Five Forward 20/20 Competitive Study

The Status of Large Minority Businesses in the Chicago Region: Long-term Implications for Job Creation and Neighborhood Stability

JUNE 30, 2014

Š 2016 Chicago United, Inc. To order copies or request permission to reproduce materials call 312.977.3060, write Chicago United, 300 East Randolph, Chicago, IL 60601, or go to www.chicago-united.org. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form by any means.

Introduction Chicago United has a 45-year history of advancing parity of economic opportunity for people of color in the Chicago area through strategic collaboration between large corporations, the nonprofit community, and minority business leaders.

In 2008, Chicago United launched an effort to strengthen the relationships between corporations headquartered or doing business in Chicago and minority owned firms. There is mutual benefit between these stakeholders when the regional economy grows as local minority owned businesses increase capacity, grow in scale, and become capable of facilitating larger contracts. This increase in scale enables these firms to bid competitively for contracts to support the global needs of multinational corporations and, as a result, hire more Chicagoans. This mutually beneficial strategy is implemented through Chicago United’s Five Forward Initiative™. To evaluate the vitality of Chicago’s minority owned business community, it is important to compare it to peers in other major cities.

This report presents an assessment of the status of Chicago as a center for minority business in comparison to other diverse metropolitan areas. Chicago United reviewed gross revenues and job creation as indicators in our assessment. This study is a companion to the analysis presented in the 2013 report from Chicago United on the economic impact of Five Forward.

This comparative analysis was conducted by Chicago United in June 2014. It clearly shows that there is a critical need for concentrated efforts to support local minority business enterprises (MBEs) as a means to increase the economic health and competitiveness of the Chicago region. Based on publicly available data, it appears that minority owned businesses in other cities are experiencing more growth than Chicago-area businesses, and they are creating more jobs.

The 2013 Five Forward report indicated that a more concentrated effort to do business with locally owned minority firms will accelerate growth and job creation.

Several corporations have made such a commitment through the pilot Chicago United Five Forward Initiative. The initiative is a model for economic growth that calls for increased spending by the region’s major corporations with local MBEs. Chicago United’s contention is that such increased spending with companies that are capable of supporting the large-scale needs of large enterprises will lead to job growth in local communities most in need of increased employment. The 2013 economic impact report, titled “Building a Stronger Regional Economy through the Utilization of Minority Business Enterprises,” provided evidence that the Five Forward pilot program, if expanded, can deliver on its model for increased job growth and minority business expansion.

In the following competitive analysis, we support the case for increased spending with Chicago based minority owned businesses. Chicago’s MBE community is not enjoying the same support and growth seen by their peers in competitive markets, and in the interest of the economic health of the region, we must reverse this trend. There are good business reasons to focus on expanding capacity and scale of minority owned firms. For example, according to World Business Chicago, the city seeks to increase its export profile, (i) and data provided by the Department of Commerce, Minority Business Development Agency show that minority owned enterprises are twice as likely to export as their majority counterparts (ii).

Job creation has long been a focus of Chicago’s business leadership, particularly for minority communities. Studies show when doing business in communities of color, minority owned firms tend to hire more people of color than similarly situated white-owned companies (iii). As these indicators show, a focus on growing local minority firms is both a business and social imperative for the region.

2

(i) A plan for Economic Growth and Jobs, World Business Chicago, March 2012 (ii) Minority owned firms lead the nation in exporting. Minority Business Development Agency April 2012 (iii Utilization of minority employees in small business, Timothy Bates. The review of Black Political Economy, Summer 1994

Creating This Competitive Analysis Chicago United conducted this analysis of the state of minority-owned businesses in similar metropolitan areas to better understand Chicago’s competitive position in commerce.

The analysis uses data from publicly available reports published by Black Enterprise and Hispanic Business magazines.

