He kept the trade name of Von Ruden from the original manufacturing company.

The company was the first occupant of Buffalo’s industrial park and at the time was the city’s largest manufacturer.

Brandon Anderson (Al’s son and company president) says that locating in Buffalo “would prove crucial to our success. Wright County provided the labor resources needed to grow a company and the City of Buffalo continues to prove every year that it was up to the task to support our vision.”

To this day, he says, the City Administration of Buffalo including Merton Auger and Laureen Bodin provides the necessary infrastructure and commitment to community development needed to be a foundation for Von Ruden to grow.

Brandon, who joined the company in 1993, says the company takes pride in being

a good corporate citizen. The company has raised money for local charities and civic causes.

“We still have three of those original students employed here,” Anderson says.

The Von Ruden president is particularly pleased with the company’s surreally low customer turnover.

“Ninety-nine percent of our customers don’t ever leave us once they’ve engaged

with us,” he says. The reason? “We want to provide a

family-oriented environment for our customers and our vendors,” Anderson says. “We don’t believe in a vertical hierarchy. Everything is done on a horizontal plane. We expect to have an open family environment. It makes it personal.

“We always operate as if we were the customer in every situation. How would we react? What would we expect?”

In addition, he says the company doesn’t base all decisions on profitability. “It is not based on return. It is based on what’s right. We want everyone to experience that. We believe it takes a lot more money to find new relationships than to keep the ones you have.

“We put every effort into making sure those who join us are part of our family – and feel it.”


Von Ruden’s ExpressThe company and the city celebrate the company’s 25 years of success.

Brandon and Al Anderson

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ohn Meyer, continuous improvement project leader at J&B Group, brings a

keen sense of marketing to his efforts.For example, Meyer recently took

the stage at an Enterprise Minnesota business event called Achieving Office and Production Efficiency the Lean Way, with a guitar strapped around his neck.

“I thought I would bring the guitar with me because feedback that I get when I do a presentation is usually that I am kind of angry-looking in the face; first impressions. But when I bring this up here all you guys are looking at me and thinking, ‘This is going to be fun.’ And that’s a big thing about continuous improvement; just making it fun.

J&B Group, based in St. Michael with more than 400 employees, produces No Name Steaks® and Midwest Pride® products. During a typical week, the company delivers several million pounds of product to customers in 10 states.

Involving associates: “You want to involve everybody.”

Branding: “It’s repetition. It’s burned in.”Engaged training and events. “Tell

associates ‘what’s in it for me.’ If you can’t answer that question, you’re not going to engage them. They’re going to walk out of the room thinking, ‘Why do I want to do this?’”

Strategic leadership development: “The easiest way for me to encapsulate that for you guys is, you have to be ready to get fired. It’s as simple as that. You have to be honest enough, and ready to speak the truth.”

Results: “Make it visual. Post it out there where associates can walk through that door every morning and see, ‘Here is what I was supposed to go, here is my goal, here is what we actually did yesterday. How did I do?’ ”

Meyer strongly recommends encouraging leaders to tour the efforts of other companies first hand.

“There is nothing greater than having your leaders get out of their box, and out of the company, and go see what someone else is doing,” he says. “You can sit in a meeting room and tell them how somebody else is doing it, but it will never make the same impact. You have to get out and do it.”

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n 2012, Jerry Kauffman, president and CEO at New Ulm-based Windings Inc.

laid out an aggressive 10-year strategy that sought to quadruple its business through a combination of domestic growth and exploiting new international markets.

Founded in 1965, Windings manufactures custom electric motor and generator components for electromagnetic/motion conversion applications. With an additional production facility in Sonora, Mexico, the company produces critical components for manufacturers in the medical, avionics, aerospace, defense, and automotive fields as well as for NASA. Windings is 100 percent employee-owned and employs nearly 100 people at its New Ulm plant.

When Kauffman took over five years ago, he observed that the company needed a clearer path to continued success.

“The company had grown over the years, but it was clear that we didn’t have sales organization or sales strategy,” remembers. “We had grown primarily by word of mouth. We needed to make some investment in that sales organization and develop a strategy or we were going to plateau.”

In addition, he says, “it was pretty obvious that everything we were doing was in North America. We had a lot of customers that had operations overseas, particularly in Europe. And we had a few people who just found us who were European.”

But with little experience in doing business outside the U.S, Kauffman turned to his long and successful relationship Enterprise Minnesota to help market his products abroad.

“It came across my desk after I participated in a Peer Council, he says. “It looked like a good intro, a survey into the kinds of technologies, skills, and knowledge base for a company that really hadn’t done it before.”

Roger Hurd, Enterprise Minnesota business growth consultant, worked with the team at Windings to develop and

execute a strategic export-marketing plan. Roger recommended the company take part in Enterprise Minnesota’s Global Market Strategy program. It helps manufacturing enterprises make a strategic decision to export, and guides them through the steps of discovering which foreign markets hold the greatest potential for their products, and how to target each market most effectively.

“I feel like the networking and resources that we gained through the Global Market Strategy program helped us to move forward the equivalent of three to four years in about six months,” Kauffman said. “It has really accelerated our movement forward towards accomplishing our strategic goal of developing a global presence in support of our growth goals.”

Enterprise Minnesota also helped Windings connect to resources within

academia, the U.S. Trade Commission and the U.S. Department of Commerce. Enterprise Minnesota helped Windings identify specific European markets that would offer the company its best opportunities to establish a global foothold, as well as aided in the vetting of potential trade partners and clients.

From that, the company developed some early positive experiences. One, a German-based company in the oil-and-gas industry, turned to Windings to help develop a proprietary technology that could be used to increase their performance at really high temperatures. After success there, the customer referred them to one of their customers that needed a motor that could use their technology.

“Now we had a customer and we had a customer’s customer, Kauffman says. “It was kind of game changer.”

They also made inroads in aerospace and in motorsports.

By 2017, Windings expects to realize a $4 million increase in new sales. The company will also be creating 10 new jobs, investing $200,000 in a new plant and equipment, and an additional $100,000 in workforce and information systems. “That’s still the trajectory that we’re on,” Kauffman says.

After all this, Kauffman says relationship building is still key to successful exports, but the real lesson is finding the right relationships.

“A key thing we learned was that it is really important who you are partnering with,” he says. “It is important to have people in a country who are familiar with that country and culture. But it is very hard to direct hire people who are in that country.”

There is probably quite a long time between starting out and when you would have critical mass to actually develop a footprint in the country, he says.

