Building the High Road to Sustainable Communities
by Dan Swinney
I was hired as a lathe operator at Taylor Forge, a subsidiary of Gulf
+Western in Cicero, an industrial suburb on Chicago's West Side in
1975. Taylor Forge made big pipe, fittings, and flanges for the Alaska
pipeline and big utility companies. Unknown to me at that time, G+W was
at the cutting edge of new corporate strategies that were emerging with
force in the American economy of the late 1970s. With a huge loan from
Chase Manhattan Bank, G+W purchased a number of manufacturing companies,
including Taylor Forge, with the intent of "milking the cash cow," as it
was described in a Harvard Business School case study. G+W had no
long-term strategy for the particular companies (or the products or the
workers) it had purchased except to pull out cash and value and to use
the money to finance acquisitions in other, more lucrative sectors, like
entertainment--e.g., Paramount Pictures. The short-term objective was
the only concern. It was like buying a car and never changing the oil.
G+W began to close Taylor Forge department by department, never telling
us what the strategy was. To make matters worse, the executives
suggested at the end that if we gave up part of our wages and pensions,
we might be able to save our jobs--testing our level of fear to see how
much they could squeeze out of us before they closed the doors in
1983. G+W shareholders made a ton of money and the corporation
continued to expand. Cicero--the town that had been home to Taylor
Forge for several decades--was to lose 50% of its job base in the next
six years as other companies, also, closed.
The Center for Labor and Community Research
I founded the Center for Labor and Community Research in 1982 to provide
the kind of research and analysis that I had needed at Taylor Forge, and
for unions, communities and others concerned about saving jobs and
stabilizing our economy. CLCR focused its attention on the micro-level
of the economy--the firm and the community, engaging in in-depth
research as a foundation of information for grassroots community and
labor organizations and local government.
We were uncertain about our future strategies and how we could respond
to the economic transition unfolding in front of us. We began by
looking at hundreds of companies in Chicago that had closed or were in
danger of closing. Chicago lost 3,000 of 7,000 companies in the 1980s
and 150,000 basic manufacturing jobs, so we had a lot at which to look.
The prevailing and powerful view then, as now, is that this chain of
events and its consequences was painful and destructive in many ways,
but inevitable. The logic was, and is, that we live in a new global
economy witnessing a fundamental change in the international division of
labor. The new role for the United States is as a source of
intelligence, information, and finance. The Third World with its
low-cost labor will be the center for making things. Then there is this
new complex and powerful communication technology.....the new
Information Age.....the end of work......the new service economy....and
so forth.
The prescription from this logic is that you cannot do anything about
these wrenching problems but accept them, so it's best to find a niche
that gives you the best chance to survive under the best terms you can
get. For the overwhelming majority of the population this means getting
by on less, and for the bottom 20% it means getting by on much less.
The implications of this thinking resonate in every aspect of cultural,
social, and political life.
We felt that this notion of inevitability needed to be examined in the
context of the specific companies and communities so obviously at risk.
Of course, we found a few companies that really needed to close--the
equivalents of slide-rule producers. Their products or technology were
completely out of date and there was no way they could compete in the
new marketplace. On the other hand, the overwhelming majority of
companies that we examined were not obsolete. They were at risk because
of problems that could be solved in the context of our economy under our
current system. Some of the problems are simple and require
straightforward solutions; others are more complex. I estimate that we
could have saved 75% of the jobs and companies lost in the 1980s with
some creativity and determination by labor, community, government, and
business.
Small companies slipping through the cracks in the market
Never making it to the headlines was the closing, in the 1980s, of
hundreds of small companies, each with a handful of employees. In 1986,
Gladys Scott, a resident of the Hyde Park community on Chicago's South
Side, called CLCR with alarming information about a printing
company--Bankers Print--that had handled her printing needs for more
than 16 years. The owner, Carl Wilson, had cancer and no heir to take
over the business.
