Each year, Enterprise Minnesota conducts the State of Manufacturing® survey to ask the state’s manufacturing executives for their economic outlook and top issues.
Sponsor: Southeast Technical College
4 p.m., Wednesday, February 6
Let's start with worker readiness. We're in the right place to talk about that, and let's do that. What's your sense of availability of employees with the right skills to do what you need to have done?
• Yes. There is a level of urgency. I don't think the kids that are coming out of high school these days recognize the opportunities in the manufacturing sector because they have such little exposure to it in high school – and their parents are necessarily touting it as an opportunity. So I'm not seeing that great a level of candidates coming out for operator jobs or technician jobs or engineering, for that matter.
• I hire farm kids. They know how to work, really. The vast majority of my employees are mature now. They're not new in the workforce. But they grew up learning how to work at any skill level---at an engineering level, at an operating level, a welder level. I think that's something that's beyond the school's responsibility or the education responsibility, and more as a symptom of a bigger problem.
• As a farm kid, that was the best thing on my resume, and I have master's degree.
• I tell you, I've hired hundreds.
• The issue is that you have fewer farmers. Also, the farmers you have don't have as many kids. My brother still runs the farm. He's a bachelor farmer at age fifty.
• I have a seventeen-year-old senior in high school, above average academically, involved in three sports. He doesn't have many skills to offer other than he is a pretty good kid. But at a skill level, he'd have to be from the ground up, start sweeping the floor. I tried to teach him how to change the oil in the car. He wouldn't open the hood.
• At age 14 I knew how to weld.
• So did I.
• I drove a tractor. I knew how to build some on my own. My fourteen-year-old, same thing. He's an athlete, good academics, and luckily he's picking a little rock for the farmer that lives nearby. But he doesn't know how to weld. I don't have the will to teach him. He drives the tractor at the farm. He learns what his uncle teaches him. Now, as a parent of a fourteen-year-old, I want him to go to a four-year institution.
• I want him to learn the same trades that I learned. But I want him to have a four-year degree.
• So he can come here, get his first two years of education at half price, guaranteed to transfer to Winona State or any place, and at the same time we will try to convince him that it's a better idea to get a two-year degree.
• Here's my challenge. My 17-year-old son needs to leave town. He wants to grow up and experience something rather than being taken care of.
• Send him up to Red Wing.
Is there a generation difference with young people just joining the workforce?
• Work ethic.
• I have a ton of grandkids, and I can really see it in that generation. They don't like manual labor. They can sit at a machine and do something. That's fine. And this is a general attitude that I see all the way across younger people. Each generation seems to be getting progressively worse. I grew up at a very early age having to work. The issue is the home life and the parenting stuff. They seem to discourage people from working with their hands. They want their kids to go to school and sit behind a computer and make two million dollars a year. Well, it's nice but it's not realistic.
• We've gone through a lot of ebbs and flows as far as finding dependable people that maybe don't have the mechanical background. Some learn, others don't. We've gone through some dry spells too where we just cycle through some people who don't have the work ethic. We've tried to do some things with tech schools too, as far as, I don't know. Once they get their two-year degree, maybe they view it as back-stepping in to a career in operations in our field. So you've got to keep trying and maybe canvass a larger area.
• Recently we got a good influx of candidates that have stuck with us. Whereas during the downturn they were harder to find. I don't know why. You would have thought the opposite.
• That's very true. The problem is we have too big of a safety net.
• I'm on an investment board. We have members of our board that are HR people from local manufacturers, and they have major layoffs. They give them all these benefits, plus retraining, and then when they want to hire them back to work they don't want to go back to work, because they don't want to lose their benefits. This is a problem.
• Yeah. The entitlements are a challenge. My son plays hockey, so I'm a hockey parent. Another hockey parent got laid off---both parents were laid off during the downturn. I asked her if she was out looking for a job. "Why would I be out looking for a job? I got two years. I don't have to work." Truly.