“You have to find ways to find the right partner to represent you to get you through that awkward stage, helping people understand what capabilities you have.”


Winding(s) Up GlobalNew Ulm-based Windings, Inc. is finding impressive growth through international strategies

I

Jerry Kauffman

With Andrew Beuning, CPA, Wipfli


s it your sense that small and medium-sized manufacturers might be giving up more in taxes

than they should? Absolutely right. What I’m seeing

is that some smaller manufacturing companies are potentially leaving money on the table. Most money is in the form of credits and or deductions that manufacturing companies may not be aware of.

Sometimes the tax advisor doesn’t realize exactly what these companies are doing and if the activities qualify for the various credits and deductions. Some advisors think that the company owners are up to speed on changes in tax law and will know themselves if the activities qualify. Unfortunately, sometimes it just slips through the cracks.

Let’s talk about some examples. We hear a lot about the R&D credit …

There are still many businesses that continue to self-assess and overlook the R&D tax incentive because the tax law is so complicated and they simply do not view improvements made to products or business operations as R&D activities. Normally, when companies think of research and development they are focused on the development of new, cutting-edge products. While these highly technical activities generally qualify for the research credit, many of the day-to-day activities of companies may qualify as well. When a company is engaged in making improvements to products, or making improvements to the processes utilized to create a product, both types of activities may be eligible for the R&D tax credit.

Minnesota also has its own R&D credit for work done in Minnesota. Companies can use the credit to offset tax liability, and carry forward any credit that isn’t used in the current year.

Is there another that may get more attention?

The Manufacturing Deduction, or

the Section 199 deduction: It’s for manufacturers who manufacture products here in the United States instead of manufacturing overseas. There are different limitations, but generally the deduction is equal to nine percent of the company’s net income. If a company shows, say, a bottom line of $100,000 they could get a $9,000 additional tax deduction as a benefit of manufacturing here in the United States.

Accounting firms aren’t necessarily missing this. The questions are more along the lines of which manufacturing activities qualify. For example, if they get all the pieces for a snowmobile, and all they do is attach a track and a set of handle bars that’s not necessarily manufacturing. A company like Arctic Cat or Polaris is actually making and creating a snowmobile. They design the snowmobile; they assemble a majority of the end product, crate it up and ship it out. The gray area comes in the distinction between “assembling” and “manufacturing.” It is not always obvious. For example, if you take cheese, wine and chocolate, most CPAs would say, that’s assembly. But a circuit court in California recently ruled that process to be manufacturing process. In that specific case, one reason the court said it qualifies is because the chocolate, the wine, and the cheese on their own serve one particular purpose, but when you combine it all together, it has a different purpose. It’s not that single fact alone the court pointed to, but it points out how at least that court looks at “manufacturing”. That’s what I mean. Do the companies and the executives truly understand the “manufacturing” rules?

What about something related to international trade?

IC-DISC -- Interest-Charge Domestic International Sales Corporation. I’ll use the term domestic sales corporation, although that’s not technically correct. It is a domestic corporation to which a company can pay a commission

I

INNOVATIONS

Andrew Beuning is member of the firm’s tax team, specializing in corporate tax matters. Andy’s focus is in corporate tax consulting and compliance with an emphasis in ASC470 audit, training, and computation assistance. He specializes in auditing and assisting with the tax provision of publicly traded and privately held companies preparing to go public.

for all its international sales. If your international sales are more than a million dollars, then this is something you should at least look into. It works like this: if you have a million dollars of sales, for example, you pay this IC-DISC company $40K, a four percent commission on those sales. That’s a deduction on the US tax return – let’s just say the supplier and shareholder is an S Corporation, and let’s say it’s a 40.5 percent tax rate. That’s $16,200 in tax savings. That $40,000 commission that is paid out to the IC-DISC is then distributed to the shareholders of the DISC as a qualified dividend, taxed at a 23.8% rate ($9,520 of tax due on the dividend by the individual shareholders of the S corporation.). Net tax savings is $6,680.

It allows the US to offer it an alternative to domestic companies to keep their manufacturing here in the US.

Four Questions

any CEOs would be more than content with dou-bling their business revenue in the next six years, but CEO Allan Cronen of Litchfield, Minn.-

based GVL Poly is aiming higher. His goal, along with GVL shareholders, is to multiply by tenfold their current revenue of $5 million annually to $50 million annually by 2020. This goal may seem ambitious, but Cronen believes in innovation and assessed risk taking.

“We’re in very aggressive growth mode,” says Cronen.Since GVL’s start in 1992, the company has used rotational

molding to create strong lighter-weight plastic attachments for farm equipment. Rotational molding is a process of loading polymers around a heated core and spinning the polymers on a bi-axle to create products. The company’s first product was corn-snouts and to this day, the corn-snouts GVL manufac-tures are its leading product.

The corn-snouts are lightweight, long, cone-shaped plastic attachments for combines that help to separate corn from their stalks during harvest. Because the plastics GVL uses are light-weight, it allows farmers to save on fuel costs and also to buy a cheaper product with the same durability as metal attachments.

One innovation GVL poly has recently invested in is a large $1

million 3D rotational printer built by the Eden Prairie, Minn. company Stratasys. The printer is used to quickly create test prototype products for customers.

GVL has also begun opening manufacturing plants next to their customers in order to reduce shipping costs. This spring, GVL opened a second plant next to AGCO in Hesston, Kan-sas. “Freight has become a significant concern for some of these larger original equipment manufacturers,” says Cronen, “and every penny we can save them gives us an advantage.”

In the future, Cronen estimates more plants being built next to other customers as well, with the possibility of eventually opening plants overseas to service their international custom-ers. Currently, GVL has customers in 27 countries including Italy, Germany, South Africa, Brazil, and even New Zealand. Cronen says that a 2010 Enterprise Minnesota session on exporting helped his company develop an exportation plan for selling and distributing product around the world. Currently, the company works with a distributor out of North Dakota to ship their product.

Additionally, in 2012 GVL invested in expanding its engineering team. At-tracting quality engineers was at first a struggle for GVL because the 50,000 square foot manufacturing plant is located in rural Litchfield. However,

GROW


Using innovation and aggressive expansion GVL Poly looks for tenfold growth

PRIMED TO

M

By Clayton Benjamin

GROW


CEO Allan Cronen, who calls himself a “recovering banker,” says he originally invested in GVL Poly because, as a banker, he saw many plastics companies’ financial statements and realized they were profitable.

in 2012 when the town Bobcat plant moved its engineering department from Litchfield to Bismarck, N.D., GVL was there to reap the benefits.

