High Impact Manufacturing Firms Come in All Sizes, Have Big Effect on the Economy
By Jack Healy, Director, MassMEP
In all of the media discussion about the new $787 billion stimulus bill, there has been little reporting on the "productive sector" of our economy, i.e. manufacturing, and what will need to happen if we are ever to make enough product to pay down the debt that we just incurred.
A recent public opinion survey, conducted by the Opinion Research Corporation, supports, what we all know from talking with our friends and family — "Nearly half of Americans surveyed believe that the U.S. has lost its competitive edge in manufacturing and has gotten less competitive in the last ten years." While this is certainly true of some manufacturing sectors, it is not true of the many manufacturers who have evolved and view monies spent on research, development, and innovation; reskilling; and training as investments in the future of their organizations, and not as expenses that can be easily jettisoned. The impact these innovative manufacturers are having is defined in a recent study commissioned by the Small Business Administration where such enterprises are identified as "High Impact Firms."
High Impact Firms usually represent three percent or less of total firms, but account for almost all employment growth in our economy.
High impact firms are identified in this study as an enterprise with sales that doubled over the most recent four year period and has an employment growth quantifier of two or more over the same period. The findings of this study indicates that the average High Impact firm :
Is not a new startup
Comes in all size of companies
Exists in all industries
Conversely, Low Impact Firms do not grow, on average. The SBA Study revealed that nearly all of the job losses in the economy over any of the three four-year periods studied were attributable to low impact firms with more than 500 employees.
The overall purpose of the SBA study was to shed light on an important question: "What are the characteristics of High Impact Firms and how have they changed?" This study should also help inform regional policy with respect to promoting economic development. Most economic development money is spent attracting new plants, and most small firm and entrepreneurship policy is focused on new firm start up or helping disadvantage firms. Very little economic development money is spent on expanding or retaining existing firms, or what today called "Economic Gardening".
Part of the reason for a lack of Economic Gardening is that very little is known about second stage companies or companies on their way to rapid growth. The only accessible indicators are employment figures. Unfortunately, there are no enterprise reporting indicators for the growth of innovation, nor for the growth of productivity, which, along with skill levels are important indicators of high growth enterprises.
Since the SBA study only examined data, there was no personal interaction with any of the High Impact Firms. If there were, the study would have shown that such enterprises would define their employee skills as one of the most critical factors necessary for growth. Unfortunately, the vast majority of industrial and economic studies suffer from the same deficit of not including data inputs from the manufacturers themselves. To illustrate what such inputs would look like, we have included some survey responses from three High Impact Manufactures, in response to the question, "What makes you different?"
Stellar Industries Corp., Millbury, MA Stellar Industries sells custom products and services to the telecom, biomedical, and defense industries. Stellar’s products include custom lapped and polished electronic grade ceramics that are used in a variety of electronic components, such as laser diode/photodetector submounts, high power microelectronics, and microwave and RF thin film substrates.
Ron Visser, President, stated, "We continue to invent new products. About 25% of what we have invested is in R&D. We push the state of the art as far as the amount of power you can get from lasers, for example, and so far it has been successful for us. Obviously we have dodged the bullet over the last 24 years and only once have we been really hurt and that was during the telecom crash in 2001, when sales were cut in half. We had to lay off staff and that was horrible. We have tried to hire most of them back when we began to rebuild. We have a focus on employee training and all of our employees have completed training in Lean Manufacturing, Value Stream Mapping, and Kazien implementation, and we advertise this fact on our web site."
Rose Industries, Palmer, MA
Rose Industries is a 30 year old machine shop supplying the aerospace, medical, and defense industries. The company was just voted one of the top 10 best U.S. machine shops by Machinist Magazine.
Deborah Lamb, Owner, stated, "We have made a lot of careful choices. We have purchased the right software and equipment without over-purchasing. You can spend half a million dollars on a machine or $100,000, but you still need to charge the same rate. We have picked the right equipment and have good people. It is extremely difficult to find the right people. Between lack of experience and lack of work ethic, it is a real struggle. We are not afraid to go through several people until we find the right one. We are a small shop so we do not have the time to mentor people who cannot do the job that they applied for. Many people have been standing in front of machines pushing buttons for so many years that they have forgotten their machining skills. Our staff has a serious set of skills and they put them to real use every day."
Diamond Antenna and Microwave Corp., Littleton, MA
For over 50 years, Diamond Antenna has been a forerunner in the design and manufacture of precision microwave rotary components used for air traffic control, radar, and communications system antennas.
Jeffrey Gilling, President of Diamond Microwave, responded to our question. "Thanks to the development of our Diamond Roltran Roll Rings, which carry power and signaling in demanding situations without any maintenance, the company has planned for growth of 20 to 30%. We are a company now focused on developing an infrastructure to manage this growth and to attract and retain the best employees."
Most commonly they are looking for machinists and employees with mechanical aptitude and they are looking to get better at providing their own training in house and focusing on specific skills. According to Gilling, "Core competencies in Massachusetts are not low tech. Enlightened companies have to realize that if they want to climb the ladder of business proficiency that they need to keep investing."
Future of Manufacturing in Massachusetts
The need for manufacturing skills, as described above, has been reported in a number of surveys, the latest being the "The Future of Manufacturing in Massachusetts," provided by Northeastern University, which highlighted the critical need for technical skills based education. Despite the identification of such needs , there still remains much to be done to meet current needs. It seems ironic that the job training requirements contained in the Green Jobs bill may end up supporting all of manufacturing by providing the necessary funds for training machinists.
Government agencies looking to stimulate economic growth would be well served by providing the necessary skills for High Impact Firms. The subsequent growth of these firms will maximize the government’s investment and provide the necessary manufacturing growth that will be required to pay down on the debt that will be incurred by the 2009 stimulus bill.
Next Generation Manufacturing Study
And speaking of surveys, the Massachusetts Manufacturing Extension Partnership (MassMEP), New Hampshire MEP, and Maine MEP, have launched a research study, along with 15 other states, to assess the progress of manufacturers in adopting strategies to compete in the global economy. The Next Generation Manufacturing Study is the first step in a long-term effort to help our region’s manufacturers weather today’s recession and improve manufacturing competitiveness over the next decade.
The web-based survey, which starts February 10, 2023 and ends March 15, 2023 is confidential and takes approximately 30 minutes to complete. Manufacturing participants will receive a customized benchmarking report comparing their progress to the overall results as well as to other respondents of similar revenue and number of employees.
The questionnaire asks manufacturers to rank their progress toward the world-class performance benchmarks of Next Generation Manufacturing, a framework of strategies that will drive manufacturing growth and profitability in the 21st century. The elements of Next Generation Manufacturing are customer-focused innovation, systemic continuous improvement, advanced talent management, global engagement, extended enterprise management, and sustainable products and processes.
Manufacturers wishing to participate in the Next Generation Manufacturing study can do so at www.NGMStudy-NewEngland.com.
