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THE PRINCIPLE OF PLACE

BUILDING COMMUNITY WEALTH THAT STAYS LOCAL

The $13 billion anchor mission in Cleveland

“I was going strong and then I got the meeting,” Daniel said. After working three years at the plant of a multinational corporation in Cleveland, he was laid off. “It was a full- production plant, but they were doing a lot of cutbacks. We were told they had $3 million to cut.” Soon after, Daniel saw a flyer for Step Up to UH, a recruitment and training program run by University Hospitals as a path to employment for residents from nearby low- income neighborhoods. Daniel was in his 30s, African-American, wearing a blue uniform. As he talked, he sat across the table in the Employee Enrichment Center in the hospital’s Lerner Tower. He told about how he was accepted into the Step Up program, how it taught him soft skills, like how to dress, how to accept supervision without defensiveness. He sought out work at the nonprofit hospital, he explained, because “It’s more stable.” As someone with four children, he “had to think stability. The hospital isn’t going anywhere.”¹

After graduating from Step Up in 2015, Daniel started at University Hospitals (UH) as an environmental services worker at $11 an hour. (Step Up asked that Daniel’s last name not be used.) Within a year and a half, he advanced to $13.13 an hour. He’s now studying accounting, and UH is paying for his classes. “I’m going for a CPA, I’ve always been good with numbers,” Daniel said, settling back in his chair, his eyes taking on a deeper intensity. “I’m in here all the time,” he added, gesturing toward the half- dozen computers for employee use. “I’m looking at the job board, waiting for the next time an entry- level accounting position opens up.”

Daniel’s path—from a laid- off factory worker to an accounting degree—is the kind of trajectory of hope University Hospitals is interested in. This nonprofit hospital system goes out of its way for Daniel, one among 26,000 employees, because of the principle of place. This institution cares about the neighborhoods surrounding its flagship medical center on Euclid Avenue—where unemployment is a dismal 24 percent, closer to 40 percent counting discouraged workers. These are among the most disinvested areas in a city where poverty overall stands at 39 percent.²

University Hospitals is rooted here. This nonprofit hospital system has revenues of a massive $3.9 billion.³ While traditional corporations of such size operate anywhere and everywhere, their gaze fixed on Wall Street, University Hospitals is focused on northeast Ohio, where it’s operated since 1866.

The heart of UH is found at Cleveland’s University Circle—a square mile oasis of dozens of world- class educational, cultural, and health institutions, including Cleveland Clinic, Case Western Reserve University, and UH. These three institutions alone represent more than $13 billion in annual economic activity.⁴ Little of it traditionally reached their immediate community. Head out from their pristine world in your car, and within minutes you’ll come across long- empty buildings that are graffiti-covered, with glass blown out, windows staring vacantly across weed-choked lots.

Those neighborhoods are where the Evergreen Cooperative Laundry was launched. The laundry is twelve minutes by car from University Hospitals. Many Evergreen employees were hired from these neighborhoods. The large contracts fueling the three Evergreen businesses were made by anchor institutions like Case Western Reserve University, UH, and Cleveland Clinic. How this came to be is a story of how social breakdown and separation can become soil for seeds of renewal and connection. It’s a story with profound lessons for the emergence of the democratic economy.

In particular, it’s a story about how government alone isn’t enough to pull the disadvantaged into economic well- being. Anchor institutions are another source of substantial economic power that potentially puts the interests of people and community first.

