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EQUITY: How Chicago can do a better job diversifying corner offices. PAGE 14

CHICAGO BOOTH INSIGHTS: Use social psychology to help boost your small business. PAGE 8

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Curtain opens on hospital price gaps New disclosures show widely varying rates for the same procedures BY STEPHANIE GOLDBERG

A HEADY YEAR FOR LUXURY

Here’s something hospitals would prefer you didn’t know: The average price private insurers pay for a major hip replacement surgery at Northwestern Memorial Hospital in Streeterville is $39,897—32 percent more than the average price of the same procedure at Amita Health St. Joseph Hospital 3 miles away in Lakeview. This information became publicly available for the first time under a new law requiring hospitals to disclose the rates they negotiate with private insurers. Disclosures trickling out

from Chicago-area hospitals offer a glimpse at the wide range of prices charged for the same medical services. The law aims to increase market competition through price transparency, ultimately making health care more affordable. “The problem with health care is that there’s no market check on charges,” says Sara Rosenbaum, a health policy expert at George Washington University. Hospitals have long sought to keep the prices they negotiate with insurers private, arguing that disclosing such rates could harm competition and prevent more innovative payment models. But advocates say price secrecy contributes to rising health care costs. The price disclosures could See PRICE GAPS on Page 21

HOME SALES IN THE SUBURBS 5 letters hurting City home sales at $1 million or more dropped nearly 7 percent in 2020. this Chicago hotel In the suburbs, they were up 40 percent. CHICAGO-AREA BUYERS OF LUXURY HOMES showed a strong preference for the suburbs over the city in 2020, a year marked by pandemic and social unrest. In the city, home sales at $1 million or more dropped nearly 7 percent in 2020 from the year before, while in the suburbs, sales were up a whopping 40 percent. That’s according to year-end data compiled exclusively for Crain’s by Mary Jo Nathan, a Compass agent in the city, from the records of Midwest Real Estate Data. “It has more to do with people seeking space than (it does with) the big, bad city,” says Nathan, who lives in the North Center neighborhood. With

COVID shutdowns forcing everyone to stay home for most of the year, city residents were more likely to chafe because of living with smaller yards or no outdoor space but a balcony, and “in the suburbs they could get a big yard,” Nathan says. “Or you can get a yard in the city’s neighborhoods,” she says. “Just not downtown with a condo.” The data backs Nathan up. The drop in luxury sales in the city was largely because of the 2020 market’s loss of interest in condos. Sales of attached homes (condos and townhouses) at $1 million and up dropped more than 25 percent in 2020, according See LUXURY HOMES on Page 19

Can the riverside property flourish with Trump’s name on it?

CRAIN’S FILE PHOTO

BY DENNIS RODKIN

BY ALBY GALLUN After encouraging a MAGA horde to march on the U.S. Capitol, could Donald Trump now be the target of an insurrection at his own Chicago hotel? If the downtown hotel hasn’t suffered enough from the coronavirus, it’s now facing some

damage of the self-inflicted variety. The Trump brand, already polarizing during the Trump presidency, has become downright toxic as his tenure See TRUMP on Page 22

TECHNOLOGY

POLITICS

Facebook is taking aim at Cameo, the city’s hottest startup. PAGE 3

All, more or less, that you need to know about Illinois’ new House speaker. PAGE 6

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2 JANUARY 18, 2021 • CRAIN’S CHICAGO BUSINESS

The Illinois GOP has an opportunity—even now

office or remain the dominant figure in the GOP. It may take a while but, like an ice cube in the sun, he’ll melt away, caught alone in a tweet-less land. But if Trump is gone, his voters and their issues remain. To deny them, to ignore their calls and their concerns, is to beg for another Trump to rise up later. “I don’t believe in a cult of personality,” says former gubernatorial and congressional hopeful Jeanne Ives, a cultural and economic conservative by anyone’s measure. But while the GOP needs to “take the rhetoric down,” she adds, “people want someone who is fighting them. . . .People are DEMOCRATS ARE QUITE CAPABLE OF for tired of big government with no solutions.” SOILING THEIR OWN NEST. Now, one of the reasons through an existential identity crisis, why many voters consider governone whose results will affect all of us ment to be the enemy is because of the garbage some of their leaders and not just Republicans. from Fox News-land are feeding Trump is toast. History. Soon to leave the White House and, after the them. You know, the enablers, the invasion of Capitol Hill, without any folks who helped peddle the line that arguably the most investigated real prospect to again hold public all it the Adam Kinzinger conundrum. Ask top Illinois Republicans who can lead the party back to the glory days, the days when the party’s nominee could grab a U.S. Senate seat or defeat Gov. J.B. Pritzker, and they’ll drop Kinzinger’s name. And almost as quickly, they’ll openly wonder whether the southwest suburban congressman who voted to impeach President Donald Trump can win a GOP primary and make it to the general election. So it goes for a GOP that, both in Illinois and nationally, is going

and litigated presidential contest in American history has been rigged and unfairly decided. Like downstate U.S. Reps. Mike Bost and Mary Miller. Even as the Capitol was still reeling from the impact of a cop-battering, glass-breaking mob, they voted to give the mob what it wanted: a halt to certification of the presidential winner for no good reason beyond Trump’s heart’s desire. Or Todd Ricketts. He and his siblings own the Chicago Cubs, and some think his deep wallet might make Ricketts a candidate for statewide office or a major backer thereof sometime soon. But if Ricketts has any regrets for heading fundraising for Trump, he hasn’t voiced them. I’ve asked. Or the four other Republican congressmen from Illinois who couldn’t bring themselves to join Kinzinger and vote to hold the instigator in chief to account. That having been said, while some surely are flat-earthers and

GREG HINZ ON POLITICS

anti-vaxxers, 2.5 million Illinoisans voted for Trump. Their issues, be it tax rates, public safety or jobs, need to be addressed. They count. The truth is that, with Republicans in disarray, Illinois Democrats are utterly full of themselves, convinced in their gut they can do what they want because no one will call them to account. I’ll admit the Illinois House recently did finally retire Speaker Mike Madigan—after a decade of bad publicity and a growing series of federal indictments in the Commonwealth Edison scandal, that is. But those same legislative Democrats in that same legislative session also voted to boost Chicago firefighter pensions that the

city already can’t pay for, costing hundreds of millions of dollars. The Dems also voted to further boost the bargaining clout of a Chicago Teachers Union that literally wants to own both sides of the bargaining table. Why? Because the unions wanted it, that’s why. And rank-and-file Democratic lawmakers don’t have the guts to say no. What I’m saying is that Illinois Republicans have opportunity, even now. Democrats are quite capable of soiling their own nest. But to reach millions of voters in the middle, the GOP somehow has to cleanse a brand that now is horridly tarnished. Please, give me real choice on Election Day.

Data shows true ‘State of the State’ in Illinois

lthough COVID-19 caused real gross economic output to decline in the second quarter of last year by 30.6 percent, annualized, what’s concerning are the pre-pandemic cracks that left Illinois extremely vulnerable to a downturn and its most vulnerable citizens even worse off. Before COVID-19, Illinois suffered from persistently weak economic performance, a chronic exodus and greater racial inequality than other U.S. states. As Gov. J.B. Pritzker prepares to deliver his annual State of the State address later this month, he’s got to put some glue on these cracks. Otherwise, our economy will struggle through a painfully slow recovery. While it is easy to blame Illinois’ fiscal troubles on the pandemic, COVID-19 cannot explain why for the past two decades, Illinois’ economy grew by 1 percentage point less than the rest of the U.S. economy on average each year. If Illinois had just kept pace with the rest of the country, its economy would have grown by an additional $154 billion during that time period, or 17.4 percent of the state’s economy in 2019. Put another way, just keeping up with the U.S. average would have put an extra $2,021 in each worker’s pocket in 2019. Lower economic growth means lower growth in aggregate income, which matters greatly in our fiscally challenged state. Keeping up with the rest of the country would have been enough to fix Illinois’ chronic budget deficits, which have gone on for 20 years and counting. But the economy isn’t just about money, it is about real people. While all Illinoisans were harmed relative to other Americans, the biggest losers in Illinois’ persistently weak economy are Black men and women. Because

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Illinois has failed to create enough new jobs, people here experience longer periods of unemployment, especially Black Illinoisans who are historically fired first at the first sign of economic weakness. Black families for decades have been disproportionately harmed by public policy mistakes. COVID-19 only worsened racial disparities. While the U.S. white-black employment gap stood at 4.7 percentage points before COVID-19, Illinois non-Hispanic Blacks were on average 9 percentage points less likely to be employed than similar whites, data from the U.S. Census’ monthly Current Population Survey shows. That racial gap widened by 3 percentage points during the COVID-19 recession in Illinois. What is even more shocking is Black Illinoisans are less likely to have a job than other Black Americans despite being younger, more often college educated and more likely to live in cities near jobs— all factors that should put them above their U.S. peers. The arrival of COVID-19 meant Illinois’ Black families suffered even more than Black Americans in other states, and the state was too weak to help. Despite record tax hikes, two decades of rising pension and debt service costs left Illinois with fewer and less reliable public services. They also eroded Illinois’ safety net. Government pension spending skyrocketed 501 percent as spending on child protection, state police and college aid for low-income students fell by one-third since 2000. Even state general assistance was eliminated in 2011 despite the state imposing a record income tax hike that year. Economic growth fell as the delivery of key public services deteriorated in order to keep up with costly debt.

A win against COVID-19 will help Illinois’ struggling economy, but it will not undo the damage from decades of mismanagement and corruption in Springfield. Illinois can solve its fiscal problems, protect core services, improve outcomes for all Illinoisans while also starting to repair decades of persistent racial inequality. A constitutional pension amendment would free up billions to repair injustice and lower taxes for job creators. In addition, a move to consolidate school districts—not schools—would reduce unnecessary administra-

ORPHE DIVOUNGUY ON THE ECONOMY

tive spending. If districts served more schools and more students, more education dollars could flow to classrooms that help disadvantaged kids get ahead. And if we want any real reforms to emerge, Springfield has to change its culture of corruption by instituting ethics reform and changing the way the Legislature

does business. During the State of the State, Pritzker needs to bring these reforms as his economic glue pot. Just chasing a bigger money pot will only widen the cracks. Crain’s contributor Orphe Divounguy is chief economist at the Illinois Policy Institute.

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CRAIN’S CHICAGO BUSINESS • JANUARY 18, 2021 3

Samantha Lee is co-founder of Hopewell Brewing.

CRAFT BREWERS:

Observers worry the state’s craft beer businesses, which generated almost $3.4 billion in economic impact in 2019, could be reaching the edge of a cliff BY ALLY MAROTTI

THE OWNERS OF SKELETON KEY BREWERY in Woodridge are working on a beer called “Plan for Everything.” It is inspired, of course, by 2020. Most of the suburban brewery’s revenue before the pandemic came from its taproom, says co-owner Emily Slayton. Now, besides a few intermittent pints served on the patio, all of Skeleton Key’s beer is canned and sold for at-home consumption. Though it is making about the same amount of beer, the brewery is losing money, Slayton says. Profit mar-

Chicago Mayor Lori Lightfoot emerged from the Illinois General Assembly’s abbreviated session bruised by new legislation that will worsen the city’s financial woes and weaken her hand with public-sector unions. One bill passed in the session sweetens Chicago firefighter pensions, adding hundreds of millions of dollars to the city’s pension tab. Another gives the Chicago Teachers Union, already one of the sharpest thorns in the mayor’s side, bargaining powers

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See BEER on Page 20

Silicon Valley giant is developing a competitor to Cameo BY JOHN PLETZ

NEWSCOM

BY A.D. QUIG

it lost in 1995. And leaders in the Illinois Senate are committed to taking away her power to appoint school board members even though the effort is delayed for now. City Hall and Springfield insiders cite various factors for the setbacks, including a shortened, five-day session that gave Lightfoot little lobbying time, legislators’ focus on passing a suite of Legislative Black Caucus bills, and the chaos of replacing longtime House Speaker Michael Madigan. Still, the defeats highlight Lightfoot’s lack of the deep political relationships and leverage that helped her predecessors get their way in Springfield. For example, Rahm Emanuel staved off the broader CTU negotiating power and elected school board

gins are smaller on canned beer than draft. Such is the case around Illinois, home to 286 of the nation’s roughly 8,275 craft breweries. Bars and restaurants have been closed for indoor dining since October, and the reopening of concert and sports venues is not yet on the radar. For craft breweries that sold beer to those establishments and have seen their own taprooms close, the

Facebook takes aim at local tech star

Mayor Lightfoot’s bad trip in Springfield Lacking Statehouse connections, she suffers stinging defeats

JOHN R. BOEHM

‘WE CAN’T KEEP OPERATING THIS WAY’

Mayor Lori Lightfoot bills for years because his friend, then-Senate President John Cullerton, didn’t call them for votes. Some observers say Lightfoot might not have suffered such quick defeats on the firefighter pension and CTU bargaining bills if she had more legislators watching out for Chicago’s interests. See LIGHTFOOT on Page 21

Facebook is coming after Chicago’s hottest startup. Cameo built a fast-growing business on the novel idea of connecting celebrities and their fans using video. Success like that attracts attention, and not always in a good way. Social media goliath Facebook is working on a product called “Super,” which would let celebrities and others earn money by hosting live video events that fans could pay to participate in, Bloomberg News recently reported. Cameo has a similar interactive video-chat product, the follow-up to its original offering that allows people to order custom

video greetings from celebrities. Facebook suddenly poses the most ominous potential challenge Cameo has faced since its founding four years ago. With vast reach and bottomless resources, the world’s dominant social media platform has $55 billion in cash, $100 billion in annual revenue and a user base equal to one-third of humanity. “When Facebook likes what your company is doing, you face two possible fates: Facebook buys you for less than it would cost them to reproduce what you do, or Facebook comes after you, with the advantages of its user base, engineering might See CAMEO on Page 19

