Native Nation Building TV: "Building and Sustaining Tribal Enterprises"
Native Nations Institute. "Building and Sustaining Tribal Enterprises" (Episode 4). Native Nation Building television/radio series. Native Nations Institute for Leadership, Management, and Policy and the UA Channel, The University of Arizona. Tucson, Arizona. 2006. Television program.
Mark St. Pierre: "Mark St. Pierre. Hello, friends. I'm your host, Mark St. Pierre and welcome to Native Nation Building. Contemporary Native Nations face many challenges including building effective governments, developing strong economies that fit their culture and circumstances, solving difficult social problems and balancing cultural integrity in change. Native Nation Building explores these often complex challenges in the ways Native Nations are working to overcome them as they seek to make community and economic development a reality. Don't miss Native Nation Building next."
Mark St. Pierre: "Today's show looks at enterprises owned by Native nations, how those enterprises are run, why many such enterprises fail, and what Native nation governments and elected officials can do to help ensure their success. With me today to discuss why some Native nation enterprises succeed and others fail are Lance Morgan and Kenneth Grant. Lance Morgan, a citizen of the Winnebago Tribe of Nebraska, is the Chief Executive Officer of Ho-Chunk, Inc., the Winnebago Tribe's award-winning economic development corporation. Kenneth Grant is a research fellow with the Harvard Project on American Indian Economic Development and a senior policy scholar at the Udall Center for Studies in Public Policy at the University of Arizona. I'd like to thank both of you gentlemen for being with us today. Kenny, I'll start with you. Give us a definition of tribal enterprise."
Kenneth Grant: background:white"> "I think most people think of a tribal enterprise as a company that's owned by the government, and that's not quite correct. It's a company, a business unit, that's owned by every single tribal member by virtue of the fact that they're a citizen of the tribe, and these business units typically have as their objective to earn financial returns and other social objectives that accrue to the entire community, so that all the citizens are owners and share in the benefits. So that's what I think of when we talk about a tribal enterprise."
Mark St. Pierre: color:#222222;background:white"> "Lance, you've developed one of the best models for tribal enterprise. What are some of the toughest challenges that tribes have to overcome?"
Lance Morgan: background:white"> "Well, you have to think about it terms of the situation that we have to function in, and we have a political system we didn't design, we have a system that doesn't allow capital to flow to reservations very easily, you have a poor educational system that doesn't necessarily deal with business development, you don't have a history of entrepreneurial and business success. And all of these things combine to create probably the toughest business environment in the United States."
Mark St. Pierre: color:#222222;background:white"> "Is one of the problems that you encounter, and this is for either one of you, separating business from tribal politics?"
Kenneth Grant: background:white">"There's a real difficulty in separating the roles. With government-owned or tribally-owned enterprises, people are wearing multiple hats at the same time, and so you're a citizen of the tribe and yet you're also a part owner of the enterprise. A council member has governing responsibilities, is also an owner, is also a citizen. That collapsing of the distance between government and business often creates a lot of role confusion for tribes that is difficult to overcome."
Lance Morgan: background:white"> "I once went to a conference and gave a speech there, and before I spoke somebody said, 'There are 30 government entities to help you tribes get into business.' And it occurred to me that they're helping us set up these government-led economic models, kind of the communism or socialism things that we had spent billions of dollars or trillions of dollars probably in 30 years fighting it 'cause it's inherently evil. And that's the system they had in mind for us. And I'm not so sure, I'm not going to make a comment on...at the end of the speech I said, 'I think that...I can't believe Winnebago is Karl Marx's last hope.' But I think that you have to understand the situation we're in. If we need to develop businesses, the government is really the entity with the only access to capital to do that, and so you almost have to get into this, and if you don't then you have this kind of capital-starved entrepreneur sector you've got to hope for the best with. But if you don't have that tradition or those capabilities, the government really is the only answer, so if you're going to set it up, you have to figure out a way to set it up that takes away some of the negatives of having a political entity run the business and I think that's really the challenge. You really...the tribe doesn't have a choice."
Kenneth Grant: background:white"> "Right, exactly. And a lot of people say, 'Oh, it's separating politics from business and the fact is you can't separate the two. It's a question of how they meet and making that relationship as productive as possible."
