CHL Systems: Michael Giagnacova

IndustrialSage

Michael Giagnacova of CHL Systems shares on building relationships in business; and seeing challenges as new opportunities.

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Danny:

– Well hello and welcome to the IndustrialSage Executive Series. I am joined by Mike Giagnacova, the CEO for CHL Systems. Mike, thank you so much for joining me today on the Executive Series.

Mike:

– Oh, thanks for having me. I appreciate it.

Danny:

– Alright, well I’m excited to get into today’s episode. For those who aren’t familiar with CHL Systems, could you give me a high-level, like who you guys are and what you do?

Mike:

– Yeah, so we design and build solutions that move, make, and pack the products that feed our country. That’s the short clip of what we’re involved with.

Danny:

– Excellent, alright, well I’m excited to get into that a little bit more as I suspect you guys—there’s a lot that’s been going on in that industry. We talk about food and packaging and just moving all that, so a lot of things that have been going on. But before we get into all of that, this is one of my favorite parts of the episode where we get to learn more about you. We get to learn about Mike. So Mike, tell me; take me back. How did you get into this industry? How did you get into this space?

Mike:

– Yeah, so I was kind of born into it. My father owned a company that designed and built custom machinery, one-off machines. You would come to us; you would have a need for something that you’d have to custom design and build. So at a young age I started working as a machinist, working for my dad in that industry. Then I went to night school, Drexel University, for industrial engineering and worked during the day for my father. Then when I graduated there, I went to the University of Pennsylvania. We are just outside of Philadelphia. The Wharton School had a management program, so I took that. I went through that, that application. Then from there, worked in various manufacturing jobs learning how to make products, learning how to market and sell them. Those early days of being a machinist really have, I’ve carried them all the way through my career. Understanding manufacturing has been a huge part of my career.

Danny:

– Yeah, absolutely. What I think is interesting is that you said your dad owned that business, right? He was creating machines, and you’ve got a lot of, I’m guessing, some entrepreneurial genes or certainly some learnings from seeing your father doing that. Talk to me a little bit about that. Is that accurate?

Mike:

– Yeah, it’s pretty accurate. My dad was—he’s still alive—a true inventor, a great engineer. He went to Drexel as well, so we have a family history of Drexel grads. He was a true inventor of custom technology. You just couldn’t help but be a part of that. That’s who we were, and so some of the technology that we would use was cutting-edge. No challenge was too big, so to your entrepreneurial thing. The greater the challenge, the more exciting it was. And so yeah, I have a piece of that in me, too; not as much as my dad, but enough to get me into trouble.

Danny:

– Yeah, that’s always the rub right there. Enough to get you into trouble. Well let’s talk about some of that trouble. What trouble has that gotten you into?

Mike:

– Yeah, so I’m 59. I’ve been in this industry since I was a teenager, and been in different management positions pretty much all my life. There’s a lot of learning. You’re dealing with a lot of people. How you work with people, how you learn from them, there’s always an experience to learn. It builds who you are. That entrepreneurial spirit, for me, is really probably more driven around growth. How do you continue to grow a company that’s conservative, but at the same time it’s controlled growth? You’re not just swinging 20, 30% one way or another, and then you’re dipping back down. I think probably through my years of experience, the biggest challenge is going to be, how do you build a sustainable growth model that builds a company in manufacturing? You’ve got to remember; when I started manufacturing, the percentage of manufacturing to service was 80 manufacturing, 20 service. Now that has switched to maybe 5% manufacturing, 95% service. That’s a huge dynamic change in manufacturing.

Danny:

– Yeah, absolutely, and it’s continuing to evolve, it seems like just certainly on a yearly basis. Certainly with Covid there’s been a tremendous amount of change with that. Still in the same vein of your journey with this, who has had—if you could talk to me about somebody who’s had a big impact on your career? I know there’s a lot, but is there somebody that comes to mind that really has helped to shape you, to help you, to where you are today?

