HOW BUSINESS IS LINKING HANDS IN THE INNER CITIES
Banks and inner cities have had a history of troubled relations, and Huntington Bancshares Inc., based in Columbus, Ohio, was no exception. Under pressure to increase its minority loans, Huntington tried advertising to poor neighborhoods. But the campaign, says Donald Walters, senior vice-president for community services, "wasn't working." Local blacks such as Phillip Douglas say the bank was insensitive to their needs. Walters, on the other hand, says the communities "didn't trust" his bank or any other institution.
Then, Paul R. Taylor entered the picture. In 1991, the Columbus community development consultant with longstanding ties to the bank proposed a smart strategy: get the minorities and bank together through a partner they both respected--the churches. Through Taylor's firm, P.T. & Associates, Huntington tailored a package of services for inner-city residents and used its marketing budget to make a set donation to the churches for every customer they signed up. The bank has booked $44 million in mortgages--at market rates--and some of the 165 participating churches are earning up to $1,000 a month. Taylor is replicating the program in seven other states. "Everybody knew it was a win-win process with the church involved," says Douglas. "The church eased people's fears and skepticism."
MOVING ON. By joining with the church to gain a foothold in the inner city, Huntington is part of a growing trend. Not long ago, most companies avoided doing business in inner cities or getting mired in their problems through corporate philanthropy programs. Those that got involved often walked away frustrated, either because they tackled isolated issues or ignored the residents' most pressing needs. "Their attitudes were, `This is too overwhelming, we'll just move out,"' says Charles R. Stephens of the Center on Philanthropy.
Haunted by memories of the Los Angeles riots and never more aware of such entrenched urban problems as crime and illiteracy, companies are turning to the cities. Unlike in past efforts, Corporate America isn't trying to impose its own solutions. From General Mills Inc. to Lincoln National Corp., companies are helping to rebuild entire neighborhoods--and they are doing so in partnership with the communities.
Good public relations is only one factor driving such efforts. Companies such as Pathmark Stores Inc. and J.P. Morgan & Co.'s community development arm are targeting inner cities as profit centers and rebuilding communities at the same time. Others such as Textron Inc. and the St. Paul Cos. are refocusing their philanthropic goals, funding or teaming up with local groups to take on many problems simultaneously. "There's more going on," says Paul S. Grogan, president of the Local Initiatives Support Corp. (LISC), which funnels private funds to communities. "And more companies are participating in more than one way."
The surge of corporate-community partnerships is gaining notice. The Committee for Economic Development (CED) has been studying some of the most promising projects, such as the development of a shopping center anchored by a Pathmark supermarket in Newark, N.J., through a joint venture between Pathmark and nonprofit New Community Corp. The CED is readying a report urging business leaders to make the reversal of urban decay a top priority in partnership with residents or through LISC and similar intermediaries. "The only fundamental, lasting solution to inner-city problems has to be built on the residents," says William S. Edgerly, a former bank CEO who chairs the CED task force on inner cities.
The Conference Board, meantime, in a coming report reviewed by BUSINESS WEEK, assesses the risks in a variety of community partnerships as a guide for companies contemplating such projects (table, page 81). The report concludes that companies, while they can't replace government or community groups, have found they can bring "special capacities to a partnership." But it warns that community building requires a long-term commitment of a decade, and even then, chances for success are iffy. What's more, the projects tend to be high profile and to become entangled in political brawls.
LOTS OF PRAISE. The Atlanta Project is a prime example. Launched as a private community development umbrella agency by former President Jimmy Carter in 1992, the Conference Board calls it "one of the most ambitious community projects ever taken on by the corporate sector." The Atlanta Project divides the city into 20 "clusters." Each cluster has a corporate partner that agreed to commit an executive for five years, plus donate funds and services. Companies signing on include Equifax, Coca-Cola, and Sprint. Some $32 million in cash and kind has been contributed to the project, but it isn't a relief agency: Its key role is to help communities solve their own problems in six main areas: community development, economic development, housing, education, health, and public safety.
The program has won plaudits nationwide, but all has not gone smoothly. "We've had tremendous problems and frictions," says Daniel E. Sweat, program director. In one cluster on the city's rough east side, political turmoil over how to divvy funds has left sponsor Atlanta Gas Light Co. trying to referee among warring factions. "If there's more than one group vying for power, it's very difficult for them to develop a plan for their community," Sweat says.
Other partnerships have been more harmonious. San Antonio's United Services Automobile Assn., an insurance and financial services company, conducts its philanthropic activities in inner cities mostly through community-based non-profits. USAA's banking unit, for example, is the main corporate funder of the Neighborhood Housing Services of San Antonio Inc., an affordable-housing group. A USAA assistant vice-president is chairman of the NHS and sits on some committees. Still, the NHS and the communities set the agenda. "This is a true joint venture, but the residents let us know what they need," says the NHS's Greg Frazer. "They are the experts in their neighborhoods." If companies keep that in mind, and if they're willing to make the commitment, the future of corporate-community partnerships is bright.
Hallmark, General Mills, and other companies are seeking to revive neighborhoods, fix schools, and curb violence.
Risks: Even with long-term commitment, odds for success are iffy.
With the help of these groups, Pathmark Stores and others are entering inner-city markets and rebuilding neighborhoods.
Risks: A lack of mutual trust and openness will doom projects.
Companies are investing in cities through entities such as the Local Initiatives Support Corp. that funnel private funds to communities.
Risks: The intermediaries will add bureaucracy, not build bridges.
DATA: CONFERENCE BOARD, BUSINESS WEEKMichele Galen in New York, with David Greising in Atlanta and Stephanie Anderson Forest in Dallas