Lance Morgan: background:white">"We're owned by government entities, so really politics plays into the decision-making to some extent. It always will. But you still have to figure out a way to balance those issues."
Mark St. Pierre: color:#222222;background:white"> "Those of us that have been around for awhile remember a lot of failed EDA [Economic Development Administration] attempts to create tribal enterprises. Is the climate different today than it was in the past?"
Kenneth Grant: background:white"> "I think that there's a lot more success out in Indian Country in running tribal enterprises. So you can look from the Citizen Potawatami Nation to Mississippi Choctaw -- who have a plethora of successful tribally-owned enterprises -- to individual instances, whether it's Yukaana Development [Corporation] up in Alaska. You can look across the tribes, north to south, east to west, and there are examples of success, and I think Lance can speak to this better than I can, but they are becoming much more sophisticated in understanding sort of what the dangers are and how to promote business and run these operations."
Lance Morgan: background:white"> "You referred to kind of the old grant-based economic development model, and I think that that's still an important part of it, but we need to...we've transitioned I think, or the challenge of transition is away, from the grant as our only development tool. What we did is we ran kicking and screaming from anything to do with the government for the first seven or eight years we were in business. And then it occurred to us when we wanted more capital that, hey, maybe we should go back and dust off the old grant model, and we've been able to raise grant money, but it's a supplement to what we're trying to do and it gives us some of the startup capital we need and we're not dependent upon it. And I think it's still a tool that you need to [use] but -- as you grow in sophistication -- that it really factors into your decision-making, it doesn't drive it."
Mark St. Pierre: color:#222222;background:white"> "Kenny, you've worked with a lot of tribes. Why do you think so many enterprises have failed?"
Kenneth Grant: background:white"> "I think part of it is there are issues that are particular to each tribe. Let me put it this way. I think the most insidious problem that I've seen -- working with tribes and trying to run tribal enterprises -- is when the tribe and the citizens think it's an operational problem, when really it's an institutional problem. So I'll give you a quick example of working with one tribe where they had a plethora, I mean just a whole bunch of human capital, great natural resources, access to financial capital. These were very, very well-educated people, and yet the tribal enterprises kept falling. If you talk to the tribal citizens they'd say, 'Well, we just haven't been as civil as we used to be, or people aren't following the procedures book -- and there's this big procedures book.' Or the opposition would say, 'If I were in power all of this problem would go away.' In fact, what you saw is that there were really big disputes that had never been resolved because they had no tribal court system and these disputes were creating distrust and they would just bring an operation to a standstill. A council meeting would just come to an end. And so it wasn't really about civility, it was really about the foundation and the institutions. And that's the toughest problem is when you think it's just our accounting isn't in order, when in fact it's really about how the institutions are operating."
Lance Morgan: background:white">"Yeah, I'd like to add to that a little bit. I think that people tend to simplify the problems, and they focus on whatever bad thing happened at that time and they try to allocate blame, and some people try to do that for their own political gain and all these kinds of things, so you have a tough kind of local political environment. But if the people would take the time to say, 'All right, if we're having this problem over and over again, there's probably some reason for it.' And I always recommend, when tribes come to visit us, that they look at their government structure, they look at their corporate structure, and they figure out in advance what their challenges are going to be and try to plan for them in advance. If they do that, then their chances of success in avoiding these kinds of constant cycles of problems are much higher."
Mark St. Pierre: color:#222222;background:white"> "To follow up, Lance, then what are some of the things that Native Nations need to look at to build success?"
Lance Morgan: background:white"> "Ho-Chunk, Inc. is really the second attempt. Winnebago Industries was our first attempt in the 1980s, and that pre-dated me a little bit, but when we got there and we decided that we wanted to set up a new corporation, we sat down and we said, 'What are all the reasons we failed before?' 'Cause we have a long history of failure in some of these businesses, and we listed them out and we tried to design a system that would allow us to actually deal with some of those things right up front, and I think that's probably a pretty important step."
Kenneth Grant: background:white"> "That statement reminded me of a speech that Chairman [John "Rocky"] Barrett gave at Native Nations Institute maybe four or five years ago now, and he was talking about his economic development plan. He's chair of the Citizen Potawatomi Nation and he said, 'My constitution is my economic development plan,' meaning, 'I wanted to get the institutions right, I wanted to sort of be able to lay the foundation. That was my goa. Then let the economic activity flourish.'
