Re-Post: New Pathways for a Cleveland Comeback from Defend Cleveland

Submitted by Betsey Merkel on Tue, 01/20/2009 - 20:02.

From Defend Cleveland, by Ed Morrison

The Cleveland comeback has stalled. Once hailed as a shining example of rebirth in our industrial heartland, Cleveland now sits rudderless and drifting backward. The stiff headwinds facing Cleveland Between 2000 and 2007, Cleveland suffered one of the largest proportional population losses in the country. The city shrank by 8%. Per capita income growth in Cleveland also lags behind cities like Cincinnati, Milwaukee, and Pittsburgh. Since the early 1990s, the income growth gap between Cleveland and these other cities has widened. Lagging incomes creates another problem. As a regional economy deteriorates, the pressure for social services goes up. It’s not surprising, therefore, that — with income growth lagging — local tax rates in Cleveland are among the highest in the country. Political corruption also takes a toll. Cleveland sits in the middle of Cuyahoga County. Several months ago, federal law enforcement officials launched a sweeping probe of political corruption in the county. The future doesn’t look much brighter. Cuyahoga County is often described as the epicenter of the foreclosure crisis in the country. Counting from 2000, Cuyahoga County has the highest per capita foreclosure rate in the country. Overnight, foreclosures decimate neighborhoods that have taken years to rebuild. In the Cleveland neighborhood of Kinsman, half of the mortgage properties are in foreclosure. In other neighborhoods foreclosure rates range from 25% to 30%. Not surprisingly, Cleveland’s foreclosures are concentrated in the lowest income neighborhoods, the places hardest to rebuild. Within these neighborhoods, vandals strip empty houses of appliances, windows, pipes, and fixtures. It takes about 72 hours for a house to be stripped after becomes vacant (all of which makes scrap metal recycling a booming business in Cleveland). Stripping the pipes renders the property a total loss. Meanwhile, the Cleveland Municipal School District, like many large urban districts, is making only glacial improvements. According to a recent report by America’s Promise, Cleveland ranks 48th of 50 large school districts in high school graduation rates. Fewer than six in ten of Cleveland’s 9th graders will complete high school. Cleveland’s dropout factories include Collinwood High School and East Tech High School, where only four in ten 9th graders graduate. Cleveland emerges as a Comeback City Many older industrial cities face the same set of challenges, but few cities started three decades ago with the same promise of regeneration. With the collapse of the steel industry in the late 1960s, Cleveland started on a spiral downward. It did not help that 40 years ago the Cuyahoga River also caught on fire. Cleveland jokes became a staple of late-night television. The city hit bottom when it filed for bankruptcy in 1978. Cleveland turned the page with the election of George Voinovich as mayor in 1980. Voinovich, a tough minded Republican, challenged the business, labor and civic leadership of the city to transform Cleveland. The business community responded. A core of corporate CEO’s organized Cleveland Tomorrow, modeled on the Allegheny Conference in Pittsburgh. Cleveland Tomorrow then drove a focused agenda of urban transformation. By 1989, Fortune magazine applauded the city’s new trajectory in an article, “How Business Bosses Saved a Sick City”. The White Administration: The drifting begins The Partnership between the city and the business community began to shift in 1990 with the election of a new mayor, Michael White. While the business community worked with White to complete projects planned during the Voinovich administration, like a new baseball stadium and basketball arena, the relationship between the mayor and the business community gradually deteriorated. In 1995, the business community still supported White sufficiently to push for mayoral control of the city school system. But this step represented the last big collaboration. By the time White began his third term in 1997, the Voinovich momentum pushing public-private partnerships had evaporated. At the same time, dramatic changes were taking place in Cleveland’s corporate landscape. By the late 1990s, the city had lost five Fortune 500 headquarters. Manufacturing, the backbone of the region’s economy, shrank dramatically. Importantly, as the influence of manufacturing declined, real estate developers emerged as important forces within Cleveland’s business circle. Entering the 2001 recession, Cleveland was clearly in trouble. The local paper, the Cleveland Plain Dealer proclaimed that Cleveland and the region was facing a “quiet crisis”. The editors started pushing for a master plan for economic development to follow up on the momentum of the Voinovich years. As one editor noted: “Our population is static, and has been for the past decade. Our recent college graduates are seeking opportunity elsewhere. Old industries are dying, and the climate for growing new ones isn't the best….Greater Cleveland must get serious about creating and backing a master plan for economic development or face economic extinction.” The Greater Cleveland Partnership takes control The business leadership responded by consolidating