Episode 08: Manufacturing in Minnesota

Christy Kallevig: Welcome to Vital Connections On Air, a podcast brought to you by the University of Minnesota Extension Center for Community Vitality that explores the trends and topics important to communities and leaders throughout Minnesota. I'm your host, Christy Kallevig, and today I'm joined by Bob Kill, president and CEO of Enterprise Minnesota. Welcome to the podcast, Bob.

Bob Kill: Christy, It's great to be with you. I look forward to our conversation about the vitality of Minnesota and in particular, Greater Minnesota.

Christy Kallevig: Yes, I think that we're going to learn a lot in our time together today. So why don't we start off by you telling us a little bit about Enterprise Minnesota? I am guessing not many people outside of the manufacturing world know a lot about you.

Bob Kill: Enterprise Minnesota has been around for a number of years. Our focus, as we say it is our mantra, [is] helping manufacturing enterprises grow profitably. We're 34 individuals strong, located across the state, providing a continuous improvement strategy; leadership development and certain certifications that manufacturers need from our consulting role. We're very pleased and excited about the kind of the resurgence of people understanding the value of manufacturers, especially to our Greater Minnesota communities. They bring a lot of vitality and great paying opportunities. The second part of what we do is we really want to bring visibility to economic development individuals, elected officials, and educators as to how we could partner to help this industry with the challenges that this industry faces, as do many other industries. [We also want] to get them to understand the differences between the seven-county Metro area and Greater Minnesota, because there are some very big differences. Both good and bad, I might add.

Christy Kallevig: Right, I look forward to exploring some of those differences with you during our time. How do you get your funding? Are you a governmental agency or are you a nonprofit? What is the structure that way?

Bob Kill: That's a great question. We are a nonprofit, and we keep it nonprofit for legal reasons. We're the Minnesota affiliate for a program housed within the Department of Commerce called the Manufacturing Extension Partnership. So we're fee-based. We generate fees; our clients pay for our services. We're always looking for grants, maybe from the state, to not provide free services, but to create rebates or a partial rebates. So one of the programs we have now from the State of Minnesota, and we've had it for a number of years, is called the Growth Acceleration Program, which allows, depending on the size of the company, a 25 or 50 percent rebate upon completion of our services. So let's say we're working with a company and doing leadership development for the next generation of employees and leaders. And the fees are X dollars. If they are under 100 employees, they could get a 50 percent rebate after the fact by completing the services. So it's a wonderful program; there is skin in the game for us, the manufacturer, and the state wants to invest in manufacturing, so it's been a very strong program, supported by — you know — manufacturing is not partisan. For our federal program, we can get reimbursed partially for some of our costs. Our particular focus is on very small, small and medium-sized manufacturers.

When I say those things, it's somewhere between one employee to 500, but our typical client is between 15 employees and 200 employees, so these are vital companies to the communities and they're vital to the large manufacturers. We love to talk about 3M and Polaris and Toro and these are wonderful, wonderful companies — but they rely on these small and very small manufacturers oftentimes to build some of the core technology that's in their product. So you can probably tell, I get a little excited I talked with manufacturing because it is a passion of [mine] and all of our people.

Christy Kallevig: I think it's important to have people that are passionate about their work, because that's what helps us move forward. And like you said, those businesses that we may view as smaller are integral to helping the large businesses keep going and achieving their goals as well. We all work together right?

Bob Kill: Absolutely, and the challenges of manufacturers, which are located all over the state. If you live in the metropolitan area, I think you think that 80 percent of manufacturers are in the metropolitan areas. Absolutely not the case. Look, less than 50 percent are in the seven-county metro area; the other fifty-five percent are scattered all over the state, sometimes in very small communities. The other statistic that I like to remind people of is that manufacturing creates 13 percent of Minnesota's jobs, 16 percent of the payroll, and for every manufacturing job there is a service and a support job, by about 1.9 percent of those jobs. So we feel manufacturing is very vital. We are pretty passionate about Greater Minnesota, because we see the needs being very different in many categories: workforce, child care, attracting young people — the list kind of goes on. At the same time you know we feel like there's been great progress made in helping these smaller companies by the work we do and by the work that our partners do right.

Christy Kallevig: When you talk about how the manufacturing businesses are scattered throughout the state, is there one part of the state that is more dominant in the area of manufacturing than the other?