Lance Morgan: background:white"> 'It's not even a difficult thing to really figure out how to address [that], because you can almost go to any -- ask a tribal leader and economic development person, 'What are your problems?' And they can list them out in detail, and they're almost the same as everybody. But why not take a little bit extra time and put your institutions in place to deal with some of those problems right up front?"
Kenneth Grant: background:white"> "The one place I might have a little disagreement is the problems are often known, but when you're talking about changing systems, that can be a very difficult process, because people have gotten used to the system that they have, they know how it operates, and so trying to transform those institutions can be a real challenge."
Lance Morgan: background:white"> "Oh, it's actually...it can actually not just be a challenge, it can be dangerous because I think you can do things -- I've seen some tribes do some things that are actually counterproductive, and they do it in the name of maybe some kind of ode to a traditional practice in the past, but it really doesn't make sense in a modern contex. And I've seen some tribes do some things, set up governmental structures that really sounded good and sounded like a great idea but in practice have been a real impediment towards their growth and development."
Kenneth Grant: background:white"> "And I think it's interesting that the first part of this conversation has really focused more on foundational issues about institutions -- and we can get into the operational issues of the tribal enterprise -- but clearly you can see where Lance and I are going about getting the environment right in which the enterprise can then begin to perform."
Mark St. Pierre: color:#222222;background:white"> "Well, that kind of leads to a logical question, I think, and that is that Lance listed at the beginning some of the obstacles that are very real that every tribe face, especially the larger tribes, larger populations. What are some of the factors that tribes can control?"
Kenneth Grant: background:white"> "I sort of come at it from the economics and I look and I say, 'Okay, there's the market out there and there's much that the tribal enterprise can't control. They have to go out and compete against other companies that are providing the same services and then there's policy over here and tribal policy, maybe they've got some say in there but there's not too much control and then there's federal policy.' So I look at it from the economics and say, 'What they really can control is their operations. Are their operations running efficiently, the accounting and the reporting, the board structure?' That's really what they have within their own control."
Lance Morgan: background:white">"I think that's right, but I think what we've done is we've had a tendency to look for some advantage. I always joke that...all of a sudden we're all business experts because of gaming, but I think that it doesn't take a huge sophistication I think to make a lot of money in gaming if you're right next to a big city and you have a monopoly. But what we've had to do is find niches where we have not as huge an advantage as gaming but some advantage over our competition, and there's huge advantages being a tribe. You have your own governmental jurisdiction, you can make your own rules, you can get preferential treatment on some contracts, maybe you can get some start-up capital from various places. So we've tried to focus on areas where if we make a mistake learning, that it's not going to kill us, and that if we get our act together, we should be able to long term have a viable entity because we have some inherent niche or some inherent kind of advantage in that market."
Kenneth Grant: background:white"> "Mark, I'll just follow up. That's a great point and that's a lesson that's seen over and over and over again, is exploiting these small niches where there's a comparative advantage for the tribe and then growing that. You can see it in Yukaana Development Corporation, which is an environmental remediation group up in Galena, Alaska. Very focused on a few issues, they basically have their teams all over Alaska now. The Cherokee Tribal Sanitation Program run by the Eastern Band [of Cherokee], servicing first their own community, then got so good at it went out and signed contracts with neighboring jurisdictions so that they provide waste facilities, a transfer station for their neighboring communities, and they sort of grow off this seemingly little niche but they learn the game and then grow."
Lance Morgan: background:white"> "I don't think it's a coincidence that tribes everywhere are involved in gaming, are involved in gasoline- or tobacco-type issues. Those are kind of the stereotype economic development issues. And what those really are, if you think about them, they're not inherent Indian businesses. What they really are are businesses that you can get into and take advantage of having a jurisdiction or a different tax base or making a decision on gaming, for example, that another place doesn't. And so I think the challenge is -- or I recognize that these are jurisdictional advantages and we're going to develop our businesses. The challenge for us has been, all right, these businesses are controversial, they create clashes with the state, they create competitive threats that people don't like, and our challenge has been to figure out how we take the money we've made and move to the second stage. How do we take that money and get into home manufacturing, get into construction, get into government contracting, those kinds of things, things that take full advantage of being a tribe but aren't nearly as controversial and aren't a stereotyped business. I think then that's been the challenge for us."
