Swimming in a Sea of Red Tape - Helping Employees Understand How Bad Policy Shrinks Paychecks – with Paul Stangl [Ep. 1]

Linda J. Hansen: Today’s guest for the Prosperity 101® Breakroom Economics™ podcast is Paul Stangl. His name might not be widely recognized, but he is representative of millions of small business owners across this country who are running a privately held business or a family owned business. Paul is the president of Wisconsin Stamping and Manufacturing and is the prior president and current executive chairman of Raffle Systems. Prior to his current positions, Paul was an attorney in the securities and M&A practice at Foley and Lardner LLP, and a member of the investment banking group at Robert W. Baird. Paul served as a surface warfare officer in the United States Navy, with a nuclear power specialty. He received his MBA and JD from the University of Michigan, and his BS in electrical Engineering from the United States Naval Academy. I am blessed to have Paul serve on the advisory board of Prosperity 101® LLC. where he provides great insight and recommendations. In today’s episode, Paul will share his ideas for policy makers on how to level the playing field especially in relation to intellectual property law, taxation, and other policies that can affect business owners and their employees. Please welcome my friend, Paul Stangl. I've known Paul now for many years and many members of his family that have done business together, and I'm just so honored to have him be a guest today on this podcast. So, without further ado, I'd like to introduce again, Paul Stangl from Wisconsin Stamping and Manufacturing where we can talk about this business and how his employees are affected by policies. And how Wisconsin Stamping and Manufacturing can benefit or be hurt by policies at the local, state and national levels. So, Paul, thank you for joining with us.

Paul Stangl: Thank you for having me.

Linda: Thank you.

Paul: Appreciate it.

Linda: Paul, tell us about Wisconsin Stamping and Manufacturing.

Paul: Wisconsin Stamping and Manufacturing has been around at its roots since 1958, but in fact, some of the entities that we've acquired along the way to make what we have today started in 1936. So really all the way back to 1936. We're a job shop, a multi-disciplinary job shop. So, we make parts for other people but through a lot of different disciplines, whether that's-- stamping in our name is a bit of a misnomer because we do a lot more than that.

Linda: A lot more than that.

Paul: So, anything metal is what we pride ourselves on making talented group of individuals that are employees here and a lot of longevity in our employees.

Linda: What would you say is the longest term employee?

Paul: We've got somebody celebrating 40 years this year.

Linda: That's fantastic.

Paul: Two years ago, we had somebody that was with the organization for 42 years. Started at 18 and then retired. So, a lot of longevity. And I think that speaks not only to that individual but to the environment that we try to create here over the years.

Linda: Absolutely. And I can say firsthand, Paul and his family, as they have run businesses, they have such a great reputation for treating employees well, for quality in their work, and excellent work ethic. So, tell me a little bit about that work ethic.

Paul: That started with a-- for me, in my family, my father was a very active individual, a hard charger. My family's involved in a few other businesses in the local area. Weimer Bearing, which is adjacent to us in the business park and then Raffle Systems down the street where we design and manufacture electronics predominantly for the furniture industry. But at a young age, that was instilled in me. Nothing's free in life, you work for what you get. And the harder you work, the bigger the benefits. You hope, you always hope that that's the case, in the same thing that we try to instill in our employees. The harder and better, and more efficient we can be, the larger that pie is for all individuals involved. So, from a young age, that was instilled in me.

Linda: That was instilled. Yes, yes. And unfortunately, your father has passed on. He was an inspiration to many. So, he is-- tell us a little bit more about him and how he got to start Weimer Bearing and all these companies came to be.

Paul: Sure. Weimer Bearing's a predominantly an industrial distributor of Componentry. My father worked there in college, and in 1976, as a young man, ended up buying 50% of the entity. In 1980, he bought the balance of the business. Very small, at that point, it was located in Milwaukee on National Avenue. And from that point, just built upon the business. Now my older brother, Frank, runs that business. I have a younger brother involved there too. And still following that same path, although technology has changed as it has, in every business. So, the products that we carry and sell has changed over time. But at heart, it's still the same business.

Linda: Right. And well, I'm sure he, your father, taught you to be adaptable as well.

Paul: And I think in today's environment, we all have to be more adaptable.

Linda: We all have to be adaptable. Yes, yes.

Paul: Yes.