After meeting with Mr. Wilson and talking with the employees, we were
able to arrange an employee purchase of the company--a successful
conclusion that no one had seen as an alternative. The experience
focused our attention on small companies. After all, despite public
perception to the contrary, 90% of all manufacturing companies are not
big, complex, fully integrated firms. Individually they are
insignificant, but in their aggregate they are the bedrock of the
manufacturing economy. With 100 employees or fewer, they typically
have local markets, adequate technology, and a skilled work force. They
are frequently linked to the larger companies who do represent
two-thirds of the employees in manufacturing, providing services and
materials for production. The health of these small companies is a
major variable in the success or failure of the larger companies and the
community.
On behalf of the Economic Development Commission of Chicago, in a study
funded by the MacArthur Foundation, CLCR looked at 800 of these small
companies with an owner 55 or older, and found that almost 40% were at
risk of closing because of the issue of succession.
Yet this problem can be solved with conventional resources and a little
creativity and extra effort by those concerned with community
development. Small companies with aging owners and no successors can be
identified in a number of different ways. They are often good
opportunities for employee buyouts, as was the case of Bankers Print.
Or they are an excellent opportunity for aspiring local entrepreneurs
who are typically African American and Hispanic, heretofore excluded
from this kind of opportunity.
Big Companies--often the economic anchor for a community
The 1980s was the beginning of a period referred to by some as the
"casino economy." Transnational and large corporations began to acquire
other companies and frequently pursued short-term, profit-generating
strategies that benefited shareholders, but resulted in moving or
closing firms that had been anchors of the local economy and the
foundation for local employment. Companies taken over by transnationals
eliminated 80,000 jobs in the Chicago area during the 1980's. There were
enough energetic and sophisticated campaigns to prove that these large
companies could be saved by labor and community coalitions.
Brach Candy Company
In 1989, at the request of a local community coalition called the
Garfield/Austin Interfaith Action Network (GAIN), CLCR became involved
in a protracted effort to save jobs at Chicago's Brach Candy Company.
In 1987, this West Side company had employed some 3,700 people and
generated $80 million in payroll revenues that circulated through the
local economy, yearly. The company was purchased by Klaus Jacobs, a
Swiss entrepreneur. By 1989, he had laid off 1,000 people, replaced
four CEOs and management teams, lost about $100 million in sales, and
threatened to close the company if the City of Chicago didn't set up a
Free Trade Zone that would permitted Brach to buy sugar at reduced
international prices.
CLCR established a partnership between GAIN, the Teamster local that
represented the production workers, some of the management of the
company including Peter Rogers, a prominent Brach ex-CEO and a
coalition of 80 organizations. The Campaign sought a High Road future
for Brach:
- an effort by managers and employees to buy the company, as well as a
proposal to own the manufacturing facility jointly with Klaus Jacobs.
Jacobs rejected both proposals.
- proposals for significant changes in the organization of production,
worker participation in management, profit sharing, and the building of
an effective relationship with the local community and the city. We
proposed that the company let contracts for goods and services to local
companies where feasible, expanding the market for existing businesses
and creating the opportunity for business start-ups.
- a relatively bitter campaign to prevent the company from implementing
a Low Road strategy. It wanted to cut wages and benefits of the
workers, but the union and coalition instead won a good four year
contract.
The Candy Institute
Through our work at Brach, we became familiar with the candy industry in
Chicago. To our surprise, we learned that the Chicago area produces
more candy than any other city in the world, with more than 100
manufacturers plus many smaller candy makers employing 13,000 people and
generating $2.4 billion in shipments. It is a sector that can afford
good wages because of the skills and talents of Chicago's labor and
management pool.
We realized that as long as we remained reactive to problems created by
Low Road entrepreneurs such as Jacobs, our industry and local economy
would be in trouble, and key assets-human and material-would be wasted.