Bob Kill: A nice, good question. So the reason I have some of these statistics is we're in the ninth year of our State Manufacturing Survey that we do annually and it's a phone survey of 400 random manufacturing executives. Actually, we test more than that, because we want to divide the data by the Initiative Foundations, which cuts the state up into the seven-county metro and into six regions as you know, [but] many of our listeners maybe don't know. There's differences for each region. The challenges are pretty similar, but you can see the industry that is dominant in a particular area has a reflection. So, for example, the Southwest region which is very ag and ag industry related — in many cases is a strength. It's been under challenge the last few years because of the price of soybeans and corn, etc. So they kind of stand out as having maybe a different set of issues than others. But kind of follow the population, Christy.  You think about the west central — Willmar, Alec, Fergus Falls, the freeway down. There's a real concentration, because transportation is pretty important to these manufacturers. But manufacturing is kind of our pockets. But it's really across the entire state, but different by the industries that they tend to serve somewhat based on the local economy.

Christy Kallevig: And you mentioned that you are in the ninth year of that survey that you do — which has great data [that] comes from that. It was really interesting to look at your website and see the articles that you have posted based off of that data. Can you share with us some workforce challenges or interesting pieces of information that you've gathered through this year's survey?

Bob Kill: Well you know, we always asked some key questions. We've had as few as seven, as many as 11, but there's a core number of those that have been with us forever. [Rising] cost of healthcare, finding and retaining and developing workforce people. Then on some economic questions. As much as healthcare is always a challenge — because it just is for smaller companies — you know they might start out by providing it free, and now it's almost difficult to do that. As they grow they want to figure out a balance to be fair to the employee and offer good benefits. But health care has kind of plateaued as a challenge. What has ricocheted up dramatically in the last seven years is the workforce challenges. You know [the]14 percent that said that they had had very extreme difficulty. That's almost tripled in the years since it's by far the greatest increase in the concern level of any metric. If you look at it by size of company, the smaller companies, the bigger the issue. And if you look at it by Greater Minnesota versus metro, it's significantly different in the Metropolitan area. If you go back to 2008, our first year, the difference between Metro and non-Metro was immeasurable — 55 percent. They had challenges finding qualified workers. As you look at it this year, Metro people say 62 percent, in the Greater Minnesota say 75 percent that have it. Sixty-eight percent say it is very, very difficult. So while it's on the scale in many areas, and if you look at it region by region, it does reflect in many ways reflects the vibrancy of the manufacturing sector. This year we really wanted to add and dig a little deeper. It's a huge difference between these regions.

You can see that they see the mining industry has been down, forestry's been down. So lots of concern. But having traveled up there recently, all of a sudden that's coming back as the mining is coming back. So when the regions are back experiencing growth, it will see the same thing with the agricultural and food processing industry in Southwest will really ricochet up. So the further you get from the metropolitan area, Christy, the more concern and the more challenge. Then you get into a smaller community, let's say some 500 employees, it really is challenging to keep young people and to really let them understand the great career they might develop within manufacturing. We all want to escape to the big city, and then all of a sudden some of us want to skate back away from the big city.

Christy Kallevig: When you are talking about workforce challenges, is it specific to finding qualified workforce or are there other things that are in that category?

Bob Kill: You know we try to dig into the kinds of jobs. Every year we get a little more specific. There are challenges.  You only have so much time you can take with the executive. So we do ask the right quantifying questions or qualifying questions in our focus group so we complement the survey with executive focus groups and with student focus groups to try to put some more relevance around what was leading to this. And the Workforce challenges are exasperated in Greater Minnesota by a number of things. One, the number of young people is not what it once was. So we just don't have the population growth — the farms. There's been consolidation of the farms. We know that, and that's where a lot of the young people used to come from. That's where a lot of the manufacturers and smaller communities got started, when a farmer started welding something and came up with a new product.

The other challenge is childcare. Now this is the first year that we really tried to dig into that. Now the Center for Rural Policy and Development has done some extensive research. We partner with them on a regular basis and they're the ones that kind of raise their eyes to say how can we how can we ask this question. We didn't get a good response because the first year when you do something like that in a survey, Christy.  It becomes problematic as to how you ask the question to make sense, and how do you ask that of enough people to make sense? So we asked some of the focus groups and then we definitely got an earful.

Christy Kallevig: And what did you hear from them, in these focus groups?