Mike:

– Yeah, that’s a good question. I think it depends upon the lens that you look through. If you look at the entrepreneurial spirit, there’s no doubt it was my father. I grew up in that. From a management standpoint, I worked at a company for a number of years called Harold Beck and Sons. They made electronic control drives. There was a manager there; his name was John Miller, still alive. His management perspective was just rock-solid. He didn’t get too excited. He didn’t get too down. He was really focused on, how do we make everybody better? He was probably my manager when I was maybe 30; I’m 59 now. To this day, I still use phrases that he shared with me back then. From a business environment, I’d have to say he was a big impact. In my personal life there’s plenty of guys that go to my church that I’ve worked with that really come alongside me, help me with my walk. Those guys are rock-solid. They may not be CEOs or famous people, but their impacts are huge.

Danny:

– That’s awesome. That’s great. Alright, so let’s move to… pivoting here a little bit. What, on a daily basis, what keeps you super energized? What gets you, in the morning when you wake up, you say, “Okay, we’re tackling this, or “We’re doing that”? What is that thing that pushes you along?

Mike:

– I wish it was one thing. The challenge is, it’s multiple things. For CHL, I think one of the main things, and one of the real benefits that I really get out of working here is the people. Really strong technical craftsmanship-type people here, and so they really get me fired up because they’re the people you work with every day. I enjoy that; I enjoy interacting with them. I enjoy being a part of their day. The growth model, how do you scale and grow at a respectable rate? We just opened an office in Texas, so we’re leaning into that space. Those things fill that entrepreneurial spirit in you.

Danny:

– Yeah, absolutely. Let’s talk a little bit about industry challenges and things that have been going on. Obviously there’s a lot of things going on right now. There’s a lot of things that were going on because of Covid, stuff that was going on before Covid. What are those challenges that your customers are facing right now?

Mike:

– Yeah, so probably the biggest challenge that a lot of our customers are facing is the labor shortage. If you go back through 2020, 2021, through the height of some of the Covid period, a lot of our customers, they may be protein providers. They may have 500, 600 people in the plant. Just to keep their level of headcount up, it was a challenge. Moving forward, what’s that challenge going to be? It’s going to be continuing to find ways to automate, to help those workers out, to take some of the jobs that are really difficult on them, and how can we automate that? That’s a place where we can help them. As of just this last week or two, the price of fuel, that’s going to be a huge problem for all of us. We’re all going to deal with that challenge. That’s the people that work here and the people that work in those facilities. They’re going to pay more for gas. But beyond that, everything that we use that has petroleum, the price is going up. Plastics, stainless steel, anything that has that in its processing is going to affect everyone.

Danny:

– Yeah, unfortunately. Hopefully that’s going to be a—we’ll see. Hopefully that’s a short-term bump. I don’t know; we’ll see. There’s a lot of craziness going on right now, but let’s talk about how you’re solving some of these challenges for your customers. You mentioned a little bit earlier on, you have a partnership mentality when it comes to your customers. Talk to me about, what does that look like, and how are you solving those challenges for your customers?

Mike:

– Yeah, that’s actually a great question. The mindset of partnering with your customer is huge for us, and what does that mean? If you’re working with a customer that is going to engage in some level of automation, for that to be really successful, it has to be a close-knit communication, a trust both ways. It can’t be, hey, I’m just going to take the lowest bidder. You’re going to get the job, and do it. There’s got to be a long-term partnership that goes back and forth. Especially with automation, it depends upon what it is. It can be robotic automation. It can be hard machine automation that you’re going to design a specific machine that can do that. But educating everybody, especially the customer, on what does it mean to own this automation? And so when you look at that, that’s a long-term play. That’s not one order, and I’m out, and I’m going to go to the next. When you really work with someone as a partner, the trust factor is huge, but also the outcome at the end. In our industry for a number of years, a lot of customers were, they made a lot of decisions just on the return on investment. Well, you’re starting to see that change a little bit. You’re seeing some of that in years of return extending out. The real benefit is that people are starting to see the value of just having a close-knit partnership they can rely on.