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4 JANUARY 18, 2021 • CRAIN’S CHICAGO BUSINESS

JOE CAHILL

CHICAGO COMES BACK

ON BUSINESS

McDonald’s enters the fast-food chicken fray with something to prove. A few things, actually. The three chicken sandwiches Chicago-based McDonald’s plans to launch next month are the burger giant’s chance to show it can innovate successfully, counter fast-growing rivals and improve relations with discontented franchisees. More fundamentally, the new offerings will test McDonald’s ability to compete in a market segment where taste matters more than its traditional strengths of price and convenience. “It’s a very important initiative,” says restaurant industry consultant Bob Goldin of Pentallect. “They’re really at a competitive disadvantage without a premium chicken sandwich.” Chicken is the hottest thing in fast food these days, surging past other fare as customers seek healthier options that taste good, too. Same-store sales of chicken rose 17.9 percent at the largest chains during the second quarter of 2020, according to data from restaurant consultancy Aaron Allen & Associates. Burgers, a McDonald’s staple, sagged 7.5 percent. Driving demand are a pair of chains that didn’t register much as McDonald’s competitors until recently. Popeyes Louisiana Kitchen posted 20 percent same-store sales growth in the September quarter, thanks to chicken sandwiches so popular that customers line up for blocks to get them. Chicken specialist Chick-fil-A climbed to No. 3 in the fast-food ranks on compound annual growth of 16 percent between 2009 and 2019. A fair amount of their growth comes at McDonald’s expense. Franchisees fume as customers bypass their stores to get better-tasting chicken sandwiches elsewhere. An independent group of McDonald’s restaurant owners demanded that the company give them a chicken sandwich on par with offerings from Chick-fil-A and Popeyes. “It’s important for competitive reasons, and also for franchisees, who have been asking for it for some time,” says R.J. Hottovy, director of financial analytics at Aaron Allen. They’ll get it on Feb. 24, when three new chicken sandwiches debut at McDonald’s restaurants across the U.S. Customers will be able to choose a Crispy Chicken Sandwich, Spicy Chicken Sandwich or Deluxe Chicken Sandwich. McDonald’s hasn’t disclosed pricing, but these are premium products with toasted, buttered potato rolls, crinkle-cut pickles and other high-end accoutrements. McDonald’s new offerings come nearly two years after chicken sandwiches burst into public

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consciousness in the summer of 2019. The lag allowed Chick-fil-A and Popeyes to build big leads, while an array of other competitors took notice and developed premium chicken sandwiches. McDonald’s offerings will compete not only with the category leaders but also with new chicken sandwiches from Wendy’s, KFC, Shake Shack, Church’s, Whataburger and Taco Bell. Catch-up is a difficult game in consumer markets, as is differentiating yourself from a herd of competitors selling similar products. For McDonald’s, the challenge is compounded by its dismal track record with higher-end fare. McDonald’s has struggled in pricier fast-food segments, where competition revolves around taste and perceived quality, not speedy service and affordability. Despite its reputation as a burger specialist, McDonald’s stumbled in attempts to match offerings from “better burger” chains, abandoning the Angus Burger and Signature Crafted burger lines when they failed to catch on. A McDonald’s spokesman expresses confidence in the new chicken sandwiches, noting rave reviews in market testing over the past year. “We feel we have developed a great sandwich,” he says. “It performed extremely well in our test markets (of Houston and Knoxville, Tenn.) last year. He adds that McDonald’s is no stranger to chicken, with popular offerings ranging from Chicken McNuggets to a lower-priced chicken sandwich and breakfast items with chicken. Higher culinary standards apply in the premium chicken sandwich segment. “The competitive bar is high,” Goldin says. “They’re going to have to hit the mark quality-wise.” If McDonald’s hits that mark, its operational advantages could set it apart. With 14,000 U.S. outlets, almost all equipped with drive-thru lanes, and a bottomless marketing budget, McDonald’s has tremendous drawing power. Those assets have fueled growth during the pandemic, as McDonald’s focused on a core menu of highly popular items to speed up drive-thru service while COVID restrictions hurt rivals dependent on in-store dining. When the pandemic abates and restrictions ease, McDonald’s pre-COVID struggles with slumping customer traffic could return. Popular premium chicken sandwiches might provide a new growth engine. “McDonald’s has attracted more customers during the pandemic,” Hottovy says. “They will need something to keep them coming back.”

Set your intentions for the rebuilding year ahead

GETTY IMAGES

Playing chicken at McDonald’s

2020 taught us to expect surprises. ‘If you’re not flexible this year, you will lose.’ BY EMILY DRAKE AND TODD CONNOR Chicago Comes Back is a weekly series on ChicagoBusiness.com providing leadership insights to help your business move forward, written by leadership consultants Emily Drake and Todd Connor. Drake and Connor facilitate Crain’s Leadership Academy. Drake is a licensed therapist, owner of the Collective Academy and a leadership coach. Connor is the founder of Bunker Labs and the Collective Academy and is also a leadership consultant. Check out previous installments at ChicagoBusiness.com/comesback. EMILY DRAKE: Ah, the new year. A chance to reflect, take stock and mark an occasion. As many leaders have come back online, they’ve shared feelings of gratitude, relief and determination with me. I’m also hearing from people who were laid off, promoted, are starting in new roles within new organizations or even deciding this is the year to launch that business. So people’s experiences run the gamut, of course, but no matter who I talk to, I’m reminded of the importance for leaders to reflect and predict. If anything about 2020 taught us, it’s that surprises can be expected. Coasting or hoping someone else will define our reality for us no longer seems tenable. Our role in this moment is to have a point of view for how the year may unfold for us personally and professionally, and then be prepared for disruption. TODD CONNOR: Expect the unexpected, we might say. We shared a reflection on 2020 that mirrors our first intention for the year: Work matters, treat it accordingly. Work has long been the epicenter of social capital for so many, and it’s also where we derive our worth, connection, place in society and value, in large part. Anthropologist James Suzman’s new book “Work” gets at exactly this history and challenges how we work now. In our “comeback state,” it’s even more incumbent upon employers to consider not just employee engagement, but also to consider and prioritize employee well-being. Throw out the old playbook of surveys, and get ready to understand the individuals in front of you—not just the aggre-

gate data. Employee engagement, we have argued, is the lagging indicator of employee wellness, leadership vision and a clear, organized and well-communicated organizational strategy. ED: Right. And to the extent leaders feel they faltered in leading and supporting their workforces in 2020, they can be forgiven and take the opportunity to do it more intentionally and better. Surveys and data will give you the “what” and even the “why” of the current state of culture and connection in your organization, but the “how”—How do we heal? How do we inspire? How do we motivate?—is a more effortful experience, and one that has to be engaged over time. A second intention, then, for the year is this: Invest in the individual. For me, this is less about making sure your leaders have coaches, professional development training and HR benefits to problem-solve and improve their skills, and is more about shifting an organization’s thinking to caring about each employee and building structural ways to do that. From review processes—how we define productivity?—to mental and emotional health services—do your employees have what they need? How do you know? I think 2021 will usher in an era of employee-designed solutions for what they personally need. TC: I think before, you could argue, “That’s not my job to handle a team member’s mental health needs.” And now, it absolutely is. This will be the difference between engaging a diverse, strong workforce and

risking slipping into obsolescence. Well-being is now a core competency. With that in mind, I like another intention for this year: Stay open, be flexible. According to LeanIn.org’s “2020 Women in the Workplace” report, 90 percent of companies think more work will be done remotely after COVID-19. We’re not going back to work in a physical sense, so understanding that flexibility with yourself, with your team and with your clients is going to remain key to success. ED: I think it’s just that powerful: If you’re not flexible this year, you will lose. I know so many leaders who are uncomfortable, all the time, unsure of how to motivate themselves, much less their employees. To them, I say, “Good! You’re doing it right.” Resilience is present and accounted for alongside the discomfort, fumbling and mistakes. The last intention I’d offer is: Make it manageable. We regularly say “go for it” when we’re asked by individuals whether they should start a business, or begin to build, or ask for the budget to launch something new. I think that will always be our drumbeat, but I’d add that leaders should mind the burnout and pace yourself. Have allies in your corner who are encouraging you to go faster on some things and quit others. Get clarity by getting a community involved. TC: Community is the single most-powerful thing you can create this year. Whether it’s joining a mastermind, or group coaching, or building your own personal advisory board, who you are surrounded by this year needs to be the optimists (who are also realists) and individuals you admire for their resiliency. Be intentional about reaching out to them, with real critical questions about what will work and what won’t as you lead into the next year of recovery and rebuilding. Make the time for connections so your comeback story continues in 2021 and for the long haul.

1/15/21 3:54 PM

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All, more or less, that you need to know about Illinois’ new speaker Welch, the man taking over for Madigan in the House, possesses a near-perfect voting record—Illinois-style

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Rep. Emanuel “Chris” Welch, the new and first African American speaker of the Illinois House, has a near-perfect voting record— Illinois-style. After an unsuccessful try in 2006, he prevailed in the 2012 Democratic primary for a House seat with just under 40 percent of the vote. Since then, with one exception, he has prevailed in each primary and general election unopposed, taking 100 percent of the ballots. The Hillside lawyer, 49, was a beneficiary of the recruiting, vote-getting and gerrymandering machine run statewide by former House Speaker Michael Madigan for nearly four decades before Welch helped decapitate it last week. The House’s Black Caucus, which includes Welch, was behind Madigan’s campaign for a record 19th term as speaker—that is, until it wasn’t. As chair of a special Illinois House panel investigating Madigan’s role in the Commonwealth Edison bribery scandal, Welch late last year drew flak for declining to subpoena witnesses. Madigan has admitted no wrongdoing and hasn’t been charged, and the panel assigned no blame. The proceedings nevertheless sufficed to trigger Madigan’s downfall and Welch’s succession. “My impression is, that committee served its purposes for the Republicans,” says veteran Springfield observer Charles N. Wheeler III. Welch “did his best to stall and muddy the waters, but (Minority Leader Jim) Durkin got what he was looking for: the publicity going forward.” Now, though, Republican legislators have lost the foil they had in Madigan for so many years.

CHANGED REALITY

For listing opportunities, contact Debora Stein at dstein@crain.com or submit directly to

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Welch isn’t likely to retain the same tightfisted control of the chamber as Madigan did over the last 15 years, with the ability to single-handedly derail bills and enrage Republicans. No one would. Wheeler, a former newspaper reporter and retired chief of the public affairs reporting program at the University of Illinois-Springfield, points to the Jan. 12 passage of a police reform bill that includes the eventual elimination of cash bail as a harbinger of a changed reality under Welch’s reign. Welch mostly recently made news beyond his district, which stretches into west suburban River Forest and Forest Park, for opposition to the unexpected closing in 2019 of Westlake Hospital in Melrose Park. He was on the hospital’s board and accused its new owner, Pipeline Health, of deceiving the village and state during the acquisition process. (The hospital was

WTTW NEWS

BY STEVEN R. STRAHLER

State Rep. Emanuel “Chris” Welch, D-Hillside, takes the oath of office to become speaker of the Illinois House. reopened last year to treat COVID patients.) Welch has chaired the executive and higher-education committees in the House and pushed to diversify boards of publicly held corporations, sponsoring legislation to require Illinois firms to disclose board composition. He has pushed for more racial diversity at financial institutions, Medicaid providers and university vendors. When the Big Ten flipflopped last summer and approved a truncated football season amid the pandemic, Welch deemed the decision “unconscionable.” The Proviso West grad served on the board of Proviso Township High Schools for 12 years, 10 as chairman—just the kind of grooming for higher office that the Madigan team looks for. He’s a graduate of Northwestern University and John Marshall Law School. Welch has represented municipal and school clients, first at Sanchez Daniels and currently at Ancel Glink. On its website, he cites successful defenses for the city of Chicago, the town of Cicero and the city of Blue Island against allegations including excessive use of force, wrongful death and civil rights violations. Welch’s wife, ShawnTe Raines, also is a partner at Ancel Glink, specializing in municipal law after handling personal injury cases. The Chicago Tribune reported that police were called to Welch’s home in 2002 by an ex-girlfriend who alleged he repeatedly slammed her head into a kitchen countertop. She did not press charges, the newspaper reported, quoting him as saying, “People mature, they look back and would do things differently, handle situations differently.” Welch in a statement blamed Republicans for the matter now coming to light, the Tribune said: “At no other occasion have these events been brought up and I firmly believe my Republican colleagues are threatened by the potential growth of my profile.” Welch’s office did not respond to inquiries from Crain’s.

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Psychology can help set the stage for business success While many employees might thrive in certain circumstances, you can’t force others into the same box. But you can use the environment you create to help them, and your firm, succeed. people themselves. Under Lewin’s equation, that leaves the environment, which is something managers have at least some control over. If you want to change someone’s behavior, including your own, your best bet is to go to work changing the circumstances.

CREATING STRONG ENVIRONMENTS

Social psychologists focus on the external circumstances that affect the behavior of individuals. They talk about creating strong environments that help to move people in the direction of their goals, which is what I teach my executive MBA students in classrooms much like the one described above. So, how do you do it? Business executives decide who is on a given team, the roles they play, how they are compensated and the resources at their disposal. Your own behavior is a big part of the situation. If you want to change the behavior of others, start with your own actions. As an example, think about how you give team

Linda E. Ginzel is a clinical professor of managerial psychology at the University of Chicago Booth School of Business.