Bob Kill: In the metro when we asked about it, it was no issue. It's costly, but there's plenty of choices. What we heard in Greater Minnesota was, I think, things that we all kind of know but the manufacturers fill us in. You know oftentimes there's two working parents in these households of younger people, but it's a real challenge if you want both working, because even if it's not expensive it's not available. And I think a high percentage, I would say I think the Center for Rural Policy Development says that almost 70–75 percent of the Minnesota households with children under a certain age, six or seven, who want to have both parents working. We see that so often. Some of our manufacturers, Harmony Enterprises, for example, built their own daycare center and gives a very reduced rate for their employees, but they also make it available to the community. I've heard that they have a waiting list. So the manufacturers are starting to realize that workforce childcare and good benefits are all kind of tied together to be more attractive. So we're going to continue to dig deeper into this, because the focus groups really put a lot of emphasis that there aren't enough facilities.

The guidelines for developing a facility is as challenging — when Harmony Enterprise built theirs — you think there's regulations for manufacturing? We learned that when we're dealing with children, there's a lot more regulations. So that lack of child care in cases we know behind the scenes is affecting the opportunity to hire and attract skilled people back to a community just because it would be available. So it's a high risk too to attract people back. We've had other manufacturers kind of focused on the health care side of it, which in many ways is relevant to child care. So my takeaway after we got done this year, our first year of really focusing on how does this impact is we need to dig deeper. We will dig deeper. We're going to find that it's very critical. I think after two or three years we'll probably find that it's almost similar to what's going on in the workforce, because they're very relevant and tied together. My message to our clients is you, as the manufacturer, have to figure out how to do something about this. Without you, they become very vocal around workforce and it's starting to pay dividends. They have to try to figure out themselves how they're going to help make these young people's lives easier. And shortage of child care is a looming issue. No question about it.

Christy Kallevig: When you hear stories or come in contact with companies that are really digging into this, with maybe community partners? You mentioned Harmony Industries for example, that they took the steps and opened their own center. Is that something that you're hearing more of that there's kind of this grumbling that we have to do something, and that might be what we have to do?

Bob Kill: Yeah very definitely. I mean up in the Brainerd Lakes area, Clow Stamping is a very large employer. They have a very aggressive and progressive recruiting policy. And I'd call an HR executive and you know she's trying to think about how do they do this for the community and for themselves to grow?

So yeah, we were seeing more and more of the progressive manufacturers and communities, even, think about how do we do this. Of course the challenge is, it's also you look at it from a cost perspective to have good safe child care. It's expensive.  We're going to see this in my opinion, having listened to clients and to focus groups. We're going to see them try to address this like they do with health care. They know it's necessary. They're trying to balance it between how much they pay versus [how much] the individual pays. You know young people want health care now. Ten years ago they never seemed to talk about it. I think child care is going to follow the same route of becoming vital to figure out how we're going to balance between local community partners, ourselves, and the employee. The manufacturer has to play a strong role in it like they are in trying to address working with the technical colleges around developing future manufacturing employees. So the early stages is really raising the visibility I think because, we have in some ways if you sit in the Metro as an elected official, you don't understand why it is such a big challenge if you're in Greater Minnesota.

We have to get the voices to come together. Like other topics, workforce, for example and we're going to bring more visibility in our survey as we go forward, and we're trying to partner with people who are addressing it. That's the Initiative Foundations — we partner with them on a lot of things. Sometimes they don't like the word partner, but you know they see us as a stakeholder. We see that they are doing a lot in child care grants, and I think we're doing an effective job. Again, they recognize it because they're in Greater Minnesota, so this is the first year that we really saw good data across all the Initiative Foundations — child care can be embedded into that. I think we can make a difference.

Christy Kallevig: Why should we worry about it? I mean, what do you see as the lasting impacts for manufacturing economy — for Minnesota's economy? You know some people may be listening to this thinking child care is really just one family's problem; it's not mine. How does this shortage in child care impact our overall economy?

