In Minority Business Success , authors Leonard Greenhalgh and James Lowry chart a path for the full participation of minority businesses in the U.S. economy. Today, minorities are well on their way to becoming the majority of our workforce and a large part of our entrepreneurial endeavors; their full contribution is essential to national competitive advantage in a global economy.
The beginning of this book summarizes demographic changes in America and shows why it's in the national interest to foster the survival, prosperity, and growth of minority-owned businesses. The authors outline why these businesses are vital to the solution to our current economic woes. Next, the book turns to what minority firms must do to take their place in major value chains, and, finally, the book examines what governments, corporations, and support organizations ought to be doing to foster minority inclusion. In total, Greenhalgh and Lowry lay out a new paradigm for developing minority businesses so that they can fully contribute to our national competitive advantage and prosperity.
|Publisher:||Stanford University Press|
|Edition description:||New Edition|
|Product dimensions:||5.90(w) x 8.90(h) x 0.60(d)|
About the Author
Leonard Greenhalgh is Director of Programs for Minority- and Women-Owned Businesses at the Tuck School of Business at Dartmouth. He is the author of Managing Strategic Relationships. His work in helping minority business is reflected in the Lifetime Achievement Award conferred by the Minority Business Development Agency, U.S. Department of Commerce.
James H. Lowry is a nationally recognized workforce and supplier diversity expert and a Senior Advisor for The Boston Consulting Group. Previously a Senior Vice President at BCG and Global Diversity Director, he led the firm's workforce diversity, ethnic marketing, and minority business development consulting practice. In 2009, he received the Lifetime Achievement Award from the National Minority Supplier Development Council. He is presently a member of the Howard School of Business board and serves as Chairman for the Howard University Entrepreneurship Center.
Read an Excerpt
Minority Business SuccessRefocusing on the American Dream
By Leonard Greenhalgh James H. Lowry
Stanford University PressCopyright © 2011 the Board of Trustees of the Leland Stanford Junior University
All right reserved.
Chapter OneMINORITY BUSINESS SUCCESS IS A NATIONAL PRIORITY
History repeats itself. Problems go unattended for years until the nation is forced to deal with a crisis. The launch of Sputnik shocked us out of our complacency about America's leadership in space. The publication of Rachel Carson's book Silent Spring made us aware that we had been poisoning and plundering our environment. The meltdown of the credit system revealed the underregulated banking system to be catastrophically overleveraged. What had been invisible to the public eye suddenly became visible.
The nation is on the brink of another crisis. Minorities are destined to become the major population group in the coming de cades, but they have not been allowed to make their proportional contribution to the U.S. economy. Today we need their contribution, not only to speed economic recovery but also to boost the nation's output of goods and ser vices to preserve our position in the increasingly competitive global marketplace.
Globalization has increased the importance of national competitive advantage. Wealth flows out of lackluster economies into the coffers of nations that do a better job of value creation. Understanding this, all industrialized countries—except, it seems, the United States—have a National Industrial Strategy that plans what must be produced domestically, which industries are strategically and economically important, and which policies and infrastructure must be in place to create, attract, annex, or retain the high-profit, high-growth industries.
A U.S. National Industrial Strategy would acknowledge the importance of minorities to America's economic future. When minorities become the majority of the workforce, the supply chains, and the entrepreneurial economy—as they must—their success in creating wealth will determine the fortunes of the nation and everybody within it.
To date, the odds have been stacked against minority economic success. We once denied minorities access to ballot boxes, lunch counters, and drinking fountains. Now we deny them access to good educational opportunities, capital, and all but token business opportunities. Minorities do not contribute to the U.S. economy in proportion to their representation in the U.S. population because they cannot. The motive to own successful businesses is strong enough, but many barriers remain intact.
This situation needs to change. The business case for minority inclusion is compelling. It has obvious implications for public policy, corporate outsourcing practices, and support organization efforts. But there has been little progress during the last two de cades, even though the minority population has grown dramatically. We are using approaches designed for a different era and are not producing the results the country needs. We need to refocus those efforts. This book suggests an alternative paradigm that will create a different future for minorities in the U.S. economy.