“All of our engineers came from Bobcat” says Cronen. “It was a blessing for us.”

With a strong engineering team, Cronen says GVL is able to offer a start to finish product starting with idea creation, to the design phase, then going through rapid prototyping, to tool and mold building, to custom color blending and fabrication, to assembling and warehouse distribution. He says that the start to finish process is some-thing other competitors don’t offer.

Also, by adding more engineers, GVL Poly has been able to add services in ad-dition to manufacturing their well-known corn-snouts. Now GVL offers three dif-ferent services: agro-poly, roto-poly, and proto-poly.

GVL’s agro-poly service accounts for most of their business which services the farm industry. However, GVL has also added their roto-poly and proto-poly services. Roto-poly is a rotational-molding service offered to original equipment man-ufacturers for making specific products. Some of those products have included road barricades, confined space fans, and chemical tanks. Proto-poly focuses on engineering and designing for smaller manufacturers who do not have their own engineering team and for assisting larger manufacturing companies that do have their own team.

Though GVL is now aggressively ex-panding, it hasn’t been without its learning curve.

In 2002, Cronen, who calls himself a “recovering banker,” says he originally invested in GVL Poly because, as a banker, he saw many plastics companies’ financial statements and realized that they were profitable. More specifically, investing in GVL made sense because of the company’s proprietary corn-snout product. Addition-ally, the company had a well respected name and held the majority of the market share for plastic corn-snouts.

Though Cronen and investors saw GVL as a good investment, one of the largest mistakes Cronen says they made when first operating the company was assuming that he and his investors knew enough about the company in order to grow its revenue without “realizing that the employee and some of the management development was important,” says Cronen.

He also says it was a mistake that we


“didn’t necessarily worry about hiring pro-fessionally trained people in certain areas of our business.”

From these mistakes, Cronen says he learned his lesson. In fact, he says the most rewarding part of running and growing GVL is working with great employees and having the ability to make impacts on their lives by offering them a career, benefits, and the ability to create great products. In fact, he says he likes to remain visible on the factory floor.

Cronen says part of keeping any business successful is by applying the Entrepre-neur Business Value. Being an ex-banker, Cronen knows what banks are looking for in businesses when offering to invest in them. They are looking for return on invest-ment, return on innovation, leadership and enhancing the value of your business.

Cronen explains that companies need to consider the return on their investments, but to realize that some of their invest-ments may not come until a much later date. For instance, he encourages compa-nies to invest in the bleeding edge of the

industry. Meaning that you should invest in something you might not have an immedi-ate return on, but will likely see profits on in the future.

Cronen explains that GVL’s current bleeding edge investment is in polymer research. “We’ve been working on a bio-mass filler for resins,” says Cronen. “We’re looking for material other than grain.” The other material Cronen mentions is the corn husks the company’s products help harvest, which usually have no purpose but to be re-used as nutrients for farm soil. Cronen says that his company is interested in creating sustainable growth and sustainable prod-ucts and that reusing harvest by-products contributes to sustainability.

Cronen says that the company has suc-cessfully used the biomass filler to mold products, but it is still in testing phase and the production process needs tweaking. He estimates that this bleeding edge invest-ment is still probably three to five years out before it can be manufactured and added into company returns.

When investing in the bleeding edge,

Cronen warns, “There is no income from it, you might have some revenues, but it’s not about to cover expenses. It’s a careful investment.”

In addition to the bleeding edge, Cronen says manufacturers should refine services to maximize returns. Often manufactur-ers are asked to create a specific product or process for one customer, or as a favor to one customer. These products, “create value for your one customer, but don’t create long-term value for your company,” Cronen says.

“We add things to our basket all the time,” Cronen says. “and it’s about emptying that basket and looking through those. Removing some, trimming some, modifying some is something we do quite frequently,” says Cronen.

For example, at the time GVL Poly add-ed their engineering and drafting services and 3D printing, “We were very focused on and only doing things that would end up being a roto-molded product. If it wasn’t going to be roto-molded we were not going to do it,” Cronen says.

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“We looked at that service (engineer and 3D printing),” he says. “We knew we had a lot of capacity but not a lot of demand in that area, but we thought we could do some projects for our customers that have some roto-molded products in some areas, but maybe need engineering assistance or 3D printing done for a product that isn’t rotational molded. But yet they are our customer and so that is a service we refined and actually expanded.” By reassessing the engineering and 3D printing needs of their customers, GVL Poly was able to add ad-ditional services and increase revenue.

Furthermore, expanding on his own ex-perience with hiring the correct people for the job, Cronen also states that companies need to train a skilled workforce. Finding the right people for the right job and also providing them with on-going training is a must, says Cronen.

At GVL, employees have received both outside and in-house education. Cronen says that some floor employees have been sent for week or two-week long train-ing programs at technology schools both at Penn State and at Pittsburg State in Pittsburg, Kansas to learn about rotational molding and plastics.

Additionally, workers who have been there for 10 to 15-plus years actively cre-

ate training programs for newer workers. The training includes a first-day exam on rotational molding and then a 30-day follow-up exam to track employee progress and knowledge. This allows managers to understand if their training materials are lacking in a certain portion or whether a new hire needs more one-on-one training.

Along with investing in a well-trained workforce, Cronen also emphasizes that manufacturers need to emphasize a return on innovation. Innovation can take two routes at GVL Poly, either by innovating a new product, or innovating a new process. “Sometimes these innovations start out on the bleeding edge of things, and then later on that innovation pays off,” Cronen says.

One example Cronen points to is the need for farmers to be able to adjust the heights of their corn-snouts in the fields. A workaround to this was using a chain and u-bolt. So the engineers at GVL created a new product that allows for this adjust-ment priced at $15 to $20. Their invention is currently in the patent process, but, “It increased our sales. It’s a better system than the old system. It’s more reliable than the old system. And the farmers are willing to pay for the extra cost of that,” says Cronen.

Also, to stay competitive, OEMs need to display leadership. A part of leadership

for Cronen, “is not being afraid to hire someone who might shake things up a little bit in a positive manner in your company,” he says, “and understanding that change is inevitable and if you take a positive ap-proach to that, it can mean great things for your company.”

He also emphasizes that different parts of a company need different types of leaders and skills. For example, engineering and financing need different types of leaders. “It’s all about having the right people there driving that bus,” Cronen says.

Cronen says that it’s also a positive to lead by example. “At this point, even though we are getting larger,” Cronen says, “I don’t ask our employees to do anything I am not willing to do.”