Danny:

– I’ve got a couple questions I want to follow up with. One of them I guess would be, as far as a go-to-market strategy, are you guys working directly with customers? In other words, are you working through integrators or just directly with these customers? What does that look like?

Mike:

– Yeah, so we are working directly with the customers in 98% of the situations. There are some situations where we’ll come in as an integrator for someone else. The business model that we have is, we’re going to take the project from inception to engineering to manufacturing to installation to commissioning, and that’s kind of like our competitive advantage. In that model, we really want to have a connection with the customer to really be able to make sure you understand what the needs are and you’re providing that. When you go through another channel, sometimes that can be… things can get lost.

Danny:

– Certainly.

Mike:

– To your one question there about how do you go to market, for us it’s really important that we don’t have one category. This is how we handle every customer. We’re really trying to market to the customer that’s going to be the best fit. That’s a challenge, but for us that’s the best model.

Danny:

– Do you have any stories or examples, concrete, XYZ—you don’t have to name a customer, but here is the challenge, and how you would walk them through that process? I know you mentioned hey, we’re going to do design then engineering and manufacturing. It sounds like you have a whole suite of solutions and capabilities, if I understand correctly. You have in-house manufacturing capabilities. You’ve got a really, from soup to nuts solution that can be fairly custom. Is that accurate?

Mike:

– Yeah, so when you look at what we can provide—internally how we do it is we break it into technologies. We have one technology group that we call CPI which is conveyance and process improvement. Then we have another group which is design/build. Now, that design/build is like a one-off. You have a custom machine that you need us to take a look at, we’re going to design and make that machine. Then we have a robotics area which would be either palletizing or pick and place cell. Then the other area would be what we would call an equipment group which would be products that we’ve designed for people several times, and maybe you’re going to try to commoditize some of that. That’s a small piece of our business, but we’d like to see that grow. To answer your question, it depends upon which area it resided in.

For instance, if it was in a CPI environment, it could be a protein producer that wants to change how they’re processing a particular product or a cut up line or something like that. They would come to us and say, “Hey, here’s our existing space.” Now I need to design you a whole new layout with some technology that’s going to produce that. We’ve done that several times. We’ll go in; we’ll look at what the requirements are. We’ll come up with a design, a layout, working with the customer to meet their needs. Then upon that, we’ll design that, make it, and put it in. The other model is if it’s a custom design build. The ideal scenario in that situation is that you partner with someone and say, “Hey, this has never been made before, so let’s work together. We’ll do an engineering study, and we’ll do some initial concepting to see if it’s going to meet the needs,” like a staged design. Then if we get to that stage, if it’s approved, then you go to the next. Each model has its own path, if that makes sense.

Danny:

– Yeah, absolutely. Obviously there’s a lot of automation companies and things out there. Now we’re seeing a lot of investment coming in. It was interesting; before the pandemic, it seemed like we were seeing a lot of consolidation, PE money coming in, just acquiring a lot of groups and making these bigger organizations and growing through M&A. How does your organization really stand out from your peers? What’s that competitive advantage?

Mike:

– Our competitive advantage is really going to be one, we’re high quality. We’re known for that in the industry. Most of the area, especially in the CPI, the conveyance and process improvement, is in the sanitary design. It’s in a protein plant that has to be washed down. The level of quality of your product, fit and finish, is essential to preventing any bacteria and those types of things. That’s number one; you make a quality product and good things happen. But the real advantage that we provide is the beginning to end. You’re going to come to us, and we’re going to work with you on what the concept is. How do we solve the problem? Then we have ownership all the way to the end. Where a lot of other people in the industry, they just—and you had mentioned earlier—they do one piece, then someone else has to take it from there. The advantage, especially in this climate when the labor pool is tight—you’ll be at some of these facilities where they may have had an engineering staff; now they no longer have that. They need to rely on partners to be able to provide that solution, not just a conveyor. Without a doubt that high quality, cutting-edge technology, and we’re going to be with you through the whole process. That’s our competitive advantage.