MINORITY BUSINESS SUCCESS IS A NATIONAL PRIORITY
We have a national problem, but we lack a national strategy that is adequate to deal with it.
The national problem is the steady decline of national competitive advantage in the face of increasingly fierce competition from rival economies in Asia and Europe.
We saw symptoms of the problem emerge shortly after the new millennium began, in the form of rising unemployment, erosion of the value of the dollar against other currencies such as the euro, the export of somewhere between 25 million and 40 million U.S. jobs overseas, the increase in the balance of payments deficit into the trillion-dollar range, and the demise of U.S. prestige abroad. The country has been hamstrung by an outdated ideology that opposes planning and regulation—despite the obvious fact that we are operating in a global marketplace in which rival countries plan a concerted effort to take over lucrative U.S. industries and U.S. global market share.
It is time to rethink what is in the public interest. The so-called "free-market system" has created perverse incentives for business leaders to "take the money and run." Propounding the myth that markets are self-regulating, opportunists mastered tactics to drive up short-term stock prices and apparent profitability, and they rewarded themselves with handsome bonuses for doing so. Their freedom to skirt market regulation was abetted by politicians who were beholden to them because of the country's election-financing policies—an arrangement that misaligns self-interest and the public interest. But the system they created and exploited was simply not sustainable, as evidenced by its sudden collapse.
After those in power did, indeed, take the money and run, the taxpayer was left to pay the tab for restoring the vitality of the economy. But, as this book will point out, we cannot restore the economy and national competitive advantage without paying special attention to changing demographics and to the adequacy of the nation's human capital to compete effectively in the global economy. We urgently need a National Industrial Strategy that sustains the key industries of today and fledges the growth industries of tomorrow. The strategy needs to be inclusive, forward-thinking, and impactful in the short run—and sustainable in the long run.
We will see that a National Industrial Strategy involves identifying the industries we want to keep within the U.S. economy, ensuring adequate workforces to staff them, fostering the development of industry clusters and infrastructure to enhance their viability, and promoting the development of American-based value chains to ensure that they remain globally competitive. The free-market system of the past decade will not preserve or promote national competitive advantage; we need a well-thought-out plan for recovery and progress, a plan that is not distorted by lobbyists sacrificing the common good to favor special interests. As a nation, we will have to realign public policy, corporate strategy, and nongovernmental support in order to embark on a trajectory that holds more promise for our economic futures.
But before we propose a comprehensive solution, we need to understand the context of the problem facing the U.S. economy. Most importantly, we need to understand the magnitude of the demographic shift and its implications.
THE MINORITY POPULATION WILL SOON BECOME THE MAJORITY
For most of the twentieth century, white males dominated the U.S. workforce, the country's entrepreneurial economy, and the multitier supply chains that sustained U.S.-based major corporations. The future will be different. Before the middle of the twenty-first century, minorities and women will dominate the workforce, the entrepreneurial economy, and the complex value chains upon which corporate success now depends.
The nation's approach to fostering their inclusion was developed in the 1980s. The situation has changed, and our approach needs to change accordingly. We cannot afford to settle for anything less than a new paradigm that will integrate and refocus the efforts of corporations, public-sector agencies, and support organizations. And we need strong leadership to ensure that we are achieving the necessary level of impact.
The urgency arises because the demographic shift is momentous. Minorities will soon become the national majority. That is a fact. We are not speculating about what might happen based on a set of theoretical assumptions; we are talking about people who have already been born or have immigrated to the United States. Table 1.1 and Figures 1.1 and 1.2 show the data, based on information compiled by the U.S. Census Bureau and related sources.
If you do not like reading data tables, then here are the important facts:
There will be more minorities than whites in the U.S. population by 2042.
Six of the country's eight largest cities are already minority dominated.