The last piece of advice for other OEMs Cronen has is enhancing the value of their businesses. “It’s about having your busi-ness as a showcase every day,” Cronen says. “We want to show any prospect, even if they haven’t scheduled an appointment, that we are proud of what we have. That the factory is clean and organized on the floor.”

“We want our business for sale every day, whether we are inside or outside our factory,” Cronen says. He states that even if you’re not ready to sell, you want every-thing in your company in the best condi-tion, from the financial statements, to the factory floor, to software.

By implementing and applying the Entrepreneur Business Model, Cronen sees success for his future at GVL Poly and the ability to expand and grow the business. Currently Cronen and investors are looking to build new plants near clusters of other OEMs that use rotational molding services. Some places they have looked into include Hesston, Kansas; St. Cloud, Minnesota; and Jackson, Minnesota. But construction of plants may not stop there. They have also considered building a plant in Italy. “We have our eye on becoming a global company,” Cronen says. “If you look at our mission statement, it is to become a world-wide partner to our customers.”

Cronen’s last piece of advice for other entrepreneurs is, “The biggest thing is if there is an opportunity, and you may believe you’re not yet ready for that op-portunity, now is the time. Attack those opportunities and make the most of them. Some of those opportunities will work out well and some won’t. But listen to your gut. Oftentimes your gut decision is the right decision. That’s a little cliché, but it does ring true.”


Cronen says companies need to consider the return on investments, but also realize that some of those returns won’t come until much later.

Jim Zuehlke


A corporate governance expert discusses when you need a board, when you don’t, and when you need to make a change.

The Interview

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Q: Why do private companies need a board?There are really two reasons, and I use the quote I read

somewhere, “Everybody needs a good boss, even the CEO.” That is one reason: the second reason is strategy.

A: Are there good reasons not to do a board? Sure. In my company, there are only two of us, we do

not need a board; there are not enough moving parts. We just worked for a client in 2013 in which we formed a board of advisers. It did its job and it disbanded within twelve months. So sometimes there is an advantage to bring a board on as overseers and bring in specific value to the organization, and then when that is gone, then you disband it.

Where do you draw the line between the need for a board of advisers or a board of directors?

It is a real fuzzy line. Every public company, every ESOP and every nonprofit has to have a board of directors because there needs to be oversight and governance; you have other people’s money in the company, so it is for the stockholders. The board of directors’ job is twofold:

a) to hire and fire CEOs and b) to approve strategy; that is it in its simplest form. Boards of advisers can provide the same function, but let’s say the CEO owns one hundred percent of the company -- the board of advisers really cannot fire the CEO.

There are other private companies we work with here in the Twin Cities that might be on the third or fourth

generation of ownership. For those companies there is a need for a board of directors because there are generations of shareholders who are not intimately involved or they might not be involved at all.

Other companies are big enough – like Cargill or Carlson Companies – that they have a board of directors because they need significant oversight. Oftentimes a smaller manufacturing company, whether it is five million or twenty-five million, really, a board of advisers can provide the same thing without all the fiduciary responsibilities.

You have talked about how many people have an erroneous misconception about the cushy roles of boards.

That is mostly because of media coverage of big public companies if there is a problem. In reality, in most of the smaller private companies, the boards roll up their sleeves. For one client we recruited a board member, who during her first board meeting identified a solution of how the company could bring two or three million dollars in savings to the bottom line. There are many ways of getting involved, and that’s what you typically see at private company boards.

Somebody said that a board member’s real value can be seen in the work they do outside of board meetings, such as spending time with the CEO or other executives. How much time do you have a right to ask

Q & A with

of a board member? People often ask me, “How can you tell

if my board member is valuable or not?” And my comment is, “Do they show up to the meeting prepared?” So there is a quarterly meeting, and every company has at least a quarterly board meeting. “Have they read all the information about the financials and the strategic issues? Are they prepared to talk about what is the agenda?”

That is number one, but then the second thing is really, “What are they doing to help the organization between meetings?”

They are usually asked to join the board because they bring some specific skill or value. It could be financial; it could be sales and marketing, it could be operations. How are you going to help the company? The company might be going through that Lean Six Sigma journey and maybe a board member has significant experience with Lean. So every other month, the board member sits down with the VP of operations to find out how the journey is progressing. The board member can give both strategic and practical advice on the current and future challenges the company is facing.

Alternatively the company might be thinking about expanding internationally into China and the board member has both experience and contacts and can assist in introductions. The value is not just in the board meeting once a quarter, the real value is between meetings. Is the board member responsive if the company asks, “Hey, can you help us? We have an account we are going after.” Or secondly, “Could you mentor this executive a little bit?” You cannot stick your nose in it and try to run the company but you sure could be a trusted adviser.

Let’s talk about family legacy. You have talked about how a board can provide continuity through generational family ownership.

Think about it as a simple formula. Think of a family tree. We have mom and dad at the top and they have four kids. They all have spouses, and they each have four kids. And so we go from two, to four, to sixteen. It gets pretty big as the tree starts to grow. I have four children, and I am one of six, I’m the youngest, and my dad tapped me to be the one to be the person who overlooks the family’s work. Why not my older brother, or why not my older sister? You don’t know which one of the kids is going to be the

Jim Zuehlke


Zuehlke is a principal at Cardinal Board Services.


person to move the company forward and oftentimes, the father or the mother, whoever runs the business, has a tough time saying, “You are the chosen one.” The board can provide objective input on how best to manage the company with the family members that are involved.

Private equity companies want to have people on boards to protect their interests also. How common is that?

It is very common. Private equity firms are almost like a kind of independent owner because they do not operate the business but they own all or a significant portion of the business.

They are looking for a group (board) that can provide both expertise and governance of the business to maximize its success.

Private equity firms are made up of really smart people who understand the value of having others helping the team reach its goals. The sum of the experience and willingness to help of a good board is much greater than any individual collection of people.

Where do you draw the line for activism between what a board does and how it directs senior management or how it personally gets involved?Well, the great quote is, “nose in and fingers out,” but I think where you draw the line is that if the board member is actually starting to get involved with senior management without the CEO’s knowledge. It is the CEO’s job is to run the company. If the senior management is coming to you and you are not including the CEO, a board member has clearly

broken the line of communications. But the second part of it is, if a board

member has their own agenda of what strategy the company or individuals should be doing then they are less effective as a contributing board member. Management must develop and execute an agreed upon strategy. If the execution of the strategy does not work, it is up to the CEO, for which there are consequences.