• That's a problem with employers because they're going to look for a dependable skilled person, a capable person, but they're getting paid not to work. And there are jobs available.
• And it feeds into it, too. They collect the maximum unemployment and, obviously, in southeast Minnesota, we don't pay the same wages as the metro. So if you've got a maximum unemployment claim, you don't want to take a lower-salary job, even though you're going to have to in order to build yourself back up. But when you have three extensions---we only have seventy-two here in Minnesota, but some parts of the country have ninety-four weeks---by the time that time frame is up, your skills are even less than they were to begin with, and now you have to go back out there looking for work.
• I have a neighbor who hasn't worked in seven years, and his house is twice as big as mine and his lot is twice as big as mine. His wife works on the side in home health care. Something's not right in the world.
Let’s talk about training and skills.
• From a technical standpoint we actually sit pretty well, as we have our own state in southeast tech providing us with those types of professionals.
• We all struggle. The whole system is down this year. We struggle to attract students every year, and can you train them with the basic skills? Sure. Is it what they want to be doing? A good portion of our student base right now are transfer kids. Kids coming in, as I said earlier, picking up the general eds at half price and then going on, and trying to convince them to go in to the technical trades is very difficult.
• We talked last year about this too, I think. But is it just part of the culture that students just aren't getting exposed to the value of a manufacturing career, even as early as elementary or high school?
• Absolutely. I don't think they know. I talked with middle school kids---they come over here and we will get them in the room with their parents. I use Fastenal's building, because you go up 61 and I say, "when you go up Highway 61 and you look at the building here, how many occupations do you feel---and they don't know what's in that building. They don't know that you have accountants. They don't know that you have a person who's in management who's been trained by us. I think even parents who go by say, "Fastenal. They make bolts." But they don't have any concept of the number and the multitude of different occupations in every one of your plants. To me, that's sad, but we have to do a better job of educating them because they can stay here and make a damn good living if they knew the career tracks that were in each one of the facilities.
• I'll get you a bit of a root cause there. I mentioned it earlier. My fourteen-year-old son would like to get a four-year degree. Do you know any four-year machinist degrees?
• A two-year degree is almost second choice. You couldn't get into a career college.
• Four-year degree you get a machinist degree. All of a sudden establishes a credibility that didn't exist prior. Would love if my fourteen-year-old son came up to me and says, "Dad, I found a college that is going to show me how to fix combines, do diesel work, so that I can learn agriculture." My brother had a degree in agriculture. "Wonderful. Learn the family business. You're the heir." Take it over. But a two-year degree. "Dad, I couldn't get in. I'm just going to go to tech until I get my credits to go to the next." There's the issue. That's the struggle you have is trying to convince them that this is enough.
• I think you're missing part of the population here. Because there are parents who don't set that expectation for their kids, and are saying, "tech school's good. Go to tech school. These are your opportunities." I don't talk to any of those people.
• Nothing is more invigorating than seeing a young person who comes in, particularly the ones who have the ambition to not be satisfied just being a "punch the clock" machinist, but looking for the next opportunity.
• What's the next move? To go to that four-year degree, after they have already established that, why? But if they're going to that four-year degree, they're here getting their associative arts, not including any production or machine capacity information. How much of that can possibly be changed to transfer to a four-year communication degree? Imagine the strength of a person with manufacturing training, but had effective communication ability. All of a sudden you have someone who could talk to engineers. The next thing you know, they might sell.
• Another thing that needs to be preached to younger people is lifetime learning. I know we're all still learning at our ages, and they need to be taught that they are going to learn for the rest of their lives. Because the world is changing so fast, and the demands are so crucial, that we have to start programming these kids.
• It is critical in his particular business, that mid-career people become flexible about learning and taking on new projects and new things.
• As an employer, I think the employer has to keep encouraging the employees to better themselves, and the employer should provide programs, such as paid tuition, to encourage employees to learn.