Minorities—especially Hispanics—have significantly higher birth rates than whites.
Immigration has boosted the minority population.
The majority of today's children under five years old are minorities.
The (primarily white) baby boomers are reaching retirement age and will be dropping out of the workforce and the entrepreneurial economy during the coming decade.
Minorities have less accumulated wealth to pledge as collateral for business loans.
During the past decade, while the rich have been getting richer, the lower middle class and the poor—where minorities are overrepresented—have been getting poorer.
Minorities disproportionately get stuck in poverty cycles, leading to higher dropout, unemployment, and incarceration rates.
Recessions harm minorities more than whites.
THE NATION IS UNPREPARED FOR THE DEMOGRAPHIC SHIFT
This country is not preparing for this unprecedented demographic shift that will affect economic recovery in the short run and national competitive advantage in the long run. The most pressing problem is that today's minorities—who are tomorrow's employees and suppliers—are not getting the education they need to staff the workforce in the ser vice/knowledge economy, or the help they need to fully participate in the entrepreneurial economy. This situation hurts minorities because it destines all but a few of them to remain an economic underclass; it hurts the nation because the economy can neither recover nor excel if half of the population is unable to make its full contribution to national prosperity.
In addition to the threat to our future prosperity, we have seen, throughout history, that when an economic underclass becomes the majority, the established order—with its institutionalized inequities—becomes unstable. The class division between the embarrassingly wealthy and the unacceptably poor becomes a cause célèbre, and revolt in its various forms awaits only a triggering event. In our lifetime, we have seen this happen in Paris, where mobs have roamed the streets burning cars, in Greece, where gangs of youths have fought police, and in the United States, where looting has spilled over from the inner cities.
We ought to pay attention to the lessons history can teach us. Sociologists point out that revolutions do not happen when people are down and out; they happen when there is hope that people's situations will improve. The downtrodden have higher expectations when their circumstances are improving and consequently less tolerance for the unfairness of their predicament. So apply this history lesson to the situation of an African American president being elected through a campaign of "Change We Can Believe In." What is likely to happen if there is no change and if the American Dream remains out of reach for so many? How will the status quo be tolerated by people who believe they have elected a president who ought to be highly aware of their plight? Few historians would predict complacency.
Overt conflict is an obvious cost of chronic hopelessness and despair. Alienation, seething resentment, and the depressed motivation to better oneself, pervasive in inner cities and poor rural areas, are the less obvious but more insidious costs. A community of people who do not see how they can get ahead in life and have given up trying is a drain on the economic system; the larger the community, the greater the negative consequences. So the demographic shift brings with it a simmering problem that is growing in magnitude each day.
A deeper problem is the adverse economic impact of minority underachievement. The highly educated and experienced baby boomers are beginning to retire en masse. They will need to be replaced in the U.S. workforce and the entrepreneurial economy. Demographic changes destine their replacements to be primarily minorities. If we do not foster minority inclusion and do everything we can to ensure their success, the impact will extend beyond the minority community to constrain gross domestic product and national affluence.
In practice, we are not really doing much to foster minority inclusion and success, despite having so much at stake. Unless we get focused on impact, instead of contributing robustly to the national economy, minorities will remain on the sidelines of their value chains, generating little wealth, few jobs, and low tax revenues. Instead of reaping the benefits of inclusion, the U.S. economy will have to divert public funds that could instead be invested in infrastructure, research and development, education, defense, or homeland security.
Thus the issue of minority inclusion is not about historically poor Americans becoming better off at the expense of the rich: it is about all Americans becoming progressively worse off than they were at the turn of the millennium. It is already happening: think how much your purchasing power has eroded since the year 2000.
We need to understand the major barriers to the economic inclusion of minorities—particularly in the case of African Americans and Hispanics. These are:
difficulties in securing funding for their businesses; and
limited access to mainstream supply chain opportunities.
The long history of discrimination and neglect in this country has led to the present predicament. Let's look closely at each of these constraints.
