If you teach business, the fix for low-income communities is more and better entrepreneurship, more and bigger businesses. It’s a natural instinct, but putting it into practice requires venturing beyond normal practices.
Over three days last week, educators from 20 universities across the country wrestled with how to do that effectively. The National Conference on Business Development in Underserved Communities was hosted by the Foster Business and Economic Development Center at the University of Washington, which has been doing this kind of work for longer than most, about 20 years.
The business schools at UCLA and Dartmouth and Penn have been working with businesses in underserved communities for that long or longer, but more schools have gotten on board in only the past five years, according to UW’s Michael Verchot, director of the center.
Business schools teach people how to run businesses and make money, and their focus has usually been high on big business and finance. But partly in response to changing values among their students, and striking economic disparities, more schools are working in low-income communities to improve and grow existing businesses and to encourage more people to start their own.
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Verchot has been at this since he was an MBA student in the 1990s, working with Thaddeus Spratlen. Spratlen, the first tenured African-American professor in the UW business school, would scrape up money where he could to send students out to work with businesses in Seattle’s Rainier Valley and Central Area, Verchot said. The UW program grew out of that work, and funding from major financial institutions helps it do that on a larger scale now.
Last year the center helped 230 businesses around the state, either by having teams of students work with them, or by having the owners attend business short courses taught by UW professors.
Lewis Rudd, one of the founders of Ezell’s Famous Chicken, said he’d been wanting to grow his business about 10 years ago, when a friend suggested he contact Verchot.
Over the next several years, several student teams worked with him. “We had students in the kitchen taking pictures of bread being baked,” he said. They ran time studies and efficiency studies. He held up a thick operating manual the students helped write. The UW also connected Rudd with alumni who had expertise he needed. “We had close to a 50 percent increase in sales over the next year as a result of some minor changes,” Rudd said. The business moved from a family operation to a more corporate structure, and there is more expansion on the horizon.
Rudd was an ideal candidate for the program. He had a solid business and was eager to expand, but programs have to take into account that people go into business, or choose not to, for all kinds of reasons.
Some do it with growth in mind, but some do it because jobs are scarce and they just need the income. For some, self-employment is a refuge from the corporate world. Some like working by themselves and aren’t interested in hiring or expanding. In some demographic groups, there’s a reluctance to make the leap to business owner or entrepreneur, especially when people can’t count on savings or relatives and friends to invest or to bail them out if things go bad.
One panelist, David Erickson, was skeptical of the effectiveness of business creation as a community-development strategy. Erickson is director of the Center for Community Development Investments, Federal Reserve Bank of San Francisco.
He said he wasn’t speaking for the Federal Reserve, just offering his personal observations. “There’s nothing I’ve seen that convinces me small business is a strategy for helping (reduce poverty).”
Erickson said social services such as “health centers and charter schools have a much better claim of success.” They improve lives and employ local people.
The other participants agreed that there are problems business can’t address, but said their efforts can and do pay off.
Phyllis Campbell is a leader in both philanthropy and business. Campbell ran the Seattle Foundation for six years, then returned to banking as Pacific Northwest chair of JPMorgan Chase, a supporter of the business schools’ work financially and as a source of ideas.
Campbell recalled growing up in Spokane, where her family ran a dry-cleaning business. She said her father talked about expanding the business, but he didn’t have access to the networks that would support his aspirations.
Universities can help make those connections between the financial world and small businesses and teach business owners the skills they need to grow.
Erickson saw that as a useful role, saying, “Business schools can knit groups together into partnerships. They can connect need to opportunities.”
That is especially true, Campbell said, because polls show the public holds universities in much higher regard than they do banks or government.
She’s part of an effort led by Seattle University to improve its neighborhood. That work involves hospitals, philanthropists, an elementary school, a housing group and more. The university had the credibility to bring them all together.
Everyone agreed that improving lives and communities requires a broad approach.
Alfred Osborne, Jr., senior associate dean and faculty director of the Harold Price Center for Entrepreneurial Studies at UCLA, said, inequality starts early in life, and so do opportunities to overcome it. Future entrepreneurs need social skills, and the best time to start developing those skills is at the start. Solid early education is a business program and a community-development program.
Business schools have a role to play in closing economic gaps, and that role will become more important partly because students demand it. Osborne and other professors in the group said their students used to have their eyes fixed on Wall Street, but students today want to have a meaningful, beneficial impact on their communities, and they want to start while they are students.
Tonya Scott-Hickman of Virginia Union University told me, “The millennial generation is going to make us move in that direction. They’re not accepting the status quo.”
Verchot told me that before parting, the participants agreed to work together to raise the number of universities serving businesses in underserved communities to 100. To further focus its own mission, the UW center is renaming itself the Consulting and Business Development Center.
OK, it’s not that jazzy, but the mission, opening more doors to opportunity, certainly is.
Jerry Large’s column appears Monday and Thursday. Reach him at 206-464-3346 or email@example.com