fighting the low road
Building The High Road To Sustainable Communities
Strategy used by Chicago research center to foster business growth and community development combines talents of owners and entrepreneurs as well as labor, government and community.

Dan Swinney

I was hired as a lathe operator at Taylor Forge, a subsidiary of Gulf +Western Corporation in Cicero, Illinois, an industrial suburb on Chicago’s Westside 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 percent 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 microlevel 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. (CLCR was originally the Midwest Center for Labor Research. We changed our name in October, 1999.)

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 to examine.

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 percent 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 current economic system. Some of the problems are simple and require straightforward solutions; others are more complex. I estimate that we could have saved 75 percent 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 MARKET CRACKS

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 percent of all manufacturing companies are not big, complex, fully integrated firms. Individually these small businesses 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 that 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 at least 55 years old, and found that almost 40 percent 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 were 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 benefitted 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 1980s. 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 permit 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, 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 ensued 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.

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.

CREATING STRONG INITIATIVES

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 launched 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 five days to make a standard jelly bean, and sometimes as many as 20 days to make a “Jelly Belly” with exotic flavors. Candy workers are more like artisans and most possess a range of skills that permit the successful and magical mixtures of ingredients, heat, pressure, and humidity to operate. 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 Corps.

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 do 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 when there is still time to find a buyer for the company — whether it’s a group of employees; a nontraditional entrepreneur from the Latino or African American community, or a woman; or anyone else committed to maintaining production at the site.

BRINGING IN OTHER STAKEHOLDERS

We are providing direct assistance in many ways to companies as they compete in the local and global economy, and bringing in other stakeholders usually 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 six — a position often resisted by unions in the past.

The Candy Institute is just getting started. But already it has shaped the consciousness of the city around the fact that “Chicago is the Candy Capital of the World!” and that publically 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 approach to business growth and development combining the talents of owners and entrepreneurs, but also labor, government and community.

Dan Swinney is the founder of the Center for Labor and Community Research (CLCR), headquartered in Chicago. Its comprehensive strategy for business and community development is described in depth in a 95-page paper, Building The Bridge To The High Road, available from CLCR for $10. Contact CLCR at 3411 W. Diversey, Chicago, IL 60647; (773) 278-5418.