We could do an hour on this, but let's switch topics. Will things be better a year from now?
• All indications for me are yes. Those are my plans.
• I'm putting an expansion on, so basically that's the indication I'm getting. It's industry-specific, but we're in a great position right now in the plastics industry, because there's so much metal-plastic conversion going on.
• I had a great year last year. We were 68 percent up.
• I think the big negative thing is the Obama discussion about "oh, business doesn't matter," and "you didn't build this business." I think these things have a huge effect on society, especially young people, that the government is going to do everything in the future -- why work hard? You can make as much money taking the extended unemployment benefits. I have friends who are in that situation. They just don't want to work. They keep getting benefits. They're fishing and drinking beer and watching TV in the evening. That's pretty good for them.
• We're going to tax the rich and give it to the poor.
• I just think it's devastating to have the leadership come out and tell people that businesses don't matter, the government built businesses, and the hard work that your friends and your father put into it really was not true.
Am I hearing a little inconsistency here? On one hand, we have the fear of what's happening in Washington. On the other hand, we’re talking 68 percent growth.
• I think you're talking about hard-working people. And I'm talking about people saying you don't have to work hard. Everything will be fine if you don't work hard. And people really didn't build these businesses. The government provided everything to build these businesses. So I think it crumbles the foundation and the way you do succeed is hard work with a good plan. But I think we keep teaching kids is that you don't have to work hard and you don't have to have a plan, because although your grandfather said he created that business and employed all those people, the government really provided all the tools for him to do that. So why should they work hard?
• On one side of the pole you've got those of us who are competent because of the hard work of the people we are recruiting who share the same values and are going to take that business from the other ones who are sitting back and looking for the Obama or whatever the next handout will be and say, "well, I'm sure it will be taken care of." It's the ant and the grasshopper. I mean, we learned it in kindergarten. So there's a confidence that comes from knowing that those people are out there. Wonderful. I'm glad that they're thinking that way. I'll take it.
A lot of manufacturers are talking about how economic uncertainties are hindering their ability to plan. Do you agree?
• I've heard it. I think there are those that feel more conservative about doing that extension or addition until we know that it's going to happen.
• I think it matters to this community. This region is entrepreneurial. When you look at the businesses that started in this region, in this community, and how they've grown, these people will take. If the cautious people are there, that's fine. We'll take the market that they're afraid of and we’ll grow it.
• That’s different from reckless gambling.
• It's a calculated risk.
• I know that the market's there and I've got people who are cautious. We will step forward and take that market. And these times are a pretty good time to capture these markets.
• And I think you're seeing that with many of the businesses in this area, which I think is unique.
The cost of health care to one's business has been a point of high concern in past polls. Is health care fixed, from your perspective?
• No, it's not fixed. It's going to be worse.
• I'm not even worried about that.
• I'm going to save some money. It doesn't solve anything. It's going to create a big problem.
• But in a bigger picture, someone's got to pay it. I'm just being incentivized for something I would be doing anyway. So I can go ahead.
• I struggle with that. More so from a long-term perspective. I dislike robbing the rich to take care of the poor. Am I, as a corporation with a major payroll, or am I, as a taxpayer, helping to assist those in my community? Or is it now covering a much larger than my community area, and are there communities that are benefiting from the incomes and worker, you know, the backs of the workers in the areas that are working harder? If that makes sense. So, it needed to start somewhere, but I don' think the model is good right now and the larger companies, like the one I work for, are paying, I think, more than they can afford to pay.
Let’s move to international markets. Is home shoring having a positive effect on your business?
• Yes, we do see some of the stuff coming back.
• The struggle I had is that I'm selling capital equipment, and last year China, Poland, India, Hungary, Germany, Malaysia, Ukraine and a few others---and these are beautiful facilities with hundreds of workers that could be in the U.S. They are not here because of government. Period.