Linda: And I can see that in your family very, very much. So, when you talked about how you've been able to grow these businesses, and the fact that they are so long standing, which is great-- a lot of businesses fail especially privately held companies that are run by entrepreneurs. They fail. But you have had a long standing reputation for great business practices as well as great relationships and opportunities for your employees. So, tell me how that has grown in your companies.

Paul: I'll use Wisconsin Stamping, as we're sitting here today. We purchased this entity in 2007. It was a small metal stamper that made a very particular product line which we still manufacture today. But at the outset, the goal was to how do we better market that product, add salesmanship to the equation, and further penetrate the market. And then on top of that, how do we better serve our customers. We know that we can provide one product to our customer at that time but what else are the customer's asking for? And how do we service them? So, through that, we've been able to increase the number of disciplines that we do here that's both organically. We've started ground up divisions and machining in particular here in later in 2007. But then through certain acquisitions where we could get, not only talent and expertise, but also some customer base with that. So that's how we've grown from where we are today. But really at the heart of what it is, we're still a people business. Whatever goes out this door, is touched by somebody. And it's that skilled individual that cares about the product, that cares about the customer that makes us successful. Without that, we're only as good as anybody else out there. So, it's the people and in empowering them, giving them processes that work, and their dedication that makes us successful to the extent we are.

Linda: To really create a team environment.

Paul: Exactly. Yes.

Linda: Right. And let them know that you care about them. I know one of the things that you care deeply about is making sure that they can be prosperous and that they can have a very thriving personal economy for them as a result of being an employee for you. And what are some things that you tried to do to help them understand that?

Paul: The individual we try to instill in the employees, the understanding that the harder you work for the company, the harder the company's going to work for you. Everybody should benefit if the company does well. This is not a one way street, you should benefit to the extent you are challenging yourself, and you are making the company a better, more efficient place to work. If you're not, you shouldn't have that expectation. I'm a big believer that you, you are paid a wage for the work that you do, bonuses and things beyond your base wage are for people that go above and beyond. So, we're very much a-- in essence, very much a, we reward for performance. Individual performance, and those individuals, which I'm happy to say, the crew here, the vast, vast majority, I'd venture to say all of them, understand that and want to do well. Not only for the company but for themselves. And they understand that connection. So, pay for performance.

Linda: Well those long term employees that you mentioned, just having that type of workforce shows that they're happy here. That they feel rewarded, that they feel blessed to be here. So that's really great, that not every workplace can say that.

Paul: Yes. And it's not without its challenges.

Linda: I'm sure, I'm sure. When you think about providing for your employees, what types of policies at the local state and national levels have impacted your business the most both positively and negatively?

Paul: I think local, state, federal regulations, the more we're regulated in what we do, whether that's work place regulations-- I understand workplace regulations. We want to provide the safest workplace that we can provide. We don't want our employees injured. But to the extent things are over broad or over burdensome, that's a problem because it hampers productivity for us. And so, to that extent, there's regulation on one end. And even more so if our vendors or if our customers are overly regulated in their-- that's going to affect our order flow, that's going to affect our prosperity.

Linda: Right.

Paul: And the prosperity of our customers. Trade. Trade's another issue that can affect us. If we allow trading partners of our country to be unfair to the US, that affects us. And we've seen that. We see ebbs and flows of product moving offshore and coming back onshore. We hope to see more come onshore than-- back onshore that have left. That has a dramatic effect on our business. And the economics don't necessarily make sense. We're all buying the same material theoretically to make the parts. But if somebody can produce a part that at a cost less than I can buy the material, that there's something not right. So those policies definitely affect us.

Linda: Intellectual property protection is another area that I've heard from business owners who's very important for their prosperity. When we can allow intellectual property theft, either domestically or from foreign entities, it interferes greatly with our profits. So, can you tell me how that has impacted you? Or how you feel we could protect the intellectual property in our country?

Paul: Right. And it has affected us not so much dramatically at this business, at Wisconsin Stamping, but at Raffles Systems where we design electronics. We are a product design firm, we design and manufacture electronics, predominantly for the furniture industry as I mentioned earlier. And in that area we designed a lot of products over the years. And inevitably, every single one of them gets copied. We put patent protection on every one of those that we possibly can. Unfortunately, and in my opinion, that system is a little broken when you have to wait sometimes years to get protection on the product that you designed or the-- not only designed. But the basis and the intellectual property that's associated with that. So, in that market, the market moves faster than the patent process does. So, by the time we get issued a patent, in times, that product doesn't have a lot of legs in the market space anymore. But aside from that, we've had dramatic issues there. And it's been copying by foreign entities in that case with complete disregard. There's an understanding they know we have patents on this product, they'll bring it into the US, they'll flood the marketplace with us. To the point where they'll make it look exactly like ours with our patent numbers on it. So, it becomes-- the burden falls on us as a small business to distinguish that in the marketplace. And the liability falls on us quite honestly too. So, it's a frustrating-- it's a frustration more than-- and it's time and expense to litigate a patent with fair legal system here in the US.

