How a bank can be a manufacturer’s strategic and trusted partner

For area manufacturers to keep up with the fast-paced economy, create jobs and grow in a competitive market, they need to be current with the times and well-connected in their communities.

“Manufacturers invest in the best equipment to make their products. But in order to take full advantage of that equipment, they’ve got to get customers in the door,” says Krista J. Dobronos, Senior Vice President and Market Leader at Westfield Bank.

Among the many methods available to manufacturers to generate sales opportunities is a deeper connection with their bank.

“When the relationship is strong, banks can be an adviser to manufacturers rather than just providing nuts-and-bolts services,” she says. “Our connections within the community give us a broad perspective on how businesses, manufacturing and otherwise, are dealing with common issues.”

Smart Business spoke with Dobronos about how banks can help manufacturers overcome common business challenges and open a path to growth.

What are the aspects of manufacturing businesses that could be improved?

Generally, manufacturers could stand to be better marketers. One tool that they tend to underutilize in this effort is the web. It’s common for manufacturers to use the internet to find suppliers, why not use it to find sales?

Face-to-face interaction still has value, but it’s no longer typical for a sales force to go door to door and sell. Manufacturers need to better utilize the internet by creating a round-the-clock portal that’s more efficient and effective at finding potential clients.

If they haven’t already, manufacturers should build a modern website and use it to promote products and highlight recent projects. Include customer testimonials that speak to the business’s unique qualities and how they were able to solve their customers’ critical business problems.

Also, take advantage of formats where online communities can be formed — LinkedIn, Facebook and Twitter, for example. With the right approach, it’s possible to use these platforms to generate awareness and leads.

What are the outside forces in the Greater Akron market that could be considered obstacles to manufacturers’ evolution?

Not as much time is spent training the next generation of tradesmen. And given the rate of retirement of those employed in the industry, that’s an issue.

Also, according to the Bureau of Labor Statistics, Akron is seeing employment in the manufacturing segment decline. Contributing to that trend is the rise of automation and losing ground to countries that are able to produce goods cheaper.

How can banks help manufacturers evolve their businesses?

Banks come into contact with many different companies, all of which approach common problems differently in the market, making a banker a centralized and valuable source of knowledge. Bankers typically attend a variety of trade shows, are members of many industry associations and host or attend many community events. Manufacturers can leverage their banker’s experience and connections to grow their client base and expand their business knowledge.

Another key issue for banks is the fight against fraud and hackers. Banks are working to educate their clients on the tools and processes that are most effective in the prevention of fraud and mitigation of cyberthreats. It’s important for manufacturers to ensure their systems are safe so their proprietary information can’t be leaked to a competitor and that their financial transactions are secure.

What are the keys to a strong relationship between a manufacturer and a bank?

It comes down to treating a bank more like a partner than a service provider. They can help make valuable connections and uncover opportunities to grow the business, rather than just host a checking account.

Manufacturers are not unique when it comes to the challenges of common business stages, which is why banks are working to offer more education on events such as succession planning. Manufacturers should talk with their bank about the ways in which they can help them find success today and into the future.

Insights Banking & Finance is brought to you by Westfield Bank

A strong workforce sets Central Ohio manufacturers up for success

The Scotts Miracle-Gro Co. has always had a very talented workforce, says Mike Lukemire, the 5,000-employee company’s president and COO. Finding good people is something the company has always been good at.

“We’ve just never worked together,” Lukemire says. “The enemy was us. We would compete in our own space.”

The company’s brands weren’t working together to create the best solutions for consumers. When that’s the case, it’s hard to reach your full potential. Fortunately, the problem has been addressed and the result is a workforce that feels a lot more like a team. Collaboration has grown and everyone has a stronger sense of purpose.

“We’ve never really had that, and I’ve been here 21 years,” Lukemire says.

Whether you’re a small or large manufacturer, your workforce is critical. From finding talent to building a culture of collaboration, people are a differentiator.

Every SMG business unit overproduced in the first quarter of 2017 and the company is using that spirit of collaboration to work better with retailers, such as taking inventory out of the overall system.

Chairman and CEO Jim Hagedorn says there’s always room for improvement. But the company is happy with its strategy of focusing on its North American core, reconfiguring its portfolio for fast-growing areas like live goods and hydroponics, which is utilized by the cannabis industry, and remaining shareholder friendly.

“I think the best company we could buy is us. I like our company,” he says.