POOR EDUCATIONAL PREPARATION LIMITS MINORITY ECONOMIC SUCCESS
We first need to look closely at the root cause of the economic under-participation of minorities. Prior to the civil rights movement, exclusion was the result of institutionalized racial discrimination. Today, the hate-radio talk shows reveal that vestiges of that era remain among some right-wing extremists. But even in the absence of bias, many minorities cannot participate in the lucrative parts of value chains because minorities are not achieving the level of literacy—much less advanced education—necessary to contribute fully to the ser vice/knowledge economy.
Let's be sure we understand what this terminology actually means. Up until a couple hundred years ago, the United States had a primarily agricultural economy, consisting of hundreds of thousands of farms employing farmhands. After the Industrial Revolution, manufacturing surpassed agriculture as the principal source of revenue and jobs in the U.S. economy. Factory workers did not need education any more than farm workers did, because both were performing thoughtless tasks. During the 1980s, services—white-collar jobs, health care, retail, insurance, information technology, and so on—had become more important than manufacturing. These jobs required a literate workforce. Today, the most profitable enterprises are in the knowledge economy, where value is created through innovation, intellectual property, analysis, or special know-how. Google, for example, is more profitable than the Yellow Pages because it is knowledge based rather than ser vice based; for the same reason, a biotech firm will be more profitable than a nursing facility. Illiterate or marginally literate people cannot hold down lucrative jobs in the ser vice/knowledge economy, so they have limited career choices and thus make up a large proportion of the unemployment rolls.
Inadequate education is a problem in a country where wealth depends on success in the ser vice/knowledge economy. In most of this country's minority-dominated communities—inner cities, barrios, poor rural areas, and Indian reservations—only about half of today's ninth graders will graduate from high school. And many of those who graduate will not be fully able to read, write, do basic math, and use a computer—the most basic skills required for employment that involves more than supervised manual labor. The country already has an oversupply of unskilled labor. The undersupply of educated technical/professional workers is an increasingly critical issue.
The low level of educational achievement in many minority-dominated communities sustains a tragic intergenerational poverty cycle. The cycle is initiated because a child's preschool experience determines his or her learning level in kindergarten and in every grade beyond. Let's contrast a house hold in an affluent suburb with a house hold in a poor inner city to understand the system dynamics that operate.
In the affluent house hold, educated parents provide the child with a broader vocabulary and are more likely to tune in to television channels that will foster the child's learning. In grade school, the affluent parents are better able to coach the child struggling with homework and to stress the importance of paying attention in class and doing homework diligently.
By contrast, in the inner-city house hold, the children of illiterate parents start kindergarten with a diminished vocabulary and little encouragement to do well in school. The poorly educated parents cannot help the child with homework, often because they cannot do it themselves. The child is "behind" in every grade level, with little help or support coming from the home environment or the neighborhood. Add in typical inner-city adversities—such as a local culture that disrespects educational achievement, few positive role models, fetal alcohol syndrome, poor nutrition, a history of abusive treatment, and unaddressed health problems—and the odds are really stacked against those children ever gaining an adequate education. Unusual inner-city children can rise above the lack of preparation and support they get in their home environment, but typical inner-city children find grade school an uphill challenge; many of them get discouraged and drop out. Earning ability is tied to educational achievement (see Figure 1.3), so poverty in one generation tends to create poverty in the next.
Excerpted from Minority Business Success by Leonard Greenhalgh James H. Lowry Copyright © 2011 by the Board of Trustees of the Leland Stanford Junior University. Excerpted by permission of Stanford University Press. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
1 Minority Business Success Is a National Priority 1
2 To Succeed Is to Survive, Prosper, and Grow to Scale 19
3 Government Must Refocus on Inclusion 50
4 Corporations Should Refocus on Development, Not Procurement 86
5 Support Organizations Should Refocus on Core Mission 112
6 Minority Business Success Requires Leadership and Direction 134