Successful manufacturers regularly deploy outside experts to upgrade the efficiency of their operations. They do it to keep customers happy and keep up with their competitors. Those same manufacturers will also say the actual — and underappreciated — managerial artform in this process is knowing when to do it.
Rapidly rising sales in boom times can subvert a management team’s instinct to allocate time for continuous improvement; that time could be used to fulfill orders quickly and accurately. Likewise, falling revenues in down economies can coerce them to rethink any expenditures not tied to an immediate return on investment. And then there are unprecedented times like the current COVID economy, in which political and market uncertainties blur distinctions in the decision-making process.
These factors are magnified for smaller manufacturers whose tight margins influence their thinking at all times.
“It really is a balancing act,” says Doug von Arb, president of Blow Molded Specialties, which is a company that produces a wide variety of custom parts for OEMs, particularly over-the-road trucks and recreational all-terrain vehicles (ATVs).
Von Arb says his 28 years in manufacturing taught him the long-term value of incorporating continuous improvement into his company’s culture. The managerial glue that connects his company’s operational efficiencies are the tools required by ISO 9001:2015, the widely-praised international certification that imposes managerial process standards throughout companies. “We follow our ISO religiously,” he says, “and that forces us to keep pushing those continuous improvement projects, even if it means paying overtime to work on them. You’ve got to figure out how to do it.”
He strives to make the time in his plant to pursue various continuous improvement projects, no matter what the economy. Over recent years, Blow Molded Specialties has engaged Enterprise Minnesota to provide several initiatives designed to improve its overall efficiencies. That menu includes:
- Helping companies plot out and implement three-to-five-year plans for strategic growth.
- Using ongoing lean manufacturing principles to build a culture of continuous improvement that enables employees at all levels to produce efficient, agile operations that reduce time, motion, material and energy wastes.
- Upgrading internal cultures to help manufacturers develop talent and leadership strategies that attract, engage, invest in and retain their workforce.
- Implementing efficient management systems by achieving an ISO designation — the internationally recognized standard of quality management that provides a technical framework for aligning a company’s business strategy with day-to-day operations.
Von Arb has been able to afford the cost of these initiatives in part because of the Growth Acceleration Program (GAP), an incentive-based state-government program in Minnesota that buys down the cost of improving productivity for smaller manufacturers.
GAP funding allows companies like Blow Molding, which employs 250 or fewer full-time people, to obtain up to a 50% rebate for services the company receives. Cash must be used to cover the rest.
“In the end, GAP helps companies grow, achieve success, and generate even more tax dollars back to the state.”
-Brandon Anderson, president of Von Ruden Manufacturing
Companies must use GAP funds to help offset the costs of business services and products provided by Enterprise Minnesota that will enhance operational efficiency. They may not use GAP funds for financing, overhead costs, construction, renovation equipment, or computer hardware.
Von Arb acknowledges GAP eases the transition between boom-and-bust economies, but that doesn’t mean it’s an easy balance. At its pre-COVID peak, his Foley-based company employed about 150 people in its 100,000-square-foot plant. But like a lot of his fellow manufacturers, von Arb saw COVID take a bite out of demand for his company’s products. As plants in the U.S. and Mexico shut down earlier this year, so did their need for parts to maintain their trucks.
“Orders just went away,” he says, adding that market uncertainty worsened the challenge. “We had no information about when they might return.”
Von Arb devoted time to work on continuous improvement and leaning up his operation, but deeper cuts inhibited those efforts. The downturn eventually forced him to cut his workforce to just under 100 employees, “and then we lost those extra resources to be working on those things.”
Von Arb is particularly grateful for how leadership development enabled his company to endure the downturn and then adapt quickly when sales orders came roaring back last year. Despite downsizing, he kept all people who had been in leadership development without pay cuts. The company ran with record efficiencies during the downturn, he says, partly due to that instruction. “That training definitely helped us get through those difficult times. It’s hard to break even when things are down, but when you can perform to that level, you can still survive.”
