Minnesota's MDI expands with model that mainstreams workers with disabilities

CEO Peter McDermott of Minnesota Diversified Industries (MDI) wasn't looking for this job.

However, he took over the failing contract manufacturer nearly a decade ago from a dismissed manager and turned it into a growth company of 525 employees, including nearly half with developmental disabilities.

MDI has plants in northeast Minneapolis, Hibbing, Grand Rapids and Cohasset.

"This is the best job I've ever had and I've enjoyed them all," said McDermott, 68, who started as a public accountant in St. Paul, served as CFO of Blandin Paper and Cirrus Aircraft, and also ran the economic development board for Itasca County, from which he was recruited by the MDI board.

"We've got all the challenges of any business," McDermott said. "We have to do a good business, generate positive cash flow and add more people."

MDI also has a mission to hire and develop employees with disabilities through an integrated-workforce approach.

"Every other business I know wants to [produce more] with fewer people," McDermott said. "We want business that has more labor attached to it. The workforce shortage is good for us, because we can provide the jobs and support for people with and without disabilities. And businesses increasingly are looking at hiring people with disabilities. They work to their capabilities and they are positive contributors."

In a perfect world, McDermott added, nonprofit MDI wouldn't be needed because employers would understand the benefits of employing those with physical and mental disabilities. It can take a bit of time to find the right job and work to make the new employee comfortable. But it's worth it.

Employees with disabilities tend to be very loyal, McDermott added.

McDermott mentioned a woman with mental health issues who came to work at MDI and reduced her medications markedly as her health improved, thanks partly to pride in her job, work relationships and the confidence she gained at a job that pays more than $10 an hour and benefits.

MDI just finished an expansion of its northeast Minneapolis facility from 49,000 to 60,000 square feet. Employment at the plant also has increased recently from 80 to 120 people. The nonprofit business over the past couple of years has invested nearly $10 million to upgrade and expand its facilities.

McDermott also has worked hard to diversify the business beyond the U.S. Postal Service, from which MDI gets big but intermittent orders for corrugated plastic mail bins. In 2008, USPS made up 90 percent of MDI's revenue. In 2018, nearly half of MDI's revenue, or about $11 million, came from a variety of customers, including 3M, Aldi and Caribou Coffee. MDI posted about $25 million in total revenue last year.

MDI's head count is at more than 500, up from about 100 in 2009.

Everybody is paid at least the minimum wage, about $10 an hour in Minneapolis, plus benefits. The wages on the factory floor can go as high as $15 an hour. MDI employees are encouraged to move on when there's an opportunity for a higher-pay position elsewhere. Some turn down jobs to stay at MDI.

MDI earns 90 percent of its revenue from employer contracts. It counts on the Blandin Foundation, the Schulze Family Foundation, Wells Fargo and other donors to assist with building and capital investments. That includes a $1.5 million, high-speed die cutter with in-line printing capacity for customized jobs of plastic signs for retailers and others. It's a growing business.

In 2016, a newspaper colleague wrote about an MDI employee in Cohasset. He has Bell's palsy, which can cause facial paralysis and other complications. He mostly worked for less than minimum wage at a sheltered workshop until he got hired by MDI. The employee, John Week, made $13 an hour, plus benefits. He didn't belong to a gym because of all the exercise he got at work. He also mentored other employees with disabilities and was a plant leader.

Week, like other MDI employees, demonstrated that leadership is about more than being able-bodied or having a managerial job.

McDermott said he's long been struck by how MDI employees, particularly those with disabilities, complain less about their jobs and pay than anywhere else he's worked, including folks who made much more in business.

For the growth and success of MDI, McDermott's board pays him about $200,000 a year. That's not huge for a $25 million business that also proves every day the success of an integrated workforce.

"I can't complain," said McDermott, who lives in Grand Rapids and is a spokesman for hiring the disabled. In a worker-hungry economy, this is an important human development issue as well as an economic-growth imperative. McDermott expects to remain CEO at least until 70. He believes MDI can grow to 2,500 employees over the next decade.

"I have a passion for this work," he said. "I didn't like laying off people. I like creating jobs."

Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at nstanthony@startribune.com.