How do you know when it is time to get rid of a board member?

There are two instances when a board member should move on. First is if they are disruptive. When they come to board meetings, is this person complaining all the time, a know-it-all or are they are unprepared? They are too much in your business, without bringing value. The other end of the spectrum is when they are no longer bringing value. This often happens when somebody has been on the board for an extended period of time. Has the world changed but the board member has not kept up with the environment? If the

“If a board member has their own agenda of what strategy the company or individuals should be doing then they are less effective as a contributing board member.”

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board member came on the board twenty-five years ago and retired ten years ago and is still just hanging around on it, they are probably not bringing a lot of value to the organization.

And in a private company, is it the board that votes to take someone off a board, or can the CEO unilaterally do that?

One of the most important things in effectively operating any board is the bylaws that govern the actions of the board. If the bylaws are created correctly, exiting a board member can be less painful. Several bylaws that every board should have are: age limit for retirement, term limits, change of employment situation, attendance and a code of conduct.

So you can find ways to remove the disruptive or ineffective board member easier, but in the end, if there is a chairman of the board, it is the chairman’s responsibility.

If it is a board of advisers and it is the CEO owner, it is their responsibility, and frankly, the conversation goes a lot easier than most people perceive it as, because the person who is either meddling too much or is not bringing value knows this inherently.

Are you a fan of limited terms?In a way. Term limits are meant to keep

the board from getting stale by forcing regular rotations of board members.

The last board that we set up, the bylaw for term was one year, and annually, the company would review it. If the expectations are set correctly the board members will accept the terms going on the board. The downside of having a one-year term limit is that the board could potentially turn over annually and it takes a few meetings to get familiar with the company’s financials and management team.

How about recruiting: Is it always better to do it blindly through a recruiter?

I’m not sure there is a perfect answer for that. I’m a little bit biased because we are in the business of recruiting board members, but let me tell you why I think it is better to have people you do not know on your board to begin with. With it you get unbiased perspective and advice regarding the business. This is critical to the success of the effectiveness of the board. A true board member – remember, “nose in, fingers out,” -- has to give objective, straightforward advice. If the CEO has some blind spots, or the board member does not

agree with the current or proposed strategy -- even if the CEO owns one hundred percent of the company -- the board member has to be able to tell it straight.

Now, the counterargument is that many CEOs and business owners said, “I really need somebody I can trust, and I trust this person I know well.” The person you know and trust may not give the most objective advice because of the relationship. I do not buy that as much, because I think you lose too much by just having people you trust around you who

are not willing to challenge you. You have got to be challenged, because if you do not get challenged, the competition and the marketplace will challenge you constantly. I am a big fan of really getting people, and going beyond your network, because you will most likely attract board members better suited than your own network.

You said earlier that even the CEO needs a boss. We’ve all seen companies and the nonprofits go off the rails because the CEO is not answering to anybody. It changes the focus of the organization.

I have a client who owns multiple companies. One of the smaller companies has a board. A much bigger company that he started from scratch has no board and he wants us to put one together. The reason is to help the owner and his senior management team with strategy and accountability. The board’s collective voice is stronger than that of just the owners to

the management team.

You have said that certain board memberships could bring an impartial voice not only for ownership, but others as well.

They are called stakeholders. This is often overlooked. In every business there is a much larger group of individuals who have a vested interest in the success of the company. This includes ownership, employees, customers, vendors, communities and even the government.

At the end of the day, how do you assess whether or not the empowerment of a board or the recruitment of a board has been a good decision?

Accountability and strategy are the keys. Does the board help the organization and the CEO to be accountable to the success of the company and its stakeholders? Have the collective efforts and wisdom assisted in the development of a winning strategy for the company?

The other part of the board’s value proposition is providing help on big issues companies face. Has the board been able to assist in navigating the opportunities and challenges that can drastically affect the course of the company?

Has anyone ever come to you at the end of their day and said, “Building a board was not a good idea.”?

No, it has never happened.


Advice to board members: “Nose in and fingers out.”

nSCU hosted five Manufacturing Showcases this fall that focused primarily on how Twin Cities manufacturers are coping with the growing shortage

of workers who are qualified to operate in the industries’ increasingly sophisticated environments. More than 100 people attended the session at Century College on September 23rd which included a presentation of the State of Manufacturing® poll results by Bob Kill, president and CEO of Enterprise Minnesota, and a lively panel discussion. This is an abridged version of their discussion.

Q: What keeps you up at night?Pendleton: It’s finding talent. It’s finding qualified workers.

It’s finding the next idea to make sure that we’re creating multiple relationships to ensure that people are coming in the door. In our business, since we’re staffing for multiple industries, we’ve got hundreds of openings. It’s about creating a valuable environment and it’s about creating valuable connections. We have to be innovative and make sure that we’re protecting the manufacturing sector, not just now but in the future.

Peterson: Certainly No. 1 is finding good talent. And I stress good because there is good talent out there. I come from

Medtronic. At Medtronic it was easy to find good talent. All I had to do was put jobs on Medtronic.com and people came a-running -- because Medtronic has a great name, especially in the Twin Cities. And then I go to Heraeus, and people said, “who?” Hereaus world wide is German owned – 15,000 employees worldwide, truly a global company — but it’s one of those companies you’ve never heard of and likely won’t unless


An Exclusive Roundtable Discussion

A high-powered panel of manufacturing executives discuss how they’re dealing with the shortage

of adequately-trained workers.

M

AddressingSkills Gapthe

Panel participantsSkip Bolton, director of human resources, Bilfinger

Water TechnologiesAndrea Pendleton, recruiting director, Volt Workforce

SolutionsGregg Peterson, human resources director, Heraeus

Medical Components

Todd Roach, vice president of operations, ComputypeAndy Stevens, manufacturing, engineering and

continuous improvement manager, Precision, Inc.Traci Tapani, owner, Wyoming Machine, Inc.

An Exclusive Roundtable Discussion

A high-powered panel of manufacturing executives discuss how they’re dealing with the shortage

of adequately-trained workers.

Skills Gap

DEED’s role is to strengthen Minnesota’s economic competitiveness, whether it’s recruiting new jobs to Minnesota or building a highly-skilled, productive workforce.


“I’m concerned about the constant conversation about how we can’t move forward because of the lack of skilled workers. That isn’t a very attractive way to attract organizations to the state.”

- Traci Tapani, owner, Wyoming Machine, Inc.


you meet someone like me. It’s something I battle.