At the other end of the spectrum, Columbus Canvas Products, which only has 12 employees, also focuses on its people.

The custom manufacturer has increased its prototyping so it can grow new product lines, such as covers for the foam pads at trampoline parks or radiology straps for health care providers. These custom products are then sold business-to-business, rather than business-to-consumer, which means larger production runs.

President Jan Kellogg says the company added automated equipment to handle the larger orders. But more technology and automation didn’t cut back its workforce.

“It sounds like we might be reducing labor, but actually the labor shifts. It shifts to a younger group with computer understanding and CADD drawing,” she says.

The trick is finding people who are passionate and want to learn, because then you can teach them anything, Kellogg says.

“Change does not come without some growing pains, certainly, but we have a great workforce that has been very interested in figuring it out — and that has made all the difference in the world.”

Personnel is the most critical part of a business, but it can also be the most challenging to address. Some companies struggle with finding people. Others find it difficult to take those people and build a strong culture. The best organizations develop a plan that remains fluid and adaptable to a changing environment, but always has the end goal of putting the best people in the best position to succeed.

Start with the recruiting

Kahiki Foods, a manufacturer of Asian frozen foods, is growing quickly enough to expand its workforce. President Martin Kelly says the company just finished adding people so it can run three production lines on both first and second shift, with an ability to go up to five lines in the future.

Martin Kelly, President, Kahiki Foods

“It’s important to start with understanding what it is you’re trying to build from a cultural standpoint, which then focuses your recruiting efforts,” he says. “The ability to retain the people you bring in is a direct function of how well you hire for your culture and the work that’s being done.”

Over time, Kahiki has gotten better at this. It surveys people two to four weeks after they are hired. Recently, those people are happier about their decision to come work for the company because the upfront screening has improved.

Columbus is a very desirable place for businesses to locate — so companies are coming to the area.

“That creates more demand for a lot of jobs,” Kelly says. “That’s a risk for the established folks who have ongoing needs. There’s more competition, so you have to have your game on in order to be competitive, whether that’s having competitive pay, a supportive environment or just thinking through what’s important to the group of folks you’re trying to recruit into your organization.”

Pittsburgh’s proud history in manufacturing paves the way for future success

Among the manufacturing hubs of the 20th century, few are as strongly identified with their industrial legacy as the Steel City. With continued innovation and investment, Pittsburgh is well positioned to build on its past success to become a manufacturing leader in the 21st century.

Starting in the early 1900s, as skyscrapers rose to shape the contours of the great American cities, steel and related industries powered the economy of southwestern Pennsylvania. By the time American steel production peaked in the 1950s, the Pittsburgh area was the epicenter of the industry.

Over the last couple of decades, our city has become a model for economic diversification — creating a hospitable business environment to attract new companies and adding jobs in health care, technology, education and other sectors. The White House shined an international spotlight on these efforts in 2009 when it selected Pittsburgh to host the G20 Summit.

While diversification efforts have revitalized the city’s image and attracted new industries, manufacturing is still a significant economic driver in the region. It accounted for $13.74 billion of Pittsburgh’s GDP in 2015, according to the U.S. Bureau of Economic Analysis, and employed 1.18 million people in the area as of October 2016, according to the U.S. Bureau of Labor Statistics.

Given the infrastructure, available real estate and skilled labor already in place, Pittsburgh’s manufacturing legacy gives the area a competitive edge in becoming a leader in advanced manufacturing. Local universities like Carnegie Mellon University and the University of Pittsburgh are leading the way in researching advanced technologies and training individuals for the manufacturing processes of tomorrow. In the past year alone, General Electric took advantage of its proximity to our rich resources to open a new center devoted to additive manufacturing.

The U.S. Department of Commerce demonstrated support for the future of Pittsburgh manufacturing by selecting it as one of 12 cities for the Investing in Manufacturing Communities Partnership (IMCP) in 2015. Under the initiative, the Greater Pittsburgh Metals Manufacturing Community received special federal assistance for its economic development plans, including support for job training, business growth and research into advanced manufacturing technology. As Commerce Secretary Penny Pritzker said at the time of the selection, “An IMCP designation is an important signal to potential investors that these communities are a good place to spend their money.”

At Chase, we’re incredibly proud of this local community, and we’re dedicated to investing in the future of Pittsburgh’s manufacturing industry. Get in touch with me directly to learn more about how we can work together, or visit for insights to help power your business.