Danny:

– That sounds like a very strong competitive advantage. These are not simple solutions that you’re bringing. These are very complex challenges, and they’re high-dollar. These are operational, huge changes to organizations. It’s not something that you’re going to take lightly, I would imagine. I’m not a food processor. I’m not a manufacturer. But you’re not going to take that decision lightly. That sounds like a great value proposition, a competitive advantage to me. One of the things that I’m curious about, and this may feel a little off-topic, but obviously we were talking about a lot of changes. Labor is a big issue. It was an issue before Covid, but now certainly it’s a much bigger issue. It’s a critical issue. What other challenges and changes have you seen in the organization, whether that’s inside your organization or inside the industry, due to Covid?

Mike:

– It’s interesting; we talk about Covid a lot, and we talk about the challenges. It’s funny; as you look back, there was also opportunity.

Danny:

– Yeah, yeah.

Mike:

– And so for us, I just had this conversation the other day. We have a remote engineer in Ohio. I have a manufacturing guy who worked for us for 35 years who’s now working in Florida. We have an office in Texas with engineers and applications guys. I say, would we have had that if we didn’t have Covid? Covid taught us how to work remotely, taught us how to work differently. We were blessed to have some really big orders, and the technology, IT, infrastructure in-house to make that happen. It really has actually strengthened us. Moving forward, the same model that we use to try to partner with customers, we’re partnering with vendors. The last year was a really strong year for us. We needed to partner with other manufacturers to help us do that work. Those relationships are phenomenal, and so they’ll help us in our growth model. So yes, Covid without a doubt had a lot of challenges, but it also had some opportunities that we may not have actually taken.

Danny:

– I love that. I should’ve addressed that, what opportunities. I like how you took that and you spun it, and you showed what you’ve learned and how you’ve been able to grow and take advantage of those opportunities. I think that’s fantastic, and that’s interesting when you ask a lot of our organizations about that because you get some similar answers. It creates some other opportunities by doing that, certainly, but I think it’s interesting, as you mentioned. It creates a little bit more diversity from your portfolio or your talent pool. You’re able to go and work with other people that you otherwise wouldn’t be able to work with or hire individuals who—because you had geographic constraints that you don’t have anymore. I think that’s interesting. One last question, and I didn’t send this to you, kind of on purpose. I like getting the real answer here. I’m going to give you a magic wand. You can solve any issue that you want or take advantage of any opportunity for the industry, for the industry. What would that be? And it can’t say Covid, we’re solving Covid or gas prices right now.

Mike:

– Yeah, that’s a great question. I’m going to qualify the lens that I’m going to use.

Danny:

– Perfect.

Mike:

– It’s not going to be the lens of, hey, this is a poultry plant or this is a pork plant. This is a manufacturing facility. If I could take a magic wand and fix an issue, it would be to change people’s mindset that welding jobs, machining jobs, service jobs, manufacturing jobs, they’re not low-end jobs. These are careers, and our country has started to devalue some of those jobs. Boy, America would be so much stronger if we could continue to build that and build a manufacturing environment where we could make things here again. That’s my lens; it may not be yours, but that would be awesome.

Danny:

– That’s an awesome answer. Thank you for that. I have heard that several times, actually. It’s interesting, and I try to keep it open. It’s interesting because I think—I agree. And I’ll use ourselves as an example. Several years ago we never, as an organization, didn’t have a ton of manufacturing or engineering background. We came from a video marketing agency and was working in this space and learning and had a perception like you were talking about. Had that perception, oh, it’s dirty. I don’t want to do that. We want to work with the cool technology companies. But when you started getting into it, and you started seeing what was happening, and you see true innovation, that was eye-opening. It’s been amazing, and so I think part of it is exposing—we have to expose people to what is going on, the real innovation that’s happening. It’s not, “Okay, I’m doing this job.” The bigger impact that it’s having, and that there is real innovation happening. That’s exciting.