Black Enterprise (BE) publishes an annual listing of the top 100 (BE 100) Black-owned businesses in the country; and Hispanic Business publishes an annual listing of the top 500 Hispanic-owned businesses in the country. These reports provide rich data. Chicago United evaluated the data from a number of selected cities whose population, demographics, and concentration of Black and/or Hispanic businesses were similar to Chicago’s. We wanted to understand if Chicagobased MBEs were growing at rates and in concentration similar to firms in other cities.

Black Enterprise and Hispanic Business are frequently used resources for consistent data that is considered reliable and credible to illustrate the trajectory of these MBEs. The top businesses lists rank the largest African American and Hispanic businesses according to annual gross receipts.

Data were gathered from the Black Enterprise and Hispanic Business lists for the years 2005, 2010, and 2013.* Chicago United cannot certify that each publication captures data for all Black-owned or all Hispanic businesses; however, we can rely on their consistent processes for collecting and reporting the data, reflecting generally accepted information about the positions of the country’s largest populations of minority-owned businesses.

Eight markets were selected for their diverse populations and the presence of at least one minority firm on each of the two lists: Atlanta, Chicago, Dallas, Detroit, Houston, Los Angeles, Miami, and New York. The data gathered consisted of the listings from both magazines which contain company name, location, name of the CEO, number of employees and sales for each one of the three years studied. Lists produced by each of the two publications, in 2005, 2010 and 2013 were analyzed to understand the competitive position of the Chicago Market.

The objectives of this analysis were to determine the following for each period studied: •

Ranking: The rank firms from each market enter the list based on revenue, indicating the largest firm from each metropolitan area.

•

Market Concentration: The quantity of large MBEs in each market.

•

Employment: The number of jobs associated with the large MBEs listed in the BE100 and the top 100 of the Hispanic Business 500.

•

Competitive Standing: The overall strength of minority firms in Chicago compared to other markets through analysis of Chicago’s competitive position based on the concentration of large MBEs by market, aggregated reported revenues, and jobs created by those firms.

Based on the findings, there is a clear need for a call to action in Chicago’s business and civic communities.

* The 2013 Hispanic Business 500 was the last published report. Hispanic Business has ceased publishing the report.

3

Key Findings There are critical and startling findings based on the combined 2013 listings in Black Enterprise and Hispanic Business: •

The Chicago market ranked last of eight markets in large minority owned business revenues.

Los Angeles ranked first with a total of 8 minority firms earning $21.9 billion in revenues; Chicago ranked last with a total of 7 minority firms in Chicago earning a total of $637 million in revenues.

•

The Chicago market ranks second to last of 8 markets in job creation by large minority owned firms.

Miami ranked first with 25,356 jobs created by large minority owned firms; Chicago was in seventh place with 2,506 jobs created by large minority owned firms.

Large Black-owned Businesses in Chicago Chicago’s Black-owned Businesses Have Fallen Behind Examination of Black Enterprise (BE) magazine’s ranking of the top 100 largest Black-owned companies reveals a diminished standing for Chicago. Chicago’s largest Black-owned firm entered the 2005 BE 100 list in the 5th position with revenues of $498 million; however, by 2013 Chicago’s largest Black-owned firm entered the list in 23rd place with revenues of $174 million. This means that corporations looking for diverse partners that can meet the capacity requirements of their large contracting opportunities may look to Black-owned firms outside of Chicago to meet their needs.

Chicago’s Largest Black-owned Firms Listed in the BE 100

4

Company

Year

Rank

Revenue

Johnson Publishing Co.

2005

5

$498,224,000

Harpo, Inc.

2010

15

$315,000,000

Baldwin Richardson Foods Co.

