Doing well - and doing good - in the inner city

Attractive economic and social benefits can be realized from investing in poverty-stricken urban communities. Benefits take many forms. Corporations can derive profits from establishing plants or investing in small businesses located in those areas. Profits can be made by local residents through ownership in small businesses. Most important are the jobs created by these activities.

This is no dream. It is happening in St. Paul, Toledo, Baltimore, Charleston, S.C., Miami, and other cities. Essential for success in creating profits and jobs are close working relationships with the community and some cost sharing with the government. By carefully observing these guidelines, my company, Control Data, has been investing successfully in poverty-stricken inner cities for 15 years. Two of our most important activities have been to establish inner-city plants and to invest in small businesses.

Planning for our first inner-city plant began in 1967 during a time of rioting in the streets of Minneapolis. A site was selected in a black poverty area on the north side of the city, in the heartland of discontent, and the doors of the plant opened in January 1968. In the establishment of each inner-city plant, a number of rules that bear heavily on its success are followed.

First, the establishment of the plant and the choice of location are not dictated by philanthropy; they must be based on sound business decisions designed to return an attractive profit.

Second, start-up costs must be viewed in the same way business views research and development for a new product - as an investment for the future.

Third, the government must share in the cost of training local residents to become qualified employees.

Fourth, a total commitment to success must be widely visible, both inside and outside the company. To help make sure this happens, we require each plant to be modern and to use the most advanced facilities; and each plant is responsible for producing an important product which makes the company as dependent on the plant's success as the people working there.

Fifth, the neighborhood has an equally important contribution to make to the plant's success in the form of knowledge about the community, the problems of its people, and potential solutions. Community leaders commit themselves to the program to help guarantee success, and clearly established links are forged between them and the company.

There were plenty of unusual problems to be solved in making that first plant successful. Considering that it is an efficient operation with average tenure at more than six years, and considering what we learned, the payoff is a handsome one - comparable to product R&D.

Success with the Northside plant stimulated the establishment of six more poverty-area plants. The seven plants now employ over 2,400 persons. They are all profitable at a level competitive with our conventional operations. At the same time, we are serving the interests of each community and providing a path for disadvantaged persons to enter the mainstream of industry.

Experience gained from establishing the first inner-city plants also demonstrated that the communities in which the plants were located would benefit more if they were part of a comprehensive community development plan and that Control Data would benefit as well in the reduction of costs associated with getting a plant started. Therefore, in 1978 we assisted in the formation of City Venture, a consortium of corporations and religious organizations chartered to develop comprehensive urban revitalization plans and manage their implementation. All our inner-city plants started since 1978 have been part of City Venture projects.

Investments in small businesses located in poverty-stricken areas are in an earlier stage than our establishment of inner city plants - but they have progressed far enough for us to see that they will be successful and eventually provide an attractive return on investment.

Most of the small businesses in which we invest are located in communities which are part of City Venture projects. To help assure their success and the success of other small businesses in these communities, we establish a business and technology center (often called a small business incubator) to provide office, laboratory, and manufacturing space. The center also contains centrally shared facilities and services such as a model shop; drafting, accounting, and purchasing services; a complete range of computer services; and a computer-based education center for training purposes. Economies of scale make it possible to offer occupants of the center such needed facilities and services of much higher quality for considerably lower cost than any of them would be capable of acquiring alone.

At present, we have investments in 19 small companies in poverty-stricken areas. Of this number, eight are majority owned by minorities. We expect to make many more such investments in the years ahead.

In summary, a successful approach has been outlined whereby attractive profits can be realized by big business through establishing plants in inner cities and investing in small businesses. Enterprise zone legislation which is pending in Congress, if appropriately structured to support this approach, could stimulate a vast increase in investment in inner cities, and a large number of new jobs would be created where they are needed most.