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Chicago nonprofit launches campaign to promote black enterprise

Articles, Medill Reports

Published by the Northwest Indiana Times and Medill Reports

By Christina Maria Paschyn
Jan 10, 2007

In the cut-throat world of supply and demand, where high revenues and high earnings are all that matter, one would hardly expect corporate CEOs to pay attention to the skin color of their suppliers.  But that is exactly what one Chicago-based organization is challenging employers to do.

Charity Guide, a nonprofit group that promotes volunteerism, launched a national campaign on Monday to encourage more companies to buy from African-American owned firms and to pursue greater supplier diversity in their workplaces.  The campaign is small in scale, primarily dependent on press releases and the Web. The group also has no way of tracking whether corporations will follow its recommendations.  But Chicago United, a larger organization helping to identify quality minority businesses to the corporate community, praised the initiative.

“Every time a light is shown on the value of minority businesses to our economy and to individual corporations then it makes a difference,” said President Gloria Castillo.  “It can be done… For Chicago to be a global city – a great one – we need a strong entrepreneur class and it needs to encompass the minority business community.  Unfortunately, we are not seeing that locally.”

African-Americans make up 13.4 percent of the American population, but they own only 5 percent of American companies and receive not even half of a percent of the revenue, according to the U.S. Census Bureau.  And while black-owned businesses have been growing steadily since 1997, they continue to face discrimination.

A recent study conducted by economist Robert Fairlie at the University of California-Santa Cruz found that during their first four years, black businesses are 20 percent more likely to fail than white-owned businesses.  And only 14 percent generate annual profits of $10,000 or more, compared with 30 percent of white-owned firms.  They also are more likely to be denied credit than white-owned businesses.

The picture painted for black entrepreneurs is even dimmer when compared to other minority groups.  Hispanic-Americans, who constitute a smaller proportion of the U.S. population – almost 12 percent – own a greater percentage of businesses than African-Americans, about 7 percent overall.  And Asian-Americans have achieved parity, meaning that the amount of Asian-owned businesses is roughly equal to the 4.5 percent of the population they account for.

“We are in trouble,” said Robert Blackwell, Jr., CEO of Electronic Knowledge Interchange, a technology solutions provider.  “The African-American community is facing some major challenges and the only way we can turn the situation around is through entrepreneurship.”

Blackwell is on the board of advisors for Charity Guide and is funding the campaign through a grant from his company.  He said he has experienced all too well the racism within the business.

“Nobody says ‘get out of here, nigger’ anymore,” said Blackwell.  “But people have a perception of African Americans and it translates into how they treat people. I would go to a company and the people would send me to an MBE coordinator and they would say ‘would you be interested in taking a class?’  I would ask, ‘well, what kind of class, a class about your business?’  And they would say, ‘No, not really. It’s more of a basic accounting class, like how to pay your bills, etc.’ This happened to me several times after we had already been an established business.  And it’s not me, I know several other [African American business] people who this has happened to as well.”

Overcoming this perception of incompetence is even more of a challenge when business leaders think they will lose money.  “So many people think that hiring a minority-owned firm is going to be more expensive for their company,” said Michael Organ, executive director of Charity Guide.  “But making and saving money and hiring minority-owned businesses – these two things are not incompatible.”

A report last year by Hackett Group, a business advisory firm, showed that companies who made an effort to increase supplier diversity saw no negative impact on their procurement costs and overall earnings.  In fact, it may even result in more revenue down the road for companies as social-conscious customers hear about the increase use of minority suppliers.

“It is in the companies’ self-interest to hire black-owned firms because it is at least relevant to 13.4 percent of the population,” said Organ.  “And it is the right thing to do.”

Charity Guide suggests a four-part supplier-diversity plan to employers:  First, at least 13 percent of the budget in each spending-category should be awarded to black-owned firms, and budget managers must go beyond their personal networks to find quality black-owned businesses.  Second, black-owned firms should be hired directly rather than through intermediaries.  Third, the same expectations and respect must be extended to black entrepreneurs as to any other supplier.  And fourth, if a black-owned firm under-performs, another black-owned firm should be found as a replacement.

“Their effort is well placed,” said Castillo.  “We [Chicago United] are a more multicultural organization, but for companies to devote 13 percent is doing a good job.  I would actually recommend increasing that number.”

Whether the campaign will level the playing-field for black entrepreneurs remains to be seen.  But Organ hopes that it will at least encourage employees to challenge their CEOs’ diversity practices.

“Even if employees do not control or influence the budget, they can still make a difference.  They can still go up to their boss and ask ‘what are we going to do about this?’”

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