Advice for small businesses and entrepreneurs in partnership with the University of Chicago Booth School of Business.

members feedback since that will shape how they feel about coming to you with suggestions or questions in the future. Consider an underachieving employee. How are you treating him compared to his better-performing co-workers? Perhaps your own behavior is inhibiting

2021

ISTOCK

emember the traditional classrooms you’ve learned in throughout your life. What do they look like and have in common? You’re probably picturing a large space with few distractions, desks facing the front of the room and all eyes on the teacher. Most students are taking notes, the teacher attempts a joke and students attempt to laugh. The people in the room are a diverse set of individuals and yet they all behave exactly the same way. They are all engaging in classroom behavior. The first educators to create this environment didn’t know it at the time, but they were thinking like social psychologists. In particular, they were following what would later be the advice of the father of the discipline, Kurt Lewin, who said that behavior is a function of a person and their environment. Business executives and teachers have similar goals for obtaining certain desired behaviors from employees and pupils, but there is little they can do to change the

ing Leadership, can give you some of the tools I teach in my classes. There are also scores of podcasts, TED Talks, books and resources by other social psychologists. My advice: Remember that while many employees might thrive under certain circumstances, you can’t make others fit into the same box. You can, however, use the environment you create to help them, and your company, succeed.

his performance. If so, maybe you should consider the factors you could change that would improve his output. Maybe he thrives under different types of deadlines or needs more resources. Try making changes to his environment and see if you get better results. Now that you have the basics, there are many opportunities to learn more about how to think like a social psychologist in the business world. My workbook, Choos-

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Deadline extended to Jan. 22 Crain’s 2021 Notable Health Care Heroes feature will honor both individuals and teams who have been on the front lines of the COVID-19 pandemic. We will recognize health care workers who are selflessly caring for others and making a significant impact during this time of crisis.

Nominate at ChicagoBusiness.com/HealthCareHeroes Nomination deadline is Friday, Jan. 22. Section publishes Mar. 8. To view Crain’s Notable Executives nomination programs, visit chicagobusiness.com/notablenoms.

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10 JANUARY 18, 2021 • CRAIN’S CHICAGO BUSINESS

EDITORIAL

o one reading this needs us to fully recap the many ways Illinois found itself saddled with the most underfunded public employee pensions in the nation. We all know the fundamentals: We promised more than we were willing to pay for, we let our elected officials make a habit of borrowing against these longterm funds in order to enjoy short-term goodies, etc., etc. It’s a depressing tale of serial mismanagement by pols of both parties, a slow-moving train wreck that first started going off the rails as far back as the Thompson administration. What’s been true all along, though it never seems to get the attention it should, is the thing that’s been slowly inflating our overall pension costs like an overstretched balloon. It’s the builtin annual elevator in most of these contracts—a guarantee that the pensioner’s payout will rise by a fixed percentage each year. People commonly refer to these elevators as COLAs—cost-of-living adjustments—but in a world where inflation has consistently been running in the 1 percent range for years, a 3 percent guaranteed annual bump-up in pay can’t rightly be called a COLA. Nevertheless, COLAs have caused our pension costs at the city and state level to spiral out of control. The state of Illinois’ unfunded pension liability, by the way, now stands at more than $141 billion and counting. For the city of Chicago’s pension funds, that un-

annual COLA in retirement. Currently, firefighters born after that date get 1.5 percent. The mayor—who, it should be noted, was unable to persuade a single Chicago legislator to vote against the measure— calculates that the COLA change will cost her constituents $18 million to $30 million per year. Given his tendency to behave as public employee unions expect him to, it’s more than likely Pritzker will sign this bill into law. Never mind that the city, financially

CRAIN’S ILLUSTRATION WITH NEWSCOM, AP IMAGES

Putting out a fire with gasoline

funded liability is north of $30 billion. And thanks to a bill headed for Gov. J.B. Pritzker’s desk, the situation is about to get that much worse for Chicagoans. Over the strenuous objections of Chicago Mayor Lori Lightfoot, the Illinois Senate voted Jan. 11 to raise retirement

perks for 2,200 Chicago firefighters by ratcheting up their COLAs—a move that is expected to burden city taxpayers with an additional $850 million in costs by 2055. The bill lifts a restriction that prohibits firefighters born after Jan. 1, 1966, from collecting a 3 percent

IN ALL THE WAYS THAT REALLY MATTER, NOTHING MUCH HAS CHANGED IN SPRINGFIELD. strained even before the COVID calamity, is now reeling as the pandemic slows the inflow of tax revenue. Chicago will pick up the tab, whether it can afford it or not. And there you have it—a set piece that summarizes rather neatly our current predicament: A Chicago mayor whose clout in the Statehouse is next to zero, union chiefs who want what they want and have enough legislators in their sway to get it, and a governor who will do their bidding no matter the cost. We may have a new speaker presiding over our House of Representatives, but in all the ways that really matter, nothing much has changed in Springfield.

YOUR VIEW

Low-wage workers deserve more COVID protections

and distribution hub in the s Illinois grapples with country—warehousing and over a million COVID-19 manufacturing companies cases, the path forward are no strangers to using can feel hopeless. But a new temporary staffing agencies report shows how our public to shirk accountability. leaders can work together to Subcontracted workers, help turn the tide with equitawho are disproportionately ble recovery for our most vulBlack and Latinx, are espenerable workers. cially vulnerable to exploitaSince the pandemic’s ontion, and have been underset, low-wage workers have Sophia Zaman is represented in data collection produced, packaged and executive director on the pandemic so far. distributed food and other of Raise the Floor A year into the pandemic, supplies to enable the rest Alliance, a Chicago nearly half of workers haven’t of us to stay at home—yet nonprofit and legal they are often treated as dis- clinic advocating for received training on how to work safely during this crisis. posable. New data confirms low-wage workers. Some employers even refuse to that conditions in Illinois’ factories and warehouses are abys- notify workers of infections in their facility. To make matters worse, 85 percent mal; 65 percent of workers contracted COVID-19 or know a co-worker who of workers said that when colleagues did, and 11 percent know a co-worker raised concerns about COVID safety their employer either didn’t respond to who died from the virus. As an advocate for dignified work, complaints, retaliated against those who I’ve seen time and again how low-wage spoke up or took action that didn’t imworkers are mistreated. In Illinois—the prove the situation. That is inexcusable. Fortunately, the arrival of the second-largest production, logistics

COVID-19 vaccine means state leaders and safety to minimize future crises. have an opportunity to enact an equi- We must rethink our at-will employtable recovery plan. For every Illinois- ment paradigm, which allows workers an to be COVID-free, public health of- to be fired for any reason, no reason ficials must reckon with our country’s or bad reason—including when they try to improve workplace safety. When long legacy of medical racism. From experimentation on enslaved our complaint-driven system relies on people to forced sterilization of wom- worker testimony to facilitate enforceen of color, this tragic history embodies ment actions, workers must be emthe current mistrust and apprehension powered to proactively address unsafe of the vaccine by communities of color. Public health agencies can OUR LEADERS CAN PROTECT US ALL BY partner with trusted organi- CENTERING ESSENTIAL LOW-WAGE WORKERS zations in Black and Latinx communities to equip them WITH A COMPREHENSIVE RECOVERY PLAN. with the latest guidelines and support their efforts to make their conditions—free from retaliation. As communities safer. For instance, worker such, elected leaders must pass policies centers can help reach the state’s 680,000 like universal just cause and formalize temporary workers who’ve kept our worker health and safety councils to country running during the pandemic monitor compliance with public health but may be skeptical of a government-led guidelines. Our leaders can protect us all by cenpublic health vaccination program. But vaccine access is not enough. We tering essential low-wage workers with must also empower workers to partici- a comprehensive recovery plan. The pate in decisions that affect their health safety of the entire state is at stake.

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Chicago Business, 150 N. Michigan Ave., Chicago, IL 60601, or email us at letters@chicagobusiness.com. Please include your full name, the city from which you’re writing and a phone number for fact-checking purposes.

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CRAIN’S CHICAGO BUSINESS • JANUARY 18, 2021 11

LETTERS TO THE EDITOR Not so simple Although the facts would seem to be quite simple, promoters of an Obama Presidential Center remain blind to the reality that if all the hypothetical community benefits promised to result from building it were true, it would be even more true if was built in an underserved South Side neighborhood and where it would not be at the expense of cultural and environmental corruption of the 127-year-old Olmsted treasure of Jackson Park (“Why 2021 looks like an important year for the Obama Center,” Jan. 8). In this time of climate change and coronavirus recession, it would seem to be social and environmental lunacy to consider the unnecessary clear-cutting of nearly 1,000 mature trees in the public park for no bet-

ter reason than to create space to build an oppressive, monumental office building and related structures to serve selfish private interests. The Protect Our Parks lawsuit is working its way up to the U.S. Supreme Court, and additional legal actions are in the works. That’s what due process and public trust are all about. Don’t be fooled by stories and editorials to the contrary. HERB CAPLAN President, Protect Our Parks

Enough hurdles for small biz As if operating a retail store on the Near North Side of Chicago isn’t difficult enough, let’s raise the sales tax (“City Hall fiddles as

Mag Mile melts away,” Dec. 15)! As a former retail owner just off Michigan Avenue and current owner of CRC Wholesale Redefined, I can assure the Magnificent Mile Association that increasing the sales tax could be the final nail in the coffin for retail in Chicago. Instead of raising the sales tax I propose: Lower the sales tax to a competitive level, to give people one less reason to shop online. Start a PR campaign educating people about the importance of shopping local. Have a police presence on Michigan Avenue that is less ominous; flashing blue lights at all hours of the day and night feels like a city under siege. Make sure our lakefront and tourist areas remain a safe haven for all citizens and trav-

elers. Without tourism income, our financial crises will grow exponentially. The citizens of Chicago need to return to downtown and Michigan Avenue and support local small businesses, as well as the national and international brick-and-mortar stores that contribute to the vibrancy of our city. We need to show the world we are picking up the pieces, thriving and coming back strong. The city of Chicago needs to step up its efforts to reassure us they will not tolerate criminal behavior. Let’s make this past year a blip on the screen, not a defining moment that changes the course of this city’s history. Let’s change the narrative. MARY GARVEY BEDA River North

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12 JANUARY 18, 2021 • CRAIN’S CHICAGO BUSINESS

COVID pushes downtown office vacancy to record high It’s the fallout from new buildings opening, virtually no leasing activity, companies trying to shed space amid the pandemic and questions over remote work’s future COVID-19’s assault on the downtown office market has reached a new brutal milestone for landlords. Fueled by the completion of four new office buildings and a spate of companies trying to shed space on the sublease market, downtown office vacancy was 18 percent at the end of 2020, according to real estate services firm CBRE. That’s the highest in the brokerage’s 14 years of available data, surpassing the 17.3 percent peak in summer 2010 following the financial crisis. The recent surge from 15.4 percent at the end of the third quarter illustrates the scope of the fallout from a crisis that could permanently change the way many people work and the space they need to do it. Ten months into a pandemic that has forced many companies to figure out how to operate with remote workers, some have found certain people to be just as productive working from home. It’s still unclear what role remote work will play once COVID subsides and how it will impact office demand, but a growing number of tenants have listed some or all of their space on the secondary market—an indication they won’t need as much traditional office space as they used to. That makes 2021 a great time to be a company searching for space to work in the city. And a potentially tough time to be a landlord with space to lease. “There’s no shock and awe in the numbers here,” says veteran leasing broker Mike Kazmierczak, an executive vice president at CBRE who works on properties at 350 N. Orleans St. and 353 N. Clark St., among others. “The market almost came to a halt, and without the wheels turning not much happened other than things that hap-

pen whether the wheels are turning or not, like buildings delivering and leases starting.”

SUBLEASE MARKET

That lack of demand combined with new supply to drive up vacancy during the fourth quarter. The new 1.5 million-square-foot Bank of America Tower at 110 N. Wacker Drive was completed, along with a new office building in the Fulton Market District at 167 N. Green St. and two more entirely vacant ones at 215 N. Peoria St. and at 318 N. Carpenter St. Net absorption, meanwhile, which measures the change in the amount of leased and occupied space compared with the prior period, fell by nearly 10,000 square feet—the first quarter of negative net absorption in 3½ years, according to CBRE. That figure may also look worse in the near future, as it accounted for Bank of America moving into more than 500,000 square feet at its new namesake tower but did not include its

COSTAR GROUP

BY DANNY ECKER

A new office building at 215 N. Peoria St. opened in late 2020 without any tenants.

bution of COVID-19 vaccines, as more companies are starting to make concrete plans about returning to offices in full force. “The gears are turning again,” he says. It’s still too early to say when new leases will start getting signed again and how much space companies will “WHEN THE ANSWERS BECOME CLEAR need compared with before, Kazmierczak TO USERS, THEY’RE GOING TO COME says. But he notes there are companies BACK TO THE MARKET.” whose leases expired Mike Kazmierczak, a CBRE vice president since the pandemic began and have no offices at the moment, moving out from around 800,000 but will sign deals for new space this year as they get back to more square feet at 135 S. LaSalle St. The office development train in-person working. “They know there’s a future still has more cargo on the way, including BMO Tower next to Union need, they just don’t know what Station and Salesforce Tower at it is,” he says. “I don’t know how Wolf Point. CBRE reported that 4.8 to peg what part of vacancy that million square feet of offices are is, but when the answers become under construction downtown, clear to users (about how much 34 percent of which has been pre- space they need), they’re going to come back to the market.” leased. The problem for downtown Kazmierczak is starting to see light at the end of the tunnel for landlords is that new buildings landlords in 2021 with the distri- won’t be the only extra compe-

tition to sign companies looking for space. Tenants have now listed more than 5.3 million square feet of offices on the sublease market, about twice as much as there was a year ago, according to CBRE. Among the recent additions: Railcar company TTX listed its 103,000-square-foot headquarters at 101 N. Wacker Drive, Facebook listed a similar amount of space at 191 N. Wacker and marketing firm InnerWorkings listed 45,000 square feet at 203 N. LaSalle St.