Dave Schaich
Region Manager, Western Pennsylvania Middle Market
Chase Commercial Banking
(412) 255-6883
[email protected]



Learn about the emerging risks in Pittsburgh’s manufacturing and what area companies are doing about it:

Training the next generation of employees

Many manufacturers are getting creative with their workforce development as they not only deal with lost experience when people retire but also have a hard time finding job candidates.

A business mix for today’s global world

U.S. manufacturers have to find ways to expand, ways to do things that can’t be offshored. Or else, be competitive with automation or technology. It’s all about having the right business mix.

Additive manufacturing gives an edge to U.S. companies

By getting in on the ground floor of additive manufacturing, Albensi Laboratories has not only survived, it has thrived. Here’s what it advises others who are adding digitization and additive manufacturing today.


Candidates with the right skills can have a future in manufacturing

Manufacturing in Northeast Ohio is a more than a viable career option. The industry is leading the region in employment opportunities and is contributing considerably to Northeast Ohio’s economy, which is why the need for workforce training is critical.

“There may be many people interested in manufacturing who don’t believe they can do the work because they lack the necessary skills or don’t know what opportunities exist,” says Alicia Booker, vice president of manufacturing at Cuyahoga Community College. “Fortunately there are intermediaries that can teach these skillsets, translating the needs of employers to future employees.”

Smart Business spoke with Booker about job opportunities in manufacturing and the skills needed to be successful in the industry.

What are the skills needed in today’s manufacturing industry?

There are essentially two levels of skills. The first level includes the more traditional technical skills required of mechanics, HVAC technicians, machinists and welders. Those with these skills are still in demand. There’s a gap in the talent pipeline, however, largely because of a drought in vocational opportunities — shop class, for instance.

The other level includes the soft skills, such as critical thinking, communication, troubleshooting, and writing and organizational skills. The nature of work has changed in manufacturing. People don’t just work with their hands. They need to be able to think critically about the impact their job has on the other aspects of a project and solve problems.

Another consideration for those in the trades is the ability to create a pathway to management. Having the skills needed to get an entry-level job is one thing, but there is a need for people to move up to management, which necessitates an understanding of the regulatory environment that surrounds a company, sales, customer service, etc.

What areas of manufacturing are expected to have the most job growth?

The segment with the most anticipated growth is transportation — automotive is expected to be strong, but the emerging growth is in aerospace. Fabricated metals is an area of growth as the defense and medical industries call for lighter materials that have greater levels of performance. Food manufacturing is also contributing to growth in manufacturing, as is steel-based machining. The oil, gas and coal industry is seeing resurgence, but not in a significant way. However, if it picks up it will be a huge economic feeder in Northeast Ohio.

What misconceptions are keeping some from pursuing a career in manufacturing?

There’s a belief that manufacturing jobs are dirty and unsafe; require little skill, so they’re geared toward those who are not college bound; and have a high potential for layoffs. That’s a significant misconception, especially in advanced manufacturing. Factory floors are generally much cleaner today than they have been and much of the work has a digital component. Much of it requires highly skilled people to perform.

How can those people currently working in manufacturing keep up with new technologies or gain new skills?

There has to be a commitment to gaining new skills, whether employers help with that through talent and professional development, or people develop their own skills and grow through education.

At some shops, it’s a collaborative environment in which robotics work with and alongside people. That’s contributing to the expectation that Northeast Ohio manufacturers could see a 70 percent productivity increase by 2025. That leads to more opportunities and jobs, but those jobs will require a higher level of skills.

The key for job seekers will be getting the knowledge required of roles in new technologies, such as 3-D printing and the internet of things. Automation technology is also broadening its presence, but that doesn’t necessarily displace workers. People are needed to do programming and conduct an analysis of the end product to troubleshoot the equipment.

Job candidates need to prepare for how the nature of manufacturing work is changing. The same can be said for employers. Companies must change and adapt to keep up with industry advances.

Insights Education is brought to you by Cuyahoga Community College

Manufacturers: Reinvest savings into your company to gain an advantage

The state of manufacturing in Northeast Ohio is economically cautious, according to Jon Shoop, CPA, principal at Skoda Minotti.

“Many manufacturers see that there are sales to be made and business to be had, but they’re hesitant to go out and spend on capital improvements or people,” he says.