Sales have roared back, von Arb says, with the company currently using weekend shifts to keep up with demand. “Those leadership resources really gave us the ability to expand back quickly,” he adds.
Von Arb’s current challenge, which he shares with most manufacturers, is to find and recruit enough hourly employees to maintain production. He predicts he’ll need to increase his workforce by 50% by the end of the year.
All manufacturers, like von Arb, recognize that while COVID captures much current media attention, the shrinking workforce persists as the primary impediment to future growth, particularly in Greater Minnesota. That’s one reason why the leadership program at Enterprise Minnesota has earned increasing popularity among manufacturers.
“If you are struggling to find new folks, the first place to look is to determine how you can do more with the people you have,” says Michele Neale, a business growth consultant who oversees Enterprise Minnesota’s leadership curriculum, alongside fellow expert Abbey Hellickson. Neale says many manufacturing plants are managed by people who have grown up into leadership without really knowing what to do. Enterprise Minnesota’s Leading for Results program helps them identify skillsets and competencies that they may or may not have and then fill their gaps. You don’t know what you don’t know until somebody shares it with you.
Manufacturers can select from two leadership options to upgrade the capabilities of their companies’ internal managers.
Enterprise Minnesota’s Leadership Essentials program helps managers and potential managers influence the culture and performance of their companies. They learn to improve team dynamics by understanding behaviors, developing the skills of a change leader, and creating a culture of accountability and engagement. They also learn how to demonstrate the qualities and traits of a leader; evaluate the impact of individual behaviors on team dynamics; exhibit versatility in working with others; display the behaviors of change leaders; develop a culture of accountability; and promote employee engagement.
The Leading for Results program targets employees already serving in management roles. It consists of a series of five instruction classes for existing leaders. They include: understanding their role and impacting turnover and culture and productivity; cultivating the art of influence through coaching; developing effective teams and managing conflict; measuring accountability through performance development; and providing an introduction to the concept of creative problem solving.
Leadership initiatives, Neale says, tangibly contribute to a company’s ability to retain valued employees in the increasingly competitive market. “At the very least, employees say, ‘When you show that you’re investing in me, I will invest back in you.’” Employees who see how their company is willing to invest in their own progress will be far more likely to pay the company back through continued loyalty, “typically tenfold,” Neale says.
An analysis of GAP’s effectiveness required by the legislature reveals that the program bas been remarkably effective. Since the legislature first funded it a dozen years ago, GAP has helped 427 different manufacturers create or retain 10,040 jobs while generating a $30-$1 average return on investment.
The management team at Duluth-based Clearwater Composites has used GAP to streamline the company’s management capabilities. Clearwater designs and manufactures carbon fiber composites and parts for OEM customers ranging from consumer products and sporting goods to medical and aerospace. Despite a recent COVID-related downturn in sales, the company has consistently posted solid growth, today employing 30 people.
Much of the considerable success derives from the self-aware confidence of Jeff Engbrecht, the company’s founder. Engbrecht says he knew as early as high school that he wanted a career in fiber composites and realized soon thereafter that he wanted to start his own entrepreneurial enterprise. But he also knew that he wanted to leave the responsibilities of managing employees to someone else.
He says the same traits of the Entrepreneurial Operating System (EOS) model that made him a “visionary” work less well when managing people.
“We expect to grow in the future. But our biggest growing pain is more related to growing the team and finding good people,” Engbrecht says, adding that he’s in the process of hiring a general manager to take on traditional “people” issues — “things that, frankly, I’m not good at. I’m good at solving problems and being creative and innovative.”
The availability of GAP, he says, “definitely convinced us to do it. Without it, it would have been hard to justify the investment, both in terms of dollars and time.” Twelve Clearwater employees attended eight sessions of two to three hours each, including Leadership Essentials, one of Enterprise Minnesota’s most popular offerings. In the end, investment was well worth it, Engbrecht says, particularly the session about social styles, which “was definitely an eye opener.”