Linda: Right.

Paul: To litigate a patent here is extremely expensive. And it's not built for the small entities. It's built for larger entities. So, at some point we have to fix that. But at the root is our inability to stop the foreign actors or domestic actors in any case, from doing it in the first place. So somehow that process has to be fixed. If we want to protect the hard work that our employees do here.

Linda: Mm-hmm. Which is great. I know we recently spoke with a manufacturer too who they had a Chinese company come and basically copy everything that they had done. And they put it out almost, like the same part numbers and things. I mean, it was just crazy to think about. In your opinion, how could we stop that flow? Like if you had a recommendation to the patent office, the US trademark and patent office, what would you say?

Paul: I think there's certain-- certain countries that I think are worse than others. I think we all know who those countries are. And we know that, the government knows that, our government knows that. And putting preference in place to protect the US manufacturers, the US designers, the US headquartered companies, the US patent holders against that, those individuals and those countries is probably the first thing we can do. And to put an expedited process in place. If it's a certain country that we know is a bad actor in that, we'll give preferential treatment in an expedited process to the US company that's having the issue. And level the playing field by not making it so expensive. Pushing those cost on to the foreign actor and limiting their access to our market. That's something we can do; I think that's a lot easier for me to say than it is to put into practice. But, it can devastate a company in very short order. And the times have changed. If I look back ten years in issues we've had in intellectual property, for somebody to get a product to the market space, get it out in the market, and to get it copied-- whether it was exactly copied or changed slightly, that was a much longer process than it is today. With 3D printing, with 3D scanning, with the ability to reverse engineer things, extremely quickly. We can honestly see product hit the retail market and be copied in less than 12 weeks.

Linda: Almost before you-- yes. Before you even get your net.

Paul: And our product, there's no patent issued by that point. I mean, we're still in the process more probably years away from getting the patent at that point. But within 12 weeks, we're copied. It's very frustrating.

Linda: That has to be so frustrating. Right. Do you think your employees understand that at all?

Paul: I think, because the number of issues we've had in that particular business, our engineers are very attuned to it. And it's a very frustrating thing for them, all their hard work on a daily basis, to not only come up with the idea, we take the risk, we invest the money, not only in development but the truth is, we make the market for that product.

Linda: Right.

Paul: We make the market for the product.

Linda: Build the market, exactly.

Paul: And then it's stolen and undercut at cost that a lot of times, you're never going to compete with.

Linda: Right. You can't possibly. Well, and the quality, from what I've understood, the quality is usually never as good.

Paul: There can be quality problems in those--

Linda: Has quality issues, and then your almost blamed for it. Or your liable-- or you mentioned liability and it's because-- yes.

Paul: It's attributed to, in a lot of cases, to the originator of the product. Then it'll get attributed there. So, then it just becomes more of an issue on a reputational.

Linda: Right.

Paul: A reputational issue.

Linda: Right. So, economically, this can be just devastating for you, and I'm sure it has been. If you haven't had to do these intellectual property fights, what would be the impact on job creation?

Paul: Well I would have a lot of time on my hands, for one. But our engineers would too. Not having to go through the process of constant litigation on those. I mean, that's a very time consuming and extremely expensive endeavor for everybody in that company to go through. It takes away from our ability to create new products. So, we're essentially wasting time. And what we want to do and what we all want to do is create new product, make life better for everybody by creating new product and getting that next thing to the market space. We can't do that if our life is consumed by litigation. And only litigation to protect ourselves and to protect our customers. And it's our obligation to protect those customers that are playing the game correctly. And we feel that's our obligation. They're the ones that are doing things correctly. They're the customer-- we need to protect them in this.

Linda: And I'm sure they appreciate that. When you think of other policies that have impacted your business, I mean, obviously, that is one. But what about taxation, or other regulations?