Manufacturers in Northeast Ohio had a strong first half in 2016, but the second half tapered off, he says. Some of those businesses feel that the warm winter last year accelerated orders in the first half — orders that enabled construction starts, for instance — which in turn cannibalized orders from the second half.

“There has been more strategic and financial M&A buys,” Shoop says. “There is money to be spent and manufacturing is seen as a hot target. Buyers, including companies and private equity firms, are buying manufacturers and getting value out of those businesses. Owners of manufacturing companies that are approaching an exit and have groomed their business in preparation can expect a payday.”

He says there’s also a trend toward additive manufacturing, with the proliferation of 3-D printing shifting the focus away from piecework and low wages.

“The process lends itself to a more innovative environment than in China where the competitive advantage is low cost of production.”

Smart Business spoke with Shoop about the state of manufacturing, the industry’s challenges and its opportunities.

What challenges should manufacturers expect to face this year?

Some of the main challenges manufacturers face are sales competition, rising material costs and lack of available skilled labor.

Workforce continues to be a challenge, especially as reshoring — bringing jobs that had been outsourced to other countries back to the U.S. —  continues to be the trend. There are educators, associations and public entities that are working to provide solutions, but the response hasn’t been fast enough to outpace the problem.

Sales competition is another challenge that is directly related to the quality of a company’s innovation and product diversification models. Manufacturers must create opportunities in existing markets that are nontraditional to gain an edge in sales. For example, some manufacturers are doing contract manufacturing or manufacturing as a service in addition to their standard offerings. Some companies have begun taking, processing and shipping other manufacturers’ orders as a way to diversify business to create more sales opportunities.

Manufacturers are also contending with rising material costs, either through a rise in commodities prices or vendors raising prices. The reflex response is to improve processes to increase efficiency. But that approach, in the long term, isn’t sustainable. Instead, a cost-plus approach to pricing ensures manufacturers aren’t giving efficiencies away. The revenue gained through improving processes should then be reinvested in the company.

Why should manufacturers emphasize sales over cost savings?

Sales dollars are more impactful when reincorporated into the organization. A 1 percent sales price increase has been shown to improve earnings before interest and taxes (EBIT) by 10 percent. Manufacturers should focus on costs and find ways to reduce expenses, but they also need to focus on their sale price.

What is the relationship between price increases and market share and how can the two be balanced?

Reducing prices just to keep market share is a mistake as it will most likely have a negative impact. A price cut — let’s say a 3 percent reduction in sales price to hold the line and maintain market share — reduces profit by that same 3 percent. That’s a 30 percent reduction of profit on a 10 percent return, which would decimate profitability. Instead, consider removing other value-add items or services — ask for cash in 10 days rather than 30 or require customers to pay freight, for example.

Manufacturers should invest in people, training, capital equipment, technology and strategic acquisitions rather than compete to be the lowest-price option. Banks have money to lend, so put cash to use and look for tax credits or incentives to reduce out-of-pocket expenses on those investments.

Insights Accounting & Consulting is brought to you by Skoda Minotti

Better training, breaking down barriers would help solve worker shortages

The owner of a small landscaping business contacted my office recently because he could not find enough young people willing to do the type of labor required. He wanted to know about community resources to locate potential employees.

I’ve heard the same concern from local manufacturers, Ohio farmers and construction employers. While the economy is growing, there is still a need for people to cut lawns, run high-tech factory robotics or install electrical wiring.

The reasons for this are numerous. During the Great Recession, Ohio lost 166,000 manufacturing jobs — a staggering 20 percent. This is in addition to the decades-long erosion of American manufacturing due to increased global competition.

Those losses hardly engender confidence in future job security. Moreover, the health care, financial services and technology sectors continue to expand and offer physically less demanding career options. While a number of jobs in those fields offer high salaries, many pay less than a living wage — with no greater prospects for long-range job security.

Policies and programs needed

We do have young people eager to work and willing to accept jobs. What we need are improved policies and programs to match our youth with the training they need and employers with capable, job-ready applicants. We also need to focus on barriers that stand in the way of successful employment.

Millennials who are mired in student debt are less interested in owning a car than in previous generations. Further, low income households often struggle to afford one. According to the census, more than 41,000 Cleveland households in 2012 had no vehicle available. Consequently, thousands of workers use other means to get around — by foot, by bike or public transit.