Sometimes I talk out of both sides of my mouth when it comes to education, but now I find myself telling people, “manufacturing is not dead, contrary to what you hear in the media.” I can prove it. We have an addition going on, as we speak. Also, there are a lot of good jobs that don’t need a four-year degree. I have hired people who got their four-year degree and then decided they didn’t want to be a graphics designer. They want to work on the manufacturing floor. I love to hire folks who want to make stuff. There are some really good jobs with a two-year degree.

Tapani: As a business owner who is part of supply chain, I supply large manufacturers. So it concerns me when I hear about Lockheed Martin leaving Minnesota or 3M moving some of their operations from Minnesota. I’d like to see more large manufacturers come back to Minnesota because we do have a very strong supply chain. But I’m concerned about the constant conversation about how we can’t move forward because of the lack of

skilled workers. That isn’t a very attractive way to attract organizations to the state. Who’s going to want to open up a large manufacturing facility in central Minnesota if they don’t have workers? From an economic development standpoint, this is an issue that has to be solved, or at a minimum, we have to start having a conversation about it.

I am someone who has started to change my thinking about the skilled worker shortage. I’ve been involved in this endeavor of trying to get more people attracted to our industry for quite a few years. But I reached a point where I grew tired of going to meetings on economic development and expansion and hearing people say, I would have grown my company, but I couldn’t find anybody to hire. We’re entrepreneurs. We’re innovators. I honestly do not imagine sitting in my company and saying I could have doubled the size of my company, but nobody came to apply and I couldn’t find any skilled workers. I probably do need to take credit as the person who said, “stop whining,” and solve this problem.

Roach: The media is what keeps me up at night. How many people in here believe

that the printing industry is dying? I can tell you that printing business cards and books is dying, but in terms of flexible packaging, it has never been better. What student coming out of high school and college will want to set up a 40-plus year career in printing? Because they hear that printing is dying. Getting the message out has been very, very difficult. It’s something that I struggle with every day.

Q: What’s the best non-traditional, innovative advice you have for Century College? If we were to poll most of our students here today, I don’t think many of them would say, I think manufacturing is cool and it’s a career I want to get into.

Tapani: Manufacturers have to get better at personal branding. I’m talking about branding your leaders as well as your corporation. It is unfamiliar to us and sometimes we’re a little worried about it. Even using the word “cool” about manufacturing. I have two teenage daughters; I can assure you that no one uses the word “cool” anymore. We have to use the language that young people are using. It

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is better to show them and let them engage in things. As youth can engage in things they find are interesting and enjoyable, that is where passion can develop. That’s partly why removal of technical education in high schools created such a problem for us. People have no way to know they would ever have passion around that. Even someone like me: I am a graduate of the Carlson School, but I also have gone to technical school to learn welding. So just because you are a graduate of the Carlson School doesn’t mean you can’t also engage in a technical education and benefit from it.

Pendleton: Talking about essential skills, soft skills, employment readiness – that would be one area in which a very strong focus would be helpful. Helping people understand why it’s important to be on time, what it means to have the work ethic. We can’t take it for granted that people have to have an understanding about what it takes to be successful in the workplace. Having an emphasis on that will create a larger pool of people who we would consider to be great potential employees for careers we know are exciting. I’ve got a client who has a laser operator who made $96,000 last year -- partly because there was so much overtime that was needed to keep that machine running. But let’s face it, if you’ve got the essential skills, but you can’t make it to work, that’s not going to do much good.

Bolton: Over the years, I’ve been saying, stop whining and start creating your own training program and get the most out of your entrepreneurial spirit. That’s a key connection with the colleges. Be a catalyst. Help create those training programs. Manufacturers say, we not only need the skills, but we have to have these people coming out of high school understand what it means to be a good employee. That’s an issue as well.

Peterson: I was recently on an email distribution list, where somebody had started

a discussion on the 10 things you’d like to see in a student coming out of high school. They were all simple: come to work, don’t do drugs. But there are a lot of students who just need to be told those things.

Q: It is often the parents we find who need to be sold on manufacturing careers as being stable. Parents want their child to go to the Carlson School of Management. What’s your wow factor for recruiting parents?

Bolton: I’ve been in manufacturing a lot of years. I’ve never seen the product be all that cool. To me it is more about enticing your children by saying, if you are someone who works on a CNC or an injection molding machine, guess what, you’re saving lives. You’re part of the solution. You’re keeping planes in the air. You’re making parts that go into people’s bodies and keep them alive. You are making things that have real meaning in life. The generation that’s coming up has a feeling that they want to contribute. Maybe its not that cool, but you are really contributing to society.

Peterson: I’ve been amazed at the number of smaller manufacturers that you may not have heard of, but that have a lot of interesting stuff going on from a career standpoint. Heraeus is not that small. We have about 400 people here in White Bear Lake. You come in and you can actually do stuff. You can have an impact on the business, whether that is on the production floor up to the director of human resources. The amount of impact you can have on the business is significant, compared to a lot of larger companies.

Tapani. When we open up our doors and invite our community in, oftentimes we talk about how we developed a passion for our industry. In my case, I’m a Carlson School graduate. When I graduated, I was in a leadership program at one of our local

banks. I eventually worked my way into international trade finance. I found it super glamorous. I’m travelling all over the country, calling on the large corporations that were exporting their products and talking to them about how they can do that better. I was calling on large manufacturers which gave me exposure to manufacturing and I realized it was something I was really interested in.

When I had a chance to become the owner of Wyoming Machine, I quickly realized that the employees who worked on my shop floor made almost twice as much money as I made in working international trade finance at a large bank. That was a real eye opener. They were doing important work, making products that were literally changing the world and making it a better place to live. But they also made way more money than people in service industries. Once parents realize that their kid can go to school and maybe they’ll get a job at one of the wonderful service companies here in Minnesota. But if you want to earn a wage that you can support a family on, and have boats and snowmobiles and motorcycles, you are going to have a better chance in manufacturing than you will in other careers.

Roach. We need to partner more with our local institutions because they are struggling to get students to come here. I was on a panel here to discuss how they start a maintenance worker degree. How many parents want their kids to go to Century to become a maintenance person? They need to put a title on it that sounds better. We’ve got to partner more. If you’re going to wait for kids to come here and then come to your front door, you are going to be waiting a long time. Working with Century or other institutions is very important.