CONCESSION PACKAGES

The array of office options for tenants in the market could drive down rents or boost concession packages landlords need to dole out to win business, such as free rent and cash for office build-out costs. Preparing for a street fight for tenants, some downtown landlords have spent the better part of the pandemic sprucing up parts of their buildings—taking advantage of lower construction costs and the ability to do work in mostly empty buildings—to put themselves in

position to win new business. Chicago-area office renovation work in 2020 through October totaled $643 million worth of projects, or 8 percent more than in all of 2019, according to construction research firm Dodge Data & Analytics. Some developers are also making new big bets that the downtown office market has a bright future, especially for newly refurbished properties in popular locations. New York-based 601W, which turned the abandoned Old Post Office into a modern office building and leased up most of it, is now kicking off a $180 million-plus renovation of a vacant 680,000-square-foot office building nearby at 801 S. Canal St., which it has renamed Canal Station. In the Loop, Canadian developer Onni Group plans to buy and renovate a soon-to-be-empty 850,000-square-foot office tower at 225 W. Randolph St., though its deal hinges on the City Council designating the building a landmark this month and granting Onni a Class L property tax break.

Amazon to hire hundreds at Broadview warehouse The Seattle-based tech giant plans a last-mile delivery station in the west suburb, part of an aggressive expansion here and push to speed up deliveries Those ubiquitous blue Amazon delivery vans soon will be pulling in and out of a new warehouse in another Chicago suburb: Broadview. Amazon plans to open one of its last-mile delivery stations on a site at 2800 S. 25th Ave. that it bought last month from Bosch, the German industrial giant. The Seattle-based tech giant will add the warehouse to a local distribution network that has expanded rapidly over the past year as the company increases its penetration of major metro areas and tries to speed up deliveries. Amazon plans to tear down the existing buildings on the Broad-

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places like Pullman, Kenosha and Gage Park, with more in the works. The company also is opening big fulfillment centers—warehouses where orders are processed and packed—in suburbs including Matteson, Markham and Channahon. Amazon THE OPENING OF THE DELIVERY leased more industriSTATION “WILL CREATE HUNDREDS OF al space in the Chicago area—11.7 million FULL- AND PART-TIME JOBS.” square feet—than any other company in Amazon spokeswoman 2020, and it’s hiring at such a feverish pace es, the place where they’re loaded that it could soon become the reoff trucks and packed into vans for gion’s second-largest employer, after the federal government. shipment to customers’ homes. Amazon paid $11.6 million for Amazon has opened several delivery stations over the past year in the Broadview property in mid-Deview property and construct a delivery station that “will create hundreds of full- and part-time jobs,” an Amazon spokeswoman writes in an email. Delivery stations are the penultimate stop for packag-

GOOGLE EARTH

BY ALBY GALLUN

Amazon plans to open one of its last-mile delivery stations on a site at 2800 S. 25th Ave. cember, according to Cook County property records. Bosch, which ran its automotive aftermarket division there, put the property up for sale last year after deciding to move the

unit to Oakbrook Terrace. A brokerage team from Cushman & Wakefield led by executive director Larry Goldwasser arranged the sale for Bosch.

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CRAINâ€™S CHICAGO BUSINESS â€˘ JANUARY 18, 2021 13

State hires firm to verify Exelonâ€™s hardship claims BY STEVE DANIELS The Pritzker administration has hired an outside firm to scrutinize Exelonâ€™s claims that some of its Illinois nuclear plants are losing money. The Illinois Environmental Protection Agency early this month finalized a $215,000 emergency contract with Cambridge, Mass.-based Synapse Energy Economics. The firm, which has done work in the past for consumer advocates like the Illinois attorney generalâ€™s office and the Citizens Utility Board, will report back on the financial condition of the nukes by April 1. Itâ€™s tasked with auditing the companyâ€™s plants, assessing costs and revenues given now and projecting over the next five years, according to the emergency purchase statement. Among the qualifications the Pritzker administration specified for the role was that the firm chosen could not have done work for Exelon in the past. That disqualified a fair number of bidders. The move comes as Exelon for the second time in four years has said it would shutter nukes in Illinois unless theyâ€™re subsidized by the state. In August, the company announced it would close the Dresden and Byron reactors this coming fall without government action. Gov. J.B. Pritzker and lawmakers will have to decide this spring what, if anything, to do to keep those plants open. Exelonâ€™s nukes are responsible for more than half the electricity generated in the state and are valuable due to their carbon-free emissions. In addition, they support thousands of well-paid union jobs and are critical sources of tax revenue in the localities that host them. Pritzker wants passage of comprehensive energy legislation to put

Illinois on a course for a carbon-free power industry. Exelon frequently has emphasized that the stateâ€™s environmental goals will be extraordinarily difficult to realize if nuclear plants are retired before their useful lives are up. â€œWith Exelonâ€™s (closure) announcement . . . the state has concerns that the generation gap will be filled by dirty energy, namely fossil fuels,â€? according to the purchase statement. â€œIn order to advance the stateâ€™s clean energy goals, IEPA and the governorâ€™s office are assessing how and over what period of time to meet clean energy targets, which requires understanding the schedule of statewide plant closures, including Exelonâ€™s plants.â€?

SOURCE OF CONFUSION

The profitability of Exelonâ€™s Illinois fleet as a whole, as well as individual plants, has been a source of confusion, with the company using terminology like â€œrevenue shortfallsâ€? to describe financial stress. In the past, Exelon has referred to its failure to earn specified profits above its costs as the kind of hardship necessitating plant closures. â€œAs we have said from the beginning, Exelon will open its financial records to any policymaker who wants to better understand the challenges facing our zero-carbon nuclear plants in Illinois,â€? a spokesman said in an email. â€œWe look forward to cooperating with the governor and the consultants his administration engages to better inform decisions about critical state energy and environmental policies.â€? In 2016, the state agreed to subsidize two other nukes Exelon threatened to close as part of the Future Energy Jobs Act, signed into law by Pritzker predecessor Gov. Bruce Rauner. Ratepayers statewide are

Exelonâ€™s Byron nuclear plant

AP IMAGES

The reportâ€™s deadline is April 1, which will give the Pritzker administration and lawmakers just a few months to decide whether to subsidize Exelonâ€™s Illinois nuclear power plants for a second time

paying more than $2 per month on their electric bills just to funnel the $235 million in cash Exelon gets each year via that statute. Back then, Exelon, along with its Commonwealth Edison subsidiary, were arguably the most politically powerful business interests in Illinois. That certainly isnâ€™t true anymore following ComEdâ€™s July admission that it engaged in a nineyear bribery scheme to win the favor of House Speaker Michael Madigan, featuring no-work contracts to his close allies and even a board seat given to an individual at his repeated request. Pritzker has insisted that ComEd and Exelon, along with other utilities, â€œwonâ€™t writeâ€? the energy bill. Exelonâ€™s threats have made that job far more difficult, putting Pritzker in a quandary where his green ambitions will be difficult to achieve without another provision that can be construed by a corporate bailout. Once Synapse reports, Pritzker and lawmakers will have just two months to decide what to do given Exelonâ€™s closure timetable.

Cresco joins rivals in huge Florida marijuana market with $213M deal BY JOHN PLETZ Cresco Labs is moving into the Florida marijuana market, acquiring Bluma Wellness in a deal valued at $213 million. The all-stock transaction comes more than a year after Cresco scrapped a $120 million, mostly cash deal to buy Florida-based VidaCann as marijuana stocks were cratering. Cresco shares have rebounded sharply in recent months, along with the rest of the cannabis industry, amid improving sales in markets such as Illinois and a surge in new markets. The reversal of fortune has stoked a new round of deals in the marijuana industry. Chicago-based Crescoâ€™s stock has

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roughly doubled since the VidaCann deal was called off at the end of November. Bluma operates seven dispensaries in Floridaâ€”which is a medical-only marketâ€”along with cultivation capacity. Research firms Arcview and BDSA forecast Florida will become the second-largest marijuana market in the U.S., trailing only California, by 2025, based on an expectation that adult recreational use will eventually be allowed. Even without recreational use, Florida was expected to top $1 billion in sales last yearâ€”larger than Illinoisâ€™ combined sales of recreational and medical marijuana, which totaled roughly $1 billion in 2020. The number of medical pa-

tients in Florida doubled to more than 450,000 in two years. â€œWe recognize the importance of the Florida market and the importance of entering Florida in a thoughtful way,â€? Cresco CEO Charlie Bachtell said in a statement. â€œWe identified Bluma as having the right tools and key advantages for growth.â€? With the Bluma acquisition, Cresco will operate in 10 states. Itâ€™s one of the largest cannabis companies in the U.S., alongside Chicago-based operators Green Thumb Industries, Verano Holdings and PharmaCann. Verano recently said it would acquire Florida cannabis company AltMed for an undisclosed price. GTI entered Florida in 2018 after the acquisition of KSGNF.

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14 JANUARY 18, 2021 • CRAIN’S CHICAGO BUSINESS

MATCHMAKER: A database of diverse candidates looking for jobs in corporate America. PAGE 16 RECRUITING: She changed the face of local nonprofit leadership. PAGE 17

CRAIN’S CHICAGO BUSINESS RECRUITING FOR THE C-SUITE

BMO executives Tracie Morris, right, and Fellicia Foster attend every board meeting to discuss diversity with the bank’s directors.

CHICAGO’S

C-SUITE JOHN R. BOEHM

CHALLENGE

Diversity in corner offices at the city’s biggest firms is on par with the national average, but Chicago could do better. Here’s how. BY LISA BERTAGNOLI A decade ago, BMO’s upper management was 10 percent diverse. Seeing room for improvement, the bank set a goal of 20 percent diversity by 2020. Today, six of the bank’s 17 C-level executives, or 35.3 percent, are people of color. Of those six, four have been promoted from within. The bank has set two more diversity goals: 30 percent executive leadership and 28 percent senior leadership—the better to build a pipeline for more internal promotions—by 2025. What does it take to reach those goals? Commitment, and a lot of talking, says Tracie Morris, U.S. chief human resources and inclu-

sion officer, who joined BMO in April 2019. Morris and Fellicia Foster, vice president and U.S. head of inclusion and diversity, attend every board meeting to discuss diversity with the bank’s directors. “We talk about the pipeline, about executive appointments. It’s talked about if we gain someone, if we lose someone,” Morris says. “If you are not having those conversations, then (diversity) gets lost. It becomes just another HR initiative.” Diversity, she adds, permeates the bank’s culture, from a program designed to nurture middle management to its $5 billion Empower commitment to minority businesses, communities and

families across the country. The bank has created a “stay” interview, a counter to the exit interview, during which promising employees are asked what they need to nurture their careers at BMO. The bank has learned to treat employee resource groups as, well, resources for ideas on diversity, equity and inclusion. “We meet with employees because accountability starts from the top,” Morris says. “They have to see that we are available to listen.” It is crucial, Morris says, that U.S. CEO David Casper is the bank’s biggest champion of diversity. Last year, after the death of George Floyd and the ensuing

global pushes for racial justice and equity, the bank set a goal of zero barriers to inclusion. Casper instructed senior leaders to crunch numbers and return to him with a plan. “When we came back, he told us to be more aggressive,” Morris recalls. “And he sent everyone back.” Diversity, she sums up, “isn’t just an exercise.” BMO is one of many Chicago-based companies committed to adding more leaders of color to their C-suites. The city’s top 50 publicly traded firms (as ranked by Crain’s) have made progress in that department, with C-suite diversity reaching 16.9 percent in 2020, up from 10 percent in 2018,

8 percent in 2016 and 2014, and 7 percent in 2012, according to research from Chicago United, a nonprofit dedicated to parity in economic opportunity for people of color. Progress has been “minimal but incremental,” says Tiffany Hamel Johnson, CEO at Chicago United. The 16.9 percent is on par with the national average. It is also low compared with Chicago’s potential, given the city’s composition of 32 percent non-Hispanic white, 32 percent Black and 28 percent Hispanic, according to 2010 census figures. “We are a See CHALLENGE on Page 16

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CRAIN’S CHICAGO BUSINESS • JANUARY 18, 2021 15

CRAIN’S CHICAGO BUSINESS

Your job descriptions are hurting your diversity efforts

Focusing on competencies rather than detailed experience widens the candidate pool BY LISA BERTAGNOLI Several years ago, Eric Miquelon and his team were trying to fill a senior role at Avanade, an IT consulting and services firm focused on the Microsoft platform that is a joint venture between Microsoft and Accenture. A search of LinkedIn found that only 3,000 people in the entire world fit the exact qualifications for the position, says Miquelon, the Chicago-based North American president of Avanade. He started from scratch, focusing the qualifications more on background and less on minutely detailed skills. The new job description widened the talent pool, and Miquelon was able to accomplish his goal of hiring a woman for the job. Search parameters and job de-

scriptions matter. Those that focus on competencies rather than hyper-specific experience can attract more qualified candidates to a position, says Virginia Clarke, a human resources consultant soon to be based in Chicago. Clarke, who spent four years as director of executive recruiting at Google, tells of hiring a program manager for an HR position. “He didn’t know anything about recruiting, but he had a black belt in change management,” Clarke says. The hire turned out to be perfect for the job. “He added so much value to what we were doing,” she says. Here, Clarke has rewritten a job description to focus on competency for a sales manager role; the position, with beefier credentials, could be used to court a chief exec-

utive or chief operating officer, she says.