Without viable transportation to cover long commutes, however, some attractive job opportunities are unattainable for workers. That is why I strongly support federal initiatives that invest in mass transit and transportation infrastructure.

We must also consider expanding high school and post-secondary level vocational training and updating perceptions about career opportunities available in 21st century manufacturing. Since the recession, smart manufacturing technologies have been increasing American companies’ competitiveness in overseas markets.

Manufacturing still a key

Over the last five years, manufacturing has grown twice as fast as the economy overall and accounts for a majority of U.S. exports.

While it’s not expected to regain its ranking as the largest employer in Northeast Ohio, manufacturing remains a critical component of our region’s economic well-being. I have been a consistent advocate of strengthening workforce development programs and believe public-private partnerships can maximize opportunities for businesses. I also encourage employers and trade organizations to provide more internship and apprenticeship opportunities.

The Department of Labor recently announced $100 million in competitive apprenticeship grants to develop innovative, high-quality registered apprenticeship programs. These are proven to reduce turnover costs, generate highly-skilled employees and yield higher productivity, as well as a more diverse workforce, and would apply to more than 1,000 occupations.

The sooner we put smart initiatives to work, the better it will be for local businesses and communities.

U.S. Rep. Marcia L. Fudge, D-11, is now serving in her third consecutive full term. She was elected in a special election in November 2008, re-elected in the general election that was held that same month and most recently in 2012. In 2012, she was unanimously elected by her colleagues to serve as chairwoman of the Congressional Black Caucus in the 113th Congress.

Mentorships, upskilling may offer hope in manufacturing labor shortage

After enduring a protracted downturn and shedding 5.7 million jobs, 33 percent of their workforce, American manufacturers are leaving money on the table — and it’s ironic that a labor shortage would force them to do that.

A recent study from Accenture and The Manufacturing Institute reveals that companies may be losing up to 11 percent of annual earnings due to rising production costs stemming from a dearth of skilled workers.

Engineers, IT professionals and skilled tradespeople such as mechatronics technicians are hardest to find says Amy Cell, senior vice president of Talent Enhancement for the Michigan Economic Development Corp.

“We’re seeing rising wages and overtime and a potential impact on quality due to increasing turnover as new hires struggle to assimilate into the manufacturing environment,” she says.

An archaic image and outdated talent management practices are just some of the reasons why manufacturers are behind the eight ball when it comes to recruiting a new breed of factory worker who possesses technical, communication and math skills.

Nearly 75 percent of companies are reporting a moderate to severe shortage of skilled resources, and unless rectifying steps are taken, millennials will continue to seek greener pasture in places like Wall Street and Silicon Valley.

Here are several proven short-term strategies for closing manufacturing’s talent gaps.

Win head-to-head recruiting battles

In a competitive marketplace, it’s imperative to win direct competitions for available talent. Science and engineering degrees in the U.S. have increased by 19 percent since 2009, which should be good news for manufacturers.

Unfortunately, midsize manufacturers are getting outhustled by large companies and high-tech firms who dangle sexy projects, internships and job offers in front of science, technology, engineering and mathematics majors during their sophomore and junior years.

“Midsize manufacturers start too late,” says Jim Adams, vice president and partner of the Engineered Products and Services Practice at Strategy&. “By the time they get to campus in February or March, the top seniors are taken and they’re fighting over the leftovers.”

Providing guest lecturers, hosting student projects and networking with professors are low-cost ways to build relationships with budding professionals and preview their potential.

Manufacturers need to re-engineer their career track, professional development programs and communications strategy if they want to attract millennials, says Matt Mani, vice president and partner with Strategy&.

“Manufacturers take a fragmented approach to career development and that’s hurting their ability to compete for younger workers,” he says. “It’s not just an HR problem; it’s holistic.”

For instance, manufacturers are having a hard time attracting finance majors Adams says. Meanwhile, G.E. Capital is touting rotational training programs, lateral moves, stretch assignments and promotions based on performance instead of time and grade. Consequently, the financial powerhouse has no problem attracting the best and the brightest.

Manufacturers need to involve younger professionals in campus recruiting, update their image and shift their engineering model to attract and develop STEM graduates, Mani says.

Since millennials are more likely to hunt for work on social media, communicate by text message and are drawn to socially responsible employers, manufacturers need to implement some major shifts in their recruiting strategies to appeal to this idealistic segment of the labor market.