Bob Kill: Lack of child care in a community basis is going to affect the growth and vitality of these manufacturers, because if they want to attract young people — they have to develop a good health care program. And now all of a sudden with two parents maybe working. Let's even say this community has a great school system, so that risk has been removed. Now all of a sudden if both parents are working, it's geographically a challenge and that's going to affect the growth of manufacturing and the vitality of communities. I always say that that too many people don't realize that in Greater Minnesota unless you're outside of, let's say Wilmar and Mankato and Alexandria — for those communities of 10 to 20 thousand. When you get into smaller communities when you want to hire someone, you almost always have to find a second job. Well that's all wonderful, but now you've got child care vs. growing your business. That's the challenge that we see short term that's not vocal enough and long term it's going to have that effect. No question about it.

Christy Kallevig: You mentioned a little bit about bringing more voices together to talk about this. Do you see any work in the future kind of bringing lawmakers out to where the problem is to helping them see it more clearly?

Bob Kill: We do a lot of visits with elected officials and you know it's going to get talked about as is healthcare and some other things. You know the Department of Employment and Economic Development, I think they award five hundred thousand dollars a year primarily to the Initiative Foundations and to others who have a very specific program to help try to develop it. The work is more and more being done between these economic development individuals and the manufacturer. It's been kind of a silent issue. And you know the drought gets crowded out by the workforce — lack of skilled workers — but they are they're tied together. Because one of the reasons for a lack of skilled workers is shortage of being able to have both parents working if they want to. Because if they can't find reliable child care, we're not going to overcome it. I think we're at the early stages when we start our survey, Christy. Nine years ago getting people to talk about workforce challenges their eyes glazed over. Now that's all everybody wants to talk about. When I see articles where someone says we have a workforce challenge, I kind of laugh, because we've known this — we've been admiring this problem for years.

What I see now is communities — high schools, technical colleges, economic development, local chambers really kind of rallying. You and I know that the problems get solved much closer and at the community level and there's a lot of success stories around trying to create education — high schools putting technical training back into it.

And we're going to find that we're going to need those same kinds of resources coming together around child care.

Christy Kallevig: I want to transition away from child care for a minute because I think that this topic a qualified or skilled labor for our manufacturers is also so important. And we see it in the small community that I live in where we have our own manufacturer. Watching them look for employees and trying to retain their employees is a challenge. You mentioned that schools are moving into putting back some technical programming into their curriculum. I recently read an article about Redwood Falls that they're really expanding their educational services around manufacturing and trade skills. Where does the responsibility lie in preparing that future workforce? Is it in the schools, is it in the technical colleges, is it at home, and how I talked to my daughter about what her future is? Where do we start to grow that next workforce?

Bob Kill: I think we grow it in all those working together. You know you mentioned Redwood Falls? We had an article in our magazine about an individual who put a million dollars into the Redwood Falls School System and economic development. We know the manufacturers are working together to try to do what you're talking about. Hutchinson is building a new high school, and the manufacturers have put in — I've heard the official number is 1.6 million, but I've heard more than that — to make sure that there is curriculum and facilities to really open the eyes of parents and students to what advanced manufacturing really is. So you know I would say that the schools can't do it on their own. They need manufacturers. They need a community. And I can go on [down] the list. The list is pretty amazing of the high schools that have really gotten back to focusing on opening the eyes that there are opportunities. You can't force the parents, etc., because we all dream of having four and six and eight year degrees, I guess, but we're really seeing these come together and we take great pride in the number of people who have gotten involved in our survey.

When you look at the partners, sponsors, first year — 20 this year — over 200 technical colleges — high schools — Initiative Foundations — the manufacturers themselves — it's pretty amazing. And I think that a key role is being played by most of the Initiative Foundations as they've kind of come around realize that these are really important community assets to keep these companies. So it takes working together. But I would say that the manufacturers — not all — but those have really gotten progressive in realizing that these public/private partnerships around this topic really can work.