MINIMUM QUALIFICATIONS ◗ Bachelor’s degree ◗ Three years of management experience with direct reports ◗ Two years with a successful track record in sales or three years in a sales-related role dealing with customers, partners and/or product. (i.e., marketing, PPM, sales operations) ◗ Adaptable, ability to lead through change ◗ Strong internal and external customer acumen, working with each customer at the highest levels of ethics and integrity ◗ Strong written, verbal, presentation communication skills and the ability to communicate effectively with co-workers, management, executives

BEFORRREDEQUALIFICATIONS PREFE

ership skills ed selling ◗ Proven lead , solution-bas ve ti ta ul ns co in osing skills ◗ Experience tiation and cl go ne e iv ct fe ills of ef lem-solving sk ◗ Track record sales team tion and prob lu so re ining a diverse t ta lic re nf d an ng hi ac ◗ Strong co ivating, co in hiring, mot ◗ Experience s nal skills company goal ng interperso ro st ve ha t lfill long-term us fu to ts and ◗M ec ng oj ki pr in e e multipl strategic th ag ze an ili m ut to to r y ◗ Abilit t skills in orde e-managemen ◗ Excellent tim taneously ul ills initiatives sim d follow-up sk ion to detail an nt te at l na io ◗ Except

AFTER

CRITIC AL COMPET

ENCIES

◗ Exhibits self-discip line and aims for ac hievement; is prep dependable. Takes ared, organized an personal responsibi d lity and accountabil ways to improve on ity to identify and e’s organizations, cu lead sto me rs, pr ◗ Able to see the un oducts or services. derlying interrelatio nships and connec throughout the org tions that drive activ anization and indus ities try. Directs learning opportunities that and development to align with strategic ward go als . ◗ Uses quantitative and qualitative data to design solutions an Includes the ability d make decisions. to evaluate alternati ve solutions before varied input but wo making decisions. n’t succumb to cons Seeks ensus thinking. ◗ Proactively provide s regular, well-thou ghtout, actionable development oppo feedback and caree rtunities to others. r Actively seeks cons opportunities to gr tructive feedback an ow professionally. d

C-SUITE DIVERSITY

JOHN R. BOEHM

Overall minority representation in the C-suite has climbed by 10 percentage points in the last eight years. The most notable increase occurred between 2018 and 2020, when minority representation spiked to 17 percent from 10 percent. MINORITY STATUS OF C-SUITE EXECUTIVES IN CHICAGO’S TOP 50 COMPANIES Nonminority

Minority

Unable to identify

2012

80%

2014

82% 85%

2018

85%

2020

10%

83%

African Americans, Hispanics and Asian Americans are more closely matched in terms of representation in 2020; however, growth between 2012 and 2020 has more significantly occurred for African Americans and Hispanics. ETHNICITY OF C-SUITE EXECUTIVES IN CHICAGO’S TOP 50 COMPANIES Hispanic

When comparing local data for 2020 to national numbers for ethnic minority representation in the C-suite, the percentages are similar. C-SUITE EXECUTIVES Chicago Top 50 National (Fortune 100 companies)

Hispanic

Asian 13%

6% 6% 2% 1% 5% 4% 0 0 ‘12 ‘20 ‘12 ‘20 ‘12 ‘20 ‘12 ‘20 ‘12 ‘20

82.7%

Caucasian African American

10%

2016

Caucasian African American Asian Unable to identify 100% 83% 80% 80

13%

84% 6.3% 5% 4.7% 4% 5.9% 7%

Does not include other ethnicities or numbers unable to identify. National data came from a 2020 analysis of the Fortune 100 companies as presented in an April 1 publication in the Stanford Closer Look series, “Diversity in the C-Suite: The Dismal State of Diversity Among Fortune 100 Senior Executives.”

17%

RACIAL REPRESENTATION NATIONALLY IN C-SUITE POSITIONS AND POTENTIAL FOR PROMOTION TO CEO OR BOARD Function

CEO/board potential

White

Black

Hispanic

Asian

Other

CEO CFO P&L leaders Other business (functional) executives Chief (lead) human resource officer Chief (lead) communications officer General counsel Chief (lead) marketing officer Chief information (technology) officer Chief risk officer Chief (lead) strategy officer Chief (lead) sales officer Chief (lead) administration executive Other staff (functional) executive

High High High Lower Lower Lower Lower Lower Lower Lower Lower Lower Lower Lower

84% 96% 85% 76% 83% 81% 84% 78% 80% 79% 73% 40% 57% 84%

3% 1% 3% 10% 13% 4% 6% 9% 0% 0% 0% 20% 43% 13%

5% 1% 3% 6% 3% 15% 3% 4% 5% 0% 5% 40% 0% 0%

5% 2% 8% 7% 3% 0% 7% 9% 15% 16% 18% 0% 0% 3%

3% 0% 0% 1% 0% 0% 0% 0% 0% 5% 5% 0% 0% 0%

Adapted from Stanford’s “Diversity in the C-Suite.” Note: Totals may not equal 100% due to rounding.

Source: Chicago United

P014-P017_CCB_20210118.indd 15

1/15/21 3:58 PM

16 JANUARY 18, 2021 • CRAIN’S CHICAGO BUSINESS

CRAIN’S CHICAGO BUSINESS

Using tech to make matches Noirefy maintains a database of diverse candidates looking for corporate jobs Shaniqua Davis founded Noirefy, a “diversity advancement” website and database that connects professionals of color with high-growth companies, in 2017. Today, her Chicago-based company is busier than ever. Davis says Noirefy now also provides “insights to our candidates about life and culture at these organizations.” Those insights include testimonials from other diverse candidates who’ve worked at the firms. Davis, a single mother of a 12-year-old daughter, said her quest for diversity, especially when it comes to the C-suite, would be complete once “companies see diversity not as a project or a quota but as a normal part of hiring.” CRAIN’S: What is the corporate culture as you see it when it comes to diversifying the C-suite? DAVIS: The culture is still the same, at least from a leadership

standpoint. It’s a culture of traditional white males. People usually hire people who have a similar background as them, which is why the workforce looks like it does today. Small and midsize companies are the fastest growing across the board when it comes to diversity, while Fortune 500 companies have a way to go. Large corporations are good at diversifying lower and middle management but fall short when it comes to the board room or C-suite. Why do you think a company like yours is needed today? Last year was an interesting year, and I think companies were literally forced to make changes. So aside from diversifying their employment ranks, companies now recognize the need to create a better work atmosphere that appeals to minorities, more specifically Black and Latinx. That’s where a company like Noirefy can be helpful. What are some barriers for minorities getting hired at Fortune

CHALLENGE ways from that,” Johnson says. It’s not out of ignorance of the financial power of a diverse workforce. “Companies understand that (diversity) does connect to their bottom line,” Johnson says. Companies in the top quartile of diversity are 35 percent more likely to have financial returns above national medians; diverse firms have 2.3 percent higher cash flow per employee; diverse companies see a 45 percent higher market share than those that are not, according to research from McKinsey and the Center for Talent Innovation. If all that is understood, what’s keeping Chicago firms from reaching their potential? Experts in human resources and diversity, equity and inclusion point to several factors. Leadership is one. Corporate commitment to diversity is another. So is building a middle-management pipeline that recruits, retains and nurtures employees with leadership potential. For Virginia Clarke, the responsibility for diversity rests with those already in the C-suites. “This is a leadership issue,” says Clarke, a consultant and former hiring executive at Google who plans to return to Chicago this year to consult. Corporate leaders, she says, should be held accountable for recruiting, retention and progression, meaning the rate at which talent is promoted. “If leaders are not held accountable, it won’t get done,” she says. For instance, if companies start docking pay following high levels of attrition or disparate progression rates among different demograph-

P014-P017_CCB_20210118.indd 16

500 companies? Lack of access and lack of networking opportunities. To remove this barrier there needs to be more mentorship from the C-suite down to midlevel management. Should diversity go both ways? Should Black-owned companies also work toward diversifying their workforces? I think Black-owned businesses can choose to do that if they want to. I think it’s a great idea for Black-owned businesses to build up a Black workforce because once we do that, we are creating more equity in the workplace. There are more advancement opportunities for Blacks at a Black-owned business, and that is where they can get the experience needed to move into a higher position at a bigger company. What’s your definition of the word minority? Our definition of minority is Black and Latinx professionals, but society says a minority is women,

Shaniqua Davis Blacks, Latino, Asians, and so on. That’s why I don’t use the words “people of color” anymore because traditionally people of color were Blacks. And now people of color include any other non-majority race.

When will corporate America more closely represent the population? That won’t happen anytime too soon. Diversity should be something natural and not a quota that needs to be met.

Continued from Page 14

ic groups, “then you will begin to see change,” she says. Clarke also faults firms without succession plans for top executives, a lack of foresight that can cause a scramble when a top executive departs. “You have to identify external and internal talent for roles that are coming up,” she says, pointing out that a thorough executive search can take four to six months. When firms wait until the last minute, they make calls to people they know, basing decisions on pedigree more than competency. “It’s ‘Let’s hire this person I know from this company,’ ” she says. “It’s a quick way to fill a role.” Diversity, inclusion and equity “is not a project,” Clarke adds. “It is a way of thinking. You can bring people in, but if the organism isn’t ready and fertile, you will have organ rejection. These folks will be gone. They will not have been treated fairly.” A corporatewide commitment to diversity can also help Chicago’s businesses gain ground on diversity. “We talk about the three Cs: commitment, course (of action) and competence,” says Doug Harris, CEO at Kaleidoscope Group, a Chicago-based diversity consulting firm. “If the commitment isn’t there, firms don’t put energy and resources” into finding diverse talent, he says. Successful firms build “real, measurable accountability” into their human-resources and business processes, Harris says. He suggests goals such as attending a certain number of minority hir-

RAUL JUAREZ

BY WENDELL HUTSON

Charles Smith, CEO of CS Insurance Strategies: “Owning a Black business is priceless to me. It sets an example for future entrepreneurs.” ing events prepared to hire, not just collect résumés; requiring a diverse slate of candidates for top spots; making hiring a committee exercise; and requiring committees to defend their choices for hires. He also emphasizes the need to create equal opportunity for advancement. Harris cites a client who sent staff with leadership potential to an Ivy League executive program. All were promoted; none was diverse. “They changed goals and sent more diverse people,” he says, and the company eventually built a more diverse C-suite. Commitment to diversity also

means rethinking long-held standards for identifying and promoting talent. “Organizations have models of historical success, and some of those models were set up 30 years ago,” Harris says. His firm helps companies devise new models that are effective and attract a wider talent pool. One example: dropping requirements of regular travel and/or relocation, which can shrink the candidate pool and which in these virtual times is becoming increasingly irrelevant. Shedding unconscious bias—the tendency to choose hires who look like all the other

hires—is another. Harris says one client’s entire C-suite took the same train to work, sending the message that neighborhoods matter when it comes to professional advancement. Overall, he urges clients to proceed as if they are building the future rather than correcting the past. “Many organizations are attempting to correct yesterday,” he says, an approach that can result in “flavor of the month” programs. Harris’ phone rang off the hook in the weeks following Floyd’s murder, with companies determined to fix their diversity issues. “A lot

1/15/21 3:58 PM

CRAIN’S CHICAGO BUSINESS • JANUARY 18, 2021 17

A master recruiter on secrets of her trade The woman who has changed the face of Chicago’s nonprofit C-suites talks diversity BY WENDELL HUTSON Alison Ranney is known as the go-to recruiter for the nonprofit industry. In a 2017 profile, Crain’s dubbed her “Chicago philanthropy’s recruiter in chief.” Ranney, an attorney and managing partner in the Chicago office of Koya Partners, a national employment search firm based in Boston, has helped several Chicago-based nonprofits diversify their senior leadership. Recent examples are Angela Williams, CEO of Easterseals; Sean Garrett, CEO of United Way of Metro Chicago; and Rebekah Scheinfeld, CEO of the Civic Consulting Alliance. CRAIN’S: Why is leadership diversity important for nonprofits? RANNEY: Organizations, including for-profit businesses and nonprofits, are more successful when their leadership reflects their clients, customers and people they serve. Better decisions are made when there is a diversity of opin-

RAUL JUAREZ

ComEd’s Kimberly Hobson

McDonald’s Tiffanie Boyd of people were very excited,” he says. “They wrote nice letters of commitment to community and they sent nice checks.” He counsels businesses to take that “external motivation and turn it into processes, systems and specific initiatives that attract and nurture diverse talent.” With leadership and commitment, Chicago companies can build powerful and diverse C-suites. Since his appointment in November 2019, McDonald’s CEO Chris Kempczinski has installed a new global chief people officer, global chief learning officer, global

P014-P017_CCB_20210118.indd 17

ions, thoughts and experiences around the leadership table. (By) putting people of color, women and other leaders who bring diverse viewpoints into top roles, (it) gives them power and influence. Is it hard to find a diverse pool of candidates for C-suite positions? While people of color and women are often overlooked for C-suite positions at nonprofits and in corporate America, I do not believe that it is hard to find strong, diverse candidates. However, there is a gap in the market between supply and demand. The leaders are there. What’s your secret to getting diverse candidates for the C-suite? We focus our conversations with clients on the qualities, skills and characteristics critical for success instead of prioritizing qualifications. This enables us to “open the aperture” and proactively identify and attract a wide range of exceptional leaders for our clients to consider.

chief diversity officer and U.S. chief people officer, all of whom are female or a person of color. To recruit Tiffanie Boyd, who is Black, as chief people officer, McDonald’s engaged Ksquared Executive Search, a woman-owned recruiting firm that specializes in presenting diverse slates of candidates. The May murder of Floyd and subsequent calls for racial equity built an even larger sense of urgency around diversity at the fast-food company. “As a nation, we are experiencing a reckoning with our history of systemic racism,” McDonald’s said in an emailed statement. “America’s largest companies are examining and addressing their roles in that broken system. McDonald’s is no different. We are not interested in taking small steps to make incremental change in the right direction.” McDonald’s, the email said, will hold itself accountable to “represent the diverse communities in which we operate; accelerate cultures of inclusion and belonging; and dismantle barriers to economic opportunity.” At Chicago-based Adtalem Global Education, Lisa Wardell has increased gender and ethnic diversity for senior leadership to 75 percent and board diversity to 67 percent during her four years as CEO; ethnic diversity among senior leadership during her tenure has gone to 50 percent from zero. “Lisa Wardell is very intentional about this effort,” says Stephen Beard, chief operating officer at Adtalem since 2019. (Wardell, the only female African American CEO among Fortune 1000 firms, was not available for an inter-