We learned of a successful initiative in New York-the Garment Industry
Development Corporation-that was initiated by the International Ladies
Garment Workers Union (now UNITE), local Government, and major garment
companies. Inspired by their model, we created the Candy Institute. Now
four years old, the Candy Institute is becoming the springboard to
implement the kinds of strategies that we know can contribute to
rebuilding the manufacturing infrastructure in urban areas like Chicago.
Making candy is not as easy as it seems. It takes 5 days to make a
standard jelly bean, and sometimes as much as 20 days to make a "Jelly
Belly" with exotic flavors. Candy workers are more like artisans and
have to have a range of skills that permit the successful and magical
mixtures of ingredients, heat, pressure, and humidity. A major need of
all companies is to have good training programs for incumbent workers,
and a pool of entry level workers with skills and education. A major
initiative of the Candy Institute is Work Force Development. We are now
working with local companies to help them set up the training programs
they need to remain stable and competitive. With American Licorice we
are setting up an English as a Second Language Course. We are
developing a training program for entry level workers in the Candy
Industry with the Joliet Jobs Corp.
With inspiration from organizations such as ACENet featured in the
July/August 1997 issue of In Business we are setting up the Chicago
Cooperative Kitchen. With Federal funding support and in partnership
with Cook County government, we are in the development phase of this
project and anticipate a site with 60,000 square feet for use by small
companies and micro-enterprises in the specialty food industry. We will
directly service 20-30 tenants by providing them with licensed
manufacturing facilities to meet their production needs, storage space,
office space, a library and computing resource center, and financial and
technical services such as share purchasing and marketing programs.
These tenants will learn how to operate their businesses in an
environment that offers them some "breathing room" for mistakes as well
as ready access to expertise and resources for success. Most important
will be a culture and education and training programs that encourage
these companies to embrace a stakeholder vision of business and a
commitment to the high road. We want to grow companies that see the
development of their employees and their communities as one of their key
objectives.
The Candy Institute is also focused on shaping public policy to be
intentionally supportive of High Road businesses and practices; and
unsupportive of Low Road businesses and practices. With our assistance,
Mayor Daley became a champion in an effort to prevent the closing of
Frango Mints. In past years, City Government would passively throw money
and support at companies on demand or in face of threats, rarely
examining their commitment to their employees and the community. That
is a poor investment strategy for a city. Just like any other business,
local government should invest where it gets the "biggest bang for its
buck." We serve on the Work Force Development Board and are shaping
education and training policies to benefit and nurture these key
companies. The Candy Institute has become an active voice in the city
on behalf of companies that act in the interest of stakeholders as well
as shareholders.
The Candy Institute and CLCR does systematic research on the industry as
a whole in order to understand the various trends in the sector as well
as to identify particular companies in need of assistance. Our early
experience taught us that timely and accurate information is key to
retention. Getting to know this sector intimately, for example,
increases the likelihood of hearing about a succession problem in a
company at a point where there is still time to find a buyer for the
company-whether it's a group of employees; a non-traditional
entrepreneur from the Latino or African American community, or a woman;
or anyone else committed to maintaining production at the site.
We are providing direct assistance in many ways to companies as they
compete in the local and global economy but bringing in other
stakeholders that usually are ignored by business owners to play an
important role in building the company. We involve unions such as the
Bakery and Confectionary Workers Union and the Teamsters in efforts to
make their companies more competitive as a way to secure their wages and
benefits-entering new terrain in their relationships with management.
At Brach, for example, there were 240 different job classifications that
made training and production flexibility impossible. The union proposed
that this number be reduced to 6-a position often resisted by unions in
the past.
The Candy Institute is just getting started. But already it has shaped
to the consciousness of the city around the fact that "Chicago is the
Candy Capital of the World!" and that publicly inspired initiatives
like the Candy Institute can play a powerful role in making businesses
work. The Candy Institute is also a reflection of a new comprehensive
strategy for business and community development that offers a
comprehensive approach to business growth and development combining the
talents of owners and entrepreneurs, but also labor, government and
community.
The above article appeared in the May/June 2000 issue of InBusiness.