Likewise, Karen Quanrud at Tuohy Furniture has used GAP to send nine employees to Leadership Essentials, which she considers a game-changer in terms of employee attitudes. Tuohy’s 90-plus employees manufacture wood office furniture in their Chatfield-based facility. She says employees who return from the Leadership Essentials program “see a bigger picture. They are open to see beyond their own jobs.”
Quanrud sent her employees to multi-session programs away from their plant, where it didn’t take too many people off the floor at a given time and allowed them to network with people from other companies. She makes a point of taking Leadership Essentials graduates to job fairs, where she says they do an exemplary job of representing growth opportunities at the company.
“The Tuohy Furniture employees have been a fun group to work with,” says Hellickson. The company has created a momentum of developing and building the skillsets of their leaders at multiple levels, from existing leaders to current managers. “We were able to elevate their thought process about leadership. They have latched on to projects that they have done collaboratively inside. The three groups who have attended separately have created a connection in-house.”
“GAP enables targeted companies to receive highly valued service at prices they otherwise might not be able to afford,” says Bob Kill, president and CEO of Enterprise Minnesota. “At the same time, part of its effectiveness is that recipients are still required to put skin in the game.”
Brandon Anderson, president of Von Ruden Manufacturing, agrees. He has used GAP funding to improve processes within his company and happily promotes the merits of the program. “I’m a true believer,” he says. But GAP is more of an investment, he adds.
“It’s not like a COVID grant where the government says, ‘Here’s $10,000.’ We don’t really care what you spend it on,” he says. GAP funds help manufacturers invest in initiatives that help them improve, “the kind we know we should do, to either secure current business or grow for the future but aren’t sure we can afford.” In the end, Anderson says, GAP helps companies grow, achieve success and generate even more tax dollars to the state.
“It’s easy to see why both parties in the Minnesota legislature view GAP as a government investment that works.”
-Lynn Shelton, vice president of marketing at Enterprise Minnesota
An audit of GAP’s effectiveness required by the legislature reveals that the program has been remarkably effective. Since the legislature first funded it a dozen years ago, GAP has helped 427 different manufacturers create or retain 10,040 jobs while generating a $30-to-$1 average return on investment.
Anderson also credits Enterprise Minnesota with “stepping up” to take full ownership of managing the effort. “They qualify these projects, document them and report to the legislature on the return on investment. Did it increase sales? Did it increase hiring? Did it increase wages? All that creates more taxable income for the state.”
Anderson says he also values GAP’s emphasis on helping small manufacturers. “People in Minnesota realize what life would be like if there were no small businesses around,” he says. “It’s easy to give grant money to a large corporation because the impact is very quick and easy to see. One transaction to one company might save 150 jobs, which looks really good on paper. But cumulatively, there’s still more employment labor in these smaller manufacturers.”
Lynn Shelton, vice president of marketing at Enterprise Minnesota, says that GAP represents an investment in communities. “Manufacturers are job-creating engines that sustain their local economies by providing a sturdy base for prosperity across Minnesota,” she says.
The legislature is currently considering expanding GAP as manufacturers try to navigate the particular political and economic turbulence created by COVID-19. The program’s initial funding of $800,000 was cut to $400,000 by the 2019 legislature. Advocates are hoping for another increase as many manufacturers still struggle to cope with the double whammy of COVID and the still looming challenge of finding workers.
“More and more policymakers understand that manufacturers are essential to create and retain high quality jobs in their local communities,” Shelton says, adding that the number of people employed by manufacturers has grown 9% since 2010, today comprising 13% of all the state’s private-sector jobs.
And manufacturing jobs pay well. The average annual wage for a manufacturing job is more than $63,000 — 15% higher than the average wage for all industries.
On top of that, each manufacturing job supports 1.9 jobs in other sectors of the economy, she adds. “That means that fully one-third of Minnesota jobs are in, or supported by, manufacturing.
“It’s easy to see why both parties in the Minnesota legislature view GAP as a government investment that works.”
Featured story in the Spring 2021 issue of Enterprise Minnesota magazine.