2013

20

$174,900,000

Largest Black-owned Firms Listed in the BE 100 2005

2010

Metro Area

Staff

Metro Area

Staff

2

Houston

2

Houston

3

$645.3

3

300

$622.7

Chicago

1,699

11

New York

Rank

Revenues

2013

(In Millions)

Rank

1,300

$987.0

Detroit

1,100

4

Los Angeles

5

Revenues

Metro Area

Staff

Revenues

(In Millions)

Rank

200

$1,200.0

2

Los Angeles

1,800

$1,900.0

Detroit

1,514

$1,092.0

3

Detroit

2,068

$1,838.7

4

Los Angeles

1,372

$998.7

15

Atlanta

1,388

$248.4

$498.2

13

Atlanta

1,521

$316.0

20

Chicago

280

$174.9

180

$360.0

14

Chicago

459

$315.0

25

Houston

560

$129.5

(In Millions)

13

Atlanta

1,907

$304.2

32

Dallas

57

$120.0

33

Dallas

82

$90.0

18

Miami

274

$202.9

68

New York

245

$55.0

40

New York

225

$80.0

24

Dallas

300

$160.0

83

Miami

63

$40.2

97

Miami

104

$23.0

Employment generated by the listed Black-owned firms in Chicago fell a dramatic 83% during the measured period. In 2005, Chicago firms on the BE 100 list boasted 1699 employees; by 2013, that number fell to 280.

Revenue of Black-owned Firms Listed in the BE 100 $2,000.00

2005 Revenue (in Millions)

$1,800.00

2010 Revenue (in Millions) 2013 Revenue (in Millions)

$1,600.00 $1,400.00 $1,200.00 $1,000.00 $800.00 $600.00 $400.00 $200.00 $0

Atlanta

Chicago

Dallas

Detroit Houston Los Angeles Miami New York

5

Key Findings Chicago’s Largest Hispanic-owned firms listed in the Hispanic 500 Strong Growth in the Number of Businesses…But They Remain Relatively Small Although Hispanics are starting businesses in the Chicago market at a rapid rate, they remain small. Between 2002 and 2007, the number of Hispanic-owned businesses increased by 43 percent and the total number of people employed

by Hispanic-owned businesses increased by 28 percent. On average, Hispanic-owned firms earn $182,747 in business revenue compared with $1,370,694 for all other Illinois businesses. (iv)

Based on the information gathered from The Hispanic Business 500 list published by Hispanic Business, Chicago is declining in status as a leading market for Hispanic-owned firms. In 2005, the largest Chicago area Hispanic-owned firm entered the list in the 30th position with $185 million in revenues. By 2013, the largest Chicago area Hispanic firm entered the list at number 87 with revenues of $71 million.

Company

Year

Rank

Revenue

Heartland Food Corp./C.T.G. Investments

2005

30

$185,050,000

Gusto Packaging Co.

2010

25

$194,000,000

United Building Maintenance Inc.

2013

87

$71,080,000

Largest Hispanic-owned Firms Listed in Hispanic Business 2005

2010

Rank

Metro Area

Staff

1

Miami

4

Revenues

2013

Metro Area

Staff

Rank

Metro Area

Staff

1

Los Angeles

2,800

$3,700.0

1

Miami

5,500

$1,100.0

2

Miami

2,400

$703.0

12

Houston

98

$2,757.0

11

Detroit

400

$612.0

$375.5

16

Houston

156

$537.7

702

$456.9

14

Dallas

1,500

$365.0

21

Dallas

8,000

$390.0

3300

$185.1

16

Detroit

280

$319.0

25

New York

2000

$350.0

Dallas

350

$160.0

25

Chicago

550

$194.0

34

Atlanta

993

$234.6

42

Houston

70

$133.5

29

Atlanta

360

$185.0

55

Los Angeles

70

New York

250

600

$130.0

$84.3

88

New York

400

$59.0

87

Chicago

1,800

$71.1

(In Millions)

Rank

400

$2,125.0

Los Angeles

1299

6

Detroit

288

11

Atlanta

30

Chicago

36

Revenues (In Millions)

Revenues (In Millions)

$6,300.0

(iv) T he State of Hispanic-Owned Businesses in Illinois: Untapped Economic & Job Creation Potential, DePaul University’s Driehaus College of Business in partnership with the Illinois Hispanic Chamber of Commerce, 2013.