FROM SEGREGATION TO CONNECTION

At one time the institutions of University Circle were radically disconnected from their neighbors. In a city that today remains the most segregated in America,⁵ these neighborhoods were the less desirable areas to which blacks were effectively limited in the early twentieth century’s Great Migration from the South to escape the harshness of Jim Crow. Later, as manufacturing jobs left the Rust Belt for low-wage areas, unemployment in Cleveland grew. These neighborhoods deteriorated. University Circle institutions experienced vandalism, a few attacks on women, visitors reluctant to come to the area. Many professionals moved to the suburbs. In the citadel of the area’s large institutions, the talk was of an urban decay they feared might engulf them. When urban renewal was attempted, it was often about razing dwellings for institutional expansion. The areas around University Circle became a tinderbox of racial resentment. Then, in 1966 and 1968, what were then called race riots erupted within a mile of the district. Today Cleveland residents call them rebellions.⁶

White residents and businesses increased their flight. The institutions withdrew—focusing on their missions of healing the sick and educating the elite, not on helping their neighbors. Today this history remains visible in the area’s brutalist architecture, where concrete, bunker- style buildings offer first-floor walls that are blank and inaccessible—silently voicing the divide of us versus them.⁷

This legacy confronted Ronn Richard when he became president of the Cleveland Foundation in 2003. His wife, Bess Rodriguez Richard, began volunteering at the Cleveland School of the Arts, across from the Cleveland Museum of Art, where admission is free. One day, Bess mentioned a museum exhibit connected to the day’s lesson and asked students if they’d seen it. Not a hand went up. One student finally said, “Miss Bess, that’s not for us.”⁸

Shaken, Bess told this story to her husband. The next day, Ronn reached out to the heads of local anchor institutions. It was the beginning of the Greater University Circle Initiative (GUCI), which, more than a decade later, remains an ongoing network of anchors using their economic power to benefit the place they call home.

Ronn shared his vision of a “new geography of collaboration”—Greater University Circle, in which anchors and neighbors form a single community. It captured a growing consensus that the futures of the institutions and neighborhoods were inextricably linked. A vibrant neighborhood adds to an institution’s viability. When the community suffers, institutions cannot thrive. GUCI proved the truth of something Martin Luther King, Jr. had said, that we’re woven together in “an inescapable network of mutuality, tied into a single garment of destiny.”⁹

At first GUCI’s focus was physical development. Anchors found together they could raise funds at great scale—for projects like Uptown, a $150 million mixed- use development that revitalized a moribund stretch of Euclid Avenue.¹⁰ GUCI’s goals expanded to become Buy Local, Hire Local, Live Local, and Connect. Today among its legacies it counts increased enrollment at Case Western Reserve University, hundreds of employees who’ve moved back to the area, and 28 brownfields remediated. There’s the NewBridge training facility, where more than 600 people have been trained, and the Health Tech Corridor, with 1,800 local jobs retained and 1,300 jobs created. There’s the Neighborhood Connections program and its Network Nights, connecting neighborhood residents to each other and to the institutions.¹¹ GUCI is today strategizing new directions and has asked The Democracy Collaborative to help.

MAKING IT UP AS YOU GO ALONG

Perhaps GUCI’s most innovative program was the Evergreen Cooperative initiative. Its three worker- owned businesses launched between 2009 and 2012, of which the laundry is one, were initially designed to meet the purchasing needs of local anchors.

It began the day Ted spoke at a roundtable on community wealth building he helped organize in Cleveland. If India Pierce Lee from the Cleveland Foundation hadn’t heard him that day, our lives would be very different now. Afterward, she invited The Democracy Collaborative to do a feasibility study on an anchor strategy to help low-income neighborhoods. Our former colleague Steve Dubb and Ted did more than 100 interviews with anchors: What were they buying? What could anchors buy locally? They used the results to design a strategy for employee-owned companies to meet the needs of area colleges and health systems.

As the project began, Ted commuted monthly to Cleveland. “You know, one day you’ll be moving here and become one of us,” India said at one point. Ted laughed. A year later, he was living in Cleveland.

So, as someone who’d been living (happily) in Metro Washington, DC, he made a new home in this Rust Belt city. He and India and Lillian Kuri of the Cleveland Foundation, along with anchor leaders and a business development team, made it up as they went along. No other city had tried a community wealth building strategy like this. As he became integrated into the community, Ted realized that, everywhere else he’d lived, he’d been disconnected from place and didn’t know it.

