Employee-owned Reell Manufacturing is the realization of the founders' hopes in 1970

The owners broadened their approach and employees responded positively to the commitment to inclusivity.

In 1960, an ambitious 3M engineer with a habit of taking on too much, Bob Wahlstedt, landed in the hospital with bleeding ulcers.

He returned to a lighter workload and new wariness about the costs of climbing the corporate ladder.

A few years later, Wahlstedt chose to join another 3M alum in a manufacturers-representative business. By 1970, their firm had evolved into a small manufacturer of hinges and electric clutches called Reell Precision Manufacturing.

Wahlstedt, who is 87, still walks around the factory floor, greeting workers who are now the owners of Reell Precision. “I haven’t had any more ulcers,” he says.

There were days 20-plus years ago, before he retired as chief executive, when Wahlstedt would join a production line that was lagging. And the recession in 2008 and 2009 brought the company close to failure.

But its CEO since then, Kyle Smith, found a new banker, made painful cuts, rallied demoralized troops and led Reell to a decade of strong profitability and growth.

Wahlstedt and Lee Johnson, 86, two of the three surviving founders, can take heart in a healthy 175-employee outfit that makes products used globally. The firm transitioned successfully to an employee stock ownership plan that awards longtime employees with a six-figure share of the profits they helped it earn. And the independently appraised value of the ESOP has risen 400% over the last decade.

“The stock has done well since 2009. But the fundamental measure of success is how well our people and ‘stakeholders’ have done over time. Pretty well,” Wahlstedt said.

Smith, 58, signed on as CEO in 2009 and struggled at first.

There were dozens of layoffs, management pay cuts, suspended board fees and dividends and uncertainty over whether he had the support of the founders who were still the majority shareholders at the time.

He made the hard decision to end production of the company’s revenue-driving but unprofitable laptop-hinge product.

Smith worked long hours, walked the factory floor every day, answering questions about the future as best he could.

In place of laptop hinges, Reell Precision began to focus on building profitable products for the auto and medical industries. Reell’s profitable revenue growth plan had traction by 2011.

Smith lured back Shari Erdman, 48, a veteran human resources officer, from another job after six months in 2009. She was a key bridge to Reell’s cultural past of worker engagement and empowerment. Smith and the other executive cut their pay to afford her first-year compensation.

“We have 175 employees today instead of 200 before the cuts in 2009,” Smith said. “But we are better diversified with more profitable products. We have more automation. We kept the best jobs here. We’re growing.”

On finances, Smith would only say that Reell’s profitable revenue will break through $50 million “in coming years.”

“We make world-class stuff,” Smith said. “And we are a small company. Our employee-owners care.”

Wahlstedt wrote a candid book in 2017 that detailed the aspiration, trials and recent success at Reell.

The book “Where Two or Three are Gathered,” is subtitled “Why Humility is Good for Business.”

He described how the co-founders, who were committed Christians, by the 1980s became aware that some employees were uncomfortable with what seemed an overtly Christian culture.

The owners broadened their approach and employees responded positively to the commitment to inclusivity. Moreover, the co-founders’ long-standing commitment to donate 10% of profit to charity is popular, Erdman said.

For example, Reell built and supports a grade school in partnership with nonprofit World Servants in a low-income community in the Dominican Republic. Employees have seen how the school’s graduates have improved their community.

Reell’s employee-satisfaction survey score is three times that of most manufacturers.

Employees work hard, have a voice and share in the profits of a successful niche manufacturer with a proven plan.

As seen in the Star Tribune and written by Neal St. Anthony.