• The pendulum is swinging back to the center. Other industries that I was in, and the one I'm in now, I was in custom manufacturing, and there was tons of stuff going to Mexico and China that shouldn't have gone there. Now it's coming back because it shouldn't have gone in the first place. And there is stuff that's there that should stay there because it's best done there. But there were a lot of things that shouldn't have gone and now they're coming back. The pendulum is swinging back, and that's all I think is happening, and I think this was happening five or six years ago. It just took time to have that happen.
• I think you're on to something. There were things that should not have gone offshore. They were low volume, higher value, a little bit higher quality. During the recession it really cranked up. But clearly, we're seeing a lot more opportunities when we talk to the Toros, the Polarises, etc. I think it's a trend. Plus, the wages in some of these countries have changed pretty dramatically in the last few years. And I think material costs pretty much the same wherever it is. But at the same time it's not a groundswell. It's just opportunities.
Now that you look back on it, what was the net affect of the recession on your business?
• Well, we grew through the recession. That's one thing I learned working for GE was that if you have a down year, it's best to invest heavily and step ahead of your competition. The general trend is to pull back and wait for the recovery. You can't. It's the time to take a big strategic advantage against your competitors.
• We built a new one when the economy was down.
• We didn't particularly have any problems during that period. So that's another reason we focused on growing instead of waiting. Again, it's crazy. The similarity in the buzz between you and your competitors.
• I'm on a local bank board, and it was very challenging for most companies slugging through the recession---and for the banks. The regulations completely changed. What once was a fast credit---a 20-year customer, millions of dollars in the bank. He had a bad quarter, now he's a classified credit, which means you can't accrue the earnings on that credit. If you have too many classified credits, the regulator is going to tell you what you can and can't do. Within days you have an external auditor come and say "yes, you're good." A week before you had the regulators in there, "yes, you're good." Four months later, "these are all bad customers." That continues.
Anyone see that banking relationships have changed the outlook of companies in your neighborhood or in your industries?
• Regulations have prevented the banks from lending..
• It's not relationships anymore. Period.
• I've seen that. You go into the bank but they insist days later to have your credit broken out. It takes two or three months to get a loan. It's terrible. We're still getting it deeper into that problem. I was talking with one of my bankers this morning. Same thing, it's tough.
• More and more bankers talked about they didn't get something done because they had to spend a couple of days with auditors, or the auditors are coming in to get a couple of these things signed. Then we talked about it's getting to be burdensome. And yet, these regulations put on these smaller banks, they’re becoming less competitive. That has nothing to do with the financial crisis. They were good then. It's kind of like if the people are successful, let's take more from them and give it to the unsuccessful. The big banks really screwed it up and a lot of them went to jail for letting it get screwed up, and it ended up putting burdens on the good banks because it made them less competitive. Especially the creditors.
One last topic. When I say "green business," what does that conjure up in your mind? Is it positive? Is it negative?
• It's not part of the manufacturing lingo.
• Reusing. It's just the principals of lean. Let's be more efficient. Let's use that.
• It's a good opportunity for business. The government doesn't have to do anything.
• We're smart people. I think what's happening now is there's a real conversion from diesel to natural gas, and that's going to be huge.
• Green will be judged by history. You won't know if something is green until years and years later. Nuclear industry was once considered the worst thing ever invented. But then again, they shut down everything. And now we're in a nuclear renaissance building and trying to catch up because we have now re-received that it is green. The fracking industry is at the same burgeoning state with, I would argue, a lot less controversy and issues that the nuclear industry was unknown in its day and yet media, politics and activism are shutting down. So when you hear the word "green," it evokes the responses of politics fed by hyperbolic media, and you will know what the answer is for years.
• It was a good situation based on the logistics of our routes and quickest investments. You had a local group of people thinking the same way, working together. It was just kind of perfect and it was a gamble that could pay off. But think of anybody else who was going to take that gamble. It had to be a gamble.