Mark St. Pierre: color:#222222;background:white"> "This is for Lance, but Kenny if you want to jump in as well. A lot of folks, tribal people are very concerned about the job issues and the whole issue of jobs versus profits and the social impact of tribal enterprises and I'd like you to talk about that for a minute."
Lance Morgan: background:white"> "When we started our company, we created two missions. We have two primary goals, and one is to create economic self-sufficiency and the other one is to create job opportunities. I think that we've had a lot...before we started we had a long history of kind of having businesses there and we kept them open even if they weren't necessarily profitable because of the jobs issue, and I always kind of thought that was kind of a bit of a cop-out for poor management or poor decision-making or poor governmental structure. I think that if you don't have the profits, you're not really going to have the jobs for a long-term, sustainable period of time, and so I think you really need to focus on developing a successful business. If you do that, the jobs will follow. If we would have, for example, made the decision early on to keep a business that was failing open, that capital would have...we would have had to supplement that business over a period of years and it would have prevented us from making other decisions further on that would have been very helpful for us. And so by focusing on the real economic development issues, we now have more jobs than working-age people in our community. So I think if you focus on success everything else will follow."
Mark St. Pierre: color:#222222;background:white"> "Kenny, would you like to respond?"
Kenneth Grant: background:white"> "I agree. I think in some sense it's a false dichotomy, but I think Lance is absolutely right that you have to...if the goal is sustainable, ongoing economic activity, the tribal enterprise is going to be here for today, tomorrow, five years, then the focus has to be on profit and then the industry that you go into, the service you provide, or the product that you make will then dictate the number of jobs that are allowed, 'cause you can't force 20 jobs into a position where the market really only allows one job, but if you want that job to sustain itself, then it has to be the focus on profits."
Lance Morgan: background:white"> "I think the key decision upfront is does your tribe need the jobs? Some tribes necessarily don't. If you do need the jobs, then you have to go into businesses that are labor intensive and then try to be successful there. So the real decision is up front in what type of industries do you want to go after or try to develop."
Mark St. Pierre: color:#222222;background:white"> "I would think, too, that the grant mentality of the two- or three-year jobs based on a grant cycle versus long-term jobs created by real enterprise and real profits are kind of an adjustment that tribal citizens have to make, especially for those tribes that have been invested in that grant economy."
Kenneth Grant: background:white"> "I would agree. I think a lot of times what you're doing is trying to fit a square peg into a round hole. Those grants are coming from Washington. So you know the old EDA hotels. It just was the wrong enterprise, and that's not what should have been going, but the money was there, and so there's this sort of predilection to want to go get that money and do that enterprise even though the tribe may not have a regulatory advantage, it may not have a business or a competitive advantage, and they fail and that sort of begins a cycle of..."
Lance Morgan: background:white"> "I think if you don't have a clearly defined strategy, that you're likely to make some mistakes on the grant side of things. These grants are written to say do certain things, but we have found that if you come forward with a very well-conceived plan and they have trust that you're going to do it, that the government entities on the grant side are very flexible. If they believe in what you're trying to do, they will modify their system to help you accomplish your goal. So I think the real key is to figure out exactly what you want to do and make sure that that makes sense and get other people to buy into [it]. Then you can spin the system to help you."
Kenneth Grant: background:white"> "Right. But notice in that case whose leading. Here's the tribe saying this is...or the enterprise saying, 'This is where we want to go. This is our goal and are there grants out there that will fit into this process,' as opposed to, 'the grant is out there so we'll do whatever the grant says we're going to do.'"
Lance Morgan: background:white"> "Yeah, you've got to flip the equation so that you're in the power position."
Mark St. Pierre: color:#222222;background:white"> "Lance, kind of on that same plane though, there's one of the fears out there that as tribes thrive rather than survive that the culture is going to be eroded, that as tribes move into a more professional business model that somehow cultures or tribal cultures are going to die."