Paul: Taxation has a major impact on us. And obviously has a major impact on everybody. the employees on the floor, the employees in the office, major, major impact. So, to the extent, tax policy is business favorable. We know that we, as a company will see an environment of growth and employees--

Linda: You're saying tax policy now is business favorable.

Paul: It's more business favorable right now.

Linda: More business favorable right now. On the national level?

Paul: Yes. And we see the benefits of that, and the growth of that. And hopefully the employees understand that policy makes a difference. It's not just regulation, it's tax policy, it's health care. These things make a difference and not only a direct impact on the pocketbook of our employees but affect our business and the future of our business moving forward. So, yes. Tax policy has a major effect.

Linda: And you said tax policies now are favorable to business from the national tax policies. Can you tell us, I mean, since you've been in business for so long, you've, I'm sure seen the ebbs and flows and the positive and negative effects of different administration polices or just different tax cuts, tax benefits, things like that. So, could you explain a little bit what you've seen over your working life.

Paul: I think the most dramatic thing that has over the-- if I looked back ten, let's just look back ten years. Increases or decreases in the personal or the business tax rate have had a dramatic effect. I think what is missing sometimes in people's understanding is that in a lot of cases, corporations are taxed like an individual if they're pass through entities, if they're an SCorp, or an LLC, they're taxed at the owner's individual tax rate. So, it's not just corporate rates. It's individual rates have a dramatic impact on the well-being of the company. And some, especially in a growth mode of a company, when you think about, you have to reinvest in that company to continue the growth, whether that's inventory, whether that's more individuals, whether that's providing the equipment, the latest and greatest technology to make your employees more efficient, more sophisticated and better at what they do. But if you have to do all that in a growth mode, and pay a massive tax, in a lot of cases, you're borrowing money to pay the taxes. That makes no sense to me.

Linda: That makes no sense.

Paul: That makes no sense.

Linda: That's not business friendly.

Paul: That is not business friendly. And it's a hindrance.

Linda: Talking about taxation, you said that there's been better policies recently. Can you explain what some of those better policies have been?

Paul: Again, an easy one for me to describe here is some of the policies that came out on capital equipment purchases over the years in allowing an accelerated depreciation or a bonus, or a section 1 at 79. That does come into the thought process of are you going to invest and continue to invest in the business, and how rapidly you're going to do that. That's a good thing. And I think across the board, the equipment manufacturers love that.

Linda: Right.

Paul: Because it's a boost to them. Lowering the tax rates is extremely beneficial in my opinion. Not only in people, more on the personal levels. More in their pocket but in understanding that there's more in their bank account, they're giving less to the government. But also, from a corporate tax rate standpoint, a lowering of the corporate tax rate provides more, one, that should be shared with the employees, and two, to invest-- growth capital to invest back in the business and continue a trajectory of growth and reinvestment. Every business needs to be continually invested into to ensure the future. Once you've stopped that, you're stagnant. And in today's environment, the fast moving pace of everything, you can't be stagnant. I mean, everybody has a cellphone and everybody expects an answer back in six hours, regardless if it's the weekend or not. So, you can't stay still. But as I explained before about the growth and also the tax end of that, lowering tax rate only helps.

Linda: Right. I know that we often say, and I think it was Dr. Lapper who said if you want more of something, tax it less. If you want less of something, tax it more.

Paul: Yes.

Linda: So, it's true with business. If we want businesses to grow, we tax them less. And it works. What would you say to the people who say tax cut for businesses are unfair?

Paul: I disagree. I think that tax cuts for businesses should spur growth and those businesses provide more for growth, in the employees in general. So, I look at it as a pie. That pie is only so big. So, you cannot provide more if the pie is already sliced up. If you can grow that pie, you can provide more and create more opportunities. And I think that the future I mean, is about creating more opportunities for more people. So, it's a good thing.

Linda: It's a good thing.

Paul: Yes.

Linda: Yes, absolutely. Do you think that your employees fully understand how these policies affect their jobs, or their job security?

Paul: I think there's a good portion of our-- and wonderful team here. Good portion of the employees that truly do understand that the overall effect of policies on them. But there's a segment that doesn't really have that understanding yet. We hope they get there and they have that understanding. Where I think it gets fuzzy is that in today's world, the vast amounts of news and information that flows and so readily available, whether it's on the internet, on the radio, and there are so many channels on TV, I think that all gets muddled.

Linda: It's muddled.