Younger workers are looking for more than a paycheck, they want to make a difference, and most importantly, they want to work for a company whose values match their own. Involving young, energetic professionals in campus recruiting can help to change manufacturing’s staid, dated image.

Mike Baach carries on The Philpott Rubber Co.’s tradition of self-determination


“In business, if there’s a global economic crisis, a U.S. economic crisis, you can’t control what’s going on in industry, but you can control how you react to it,” says Mike Baach, president and CEO of The Philpott Rubber Co.

This philosophy of self-determination has been guiding how the company navigates market challenges throughout its 125-year history. And its longevity comes from the basic premise that the company can’t be fearful of what it can’t control.

“What we are going to be doing is figuring out how best to react to what’s going on around us,” he says.

Following that principle, Baach has moved the once risk-averse company into new and developing markets, ensured its training program is robust and has continued to chip away at the advantages of foreign competition. It’s the latter that has required a particularly innovative rethinking of workforce utilization.

Shared responsibility

“One of the smartest things the company did for certain products was to go out and find partners to help both companies reduce their cost of labor,” Baach says.

He’s referring to a program in which Philpott took some of its equipment that manufactures higher volume products and placed it with “host partners” so the equipment actually resides at partners’ facilities.

“Rather than our having labor sitting there, maybe waiting for the job that may never come, we rent the labor from the host company,” he says.

That results in an incremental utilization of the host companies’ employees on Philpott machines, spreading the companies’ overhead over bigger numbers and leading to near 100 percent utilization of labor for Philpott.

Improving workforce utilization is one way to stay competitive. Another is to expand into new areas of business. For Philpott, that’s the shale oil and gas business.

“We identified the oil and gas area as being one that would help us resist the downturns in the economy,” Baach says. “Cars don’t come off the road, there are fewer that are out there, but demand for gasoline isn’t going to go away.”

The equipment Philpott utilizes in the shale fields is specific to the company, which means training people to use it falls on its shoulders.

“There’s no college on the planet that will teach our people how to operate this specialized equipment that we have,” Baach says.

Acquired skills

“Philosophically we can’t wait for government to do things; companies have to come together and work together in order to do similar things,” he says. “The answers are within our economy, within entrepreneurs, within capitalists. We can’t just complain about the present; we have to do something.”

Training in the shale fields is accomplished through competent management, Baach says, and that manager is Jeff Rog, vice president of Philpott Energy and Transportation, a subsidiary of Philpott Co., where he serves as the company’s corporate vice president of sales and marketing. Working with field crews is his responsibility.

“We daisy-chain, if you will, through our management team — our field management — as well as the hands that are on the site in order to train the people as to what they need to do on the site when they’re there,” Baach says. “We don’t let them out there by themselves until we are confident that they’re trained.”

Philpott’s growth in the shale gas area now accounts for more than a third of the company, and the field can only expand.

“It’s one that we believe is going to be one of the foundations of the company to make us recession resistant.”

Fear of fear

When Baach took the helm of Philpott in 2007, he saw a company that was profitable, but risk averse. That fear of failure was something that had to be addressed.

“Fear of failure is absolutely, positively one of the worst things that can happen. It’s paralyzing to a company. So what we want people to fear is fear,” Baach says.

“And you know what happens when you do that? If you give them confidence, they become creative. And then success breeds success. And it gets easier for management over time on that side of things because people start motivating each other.”

Baach says the company has always had great potential, but its employees had to understand that they had the creativity to take Philpott to the next level. He has made it his responsibility to motivate employees, finding the right mix of incentives to ensure employees are helping the company achieve its strategic objectives.

“It’s in the people, they just have to have the confidence in themselves to make new things happen,” he says.

How manufacturers manage workers’ compensation, disability costs

Mike Stankard, managing director, Industrial Materials Practice, Aon Risk Solutions

Mike Stankard, managing director, Industrial Materials Practice, Aon Risk Solutions

Joe Galusha, managing director, leader for casualty risk consulting, Aon Risk Solutions

Joe Galusha, managing director, leader for casualty risk consulting, Aon Risk Solutions

Middle market manufacturers often think workers’ compensation and disability are uncontrollable costs items. However, it’s more important than ever to change this way of thinking.

“Workers’ compensation is a significant variable cost element for manufacturers,” says Joe Galusha, managing director and leader for casualty risk consulting at Aon Risk Solutions. “It’s an area where controlling workplace injuries and their associated costs can actually become a competitive advantage.”