Lance Morgan: background:white"> "Yeah. That's really a major challenge that especially I think young Native American professionals are facing right now. I've always said that culture is really based on a lifestyle based on how you live, and that's based on economics and I think that tribes have a tendency to stereotype themselves based on a positive image that we had of ourselves 100 years ago. But those cultural things, some of those values carry forward, but some of the things that they did were based on a different economic reality, and so I think we need to figure out a way to do Native values like taking care of your family, sharing in your community, but figure out how to be successful in a modern context. I think too often somebody will stand up in a meeting, make a speech about culture and it'll kill a project, and I don't think that that's probably the...and I think then they pat themselves on the back for being pure and then nothing happens and people still aren't able to take care of their families. I also think it's used to make young Native professionals feel bad. You question yourself all the time: Am I doing the right thing? Who am I now? And I think we need to try to embrace success and really figure out what the context of what part of our culture do we want to take forward and reapply it in a modern context. And I think that's the core challenge we're facing."
Kenneth Grant: background:white"> "This came up once in a classroom with Chief Phillip Martin, Mississippi Choctaw, and I will never say it as eloquently as Chief Martin said, but basically his point was, through our success we actually have citizens returning to the reservation, and so the people are coming back and now they have the language programs and all the sort of benefits that are accruing from being financially successful through their tribal enterprises. So he's sort of saying, 'How's that destroying my culture when I have all my people coming back?'"
Lance Morgan: background:white"> "Our culture 20 years ago was one of poverty and all the 'isms' you could think of, all the negativisms, alcoholism and all these kinds of things, and our culture's changed. When we first started our corporation we had this discussion, 'Do we really want to be like corporate America?' And we didn't want to. Do we really want a change? But what's really happened is, as the economy has flowered, as people's lives have gotten better, cultures take on a renaissance. Things like the alcoholism and the drug abuse and some of the social issues have begun to die down and people are much more focused on getting back in touch with who they are and taking more pride in themselves and I think that's a pretty critical...that's something I guess I didn't think through, but that's something that's definitely happened in the last 10 years in our community."
Mark St. Pierre: color:#222222;background:white"> "I'm going to change direction a little bit here now, and I think we're talking about exciting things. We're talking about thriving. But in order to get that to happen, you need to create some separation between tribal politics or tribal governmental structures and business enterprises. Could you address some ideal ways where that distance can be structured?"
Kenneth Grant: background:white"> "I think I will start from the global view. I don't think there's one way. I don't think that there's a silver bullet here. I think it's particular to the situation. I have seen some tribes and some tribal enterprises that basically rely on a strong CEO and a good relationship with the council. I've seen other tribal enterprises such as the Yakama Nation Land Enterprise has a board that is essentially a subcommittee of the tribal council and that works for them. In other instances, there are formal boards of directors essentially that stand between the government and the enterprise, and so they're sort of making sure the enterprise is reporting to the council and they're helping the enterprise set strategy."
Lance Morgan: background:white"> "I think the key for us, the real key is -- one of the main keys I think -- is having a political system that is very helpful, it's very stable. We have nine council members and three are elected every year and usually only one or two change over so we never have this huge kind of change in at-the-top strategy level, and the new people that come in, even if they're kind of curious or suspicious about what we're doing, kind of have a time to adjust and they learn, 'Okay, this isn't so bad.' And so that gives us a stable political environment to work in. Within that we have a board of directors -- we have a tribal corporation, we have a board of directors, the council appoints the board, they passed our long-term plan and they approve our annual plan. That's really their only job. They only have three roles. The board has all the other roles and then myself as CEO makes sure the business functions. And so we have clearly defined roles and we stick to them and we occasionally have to pull out the old long-term plan from '94 and dust it off and read it in a council meeting and that's been pretty helpful for us."
Kenneth Grant: background:white"> "Yeah, getting people to stick to their roles is the challenge, 'cause many times I've seen boards have really just become advisory boards and the CEO is reporting to the council because over time people have moved away from the agreement that they originally set down."
Lance Morgan: background:white"> "What we did is -- I mentioned earlier that we had listed all the reasons for our failure and we added an additional part to it. We took an additional step and I think that's been the key. We developed something we now call -- then it was the long-term plan -- but we're a little more sophisticated now, we call it the 'principles governing the interaction between the tribe and the corporation,' and we have this list of rules based on the reasons we failed before. For example, we failed because we had to go to the council for every dollar we got. So we said, 'All right, the tribe is going to give us 20 percent of the casino profits in an account that the board controls so we don't have to go to the council so every investment decision isn't politicized. We failed once before because the tribe would suck out all the money from the corporation just because they had needs to...social needs to spend it on.' But the tribe said, 'All right, for the first five years, you get to keep all of your money, and then now we're giving 10 percent of our profits back gradually up to 20 percent. We have a system in place. We failed because of personnel issues. We created our own personnel system. We failed 'cause of the lack of accounting systems, accounting was in the tribe's. We have our own accounting system. So we figured out up front and established all these rules, and every once in awhile we have to read these things and remind the council of it and everyone gets back onboard and we move forward."