different business organizations — Cleveland Tomorrow (leading CEOs), the Greater Cleveland Growth Association (a chamber of commerce), the Cleveland Roundtable (a group focused on diversity issues), and the Council of Smaller Enterprises (a small business organization) — into the Greater Cleveland Partnership. The Partnership focused its economic development agenda on building a convention center, the last Voinovich era project to be built. Cleveland has been studying a new convention center for at least a decade, but — for reasons we will explore — the city’s leaders have never been able to deliver a deal. The Partnership also re-organized a set of affiliate economic development organizations for better control and (hopefully) impact. These include JumpStart (for start-ups), BioEnterprise (for life science companies), MAGNET (for manufacturing companies), Team NEO (a recruiting organization) and Cleveland+ (a new branding effort). The Partnership’s strategy called for making these organizations bigger in order to drive the transformation of the Cleveland city-region (reamed Cleveland+) Partnership has been resourceful in financing its economic development strategy. A close relationship with a new coalition of foundations, called Fund for our Economic Future, provides about $8 million a year for the affiliate organizations. The Fund effectively operates as a financing arm for the Partnership’s Cleveland+ strategy. To build a new convention center, the Partnership pushed the County Commissioners to approve a sales tax increase to finance a new facility for about $500 million. In July 2008, the Commission — cleverly skating past a public vote (which by all accounts would have rejected the plan) — increased the sales tax unilaterally…and in a hurry. In an odd twist, the Commission voted to finance a convention center without a development plan, or even a site, in place. (So, in effect, Cuyahoga County taxpayers are already paying for a non-existent convention center.) The reason for all the rush seems clear. Last July, on the eve of the Commission vote to raise the sales tax, the Federal Bureau of Investigation assembled a team of over 200 agents to launch a public corruption probe with raids of county offices, the home of one commissioner, and the offices of several contractors. According to news reports, federal prosecutors are looking into the close relationship between county officials and several contracting and real estate development firms. The convention center: No plan? No problem The City’s future, according to this the leadership’s current thinking, hinges on a convention center. There’s only one problem: There is no evidence that this strategy works (and plenty of evidence that it will not). Convention centers represent a formula for low-skill, low-wage employment and public operating deficits as far as the eye can see. Amidst the turmoil, Cleveland’s leadership has drifted into a classic case of group think. By shutting themselves off from public scrutiny, the city’s business and political leadership have tried to shield themselves from growing public opposiiton. But in the process they have drifted into a dream world that is increasingly detached from underlying market realities. Fixing the weaknesses of Cleveland's current strategy Put the convention center aside for a moment. Despite the significant assets within the region, the Greater Cleveland Partnership’s broader strategy for Cleveland is failing to transform the city-region’s economy. Here are five weaknesses of the current Cleveland strategy and how to fix them. The wrong approach to achieving scale.— To be effective, economic development initiatives have to achieve some scale: they have to be big enough to make a difference. With traditional thinking, leaders build scale by building bigger organizations. The Cleveland leadership is following a traditional economic development model based on hierarchies. What worked 30 years ago does not work so well today. Across the business landscape large vertically integrated organizations are breaking apart. In the age of networks has arrived. In economic development, this transition means that civic leaders need to build regional scale by developing networks. Indeed, in a world of increasing economic complexity, regions that have strong trusted networks will be more competitive. They will learn faster. They will spot opportunities faster. They will align their resources faster. And they will make faster and better decisions. Cleveland’s civic leadership can be far more effective if it understands the power of social networks, how to develop them and how to align them. While there are a number of good books to explore this topic, The Tipping Point should be required reading. Misunderstanding public private partnerships.