6

Employment generated by the listed Hispanic-owned firms fell by 45% during the measured period. In 2005, Chicago firms in the top 100 of the Hispanic Business listed 3300 employees by 2013 that number fell to 1800.

Revenue of the Top 100 Hispanic-owned Firms Listed in Hispanic Business $7,000.00

2005 Revenue (in Millions) 2010 Revenue (in Millions)

$6,000.00

2013 Revenue (in Millions)

$5,000.00 $4,000.00 $3,000.00 $2,000.00 $1,000.00 $0

Atlanta

Chicago

Dallas

Detroit Houston Los Angeles Miami New York

Concentration of Large Minority-Owned Firms by Metropolitan Areas Measurements of revenue of the largest minority firms on each of the lists are only one part of the equation. Chicago United also looked at the concentration of Black-owned and Hispanic-owned firms as an indicator of the minority business environment in each market.

Key Finding: Aggregating the largest Black-owned and Hispanic-owned firms in each of the 8 regions studied, the Chicago metropolitan area ranked last in revenues of large minority firms and second to the last in job creation.

When Black Enterprise began collecting data in 1973, Chicago was home to 13 of the top 100 Black-owned businesses on the list; New York had 10. Chicago firms on the BE list were concentrated at the lower end of revenues in 2013, and there were only 5 firms listed.

7

Key Findings Market Population Data It is useful to consider the market demographics when reviewing the profile of large minority firms. However, it is clear that size and concentration of MBEs do not necessarily correlate to the size of minority population. For example, despite the fact that there is a smaller African American population in Detroit and Atlanta than in Chicago, those metropolitan areas led the Black Enterprise 100 list with 12 and 7 firms respectively.

Metropolitan Area

Total Population

African American Population

Number of firms listed

Los Angeles

12,828,837

907,618

5

Houston

5,920,416

935,371

2

Dallas

6,426,214

961,871

3

Detroit

3,734,090

980,451

12

Miami

5,654,635

1,169,185

1

Chicago

9,537,289

1,721,578

5

Atlanta

5,286,728

1,772,569

7

New York

19,567,410

3,362,616

3

Source: 2010 U.S. Census; 2013 BE 100

In 2013, Hispanic Business listed only two Chicago area Hispanic firms in the top 100 compared to 24 in Miami, although Chicago’s Hispanic population was larger than Miami’s by 300,000 residents.

Metropolitan Area

Total Population

Hispanic Population

Number of firms listed

Detroit

3,734,090

167,569

4

Atlanta

5,286,728

530,000

3

Miami

5,654,635

1,610,000

24

Dallas

6,426,214

1,746,000

4

Chicago

9,537,289

1,934,000

2

Houston

5,920,416

2,044,000

5

New York

19,567,410

4,242,990

4

Los Angeles

12,828,837

5,723,999

3

Source: Pew Hispanic Center and 2010 U.S. Census; 2013 Hispanic 500

Revenue and Job Creation Trends Lag Among Chicago-Based MBEs Reviewing the Black Enterprise and Hispanic Business rankings together provides an indication of Chicago’s overall status as a business market of choice for the two largest minority populations.

8

Jobs and Revenues by Market: Combined Data Reported in Black Enterprise and Hispanic Business 2013 Aggregating the largest Black-owned and the largest Hispanic-owned firm in each region, the Chicago metropolitan area ranked last in revenues of large minority firms and second to the last in job creation.