And I preach that over and over to our clients and Alec (Alexander) as an example — Hutchinson is an example — Redwood is an example — Brainerd's an example — Fergus Falls. Yet at the same time, how do we get people to hear about this and realize that there is work going on that they could maybe learn from? The best example I can give about how far we've come is a high-up executive or one of our large banks [who] reached out to me and said that he's the board chairman for a college preparatory school and they're growing their school are going to double the size here in the next four years. Someone came forward and said I'll give you five million dollars toward your school program, but you have to have a manufacturing and technology sector and it can't just be there, it's got to be integrated into the curriculum. I was shocked. You know it's a college preparatory. We have made progress — we have made progress! I don't know who the five million dollars is [from], but that's what it's taking. That's what it's taking. I've heard the CEO of a multinational company the other day, who's very focused on manufacturing-very focused on bringing their manufacturing back to the United States. He had a great quote: "We have to quit saying that a two year technical degree is a consolation prize." Today all the universities are talking about experiential training. In other words, hands-on training while you're getting the education. And guess what? Our technical schools been doing that for years. So it could be a great stepping stone. So it's not for everybody. These are great paying jobs. Dunwoody is the great private institution — manufacturers all over the state either graduate from it or love to recruit from it. The technical colleges are doing the same thing in a community basis. They themselves can't get enough kids — I hate to say kids — or people wanting to change their career after being frustrated or [at] midlife want to change. So the manufacturers have to step up and develop internships, apprenticeships and that's going on aggressively compared to what it was five or nine years ago. So we feel we feel good about it. But every industry has challenges around workforce, so we have to we have to really sell the value of what manufacturing is to a community and to our state.

Christy Kallevig: I just think that it's so interesting that now some of the conversations that I get to have when I'm out in the community with different people and different parts of the street and just the commonalities that pop up. There are issues that unite all of us that we need to work together to address.

Bob Kill: Absolutely. At the same time, there are issues, but the issues are rising to the top better than they have for a long time and I think we're more concerned about the vitality of these communities you're talking about. Workforce is one, but we need a vibrant Greater Minnesota economy, and we need that focus in our survey. If there's one thing our survey has done it's raised the visibility both to our nationally-elected officials, our state officials, and to economic development people. But there's a big difference in some of these challenges between the metropolitan area, however you want to measure it, and Greater Minnesota. The vitality and importance of a manufacturer in a community of 750 people versus the Twin Cities of Minneapolis St. Paul is night and day is night and day.

If you took that 50-employee company out of community, that community dies. It's like closing the high school, and you know what that has done to Main Street. So we grew up in Greater Minnesota. We have a strong passion for Greater Minnesota as an organization, and we really love working with the economic development people in Greater Minnesota, because we they're passionate and we're passionate just as your organization.

Christy Kallevig: I think it's really great to hear that you also serve the Metro area because it's important to be able to look at both sides and acknowledge the differences that exist, but make sure that we're supporting each other.

Bob Kill: Oh absolutely — absolutely we're one state. You know sometimes I joke and say we're two states, but there are differences, but the same time we rely on each other — freight consolidation, etc. I would say that a manufacturer in a small community is really recognized as a vital commodity more so than ever. And part of that is what I call the positive buzz around manufacturing over the last, say, three presidential elections. Everybody's taking credit for rediscovering it. And we're happy for that, because it is vital — you know great paying jobs and careers. Yet we've got the same challenges a lot of industries. There's a workforce that is aging. We need to figure out how to bring automation to bring safety and career growth to the industry. It's one of my pet peeves is people think automation is to replace people. It's not. It's to enhance. It's to bring safety and career growth to the people that are there. Because you just can't keep doing it the way you used to.

Christy Kallevig: I think that I could probably talk to you all day and just keep learning stuff. But I know you have a busy schedule, and so I want to be mindful of that. So thank you so much for taking some time to visit with me today. I really appreciate it. Good luck as you continue your great work across the State of Minnesota.

Bob Kill: Well, Christy, thank you for the opportunity to chat with you. We love manufacturing. Minnesota's got a great diverse manufacturing compared to many of the states around us. We just need to continue to focus on that, because they bring great jobs, great careers. Anything that we can do in Enterprise Minnesota to further that, we just never want to miss the chance. So thanks for reaching out to me.

Christy Kallevig: Thank you to Bob Kill for helping us to understand more about manufacturing in Minnesota. If you would like to learn more about Enterprise Minnesota and the work that Bob and his colleagues are doing across the state, visit their website at EnterpriseMinnesota.org. You can also find out what we are doing the University of Minnesota Extension Center for Community vitality by visiting our website: www.extension.umn.edu/community, where you can learn more about today's topic in our leadership and civic engagement alumni blog.

Make sure to follow us on Facebook and Twitter to stay up to date on new research and resources for communities and those who lead them. Make sure to join us for a next episode where we will explore a topic that Bob talked about in his interview — child care. We will be joined by Marnie Horner from the Center of Rural Policy and Development to really explore that topic. Thank you for joining us for this episode of Vital Connections On Air.