Mark St. Pierre: color:#222222;background:white"> "That leads to another logical question I guess. The Harvard Project and the Native Nations Institute research says that dispute resolution and having a good organ to do that is important."
Kenneth Grant: background:white"> "Well, it gets back to the politicization that we were talking about earlier and creating the unstable environment and what the dispute resolution does is it helps hold that in check. People have a place to go to resolve the dispute and if the mechanism is seen as fair, it helps hold the politics of spoils in check. That makes it easier for the tribal enterprise to attract the human capital and the financial capital that it needs to operate successfully."
Lance Morgan: background:white"> "We don't have a lot of problems on the dispute-resolution side with our individual businesses. Our primary dispute is balancing the separation with the government and the business and we really, since we're owned by them, we really have to figure out ways to get along with them. And so our disputes are played out kind of through negotiation typically, and I think that if we ever really got into a fight with our owner we would probably lose. They could pass laws, they can make motions, they can change the board, so our challenge is to educate people and to get them onboard with our long-term concepts and make them a believer in what we're trying to do."
Mark St. Pierre: color:#222222;background:white"> "And that's the follow up: How do you do that? How do you educate the tribal citizens who are also the tribal politicians eventually in this process?"
Kenneth Grant: background:white"> "I think it speaks to the issue of transparency, and that doesn't mean that every decision that Lance makes is open for review or put up to a vote by the citizens, but it is keeping people aware of what the mission of the operation is, how it's performing, what its financial returns are, what its goals are, and I do think that the political leadership has a role in helping to educate the tribal citizens and the owners of the enterprise."
Lance Morgan: background:white"> "One of the things we do is we have a mechanized system for putting information out to the people and to the government. We have to provide audited financials every year and an annual report and we even had a PR campaign, kind of a sophisticated thing which really was kind of a failure I think. I think what's really helped us is really going out and directly talking to our membership. One on one we've brought in our employees, we've kind of given them a fact sheet about what we do and given them information, they go home, talk to their families and we deal with kind of the little negative issues that emerge in a small community and I think our sophisticated PR strategy and press releases and all that stuff really didn't work until we started talking to our people."
Mark St. Pierre: color:#222222;background:white"> "Sadly, we're running out of time, but I'd like to do one final question for both of you. This is exciting stuff. Where do you see it headed?"
Kenneth Grant: " background:white">I think there's been a tremendous change in the last 20 years, and I think more and more examples of success are breeding more and more success within Indian Country on operating tribal enterprises. I think it's one of the biggest changes we've seen in the last 20 years, and I think the trend is very, very positive."
Mark St. Pierre: color:#222222;background:white"> "Where is Ho-Chunk?"
Lance Morgan: "Our challenge is to continue to transition from these controversial businesses to these businesses that take advantage of being a tribe, and really make a lot of money hopefully and we can take that money and funnel it towards our community in a social kind of side of the equation. I think that what I don't want to get lost in this [is] it's not really, it's never really about the money. We're never going to be Microsoft. We're a company that is focused on making our community better, and I think the more we realize that ourselves, the better off we are. So I think the future for us, drive the business forward, be as great as we can, as competitive as we can, and figure out ways -- challenging and interesting ways -- to spread the wealth in our community so that everybody benefits from it. And I think that in the end is going to be the key to our longevity there, because that's what's going to engender I think good feelings towards the tribe."
Mark St. Pierre: color:#222222;background:white"> "I want to extend a heartfelt thanks to both you guys for traveling here. I'd like to thank Lance Morgan and Kenneth Grant for appearing on today's edition of Native Nation Building, a program of the Native Nations Institute for Leadership, Management and Policy at the University of Arizona. To learn more about Native Nation Building and the issues discussed here today, please visit the Native Nations Institute website at www.nni.arizona.edu/nativetv. Thank you for joining us and please tune in for the next edition of Native Nation Building."