Ranking Metropolitan Area by Revenues Metropolitan Area

Jobs

Revenues (In Millions)

Number of firms listed

Los Angeles

2,756

$21,935,530,000

8

Miami

25,356

$16,144,620,000

25

Detroit

7,447

$4,290,525,000

16

Houston

1,771

$1,709,724,000

7

Atlanta

7,303

$1,298,446,000

10

Dallas

13,547

$1,211,681,000

7

New York

6,887

$779,738,000

7

Chicago

2,506

$637,675,000

7

Ranking Metropolitan Area by Jobs Metropolitan Area

Jobs

Revenues (In Millions)

Number of firms listed

Miami

25,356

$16,144,620,000

25

Dallas

13,547

$1,211,681,000

7

Detroit

7,447

$4,290,525,000

16

Atlanta

7,303

$1,298,446,000

10

New York

6,887

$779,738,000

7

Los Angeles

2,756

$21,935,530,000

8

Chicago

2,506

$637,675,000

7

Houston

1,771

$1,709,724,000

7

9

Conclusion Creating Sustainable Minority Businesses of Scale in the Chicago Region Relative to other major metropolitan areas, the Chicago area is not building capacity of the large minority business enterprises that are most likely to create jobs in communities most plagued by poverty. There may be structural impediments or simply a lack of awareness that has diminished efforts to support local minority firms. Whatever the genesis of the decline, it is time to focus on the job creation in communities of color that is provided by minority owned employers.

Chicago has the public and private sector infrastructure as well as the ability to rally the corporate commitment required to do business with these firms. There are many MBEs that have the wherewithal and the infrastructure to support a corporate client’s requirements, and they should be considered strategic partners in building a stronger regional economy. With a committed effort to grow the capacity of these firms, they will grow in scale and be enabled to compete nationally.

The Five Forward Initiative™ is a successful model for driving growth among minority firms in Chicago. The pilot program results showed that the expenditures by Committed Corporations with their MBE partners generated a direct impact of $227.7 million. About $67.2 million of these direct expenditures were paid in wages and salaries. This led to the creation of 1,424 jobs. When the multiplier (2.376 for goods/services and 2.184 for jobs created) was calculated and applied, the total combined direct and indirect impact increased to $540.8 million in goods and services and 3,110 jobs created. The satisfaction surveys that are conducted on a semi-annual basis provide verification that the MBEs selected by corporate partners are performing and growing, indicating that both corporations and MBEs benefit from the relationships.

As Chicago’s population continues to grow in racial and ethnic diversity, it is incumbent upon the business community to ensure that the minority business community is seen as an asset worthy of investment. The investment will provide returns by delivering job creation and more stable communities.

Information Sources: www.emeraldinsight.com/journal https://www.flickr.com/photos/usnationalarchives/ Reference materials: 2005, 2010, and 2013 BE 100 List, Black Enterprise 2005, 2010, and 2013 Hispanic 500 list Hispanic Business 2013 University of Illinois study

10

A Corporate Membership Organization Chicago United’s unique three-tiered platform holistically advances a culture of inclusion and contributes to a more diverse business community. Members focus on increasing multiracial leadership in corporate governance and executive level management; developing a pipeline of future multiracial executive leaders; and cultivating multiracial business partnerships.

Chicago United serves as a unique thought partner in corporate inclusion strategy by providing: •

Exposure to national thought leaders in diversity and inclusion research and practice like Dr. Mazarhin Banaji, a scientist in the study of unconscious bias and its effects on decision making; Professor Scott Page, a leading consultant on market and organizational performance; and Dr. Martin Davison, a teacher, researcher, author, and global Fortune 500 business consultant.

•

Exclusive, high-level discussion among peers with shared values at CEO Council Strategy Sessions, Business Leaders of Color Strategy Sessions, Diversity Officer Roundtables, and Leaders Council Forums that provide confidential exploration of critical issues facing leaders responsible for developing corporate culture.

•

Advocacy in action through primary research and programs that drive systemic change. Signature programs and products include The Transformative Inclusion Member Series; The Corporate Diversity Profiles which feature an inclusion toolkit; Business Leaders of Color publications; The Five Forward Initiative™; BoardLink; The Bridge Awards; and The Chicago United Leadership Conference.

Members come to the Chicago United for unparalleled, honest, and candid discussions of race and ethnicity in business.

Some have earned national accolades for their efforts to promote multiracial leadership by leveraging best-in-class diversity and inclusion practices. Others may be implementing first-time programs and processes.