— Over the past decade, Cleveland’s business leadership has revealed a startling misunderstanding of the nature of public-private partnerships that drive economic development. Public-private partnerships involved to categories of investment. The strategies driving these two categories must work together for economic transformation to take place. The first category involves a publicly-led and privately-supported investment projects. Typically these projects involve large infrastructure, but they also involve projects in which public financing represents over half of the total development budget. Good examples are stadiums, museums, libraries, and community sports complexes. The second category of investment involves privately-led and publicly-supported investment projects. These are investment projects in which the private sector takes the lead, but the public sector provides support and guidance. Good examples include tax increment financing districts, business improvement districts, and virtually all economic development incentives. Cleveland, during the Voinovich Administration, executed well on the first category of investment: publicly-led and privately supported projects. A new baseball stadium, the Rock and Roll Hall of Fame, the Science Museum, the new basketball arena, and Cleveland Browns stadium are all examples of this type of project. Starting in the mid-1990’s this capability degraded rapidly, so that it has taken over ten years (with no end in sight) to complete the last of the Voinovich projects, the convention center. When it comes to the second category of investment -- privately-led and publicly supported investment -- the business community has proven itself inept. It took the business community ten years to establish a business improvement district around the new baseball stadium and arena. The signature downtown shopping mall, Tower City, has no anchors, no street visibility, and terrible parking. Not surprisingly, the inept Tower City investment has been a drag on Forest City’s portfolio. Further, Forest City never followed its investment in Tower City with a push for downtown residential development. Cleveland’s civic leadership has a lot o learn about successful public-private partnerships. The easiest way to learn involves regularly visiting other cities to learn how these partnerships are designed and implemented. Not surprisingly, Cleveland’s civic leadership does not regularly take leadership visits, a common practice among dynamic metro regions. No strategic framework, no theory of change.— Foundations are fond of asking their grantees for a “theory of change”. In other words, they want their grantees to orient themselves within a broader system. They want a simple, clear explanation of how a proposed intervention will transform the system to better performance. Cleveland’s leadership has no apparent theory of change. Overwhelmingly, the Cleveland strategy is now driven by individual projects. These projects, pushed by the real estate interests that dominate the board of the Greater Cleveland Partnership, confuse real estate development for economic development. (This leads to the “Big Thing Theory” of economic development: Prosperity involves building one more big thing.) The economy has shifted under the leadership’s feet. We are rapidly moving toward an economy of networks embedded in other networks. In this new world, the meaning of economic development has shifted. With an economy driven by knowledge and networks, economic development is more than land development, real estate projects, and recruiting firms as they move from Michigan to Mexico. Today, economic development begins with brainpower in 21st-century skills. Cleveland’s leadership largely ignores the role of developing brainpower in building prosperous regional economies. The next version of the Cleveland+ strategy should explain how the city-region will innovate to build these skills. The best places to look: Milwaukee, Cincinnati, Syracuse and Kalamazoo. In Milwaukee, the Center for Education Innovation and Regional Economic Development is taking on this task. In Cincinnati, the initiative to boost educational attainment is called Strive. In Syracuse, it’s Say Yes to Education and Economic Development. In Kalamazoo, it’s the Kalamazoo Promise. Developing brainpower is only a beginning. Prosperous regions must also develop thick, trusted networks to convert this brainpower into wealth through innovation and entrepreneurship. Cleveland’s top-heavy development organizations need to shift toward network-based strategies that are more lean and agile. That will put investment toward more productive use. Good examples to follow: Ann Arbor Spark and the Milwaukee 7. In order to attract and retain smart people, regional leaders need to develop quality, connected places, “hot spots” that attract people and “smart growth” strategies that efficiently leverage scarce public investments. In Cleveland’s case, the city needs more coherence to its physical development, a coherence that embraces the city’s inevitable shrinkage in the years ahead. To create a buzz, effective regional leaders intentionally build their brands, not with clever logos, but with powerful experiences and stories that help people to connect their past to a prosperous future. Action, authentic stories, and networks are changing the stories of Akron, Youngstown, Kalamazoo and Milwaukee, all cities facing the same challenges as Cleveland. Finally, leaders in city-regions focus new skills and disciplines of thinking together. All of the challenges confronting regions today -- dropouts, poor school performance, weak entrepreneurial supports, the absence of risk capital, expensive sprawl -- are complex issues that easily cross organizational and political booundaries. Very few city-regions have figured out protocols for addressing these complexities and build the skills of thinking together. Cleveland’s leadership failure to understand the importance of these skills leads to the next weakness. The wrong mindset for making decisions.