business
Minnesota Elevator: Going up
- Article by: TODD NELSON , Special to the Star Tribune
- Updated: August 5, 2012 - 12:51 PM
A sharper focus, leaner manufacturing helped turn around a longtime Mankato-based company.
From the left, Minnesota Elevator’s Mike Klehr, vice president of sales, President Rick Lowenberg and Stan Hanson, field ops sales manager, stood inside one of the company’s hydraulic elevators at Minneapolis Community Technical College in Kopp Hall.
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Business is going up at Mankato-based Minnesota Elevator Inc., as the passenger and freight elevator company's successful turnaround ride continues.
The manufacturer enjoyed a relatively smooth climb from its start in 1971 by John Romnes, who had struck out on his own after nearly 10 years working for major elevator manufacturers in the Twin Cities.
Over the course of the next 30-plus years, Romnes went from lone serviceman to CEO of a company that installs, repairs and modernizes elevators in Minnesota and surrounding states and designs and manufactures complex custom elevators for sports stadiums and arenas and university, commercial, government, transportation and other installations across the country.
Minnesota Elevator, which had downsized from 205 employees to 175 to improve cash flow as part of its turnaround, today has 220 employees. The company, one of the Star Tribune's Top Workplaces in 2012, has won recognition for employee wellness programs, paying for employees to take an outside education course and offering eight hours of extra vacation time for employees to use in volunteering in the community. Revenue last year topped $55 million.
The company's progress had stalled in the middle of the last decade when new initiatives produced disappointing results. Minnesota Elevator lost $2.2 million in a three-year period. In hopes of reversing the slide, Romnes brought in turnaround specialist Rick Lowenberg in 2006.
Lowenberg, who had worked with more than 100 companies as a management consultant with the Upper Midwest chapter of the Chicago-based Midwest Turnaround Management Association, performed an assessment to identify the problems.
They included: unprofitable underbidding on major projects; money-losing ventures, including a million-dollar bid to compete in the same market with big competitors, and an expensive-to-develop customer training program that customers in turn shunned.
Lowenberg's strategy proved effective enough for Romnes to hire him on as company president in 2007 and to win that year's Turnaround of the Year Award from the regional chapter of the turnaround management association.
Lowenberg downplayed his approach as simple: "Make sure we're making money and are profitable on all the things we do. And if we're not, we stop doing them and change focus."
Under Lowenberg's plan, the company formed product teams of estimators, engineers and project managers focused on specific product lines and setting minimum gross margins, to avoid underbidding.
Lowenberg also halted low-margin elevator production to concentrate national sales on building complex elevators, such as those that help semitractor and trailer rigs access cramped quarters at malls or arenas and that can weigh upwards of 60,000 to 80,000 pounds.
"We're not doing standard elevators, which I call 'Super 8 Motel elevators,'" Lowenberg said in an interview in the company's St. Paul office. "The majors do that all day long. They do 5,000 elevators a year, we do 250 to 300, so we just are staying close to our knitting on that side."
Another element of Lowenberg's strategy is for Minnesota Elevator to grow through acquisition of elevator service, repair and modernization companies, at the rate of about one a year. The company has acquired Badger Elevator in Wisconsin, Dynatron Elevator in Kansas City and Lagerquist Elevator in Duluth and Minneapolis. Those moves have boosted field operations business by 50 percent since 2008.
Since Lowenberg's arrival, the company also has invested in training employees in lean manufacturing techniques. It has challenged them to find ways to cut costs while maintaining or improving quality, leading to thousands of improvements and millions of dollars in savings over the years.
The company spends more than $1 million annually on lean manufacturing and new product development, including looking into adopting new European technology for the North American market, Lowenberg said.
Clint Blaiser, president and CEO of Halverson Blaiser Group, said the St. Paul real estate investment and management firm chose Minnesota Elevator to service and modernize two dozen elevators in its commercial buildings in the Twin Cities.
"The top guys are great, the guys on the front line that do all the work are awesome," Blaiser said. "You've got to trust people like that. They've always been good to use."
The expert says: Dileep Rao, president of InterFinance Corp. in Golden Valley and clinical professor of entrepreneurship at Florida International University, said turnarounds involve two steps -- cutting money-losing endeavors and, after the cutting, achieving growth.
"If the first job is done well, the second becomes easier," Rao said. "It looks like Minnesota Elevator has successfully done the first and is on its way to achieving the second."
Good companies can lose their competitiveness and lose money on each product they sell, or bid they make, because of deteriorating productivity, inadequate knowledge of costs and the wrong strategic focus, Rao said. Lowenberg appears to have identified and fixed all three problems at Minnesota Elevator.
While growth is harder to accomplish, one way to gain business in mature, fragmented industries, as this one appears to be, is through acquisition of complementary companies, Rao said. "This allows the company to apply its renewed dynamism to new regions and markets and grow with increased profits."
Todd Nelson is a freelance writer in Woodbury. His e-mail address is todd_nelson@mac.com.
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