“We’re coaching our clients to take more responsibility over workers’ compensation and disability prevention, as well as claim management,” says Mike Stankard, managing director, Industrial Materials Practice, at Aon Risk Solutions. “If they do, there’s a significant opportunity to lower costs, and with that comes boosts in productivity, morale and many intangibles.”

Smart Business spoke with Galusha and Stankard about why workers’ compensation and disability management is crucial as well as cost containment and reduction strategies.

What’s the manufacturing landscape today?

Post-recession manufacturing activity is increasing, partially due to repatriation. But with that comes payroll growth, and then typically growth in workforce costs, which for manufacturing can largely be workers’ compensation and disability. There’s also negative trends related to the profile of the typical American worker that will compound the current challenges, so manufacturers that don’t put more effort into managing injuries and related costs may be at a disadvantage.

What workforce demographic trends make this management so essential?

About one-third of adults and almost 17 percent of youth are obese, according to the Centers for Disease Control and Prevention. Obesity drives comorbidity and complexities in an individual’s health, creating a link to the cost of care and recovery from injury.

At the same time, workers 55 and older are expected to be nearly 20 percent of the workforce within a year. A number of physical impacts — decreased strength, more body fat, poorer visual and auditory acuity, and slower cognitive speed and function — come with aging and affect a workers’ ability to recover from injury. People over 60 also are much more likely to be obese.

These trends not only affect employment-related injury costs, but also productivity and business continuity costs when workers are absent for non-occupational injuries.

How can big data be used as a tool here?

There’s never been as much data available for a nominal cost — the challenge is leveraging it. You need the right data at the right time to compare it to the right things. When benchmarking against other companies or applying data sets to your environment, jurisdictions, evaluation base and the age of the benchmarking sources are important to ensuring your data is pure.

Although there are external sources, many times third-party administrators (TPA) or insurance carriers have already done a tremendous amount of data mining and predictive modeling. Businesses just need to know it’s there and to start using it to drill deeper into the cause of loss and the cost drivers of workers’ compensation.

What are some best practices for managing workers’ compensation and disability?

The secret is preventing injuries and creating a healthy workforce. But injuries will occur, so focus on responding quickly with the right amount of effort at the right time on the right claim. Predictive modeling can help identify the types of claims likely to become more costly.

Understand what’s driving your costs by doing a baseline assessment of cost drivers and utilizing benchmarking to drill down. Then, align the incentives of all internal and external parties — TPA, carrier, broker, and vendors involved in loss control and claims management — to focus on the cost-driving elements, using a dashboard to monitor performance. This creates a sustainable loss control and claims management effort.

Many organizations need to align all stakeholders — human resources, finance, legal, operations, etc. Also, combine the efforts of health and wellness with workers’ compensation and safety. A streamlined approach creates a healthier workforce, reducing injuries and their costs.

Joe Galusha is a managing director, leader for casualty risk consulting at Aon Risk Solutions. Reach him at (248) 936-5215 or [email protected]

Mike Stankard is a managing director, Industrial Materials Practice at Aon Risk Solutions. Reach him at (248) 936-5353 or [email protected]


Hear more expert advice about workers’ compensation and disability management in manufacturing by visiting our archived webinar.


Insights Risk Management is brought to you by Aon Risk Solutions


U.S. manufacturing posts best quarter in 2 years: Markit

NEW YORK, Mon Apr 1, 2013 — U.S. manufacturing growth picked up in March as new orders increased and hiring quickened, closing out the best quarter for the sector in two years, a survey showed on Monday.

Financial data firm Markit said its U.S. Manufacturing Purchasing Managers Index rose to 54.6 last month from 54.3 in February. A reading above 50 indicates expansion.

Output increased, though the rate of growth slipped to 56.6 from 57.3 in February.

Overall, however, the index averaged 54.9 between January and March, above the 52.6 average recorded in the fourth quarter of 2012 and the best quarterly showing in two years, Markit said.

“The sector will have provided a firm boost to the economy in the first quarter, with output possibly growing by as much as 2 percent compared to the final quarter of last year,” said Chris Williamson, Markit’s chief economist.

Domestic demand grew steadily at the same rate as the prior month, while new export orders increased after contracting slightly in February.

The pace of hiring, however, increased, with the employment sub-index hitting 54.6 compared to 53.5 the prior month. March’s pace was swifter than the average for all of 2012.