The approach was naïve at first. When the CEOs of GUCI said “we’re all in,” we thought that meant the Evergreen Cooperative Laundry had contracts. Then it became clear that in a bureaucracy of 26,000, Joe in procurement didn’t care what the CEO said. The hospitals were locked into huge, multiyear contracts. But there were tricks. For example, Steve Standley, chief administrative officer at UH, convinced a large supplier to carve out a subcontract for the Evergreen Cooperative Laundry.

Tracey Nichols, then the director of Cleveland economic development, called up one day. She helped line up financing, which included a $1.5 million Housing and Urban Development (HUD) loan for Evergreen Cooperative Laundry; an $8 million HUD loan and a $2 million HUD grant for Green City Growers; and a $1.5 million state loan for Evergreen Energy Solutions.¹²

It took three years working with anchors before we found a way to really connect with the community. Now there’s a richer strategy for engagement. In fact, the motivation for the Step Up to UH program came out of neighborhood dialogue, where people expressed frustration about not being able to get in the door. In retrospect, we should have started at the top and bottom at the same time.

ORGANIZING 800-POUND PLAYERS

Anchor support was vital for the Evergreen Cooperatives, but also not enough. Evergreen Energy Solutions got its start installing large solar arrays at institutions like Case Western Reserve University, but later it had to broaden its business model, taking on painting, home renovations, and LED lighting installation for many clients. Green City Growers sold to nonprofit anchors, but it also needed other local institutional buyers—including an $800,000-a- year contract selling basil to Nestle.¹³ The greenhouse for years lost money. Today it’s in the black, as are all three worker- owned businesses.

The most substantial anchor impact recently has been at the Evergreen Cooperative Laundry, which in 2018 won a competitive bid to handle all the laundry for Cleveland Clinic. Starting pay at that facility was raised 20 percent over what the previous manager, a multinational firm, had paid. Overnight, 100 new employees were on a fast track to ownership. Employment at Evergreen Cooperative Laundry tripled.¹⁴

Over time, it’s become clear that anchor work is really a sophisticated community organizing strategy. What you’re organizing are big institutional players. At The Democracy Collaborative, we’re taking this lesson to scale. Our Healthcare Anchor Network has close to 40 major non-profit hospital systems, collectively employing over 1 million people, with $50 billion in spending on goods and services, and $150 billion in investment assets.¹⁵ They’re learning together to be effective anchors for their communities. That network’s success inspired us to launch a network of colleges and universities, and a third network of place- based anchor collaboratives.¹⁶

We’re more powerful together than apart. The deep redesign of processes is hard for a bureaucracy, and people need support to risk change in routines. But concern for the people in the place that’s home—that’s what brings people together. It’s the glue.

RETURNING TO THE LOCAL

Returning to place is a way to begin righting the relationship between economy and society. It was the Industrial Revolution that turned that relationship inside out, making industry the ruling force. Throughout prior history, historian Karl Polanyi observed, economic activity had been just one part of a social order encompassing religion, government, families, and the natural world. The kings of capital turned labor and land into market commodities—to be “bought and sold, used and destroyed, as if they were simply merchandise,” Polanyi wrote. But they were fictitious commodities, for they were human beings and the earth.¹⁷

Anchor institutions are part of a return to localism, and part of a reimagining of what it means to create health. These hospitals recognize that healthcare represents only 10 to 20 percent of health outcomes. More important are the social determinants of health—the conditions in which people are born, work, and live. Economic development is a path toward health—as it also prevents unnecessary demand on the healthcare system.¹⁸

The potential for scale is off the charts. Hospitals and universities represent 8.7 percent of US GDP, which is an enormous swath of economic activity.¹⁹ It’s equally true that turning these large institutions is as slow as turning a battleship.