— If you live in a world of hierarchies, you live in a world of two directions: top-down or bottom-up. Top-down is the preferred direction. It’s the direction of command-and-control, the direction of predictability and stability. Bottom up is the opposite. It implies disorganization and chaos, inefficiency and fragmentation, confusion and uncertainty. If you approach economic development from a top-down perspective, you want to limit and control carefully public comment. Civic engagement is a carefully circumscribed event not a process; a meeting, not a collaboration. Anyone who has attended a school board meeting understands this point. There’s only one problem. The top-down world does not exist in economic development. Complex public/private strategies are developed in an “civic space” outside the four walls of any one organization. Within the civic space, no one can tell anyone else what to do. Strategies born in a top-down mindset are doomed to fail. From a network perspective, the mindset of “top-down versus bottom-up” presents a false choice. Networks have no top or bottom, only nodes and links. Strategy is an exercise of aligning, linking and leveraging assets across a network. Transformation takes place when enough people in the network align themselves toward a specific outcome. That’s when the network hits its “tipping point”. Networks align through the purposeful conversation. Traditionalists have a hard time grasping the importance of conversation in the networked world. To them, conversation is a distraction or worse, a waste of time. In the years ahead, the challenges for places like Cleveland will be to build new civic disciplines to manage complex conversations that are both open and guided toward promising outcomes. At Purdue, we are developing the new disciplines of Strategic Doing, an approach to select and test transformative ideas in complex environments quickly. In a networked world, strategic thinking has never been more important, but how we develop strategy must change. Traditional approaches of strategic planning are too linear, time-consuming, inflexible and expensive. Strategic Doing offers an alternative. By translating ideas into action quickly, the disciplines of Strategic Doing build both collective knowledge and trusted connections. They lead us to “link and leverage” strategies that multiply the effective power of our assets. Cleveland’s leadership has a long way to travel down this road. The leadership has shown a naive ineptitude in designing civic deliberations on complex issues. For over ten years, the Greater Cleveland Partnership has been fiddling with a convention center decision. In the long run, the upside for the city is minimal, while the downside grows day by day. By following traditional top down management models, the city’s leadership, if it’s lucky, will build a 30-year-old idea 10 years late. Weak (or nonexistent) metrics.— In a traditional world of hierarchies, metrics are the primary instrument of top-down control. It’s not surprising that, as a rule, economic development professionals tend to shy away. Relatively few regional strategies include metrics. In a network world, metrics serve different and more important functions. First, metrics help clarify outcomes. They add coherence by promoting alignment. In today’s world, visions are very difficult to translate to action. More specific outcomes and metrics mark the direction in which we are heading. Metrics are useful guidepost, markers in the road to help us find our way and —when we stray — to find our way back on course again. Metrics serve another role. They help us learn “what works”. They are intimately tied to our theory of change. Economic development is inherently an inductive process of experimentation. Without measurement, we have no way of knowing whether or not our underlying assumptions are more right than wrong. Finally, measurements feed our strategic intuition and enable us to know whether to jump when the circumstances change. Our measurements become a key to our resilience. Cleveland can learn from places like the Prosperity Partnership in the Puget Sound, WA and the West Michigan Alliance where civic leaders are using their metrics to maintain their focus and alignment on a handful of strategic transformations. Cleveland can find a new path to prosperity, but it will take new leadership committed to transparency and different ways of thinking and acting. With new leadership, Cleveland can strike out on a different path. Cleveland will find prosperity with initiatives that embrace brainpower, creativity, innovation, sustainability, collaboration. These are the foundations on which Cleveland’s future can be built. About Defend Cleveland Defend Cleveland is a network of networks...a place where committed people can come to define a more promising future for Cleveland. We're not quite sure how all this will work out, yet, but Hunter and Ed Morrison -- the prime movers behind this site -- are frankly quite tired of reading about old ideas hashed out in back rooms. So, we hope to connect with a lot of people who can provide some guidance for a new Cleveland...

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