Stevens. I went into manufacturing with a four-year degree. Part of that is the prestige factor. In general, manufacturing has to sell prestige. There is a lot of competition about which way to go in life. You have to get in early. And you have to sell prestige. The other thing I would sell is that you’re not going to be strapped with $50,000 or $100,000 in student loans if you are taking a path to a two-year degree. I would say, do what you think is best, but know that there are options other than just a four-year degree. With that in mind, with a two-year degree, you’ll realize things about liberal arts. You don’t really need an art history class to go in and run a machine.


More than a 100 people showed up recently at Century College to hear panelists discuss the challenges and opportunities in the skills gap among current and future employees.P

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How Rosenbauer’s Kevin Kirvida and his team transformed their company into an international behemoth.

Company on

his past August, the folks at Rosenbauer America, the Wyoming, MN-based manufacturer of fire trucks, executed one of the most extraordinary next-day deliveries in the annals of American transport.

From a compound of three massive structures located alongside I-35W, just a few miles north of Forest Lake, Rosenbauer America makes some of the world’s most sophisticated high-quality fire vehicles. With additional plants in South Dakota and Nebraska, the company’s 700 employees manufacture some 850 fire trucks each year, making it the second largest fire truck manufacturer in America. When combined with their Rosenbauer partner in Europe, that number climbs to 2,500, making it the largest fire truck manufacturer in the world.

The process for manufacturing this custom designed-and-built fire equipment can take up to two years and international deliveries are made almost exclusively aboard transport ships.

So it came as a shock when authorities representing the newly built Dutse International Airport in Nigeria called inquiring about three Panther 6X6 rescue and firefighting rapid intervention vehicles. They were ready to open their new facility to commercial aircraft, but needed first to acquire the trucks.

And they needed them now. No, really. NOW. Commercial

aircraft would not land in Dutse until they took delivery of the trucks.

Rosenbauer had the equipment – each 40 feet long and weighing 60,000 pounds – on hand because a sale to a South American country had fallen through. But getting them to Nigeria would be a challenge. No domestic air-carrier owned an airplane big enough to haul all three vehicles which required bringing in a Russian-built transport plane – the biggest in the world – for next-day delivery.

The reported transport cost: $1 million.“It was an interesting process,” says Kevin Kirvida, president

of Rosenbauer’s Minnesota Division.Some might argue that Kirvida’s ride from a comfortable

regional manufacturer to today’s standing, as part of an international colossus, is no less impressive.

he story of Minnesota’s Rosenbauer plant is the tale of how a son methodically implemented his vision to transform

a comfortable regional manufacturer into an international behemoth with creative thinking, strategic discipline and unusual international collaboration.

The roots of the current Rosenbauer company in Minnesota

T

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go back to 1929 in neighboring Lindstrom, where then-town mayor Elmer Abrahamson – Kevin’s grandfather – determined his town needed a fire department. Also the town blacksmith, he designed and built a fire truck and donated it to the city. (That exact vehicle sits today in the lobby of the current company.)

Shortly thereafter, a neighboring town approached him. “Build one for us, and we’ll pay you for it,” they said. Thus was born General Safety, as the company was then called.

Kevin’s father, Mitchell Kirvida married Abrahamson’s daughter, and when he drummed out of the Navy following World War II into the relatively tight local labor market, Abrahamson offered him a job. The fire truck business had become a lucrative sideline to his blacksmithing business, then producing between 5-10 trucks per year.

Mitchell ended up owning the company and building it into a comfortable business.

By the time Kevin joined the company in 1978, the company was doing just that, with 20-25 employees building 30-40 trucks per year, focused exclusively on customers in Minnesota and surrounding states.

Armed with an engineering degree, Kevin began his career with three years in the Chicago offices of Graco. But metropolitan traffic and congestion soon wore him down and lured him back to Minnesota.

Kevin worked for his father’s company for 10 years, wearing many different hats and learning every aspect of the business.

“In the evening I’d be out selling trucks,” he recalls. “In the daytime I’d be overseeing the shop, doing all the engineering drawings, and ordering material to build the trucks.”

As Mitchell contemplated retirement, it was clear that Kevin would eventually buy the company from his parents, which he did, in 1988. At the time, it employed 40 people. The company, he says, was profitable, solid, and had an excellent reputation.

“My grandfather had the initial spark to build the fire trucks, but my father was the one who built the business,” Kevin says. “It was never my father’s goal to create a large company. He was more interested in a custom crafted business, where he could build trucks of high quality and maintain a close relationship with customers.”

Kevin envisioned greater growth.At the time, the fire truck market was

dominated by a handful of large domestic manufacturers who produced roughly

70 percent of the 5,000 trucks produced annually. General Safety was one of the smaller regional companies that produced the rest.

“For me personally, I could sense that I needed to take this to another level,” he said.

And that meant making some changes.One impediment to growth was his

building. He needed physical capacity. In 1950, the company moved to a building in North Branch, 10 miles north of Wyoming. Over the years, the building had been added on to two or three times, but was restricted from further growth, surrounded on three sides by a river, the railroad tracks, and a feed mill. “We were running out of options to grow,” Kirvida says.

In 1992, he found an opportunity. Forester Boats, a fiberglass boat manufacturer that had only recently used a state grant to move into two large concrete buildings in Wyoming, went out of business, devastated by a new luxury tax on boats.

The new building brought “the look of professionalism” to the company, Kirvida says.

He brought that feeling inside the building as well. He hired an “internal

nucleus” that included engineers, accounting, and a sales staff. “I wanted to professionalize the staff. I wanted to build an organization that wasn’t revolving around me, as a person,” he says.

The company was now producing 55-60 trucks per year.

n 1994, a vendor told Kirvida that Rosenbauer, a prestigious 150-year old fire truck manufacturer based in Austria,

was looking to gain a foothold in the U.S. fire truck market, the largest in the world. And they created a list of 10 companies with which they might want to partner. From that list they would choose one.

“I’m not interested in selling the company,” Kirvida remembers saying. “But I’m not foolish enough not to open the door to some kind of discussion.”

The opportunity was about more than market access. European trucks are markedly different from U.S. models, according to Kirvida. U.S. trucks are more showy, commonly festooned with chrome, gold leaf, and shiny bells-and-whistles. European trucks, on the other hand, are more utilitarian, with painted bumpers, wheels -- and a heavier emphasis on technology.


Rosenbauer Minnesota president Kevin Kirvida.

I


Following about an 18-month courtship, which included back-and-forth visits between the U.S. and Austria, General Safety emerged as Rosenbauer’s top choice. The two companies began hammering out their partnership at a meeting at the Village Inn pancake house in Wyoming.