Regardless of where they are on the curve, every member contributes to the environment and learns ways to optimize their businesses through their participation. If you want to take part in these courageous discussions, then your company should become a member of Chicago United.

11

FIVE FORWARD COMMITTED COMPANIES FIRST COHORT: Advocate Health Care

City Colleges of Chicago

Microsoft

Aon

ComEd, An Exelon Company

Northern Trust

Aramark Healthcare

Ernst & Young LLP

Northwestern Medicine

Ariel Investments

GE Healthcare

Northstar Lottery Group, LLC

Baxter International Inc.

Kraft

Rush University Medical Center

Blue Cross Blue Shield of Illinois/ Health Care Service Corporation

Loop Capital

SDI (System Development.Integration LLC)

BMO Harris Bank N.A.

Macy’s

The University of Chicago Medicine

McDonald’s Corporation

University HealthSystem Consortium (UHC)

BP America Inc.

Mesirow Financial

THE CHICAGO UNITED FIVE FORWARD INITIATIVE™ IS PRODUCED IN PART THROUGH FUNDING PROVIDED BY:

THE WORK OF CHICAGO UNITED IS MADE POSSIBLE BY THE SUPPORT OF OUR MEMBERS: Abbott

Federal Reserve Bank of Chicago

Northwestern University

AbbVie

Financial Executives International

Odell Hicks & Company, LLC

Access Community Health Network

Franczek Radelet P.C.

Peoples Gas & North Shore Gas

Advocate Health Care

Golin

PNC Bank

Allstate

Grant Law, LLC

Prado & Renteria CPAs Prof. Corp.

Aon

Greeley and Hansen

Primera Engineers, Ltd.

Ariel Investments

Heidrick & Struggles

Pugh, Jones & Johnson, P.C.

Astellas US, LLC

Hispanic Housing Development Corporation

PwC LLP

Bank of America

Holland Capital Management LLC

Quarles & Brady LLP

Baxter International Inc.

The Hollins Group Inc.

Quintairos, Prieto, Wood & Boyer, P.A.

Blue Cross Blue Shield of Illinois/ Health Care Service Corporation

Hyatt Hotels Corporation

RGMA

BMO Harris Bank N.A.

Johnson, Blumberg & Associates, LLC

RME (Rubinos & Mesia Engineers, Inc.)

Katten Muchin Rosenman LLP

Roosevelt University

KPMG LLP

Rush University Medical Center

Krieg DeVault LLP

Sanchez Daniels & Hoffman LLP

Laner, Muchin, Ltd.

Seaway Bank and Trust Company

Loop Capital

Sidley Austin LLP

LSL Healthcare Inc.

Sodexo

Macy’s

Spencer Stuart

Manpower

Tampico Beverages, Inc.

McDonald’s Corporation

UBM Facility Services Inc.

Mesirow Financial

United Airlines

MillerCoors

The University of Chicago / University of Chicago Medicine

BP America Inc. Bryan Cave LLP Cabrera Capital Markets, LLC Carrington & Carrington, Ltd. Central City Productions, Inc. Chicago Botanic Garden The Chicago Community Trust Chicago Sun-Times The Chicago Urban League The Chicago Zoological Society CIVIQ Smartscapes ComEd, An Exelon Company Crain’s Chicago Business CSMI Cushman & Wakefield Deloitte Dinsmore & Shohl LLP Endow, Inc. Ernst & Young LLP

Mitchell & Titus, LLP Montenegro Morgan Stanley MZI Group Inc. Nicor Gas NJW Consulting Northern Trust Northstar Lottery Group Northwestern Medicine

University of Illinois at Chicago UPS USG Corporation Walgreens Washington, Pittman & McKeever, LLC Weber Shandwick Wedgeworth Business Communications Wynndalco Enterprises, LLC

300 East Randolph Street, Suite CL920, Chicago, IL 60601-5075 Phone: 312-977-3060 www.chicago-united.org