GOING AGAINST TRADITION, CONFRONTING SKEPTICISM

After Daniel left the Employee Enrichment Center at UH, we visited Kim Shelnik, vice president of human resources at UH; with her was Staci Wampler, program manager from Towards Employment, which partners on the Step Up program. “This is a very different group to go in and secure employment,” Kim explained. “You’re employing individuals who never would have had a chance to make it through the normal selection process.” She oversees the hiring processes of UH, where 17,000 apply each month for 1,500 to 1,600 openings. “You already have candidates,” Kim explained. “You have to put aside openings for this.”²⁰

We sat in on one Step Up class, where participants were eight women in their late teens and early 20s, all people of color. They were dressed in skirts and stepped out, one by one, for mock interviews. Discussion was about the handout, “Opposing Rules of Home and Work.” In personal life, one column read, “I should be able to live by my own set of rules.” The instructor asked, “Is this true for you?” Most hands went up. “At work it’s different,” she explained, reading from the facing column: “Do what you are asked to do, even when you don’t want to.”²¹

On day nine of this ten- day class, the recruiter will visit. “I expect 100 percent will be made an offer” for a job at UH, instructor Yvette Herod said during break. “Some will decline.” Though she tried to explain to them, some don’t realize that if they wait, they’ll be competing against thousands.

In a normal pool of applicants, Kim said, only 1 out of 69 will be hired. “We had to create a funnel before the funnel to prepare residents.” If this seems to go against “the tradition of fair process,” she continued, “it’s a different kind of fair process.” The graduates have been more successful than those from the traditional selection process, with lower turnover. Step Up has made 246 hires in four years, with one-year retention of 73 percent, compared to 66 percent in other hiring. “That’s unheard of,” Kim said. “That’s why we keep it going.” The secret is the job coach provided for the first six months, which Kim called “the secret sauce.” Coaches help with soft skills, the number one reason for turnover.²²

Initially, Step Up met skepticism from her colleagues, Kim continued. “But we didn’t give up. It was my reputation on the line.” Over time, Step Up proved itself to be good business.²³ Yet at the time of our visit, the program was at risk. “To be honest, we can’t afford Step Up,” Kim said. “It will end unless we find funding.” For a few years, the cost was picked up by the Cleveland Foundation. Then a Kellogg grant was found. The annual cost is $25,000 to $28,000, about $1,250 per person.

As Kim related this, Staci turned and reported she had a dozen women starting new classes. Kim paused. Across the face of this woman—struggling with a shortage of registered nurses, facing staff cuts every year in her hiring team—there flit a look of satisfaction, something bordering on happiness. She relaxed. “That’s great,” she said.

As promising as Kim and Staci’s work is—and as enormous as University Hospital’s and GUCI’s resources could potentially be in benefiting community—the truth is, all these efforts struggle upstream against the massive currents of the extractive economy. Looking back to when Daniel was laid off by his previous employer—2014, when his plant needed to cut $3 million—financial statements showed sales worldwide at that multinational were more than $90 billion. That was down slightly from the year prior. Yet profit was up dramatically, from 11 percent to 16 percent.²⁴

When revenue falls but profit rises, that means expenses were slashed. The biggest expense is generally labor. Put simply: income to capital is increased by reducing income to labor. This was likely done through cuts across the company’s more than 400 factories in over 100 countries. It’s not deliberate cruelty. This company is a valuable employer for Cleveland. But like any company with ownership trading in the stock markets, it’s constrained by the system design.

Disruption in human lives disappears in the tally of what matters: earnings per share. Profit allocated to shareholders. As journalist Alex Berenson observed, “More than any other number, earnings per share determines whether a company’s shares will rise or fall, whether its chief executive will be rewarded or fired, whether it will build a new headquarters or endure a round of layoffs.” In short, “Earnings per share is the number for which all the other numbers are sacrificed.”²⁵

In the year 2014, this corporation’s earnings per share rose from $3 to $4, and its stock price soared from $66 to over $70. The year Daniel lost his job, the chairman of the company made $6 million, as pay for performance for a job well done.