Paul: And if there's a lack of clarity of what actually is the truth, and what actually is accurate. You can twist facts and be factually correct but not accurate. And I think that's a big problem. Not only here but everywhere where people really don't understand because they've heard various arguments on different sides. And pieces and parts of that are not necessarily always put together properly. So, to answer your-- a quick answer to your short question is some.

Linda: Some. Okay.

Paul: Some understand, some don't.

Linda: What about the constitution? I mean, we've talked. I know you and I talked about the policies that made America great. The policies that have allowed for prosperity and family legacies to be built. Family business legacies to be built. What about constitutional literacy?

Paul: I think it's lacking. I think in general; it's lacking. And I don’t think any more so in the employees that… the great people we have here, but in general, it's lacking. And I think that there's a lot of thought that the constitution, we've all heard it, it's a fluid document, it changes over time. It's a document that was written by some very brilliant individuals and it has stood the test of time. But again, today's environment, a lot of readily available information to people that tends to change opinions. So, there hasn't been-- I don't think the education system does a very good job anymore. There's different priorities in the education system that don't focus on what the founding of this country was based upon. And the principles of that. So, really, it's up to the individual to educate themselves, almost, in my opinion, these days. On that, because they're not going to get it in school.

Linda: They're not going to get it in school. Right. Well and that's one of the goals with Prosperity 101® and Breakroom Economics™ program, is to help provide a framework that they can just become reacquainted with the founding documents. They can become reacquainted with some simple principles of economics that are true for every business. I mean, it's not partisan in any way. It's just basic information to help people understand why America can be a land of opportunity for all the people.

Paul: That's wonderful. It's needed.

Linda: It is needed. It is, very much. So, as we close this interview, if you could say three things that you would like your employees to understand about the policies that affect their jobs, what would you say?

Paul: One, I look at total cost of employment. And something that I hope employees would understand that there's a wage. But if you look behind that and what the other pieces of that entail from the company side, and the employee side, when you look at the taxes that are taken out. But the total cost for employment, I think it shocks them when they see what is actually entailed in being an employee. And we want that to grow, we want the wage base of everybody to grow. But in understanding of that, I think has the most direct impact of how policy affects them in general. And so that would be number one. Number two. To understand that the regulatory environment is something that does directly affect us. We work a lot with industries that are very heavily regulated. And we know if we see or hear of more regulation coming down in that industry. We can pretty much bet that we're going to have less business, at least for in the near term, until that is figured out. So, understand that.

Linda: Those compliance costs…

Paul: The compliance costs and even compl--

Linda: …it's a ripple effect of that.

Paul: Compliance cost here. In a small business that we are, what it takes today to ensure that we dot every I and we cross every T and don't get ourselves in trouble. That is something I think everybody can get an understanding of. And once you have that, you understand what the common goal is and how that really, truly, does affect us. There's two.

Linda: That was two.

Paul: I think I covered about four in there though.

Linda: Well once they have this information, what do you recommend they do? Once they understand these things.

Paul: Part of it is on us, as a company to educate our employees. What makes us successful? How do get from A to B? And I think having an understanding of what gets us from A to B, gives them the understanding they need on what out of their control, or seemingly out of their control. I'd say that seemingly out of their control, affects that. And that being policy, that being the market in general. Things that they think they're out of their control but really aren't. I mean, you're voting on it. You're voting on a lot of what that is. You're voting on policy in every single election regardless of what you think, you are voting on policy.

Linda: Right. It matters who's elected.

Paul: And you are voting on business environment. And business environment is what the government doesn't create wealth. Businesses do. And if that connection is made in some manner, we're in a much better space.

Linda: Exactly. Right. Government cannot create wealth. It can just provide the environment for wealth to be created.

Paul: And that is where that disconnect in the information in society today. There is a big disconnect in what is often said, and what is reality for people.

Linda: Well, and that's great. As we close, do you have anything else you'd like to add?

Paul: No. Thank you for having me. I appreciate it.

Linda: It's just a pleasure and an honor to have you here. And again, this was Paul Stangl with Wisconsin Stamping and Manufacturing. And we are just so grateful to have your involvement with this. And thank you for listening to Prosperity 101® Breakroom Economics™ where we teach people the foundations of prosperity, the policies of prosperity and how to protect their prosperity by becoming informed, involved, and impactful. Join with us again when we meet another business leader who cares about policy. Thank you.

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