Do you get satisfaction out of helping minorities get their foot in the door? Absolutely! I feel lucky to have found this unique matchmaking role that suits me so well. I am deeply grateful to love what I do so much. Has the pandemic made it harder to recruit diverse candidates? Challenging and, at the same time, more interesting. The issues of 2020, which will continue in 2021 and well beyond, thrust the conversations about recruiting leaders of color into the spotlight. The demand for talented leaders of color is intense. Strong leaders of color are now, more than ever before, receiving more calls, more emails and more contacts about potential opportunities. What is one of your most memorable job placements in 2020? We are extremely proud to have been involved with finding David Mosena’s successor at the Museum of Science & Industry. (On

view.) “She is focused on data and has held herself and all of us accountable for outcomes.” A diverse C-suite is “absolutely good business,” Beard says, pointing out that 42 percent of Adtalem’s students are minorities. “We are producing diverse doctors, nurses and other professionals to serve diverse communities,” he says. A diverse upper-management team “makes us more responsive to our customers and more responsive to the needs of the community.” Wardell recruited and hired Beard; their connection is a director at Adtalem who is also a director at Beard’s previous employer. “She enticed me by showing up as a fairly dynamic and aggressive leader,” Beard says. Beard, who is Black, has recruited diverse talent to Adtalem, including board members and senior executives on the firm’s legal team. “There is a network effect,” he says. “It’s easier to identify top-performing diverse talent when there’s some in the building already.” The talent in the building—the pipeline of leadership potential that exists among middle managers— matters greatly. For the first time the Chicago United study examined diversity in the middle-management ranks, from which diverse top talent could ostensibly be promoted. The research, which examines the last 25 years, shows a decline in the number of African American middle managers, an uptick for Latinos and a significant uptick for Asians. Projections for the next 25 years predict further increases for Asians and Latinos and a gradual decline for African American middle managers. Why? Professionals who don’t

Alison Ranney Jan. 11, Chevy Humphrey started her new position as the museum’s first female and Black president and CEO.) David had been a successful leader of the MSI for close to 25 years. He was fully vested in finding the right leader for the next chapter of this iconic institution after his planned retirement. What are your passions outside of work? First and foremost, my life is my family. That is my husband, Erik

Birkerts, and our three children, Ryerson, Dagny and Silvie, my parents and siblings and extended family. I grew up in a family with adults as role models who had no clear separation between their personal, civic and professional interests. I am grateful that what I am passionate about personally, and what I am lucky enough to do professionally, are intertwined on so many levels.

see a career trajectory for them- son became friendly with several selves at one firm might well de- ComEd employees, who regularly camp to entrepreneurship—or to a talked about getting promoted and rewarded for hard work. “That was competitor. Charles Smith started his insur- something I hadn’t experienced,” ance career in 1995 in the mailroom Hobson says. Their talk was enticof a national firm and left in 2007 ing enough that Hobson left her after butting his head against a glass full-time job and took a temporary ceiling. “It felt as if my aspirations position at a ComEd call center. “I were not aligned with the corpora- saw it as an opportunity to show them who I am,” she says. tion’s aspirations for me,” he says. The gamble paid off. After six In 2007, he opened the Chicago office for one of the country’s big- months in the call center, Hobson gest Black insurance brokers and was offered a full-time position. bought the office two years later. He She has since been promoted three is now CEO of CS Insurance Strate- times, with pay raises that have gies, a Chicago-based commercial her financially better off than she brokerage with offices in New York would have been at her former and California. He is also the new firm. ComEd has invested in her chair of the Business Leadership career; last year, it sent her to ChiCouncil, an elite group of execu- cago United’s Corporate Inclusion tives fostering economic growth in Institute, a training program for professionals with leadership pothe city’s Black community. Smith, 42, says he has refused multiple offers to buy his busi- “IT’S EASIER TO IDENTIFY TOPness. “Owning a Black PERFORMING DIVERSE TALENT WHEN business is priceless to me,” he says. “It sets an THERE’S SOME IN THE BUILDING example for future enALREADY.” trepreneurs.” About six years ago, Stephen Beard, chief operating officer, Adtalem Kimberly Hobson was working full time at a utility company in Oak Brook. She tential. Hobson was promoted into had been with the firm for sever- her current post, senior account al years but felt she would never manager for commercial accounts, be promoted. “I had always been in November and plans to become a hard worker,” says Hobson, 46, a senior vice president in her dewho has a degree in business ad- partment within seven to 10 years. “It’s very important for me to ministration and marketing. “Because I was a woman of color, I work for a company that invests in its people and rewards hard work,” was not recognized.” The building in which her firm says Hobson. She pities firms that was located also housed a Com- ignore or neglect diverse talent. monwealth Edison office. During “You’re missing out on some great lunches in the food court, Hob- opportunities,” she says.

1/15/21 3:58 PM

ACCOUNTING

ORBA, Chicago ORBA is proud to announce that Christopher I. Georgiou has been promoted to Director. Chris has been with ORBA since 2011, providing assurance and tax services as a member of the firm’s Tax Group. In his practice, he assists individuals, partnerships and closely-held corporations with compliance and general tax planning. He works with clients in a variety of industries including manufacturing, real estate, restaurant, entertainment, professional athletics and personal service businesses.

ACCOUNTING / ADVISORY CONSULTING

DHJJ Certified Public Accountants and Business Advisors, Naperville DHJJ is pleased to promote Russell Brewer to Principal. Russell joined the firm in 2017 and brings expertise in assisting clients primarily in the manufacturing and distribution sector. He offers assurance services such as audits, reviews, compilations, and business consulting to his clients. He also helps companies with 401(k) plan audits.

ACCOUNTING / ADVISORY CONSULTING

DHJJ Certified Public Accountants and Business Advisors, St. Charles DHJJ is pleased to promote Nick Brooks to Principal. Nick joined the firm in 2015 and serves various industries offering tax planning strategies, controllership services, and business advisory services, including budgeting and cash flow planning, accounting systems support, payroll & human resources, and succession planning.

ACCOUNTING / ADVISORY CONSULTING

DHJJ Certified Public Accountants and Business Advisors, Naperville DHJJ is pleased to promote Elizabeth (Liz) Herbst to Principal. Liz joined the firm in 2014 and brings over 15 years of specialization assisting professional services firms, construction, and real estate industries with high-level tax planning and compliance, multi-state returns, and exit planning considerations.

Advertising Section

PEOPLE ON THE MOVE

To place your listing, visit www.chicagobusiness.com/peoplemoves or, for more information, contact Debora Stein at 917.226.5470 / dstein@crain.com

ARCHITECTURE / ENGINEERING

CONSTRUCTION SERVICES

LAW

TranSystems, Chicago

Pepper Construction, Chicago

Franczek P.C., Chicago

Ulmer & Berne LLP, Chicago

TranSystems Corp. welcomes Anthony Quigley, PE, as Vice President and Regional Construction Practice Leader overseeing the construction practice in Illinois and surrounding states. Quigley brings 30 years of experience working with the Illinois Department of Transportation, during which he worked on several large-scale projects in Chicago, including the $794 million Jane Byrne Interchange, the $500 million Kingery Expressway Reconstruction, and the $1.2 billion I-80 EIS from US 30 to Ridge Road.

Julie Kellman, SHRM-SCP, SPHR, CCP has been promoted to Vice President, Human Resources. Julie leads all aspects of personnel management for the Pepper Construction Group, including career development, hiring, benefits and HR information systems. Julie played a significant role in the development of Pepper’s Diversity, Equity and Inclusion program. Julie earned her Masters of Business Administration degree in Human Resources Management from the University of Illinois at Urbana-Champaign.

Franczek P.C. announces the hiring of attorney Erin Johnson. Erin represents both private and public sector clients on the full range of their labor and employment needs. Erin represents clients in Title VII, the ADA, the ADEA, Illinois BIPA and data protection laws, and contract disputes. Before joining the firm, Erin was an associate at a global law firm.

Ulmer is proud to announce Christiane M. McKnight has been promoted to Partner. McKnight is a business litigator who represents clients in complex commercial litigation in state and federal courts. Her practice includes a broad range of high-stakes contract disputes, as well as trade secret, unfair competition, and fiduciary duty matters, and she has significant experience at both the trial and appellate levels. She earned her J.D. with honors from Northwestern University.

BRAND ENGAGEMENT

Freeosk, Chicago As the pandemic has made contactless interactions increasingly important to brands, retailers, and consumers alike, Freeosk, the leading omni-channel shopper engagement platform, is poised for growth. The Chicago-based company named Dilini Fernando vice president of marketing, where she’ll lead omni-channel integrated marketing programs, including brand, product and partner initiatives. Fernando comes from Molson Coors, where she was director of portfolio and brand strategy.

CONSTRUCTION SERVICES

CONSULTING

Mercer, New York Mercer has named Ravin Jesuthasan as Global Leader for Transformation Services, based in Chicago. He is responsible for leading Mercer’s Transformation Center of Excellence. Mr. Jesuthasan will report to Ilya Bonic, President of Mercer’s Career business and Head of Mercer Strategy. Mr. Jesuthasan has nearly 30 years in the HR consulting industry. Prior to this role, he was Managing Director and global leader of Willis Towers Watson’s Talent and Rewards practice.

Pepper Construction, Chicago Pepper Construction announces the promotion of Laura Patterson, PHR to Vice President of Human Resources. In addition to overseeing Patterson the full scope of Human Resources responsibilities, Laura has been instrumental in the development of Pepper’s Diversity, Equity and Inclusion program. Laura Ruane earned her Bachelor of Science degree at Texas Christian University. Dan Ruane, CSP has been promoted to Vice President of Safety at Pepper Construction. Dan partners with Pepper’s operational leaders to oversee all aspects of the company’s safety performance. Dan has a Bachelor of Science degree in Occupational Safety and Health from Illinois State University.

HEALTH CARE

physIQ, Chicago PhysIQ is pleased to announce that Raquel C. Bono, M.D., a board-certified trauma surgeon and retired Vice Admiral of the US Navy Medical Corps, has been selected as a member of the company’s Advisory Board. Dr. Bono retired from the Navy in 2019 as CEO and Director for the Health Agency. She recently led Washington State’s medical and healthcare systems response to the COVID-19 pandemic. Throughout her career she has led the charge for disruptive change in the delivery of healthcare services.

LAW

Jackson Lewis P.C., Chicago Julia P. Argentieri has recently been elevated to principal at national labor and employment law firm Jackson Lewis P.C. Julia has a broad range of experience representing employers in all stages of federal and state court litigation. She regularly defends administrative charges before the EEOC and IDHR. Julia also conducts employee training seminars and frequently speaks on employment-related topics.

LAW

Jackson Lewis P.C., Chicago Sarah J. Gasperini has been elevated to principal at national labor and employment law firm Jackson Lewis P.C. Sarah represents management exclusively in a variety of employment and labor law matters before state and federal courts and agencies. She frequently advises employers in defending union organizing campaigns, unfair labor practices, and representation cases. Sarah also counsels clients on several areas of employment law, including employee handbooks, discrimination and harassment.

LAW

Schiller DuCanto & Fleck LLP, Chicago Schiller DuCanto & Fleck LLP announces the addition of prominent matrimonial lawyer, Brendan Hammer. He is an experienced and acclaimed trial lawyer in the field of family law, widely praised for his creative and psychologically sophisticated approach to litigation. Brendan represents a wide variety of individuals, from executives, entrepreneurs, and medical, legal and creative professionals to political figures, professional athletes, and their spouses.

LAW

Ulmer & Berne LLP, Chicago Ulmer is proud to announce Christopher D. Seps has been promoted to Partner. Seps is a financial services litigator who focuses his practice on complex litigation and arbitration in the securities and commodities industries. He represents broker-dealers and registered representatives in customer and industry disputes, regulatory matters, and expungement cases, and litigates complex matters in a variety of forums. He earned his J.D. from University of Illinois College of Law.

REAL ESTATE

Golub & Company, Chicago Joel Sandridge joins Golub & Company as vice president of design and construction where he is responsible for overseeing the execution of the firm’s domestic development projects. Joel brings extensive experience in architecture, construction and project management across numerous market sectors. Prior to Golub, he was a project development executive at M. A. Mortenson Company and worked as an architect at Solomon Cordwell Buenz where he led mixed-use, multifamily and student housing projects.

To order frames or plaques of profiles contact Lauren Melesio at lmelesio@crain.com or 212-210-0707

CRAIN’S CHICAGO BUSINESS • JANUARY 18, 2021 19

w WHERE THE SALES ARE The city’s share of homes sold for $1 million and up dropped by 10 percentage points in 2020 from the year before. RE/MAX SIGNATURE HOMES

In all five suburbs with the most $1 million-and-up home sales in 2020, sales rose sharply from 2019. Meanwhile, sales were down in three of the city’s five top locations for million-dollar homes. AREAS WITH MOST $1 MILLION-PLUS SALES IN 2020 (percentage change from 2019) 178 (24%)

Winnetka

164 (33%)

Hinsdale

155 (44%)

Wilmette

149 (69%)

Lake Forest Glenview

@PROPERTIES

Suburbs

110 (34%)

Chicago

140 (12%)

Lakeview North Center West Town

@PROPERTIES

245 (-28%)

Near North

123 (-5.0%)

DREAM TOWN REALTY

288 (-6.2%)

Lincoln Park

Clockwise from top left: A Winnetka home that sold for $1.6 million in December, a Hinsdale house that sold for $1.1 million in February, a Near North home that sold for $1.3 million in February and a Lincoln Park home that sold for $1.2 million in May.