I actually, just this morning—it was interesting—I was driving my kids to school, and we’re driving by this open—it’s very interesting; I don’t know. I’ve got to maybe digest. Maybe I’m talking too much to them about this stuff. There was this open field, big grass field, and the kids start talking about, “Oh, yeah, that’s a lot of grass to cut.” And they said, “You know, they should use robots, robot lawnmowers.” which are coming–whatever, that’s here. And they’re like, “Yeah, I think it could take—if we had one per mile, maybe if that would be enough.” What I thought was interesting, and they’re just discussing this among themselves, and they’re young kids. I think my eight-year-old or seven-year-old or nine—however old; it changes every year, so I forget the ages. Maybe they’ve got a little bit of an engineering mind, but thinking about that, it was interesting. There was excitement about how they were going to solve that challenge using robotics.

Mike:

– That’s awesome. One of the things we are seeing, too, is you’re starting to see engineers, young engineers come out of school and then want to get the hands-on experience. We’ve had a couple engineers who started out as a mechanical engineer, designing-type position, and move into a manufacturing engineering position because they need that hands-on, they need that piece of, “I’m going to make something,” and craft it which is really encouraging.

Danny:

– There’s something super fulfilling with that, to get in there. And I think there’s a learning that you don’t have without that. I don’t have an engineering bone in me, so I have a deep appreciation for that. I really struggle putting IKEA furniture together. I’m not a good litmus for that, but I think there is absolutely 100% something to that. Anyways, I love your answer. I think it’s fantastic, and I’ve really enjoyed our conversation. I’ll give you the last word as we’re about to close here. Is there anything you want to leave the audience with?

Mike:

– Yeah, I think it is easy to look at all the negatives and look at all the challenges, but it’s almost just as easy to look at the opportunities and see what can be done. We’re a relational company, and customers are becoming more relational. That’s a huge benefit because what you can accomplish together is far greater than what you can accomplish on your own. Yeah, so 2022 is going to be an interesting year. We’re going to have a lot of interesting things happen, but we’ll get through it, and we’ll be looking at the next challenge in 2023.

Danny:

– I love it. What I heard is there’s going to be a lot of opportunities in 2022. That’s what I heard. Mike, listen, I appreciate it. Thank you so much for your time. I’ve really enjoyed this. For those who would like to learn more about you, they can go to chlsystems.com. Is that accurate? We got the right URL? Perfect. We’ll make sure that that is in the show notes so people can learn more about you if they say, “Hey, listen, we want to learn more about these guys. They might be able to help us.” That’d be fantastic. Again, thank you so much, Mike. I really appreciate it. Alright, well that’s a wrap for today’s IndustrialSage Executive Series. I really enjoyed it. You know, there are a lot of great takeaways. Once again, that magic wand question was a big one, all about changing the perception around manufacturing, and it’s such a big problem. It’s a really big challenge, and we need to address it. We need to expose kids and students to the industry and show them and not tell them, but really show them with all sorts of internships and co-ops. I know a lot of them already exist, but we’ve got to do more. You can tell I’m a little passionate about this, but that’s all I’ve got for you today.

Thank you so much for watching this episode. Listen, if you like this and you’re not subscribed, make sure you subscribe. You can do that by going to IndustrialSage.com, going to the Executive Series, and you can subscribe there. We have pop-ups, all kinds of things that come up to allow you to do that because you’re missing out on great content like this. Also, I want to put a little plug in for a new documentary series that we are in the middle of right now. It’s a mini-doc series called Industries of the Future that we’re partnering with Schneider Electric on. It’s an awesome exploration into the manufacturing and industrial space. We’re exploring digital transformation, AI, robotics, sustainability, and really looking at companies and talking with their subject matter experts and really seeing what they’re doing, sort of pulling back that curtain a little bit. It’s a little bit more exploratory, if you will. We’re not focusing on product, per se. It’s more about process and different things in there, so check it out. You don’t want to miss it. We’re super excited about it. That’s all I’ve got for you today. Thank you so much for watching. I’ll be back next week with another episode on IndustrialSage.

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