Kirvida told them flatly that he wasn’t interested in a buy out. “You’re the gorilla and I’m the mouse,” he remembers saying. “I don’t want to get into a situation where I lose control of my business or I’m no longer needed or effective. I’m too young for that.”

According to Kirvida, the Rosenbauer executives were quite open-minded about the terms of the deal. “The easiest thing in the world for us would have been to come over here and buy a building or to buy machinery,” they told him. But what we can’t buy is a reputation. We can’t buy years and years of customer loyalty.

If Kirvida wanted a buy out and to retire, they weren’t interested.

“We want you to be here,” they said.

The company’s first fire truck was built in 1929 by Elmer Abrahamson, Kirvida’s grandfather. Today it sits in the company’s lobby.With additional plants in South Dakota and Ne-braska, the company’s 800 employees manufac-ture some 850 fire trucks each year, making it the second largest fire truck manufacturer in America.

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“We’re investing in you.”By May 1995, the companies agreed

to create a new company, still using the General Safety brand. Based on a valuation, Rosenbauer would invest enough to constitute a 50/50 ownership with Kirvida retaining operational control, and day-to-day decision-making.

Kirvida took no cash for himself. “They were astounded,” he says. “All I got was (money) in a bank account to allow our growth capabilities, without having to leverage the bank.”

The newly minted company then plotted out its opportunities in a marketplace that was subtly changing. General Safety was a confident competitor for high end (but low volume) vehicles, but that market was being squeezed by more budget-conscious buyers. “If the upper end of the market was feeling pressure,” Kirvida says, “the lower end of the market would start to expand.

Their analysis roughly looked like this: Annual sales were about 5,000 trucks.

The downward-trending “Cadillac” trucks constituted 10-15 percent, “Buick” trucks were 20-25 percent, the “Chevy-Ford” market was growing, about 40-50 percent. And the “Kia” market was about 10-15 percent.

The General Safety/Rosenbauer team concluded that it needed to target the growing “Chevy-Ford” market, but to do so required yet another partner. To get it done, in 1998 they acquired Central States Fire Apparatus in Lyons, South Dakota, a company that was already building 250 trucks a year, aimed in that niche.

And they weren’t finished. Two years later Rosenbauer acquired a company in Nebraska that manufactures aerial devices for fire trucks, the “ladder.”

And just recently, when their chassis vendor started manufacturing full trucks themselves, the company, now named Rosenbauer, went into the chassis business itself.

This year the company expects to build 450-500 chassis.

The results have spoken.

itting in the same Village Inn where the Rosenbauer relationship was initiated, Kirvida looks back at his path.

“Was I smart to do what I did?” he asks. “It worked out. In life we take calculated risks. The biggest thing that I would attribute to our success is that the partnership continued to get stronger as we went along.”

Too often, he says, mergers look much better in theory than practice. “It all makes sense, so you make the deal happen. And then as you go along there are personality conflicts.”

But in the Rosenbauer collaboration those differences never leave the room. “We’ve always been able to sit down and talk it out, he says.” The company’s original operating agreement spells it all out. It even spells out how you break a tie vote.

“I can honestly say, we have never left a meeting without being able to leave smiling about a decision,” he says.


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S

hen you get down to it, problem solving is the essence of leadership.

And that kind of leadership is on display these days in a series of meetings sponsored by the Metro Alliance for Customized & Continuing Education (the metro based schools of Minnesota’s State Colleges and Universities) to address the looming skilled worker gap for manufacturers.

The most recent meeting was held at Century College in White Bear Lake, where more than a hundred manufacturing company executives and friends-of-manufacturers gathered recently to demonstrate once again that there is a great momentum to work together to fill the future pool of qualified manufacturing employees. Two previous sessions were held at the Anoka and Hennepin technical colleges. (And as I write this, two more are scheduled at Saint Paul College and Dakota County Technical College.)

The man principally behind these meetings is Joe Mulford, MnSCU’s System Director for Education and Industry

Partnerships. He keenly understands the value of collaboration and has a warm spot for manufacturers from his previous eight years as dean of customized training and manufacturing at Hennepin Technical College.

He says the growing interest in these meetings stems in part from the value of the relationship between MnSCU and Enterprise Minnesota – “that both of us are reaching out to our contacts and bringing

everybody together.”MnSCU well understands the qualified

worker challenges, and has buoyed understanding among manufacturers of its training solutions as more and more MnSCU colleges have partnered with Enterprise Minnesota’s efforts throughout the state.

Mulford says the increasing shortage of skilled workers has provided an opportunity to bring folks together. “They’ll set aside more time and make a larger commitment,” he says. “There’s a little bit of crisis management happening now, where it has gotten so tight for employers, specifically in the manufacturing sector so they are re-engaging. So that’s great, if that’s what it takes to bring people to the table.”

Part of this urgency was diagnosed early by Enterprise Minnesota’s State

of Manufacturing® (SOM), our annual survey (now in its sixth year), conducted to ascertain the attitudes, challenges and opportunities of manufacturing executives on a wide variety of important issues. Over the last four years we have seen a burgeoning demand for qualified workers dominating the survey.

To complement the SOM quantitative research, we have conducted over 100 focus groups all across the state. Many readers of this newsletter may have attended one or more of these robust conversations. We’ve also “rolled out” the survey and focus group results through public events, where we have attracted thousands of attendees, including manufacturers, communities, economic developers, and elected officials. It continually reminds these folks about the job-creating power and economic importance of manufacturers to each other, to their communities, and to the state.

So, the next essential step in the evolution of the SOM project is action – and MnSCU is providing it.

Says Mulford: “We’ve seen this in downturns before. But since 2009 it’s been magnified. Companies are starting to re-evaluate their strategic plans around workforce development.

“The next step,” he says, “is for manufacturers to build an intimate relationship with their training providers. I always advise people to do this. Don’t wait until there’s a crisis. It should be no different than working with somebody who handles your insurance or the individual who mows the grass outside your facility. You need to know the instructors, the college president. So when you need help, you have somebody on speed dial.”

NOTE: The panel discussion that accompanied the Century College event was so insightful, we included an abridged transcript as the Roundtable on page 26 of this magazine.

MnSCU Steps UpThe educators work hard to become part of the solution for the skills gap

W

Final Word

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

The next step,” Mulford says, “is for manufacturers to build an intimate relationship with their training providers.”


Enterprise Minnesota Magazine October 2014

Documents

Transcript of Enterprise Minnesota Magazine October 2014