119 (15.5%)

Source: Mary Jo Nathan, Compass

HOMES SELLING FOR $1 MILLION OR MORE

Chicago 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2016

Suburbs

1,718 1,204

2017 2018

2019

2020

CITY SHARE OF TOTAL 2016 2017 2018 2019 2020

46% 50% 52% 51% 41%

Desperately seeking space: Luxury home sales in suburbs skyrocketed in 2020 LUXURY HOMES from Page 1 to Nathan’s data. There were 476 sales, fewer than in any year since at least 2015. Meanwhile, sales of million-dollar-plus houses in the city were up almost 11 percent, to 728 sales, the most since at least 2015 (as far back as the data reaches). “It’s been a tale of two markets: condos and houses,” Nathan says. Combined, the two types of housing ended the year with 1,204 sales, the fewest since 2016, when the city recorded 1,129 milliondollar-and-up home sales. Of those, 41 percent were in the city, down 10 percentage points from 2019, when 51 percent were in the city. The surge of suburban luxury sales carried the overall market— city and suburbs taken togeth-

er—to a new high. In Chicago and seven surrounding counties, 2,922 homes sold for $1 million or more in 2020, the most on record and 16 percent ahead of 2019’s tally. In some suburbs—Wilmette, Glenview and Hinsdale among them (see chart)—the surge was even stronger. Lake Forest had by far the biggest revival in luxury sales in 2020: Sales of $1 million-plus homes were up 69 percent, to 149 sales. “We had a bunch of young families from the city move up to Lake Forest,” says Marina Carney, a Griffith Grant & Lackie agent in that lakefront town. “But let’s be honest: My age group moved up from the city at the same time (in our lives), and we didn’t have a pandemic and we didn’t have social unrest” pushing those moves. Carney says she moved “back

home” to Lake Forest from Chicago in 1984. While the activity in Lake Forest’s housing market “was exciting,” Carney says, “the prices weren’t necessarily exciting.” In part because of a large stockpile of inventory from the several previous years of a slow market, 2020 sellers sometimes took a loss. That included the sellers of the only Frank Lloyd Wright house in Lake Forest, which sold in late October for $100,000 below what the sellers paid for it in 2007. As 2020’s wave of buyers picked off most of the existing inventory, 2021’s buyers may find fewer, and thus pricier, offerings. The hearty appetite for million-dollar suburban homes boosted Glenview into the top five suburbs for luxury sales, a list it

hasn’t been on in past years. Glenview’s luxury home sales rose 34 percent in 2020, to 110. Compass agent Brandi Isaac, who lives in Glenview and sold several luxury homes there in 2020, says the increase was fueled by transplants from the city. “If you were a young family living in the city in a duplex sharing a little bit of yard on a 25-foot lot,” Isaac says, “after four months, that showed you needed more space—indoor space and outdoor space.” With her husband and three kids, Isaac made a similar switch from a duplex in the city to Glenview in 2009. It’s not an uncommon move at any time. A difference in 2020, she says, was that when city buyers came to look at suburban homes, “there was an urgency to it. They were like, ‘How

soon can we get in?’ ” Anyone who wants to interpret the 2020 luxury home sales data as a death knell for Chicago’s highend market should look at the sales totals. Even with a drop in sales in Lincoln Park and a steep falloff in the Near North, which includes places like North Michigan Avenue and Old Town, both of those neighborhoods still sold dozens more homes of $1 million or more than any of the individual top-selling suburbs. In the top-selling neighborhood, Lincoln Park, there were 288 sales at $1 million and up in 2020, while in the top-selling suburb, Winnetka, there were 178. “The neighborhoods (in Chicago) have been fine,” Nathan says. It’s mostly downtown “that’s been hurt.”

Silicon Valley giant Facebook developing a competitor to local tech star Cameo use of Cameo has soared. People ordered 1.3 million video shoutand billions of dollars,” says Erik outs from celebrities ranging from Gordon, a professor at the Univer- former sports stars such as Brett sity of Michigan’s Ross School of Favre and Troy Aikman to actors Business. “You don’t automatical- such as Don Johnson and Chevy ly lose, but you do face the fight of Chase. The company’s transaction volume more than quadrupled last your life.” If Cameo co-founder and CEO year to about $100 million. Cameo Steven Galanis is worried, he’s not generally takes about a 25 percent showing it. In an email, he calls cut, which would put its revenue at Facebook’s move “the ultimate about $25 million. Its app was downloaded 2 milvalidation of the thesis that a dilion times last year, and the average purchase “IF WE GET OUT-EXECUTED BY price rose 25 percent to FACEBOOK, THAT’S ON US. THE BALL $70. Headcount nearly doubled to about 200 peoIS IN OUR COURT.” ple as Cameo added new revenue streams, such Steven Galanis, co-founder and CEO, Cameo as live chats over Zoom, which command twice rect-to-fan monetization model is the price of recorded video mesthe future of sports and entertain- sages. It also launched endorsement,” adding “it’s Cameo’s birth- ments and video-call appearances right to be the category king in this for businesses, which generally space. If we get out-executed by bring in thousands of dollars, comFacebook, that’s on us. The ball is pared with hundreds for the priciest consumer shoutouts. in our court.” Facebook has a history of deWith celebrities and users cooped up during a pandemic, veloping its own versions of comCAMEO from Page 3

P019_CCB_20210118.indd 19

peting products, or buying them, which resulted in antitrust suits by 48 states and the Federal Trade Commission.

NO GUARANTEES

A Facebook spokeswoman did not respond to a request for comment. It’s not certain that Facebook will ever release its Super product or succeed if it does. “Facebook doesn’t always succeed. Neither does Amazon,” says Tom Forte, an e-commerce analyst at D.A. Davidson in New York. “I’d argue that two things work in favor of the little guys: The capital markets are wide open. Small companies can raise a lot of money to go it alone, which wasn’t true in the past. And Big Brother (antitrust enforcers) is watching and more interested than before in protecting the little companies. Just because they’re coming up with a competing product doesn’t mean it’s game over for Cameo.” Cameo raised $50 million about 18 months ago in a deal led by Silicon Valley venture-capital kingpin Kleiner Perkins, which reportedly

valued the company at about $300 million. It’s about to raise more money, Galanis told the tech newsletter The Information on Jan. 5. Cameo has navigated obstacles and disproved doubters in the past. Just as the company was getting going, it made headlines when two of its top stars were duped into making shoutouts with right-wing, anti-Semitic references. Startups most vulnerable to Facebook are those that rely on the social media giant’s network for distribution, which Cameo does not. “Facebook has got no particular advantage in selling that (Cameo-like) product,” says Joshua Gans, an entrepreneurship professor at the University of Toronto and antitrust expert. “They’ve tried to do lots of things, like shopping to take on Craigslist. It’s still there, but it’s not like they wiped out the competition.” One potential concern for Cameo, however, is that Facebook doesn’t plan to take a cut of the money that celebrities get through Super, a spokeswoman told Bloomberg.

Facebook’s go-to move against rivals has been to acquire them, often at huge premiums. It bought photo-sharing app Instagram for $1 billion and encrypted-messaging tool WhatsApp for $19 billion. A fat buyout offer would no doubt get the attention of Cameo’s investors, but increasing antitrust scrutiny of Facebook makes such a bid less likely, Gans says. In addition to fending off Facebook, the best way for Cameo to show it has arrived is to prove it can continue to grow even as the pandemic recedes. The most common question about the company is whether the novelty of its product will wear off. “A year ago, no one knew what I was talking about when I’d ask about Cameo,” says Cliff Lampe, a University of Michigan professor who uses Cameo for case studies in his classes. “Now they’ve at least heard of it. I think it’s got staying power for the same reason that Uber, Lyft or Airbnb work: It uses technology to take away barriers, in this case between fans and celebrities.”

1/15/21 4:26 PM

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Skeleton Key Brewery in Woodridge is making about the same amount of beer, but it’s losing money thanks to smaller profit margins on canned beer.

Breweries could be reaching the edge of a cliff BEER from Page 3 situation has been a shot in the heart. Brewery owners wonder how much longer they can hold on. “Can I make it through to March? Sure,” Slayton says. “Beyond that, I don’t know.” Closures throughout the industry could reach far in Illinois, which ranked 16th in the nation for craft beer production in 2019, according to data from the Boulder, Colo.-based Brewers Association. Craft breweries in the state generated almost $3.4 billion in economic impact and produced 421,809 barrels of beer that year. So far, COVID-19 has not caused the onslaught of closures in the craft beer industry that it has in the restaurant world. Bart Watson, chief economist at the Brewers Association, tracked nine Illinois brewery closures in 2020, up from eight in 2019. Watson expects that number to rise. “I don’t think we should confuse not dying with being healthy,” he says. “The combination of pivoting strategy, to-go, some government support . . . has helped many at least kind of eke out existing this year.” To be sure, consumers have not stopped drinking craft beer. They are buying it at stores instead. Craft beer sales are up in stores about 16 percent year over year, according to research firm Nielsen. But those increased sales aren’t nearly enough to make up for the loss of closed taprooms and restaurants. Hopewell Brewing used to bring about 35 percent of its revenue through selling draft beer to bars and restaurants. Another 30 percent came from sales at its own Logan Square taproom. “We loved being the pale ale or the IPA or the lager at a corner bar,” says co-founder Samantha Lee. “That’s really how we found our strength as a small business in

a really competitive craft field in Chicago.” Hopewell has launched new revenue streams. It sells canned beer, merchandise and other local goods from a shop in its closed taproom. Still, Lee expects 2020 revenue to be down at least 15 percent from the $1.8 million it brought in during 2019. Gross profit is likely to be down 45 percent, given the costs of packaging materials needed to can all of its beer. “We can’t keep operating this way. We’re not profitable,” Lee says. “Each time there’s assistance or aid coming from the government it’s literally just buying us time.” Nielsen has estimated that the U.S. alcohol market needs to sustain 22 percent volume sales growth across all booze categories to make up for the losses at closed bars, restaurants, sports stadiums and concert venues. The growth numbers, at about 13 percent, are not hitting the mark.

HARDEST HIT

Craft brewers are hit the hardest by this slump, experts say. While grocery store shelves are dominated by domestic beers, craft brewers’ business models are built around their taprooms and sales to bars and restaurants. Sales to bars, restaurants and other venues account for less than 20 percent of revenue for the total beer industry, says Watson from the Brewers Association. That number rises to about 40 percent for craft breweries. Furthermore, craft brewers without the distribution partnerships or production capacity to supply grocery or liquor stores likely aren’t benefiting from increased sales in stores, says Danielle D’Alessandro, executive director of the Illinois Craft Brewers Guild. When it comes to grocery shopping, consumer behavior has also shifted. People are shopping at fewer stores and browsing less,

gravitating toward brands they know. “If you didn’t build your reputation for your brewery before COVID, it’s really tough,” says Josh Deth, founder of Revolution Brewing. “There’s no sampling . . . so you can’t try out new beers as easily. It’s hard on the innovation pipeline.” Revolution typically releases new draft beers for people to try at its own bars and others, Deth says. Revolution’s Logan Square brewpub is closed indefinitely, and its taproom is open only for curbside pickup. One-third of Revolution’s business typically comes from sales at bars, restaurants and other venues, Deth says. The two-thirds coming from store sales is not covering the loss. Revolution’s sales were down 12 percent last year, and volume was down 18 percent, Deth says. The brewery is finding other ways to get new beers to consumers. It is launching a variety pack of its session sour beers and selling specialty four-packs. Independent bottle shops are a bright spot, Deth says. Still, he misses the bars. “The most powerful thing we can do for craft brewing is get bars back open safely,” Deth says. Like Revolution, Begyle Brewing has flagship beers that did well in stores last year, says owner Kevin Cary. It expanded to more stores, too. The North Center brewer went from canning 2,500 cases of beer a year to 10,000. Still, 80 percent of Begyle’s revenue came from its taproom, which is closed. Cary says the brewery ended 2020 with about a 30 percent loss overall. He hopes the increased sales in stores helped Begyle reach new customers. “We’re going to be in a little bit of a hole if and when we get to the other side of this, so how do we dig out?” he says. “Maybe we made a new customer. . . .Maybe that turns into more visits in the future.”

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CRAIN’S CHICAGO BUSINESS • JANUARY 18, 2021 21

PRICE PUZZLER Newly required disclosures show wide variation in the prices local hospitals charge different private health insurers for the same medical procedures. Cesarean section without sterilization Cook County Health Cash price: $16,166

Major hip and knee replacement with complications Northwestern Memorial Hospital Cash price: $87,271

$6,000 $19,800 $30,383 (Cigna) (UnitedHealthcare) (BCBS)

$53,237 (Health Alliance)

Heart surgery with catheterization and major complications NorthShore University HealthSystem Cash price: $400,660

Lung transplant Amita Health St. Joseph, Chicago Cash price: Not available $71,761 (Cigna Connect)

$128,023 (other Cigna plans)

$166,995 (Aetna)

$204,176 (Humana)

Source: Hospital data

New disclosures show widely varying charges for the same hospital procedures PRICE GAPS from Page 1 shake the industry, equipping insurers to drive harder bargains with hospitals. Savings eventually could filter down to patients through lower health insurance premiums and out-of-pocket costs. The rule provides “a lot more insight into just how much certain payers in certain markets may be overpaying for a service,” Rosenbaum says. Prices for common procedures vary widely among hospitals across the Chicago area, and even within the same hospital. At Northwestern, a Health Alliance plan pays $53,236 for hip replacement surgery that costs a Blue Cross & Blue Shield plan only $30,382, or 43 percent less. Sometimes, prices even differ for separate health plans from the same insurer. Since Jan. 1, hospitals have been required to publish the rates they negotiate with specific health insurers in a “machine-readable” format. They also must use a “consumer-friendly” format to disclose prices for 300 services that patients can schedule in advance, or offer a tool that uses patients’ insurance information to estimate out-ofpocket costs. While most of the largest local hospitals offer a price

estimator tool, not all have fully complied with the new rule, which carries a fine of up to $300 per day. As of Jan. 14, some of the area’s largest chains, including Advocate Aurora Health, University of Chicago Medicine and Edward-Elmhurst Health, have yet to publish their rates. Hospitals like Rush University Medical Center and Loyola University Medical Center have published only maximum and minimum rates, without naming insurers, as well as list prices for services. Northwestern Medicine, NorthShore University HealthSystem, Cook County Health, the University of Illinois Hospital and many of Amita Health’s 19 hospitals appear to be in full compliance.

UNHEALTHY TIMING

The push for transparency comes at a tough time for hospitals, which are treating COVID-19 patients while also managing a logistically challenging vaccine rollout. Both 26-hospital Advocate Aurora and four-hospital UChicago Medicine say they’re committed to complying with the new rule, but that they’ve been focused on their pandemic response. NorthShore, Amita, EdwardElmhurst and UI Health say they

support price transparency and encourage patients to use price estimator tools or contact a hospital-based financial counselor for information on out-of-pocket costs. And transparency isn’t free. The Centers for Medicare & Medicaid Services estimates that implementation could cost hospitals nearly $12,000. “Rush is continuing to review and work on its compliance with all aspects of the price transparency rule, which has taken a significant amount of resources and time away from Rush’s normal business operations, especially in light of the pandemic,” the chain says in an emailed statement. “The new rule puts an extraordinary burden on hospitals while failing to achieve the underlying objective of promoting clarity for patients with respect to their health care expenses.” Northwestern, Loyola and Cook County Health didn’t respond to requests for comment. Since health care doesn’t operate under normal market mechanics, advocates say the new rule is necessary to help balance the scales. The industry relies on third-party payers, rather than consumers, to determine reasonable costs and utilization. Regu-

latory requirements—such as one requiring that hospitals treat all patients in need of emergency care regardless of ability to pay—add more complexity. Critics warn of unintended consequences. For example, hospitals with lower prices could raise their rates to match competitors. But giving payers more information about rates could lead to lower prices across the board, altering a process that has long been shrouded in secrecy. “We’re going to see use of the data by research groups and others who can shine a bright light for payers,” Rosenbaum says. “That’s what the hospitals are really scared of.” That bright light illuminates hospitals’ most lucrative revenue streams. Private insurers pay an estimated 51 percent to 122 percent more than the federal Medicare program, according to a recent Health Care Cost Institute analysis. Experts say more information is needed to truly make sense of the price variation. For example, higher patient volumes could help explain why NorthShore charges Aetna $166,995 for heart surgery (with catheterization and major complications), but Humana pays $204,176.

There are a number of possible reasons why some insurers get charged more than others. Insurers that send more patients to a hospital might get lower prices. Hospitals also may take into account how fast a payer is, as well as prior-authorization requirements and other red tape they say can delay patient care, experts say. Pricing is becoming even more controversial as hospitals continue consolidating, giving them more leverage over insurers. And while research shows mergers have little impact on quality of care, they’ve been known to drive up prices. Likewise, insurance industry consolidation gives payers more power to negotiate lower rates, which don’t necessarily equate to lower premiums for enrollees. “Prices ultimately rest on the indispensability of each party to the other,” says Alan Sager, a professor at Boston University’s school of public health. “This isn’t competition. This is the smoke screen behind which hospitals and doctors and insurance companies can continue to play games in a $4 trillion U.S. health care world without the ability for cost containment, appropriate care or affordable coverage for everybody.”

Springfield setbacks highlight Lightfoot’s lack of deep political relationships LIGHTFOOT from Page 3 The repeal of Section 4.5 of the Illinois Educational Labor Relations Act expands CTU’s bargaining power over class size, staff assignments, charter schools, subcontracting and layoffs. It also hands more clout to other public school unions, such as the Service Employees International Union and various building trade locals. “We don’t have to sit at the kids table anymore when it comes to negotiating school policy,” says

Chicago Public Schools contracts with Sodexo and Aramark to clean and landscape schools are already set to expire June 30, giving unions the opportunity to press CPS to hire more janitors and landscapers in-house.

EXPECTED TO SIGN

Gov. J.B. Pritzker is expected to sign the bill into law in the coming weeks. Davis Gates says she expects Lightfoot and CPS leaders to respect the Section 4.5 repeal in the meantime, including while they’re negotiating furreopening of schools “WE DON’T HAVE TO SIT AT THE KIDS ther for in-person instruction. “Our hope is that CPS and TABLE ANYMORE WHEN IT COMES the mayor see the legislaTO NEGOTIATING SCHOOL POLICY.” tive intent—even before (Pritzker) puts his signaStacy Davis Gates, vice president, CTU ture on the bill—as their responsibility to now neCTU Vice President Stacy Davis gotiate in earnest.” James Franczek, who has led city Gates. Her top long-term priorities are reducing class siz- labor negotiations for decades, es and curbing outsourcing of counts the repeal as a significant non-teaching jobs to third-party loss. “There has been much greatcontractors. Smaller classes mean er stability” for CPS with Section bigger schools and more teachers. 4.5 in place, he says, including

P021_CCB_20210118.indd 21

fewer strikes and longer-term contracts, giving the school system the ability to achieve some major educational goals. “The major challenge gets to be, are we inviting a pre-’95 period again or not? The good news is, currently we’re under a five-year collective bargaining agreement,” he says. How it plays out in school reopening talks is unclear. “At a minimum, it will certainly confuse things.” One silver lining for the mayor: Legislators did not cast a final vote on a bill replacing Chicago’s seven-member school board, appointed by the mayor, with a 21-member elected board in 2023. But Springfield sources say it could be considered as soon as May, and Illinois Senate President Don Harmon says it’s a priority in the next session. “He expects the legislation to be filed and the discussions to quickly resume,” a spokesman for Harmon says. Lightfoot’s spokesperson points out that she supported the Section 4.5 repeal and an elected school board during her mayoral cam-

paign. However, the mayor’s team fought hard against the bills in the recently ended session. In a letter to Harmon, Lightfoot warned the sudden repeal of Section 4.5 hampers efforts to reopen schools closed due to COVID-19, and jeopardizes “our fiscal and educational gains.” She said the current elected school board bill is “fundamentally flawed” and previously blasted a 21-member board as “unwieldy.” A spokesperson says she plans to work with advocates “to build a strong model to propose and introduce soon.” CPS CEO Janice Jackson has said elected boards are no silver bullet, and risk being controlled by interests that can bankroll expensive election contests for board seats. Thorny discussions are still to come over whether campaign finance limits will be put in to prevent private and charter schools or union interests from dominating, how big the board would be, whether the mayor will appoint any members, and the ability of parents in the U.S. without proper

documentation to participate in board elections. The passage of a bill expanding pension benefits for a subset of firefighters dealt the city an unexpected blow. If Pritzker signs the bill, it would cost Chicago $867 million through 2055. Franczek warns it also would open the door to a similar request from Chicago police officers. “If that was extended to the police, (it) would cost $2.6 billion. So essentially three times what the firefighters cost us. Now that’s not chump change.” One ray of light, he says, are provisions within the Black Caucus’ 764-page criminal justice reform bill that give the city more leverage in negotiations with the police union. The police contract expired in the summer of 2017, and negotiations have stalled over accountability proposals, in part. A major sticking point at the bargaining table—allowing people to file complaints against officers without signing an affidavit—is part of the criminal justice bill. The mayor’s office says it is still reviewing the impact.

1/15/21 4:28 PM

22 JANUARY 18, 2021 • CRAIN’S CHICAGO BUSINESS

Donald Trump’s hotel in Chicago faces challenges in post-presidential era TRUMP from Page 1 in Washington comes to an end—a corporate pariah due to the president’s role in fomenting the Jan. 6 attack. The downtown hotel market will recover eventually after the pandemic ends, but Trump’s hotel could face a bleak future as long as that big TRUMP sign hangs over the Chicago River. That’s a problem for the investors who own 160 or so of the 339 hotel rooms in the Trump International Hotel & Tower, a 92-story skyscraper at 401 N. Wabash Ave. The investment has turned out badly for many of them: The hotel’s profits were plunging even before the pandemic, according to Trump tax appeal filings, and some investors who bought the rooms when the hotel opened in 2008 are racking up huge losses in the resale market. The fallout from the riots, including the impeachment of the president, will only compound the hotel’s problems, which could put pressure on Trump to put it up for sale. After all, the Trump Organization, the president’s family business, put its Washington hotel on the market last year. It makes sense to consider the same thing here, say brokers and hotel experts. “This might be the straw that broke the camel’s back and pushed his brand to a certain low that you

can’t recover from,” says Phil Skowron, a broker at @properties who has sold many residential condos and hotel units in the building. “And it might just force his hand to sell.” The New York-based Trump Organization, currently run by Trump’s sons Don Jr. and Eric, did not respond to requests for comment. Complicating matters is the hotel’s unusual ownership structure. Trump developed it as a condo-hotel, selling off hotel rooms or suites individually to small investors. Many urban hotel developers in the early 2000s borrowed the condo-hotel concept from resorts, but the trend quickly fizzled around the crash of 2008. Unable to sell all of his Chicago hotel units in a depressed market, Trump retained ownership of about 175. He sold the last of the 486 residential condos on the upper floors in 2014, the same year he put up the massive TRUMP sign on the tower’s south facade. The Trump Organization runs the hotel on behalf of a condo board elected by hotel unit owners. It manages the residential part of the building for a different condo board. One big question is how much power the two boards have to enact big changes, whether that would mean renaming the building or selling the hotel. Brokers

UNDER

FORTY

CRAIN’S CHICAGO BUSINESS 2021

who have sold units in the tower say they have very little because Trump holds most of the cards.

MAJORITY OWNER

Trump owns a majority of the hotel units, meaning he controls the hotel condo board. The board’s president, a businessman from Green Bay, Wis., named Edward Martin, is a major Trump political supporter, donating $80,000 to the Trump Victory fundraising committee in 2020, according to Federal Election Commission records. Martin did not return phone calls, nor did Neal Shact, president of the residential board. The Trump name has also depressed values of residential condos in the building, offsetting a location, views and amenities that should command a premium, according to brokers. “Every time there’s a big headline, the phones stop ringing,” Skowron says. But the hotel owners are suffering more. Occupancies and room rates have fallen so much since the pandemic began that many are suffering big operating losses. The hotel’s troubles predate COVID-19: Its revenue fell to $51.7 million in 2017, down 29 percent from 2015, and its net operating income fell to $5.6 million, a 68 percent drop, according to documents the Trump Organization’s legal team filed with the Cook County assessor’s office, part of a

2018 appeal for a reduction in the hotel’s assessment. Prices for Trump hotel units, already low before the pandemic, have fallen even more in the past year. Five hotel condos in the building have sold for $120,000 to $133,000 in the last six months, resulting in big losses for the investors that sold them, according to the multiple listing service. Two sellers paid more than $700,000 for their units in 2008, according to county property records. One paid $285,000 in May 2017. “They’ve been difficult to sell in the last four years, and they’ve gotten more difficult to sell,” says Tricia Fox, an @properties broker who recently sold a 22nd-floor unit for $129,000, down from an original asking price of $189,000. “The only ones that are selling right now are selling at a significant discount.” The Chicago high-rise has been a source of multiple headaches for the Trump Organization. In 2008, Trump battled in court with the project’s lead lender, Deutsche Bank, over a past-due $640 million construction loan. Trump and the bank made up, but New York’s attorney general is investigating whether Trump reported as taxable income about $100 million of forgiven debt from another lender on the project. Trump also has struggled to fill the commercial space at the bottom of the building, which has sat mostly vacant since he completed

construction. Federal financial disclosure filings show Trump also is still carrying $25 million to $50 million in debt on the property owed to Deutsche Bank, which recently joined the growing list of companies that have decided to stop doing business with him. Trump’s recent troubles could embolden hotel and residential owners in the high-rise to agitate for change, hoping to persuade him to sell his interest in the building. Or Trump and his family could come to that conclusion on their own, as they did in Washington. One option would be to retain his stake but rename the building and bring in a new operator to run the hotel. Trump could wait for the market to recover and for the hotel to establish a profitable track record under a new brand. Then he could sell, allowing himself to maximize the value of his investment. But public perception would be a big factor in any big decision to sell or not. He’d need to come off as a winner, one reason hotelier Robert Habeeb thinks there’s a “slim chance” he would sell. “His hubris alone would prevent him from selling any marquee assets that would be interpreted as a defeat for him,” says Habeeb, founder and CEO of Chicago-based Maverick Hotels & Restaurants. Danny Ecker contributed.

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CRAIN’S CHICAGO BUSINESS • JANUARY 18, 2021 23

London calling from this Lincoln Park spread The double-lot house on Burling Street picks up the features the homeowner loved in Britain. It will be listed for $7.6 million. Laurel Hansen grew up in Wyoming, but it was a trip to London that fired her design sense when it came time to build a house in Chicago with her husband, Eric, a private-equity executive. Her memories of streets lined with stately Georgians, and the inviting, comfortable inglenooks inside “were on my mind” 10 years ago when Hansen started to discuss her vision of the house with architect Catherine Osika of Burns + Beyerl. (Osika later left the firm for Related Midwest.) Completed in 2013 on a double lot on Burling Street in Lincoln Park, the house is five bedrooms and 10,000 square feet. Osika’s design captures the warmth of traditional homes with features like several inglenooks—off the kitchen, the family room, the main bedroom and elsewhere. The facade borrows directly from the London Georgians that Hansen admired: It’s brick painted white with a mansard roof and orderly rows of windows. There’s also a nod to Hansen’s Wyoming roots, a top-floor room wrapped in wood, a contemporary take on a log cabin, and in the basement, a half-court basketball floor that kept her boys and their friends active in winter. With their two sons grown, the Hansens are downsizing and spending more of their time in Florida, Laurel Hansen said. They will put the Burling Street home on the market sometime in the next several weeks, but offered Crain’s an early look. Millie Rosenbloom of Baird & Warner is representing the property. The price is $7.6 million. MORE PHOTOS ONLINE: ChicagoBusiness.com/residential-real-estate

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1/15/21 3:55 PM

MORE THAN EVER, OUR CHILDREN NEED US. Because of COVID-19, hunger has more than doubled. And children are particularly at risk; one in three households with children is facing hunger. As job loss and the continued economic downturn push more people to the end of their resources, many families are having to choose between paying bills or buying food.

In four decades of feeding our community, we have never faced a need so great.

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