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Anchor Organizations Vital to Building Community Wealth Focus of MIT and University of Maryland Case Study

Friday, February 8, 2013

City of Cleveland, University Hospitals, Cleveland Foundation path-breaking model for economic development results in nearly $800 million in annual purchases of goods and services going to local businesses, 5,200 construction jobs, New Project Labor Agreement with Unions, 1,200 permanent jobs, alignment with female and minority-owned businesses.

Cambridge, Massachusetts, February 8, 2013. As many urban areas throughout the nation face shrinking populations, growing vacancies, diminishing manufacturing job opportunities, and increasingly diverse communities, the role of anchor institutions in helping communities stabilize and thrive becomes especially important. In such a milieu, anchor institutions like hospitals and universities have an opportunity to leverage their business models to maximize institutional and community gains.

The story of this effort by one anchor institution, University Hospitals in Cleveland, Ohio, is the subject of a MIT and the University of Maryland newly released case study entitled: The Anchor Mission: Leveraging the Power of Anchor Institutions to Build Community Wealth.

“Our study demonstrates that anchor organizations, like hospitals and universities, can strengthen local and regional economies and become engines of community development and stability, helping to create healthier, stronger urban areas,” says Ted Howard, co-author and Executive Director, The Democracy Collaborative, University of Maryland. “Even a slight shift in an anchor institution’s financial flows can produce immediate local social and economic gains.”

The case study outlines the vision of The Cleveland Foundation to leverage the economic power of the City’s strongest anchor institutions and Cleveland Mayor Frank Jackson’s desire to prevent resources from leaking out of the community.

“We need to create economic stability and sustainability in the region and ensure inclusion is a central part of that sustainable process,” said Frank G. Jackson, Mayor of Cleveland. “University Hospitals had a billion dollars worth of construction and procurement of goods and services that could change the way business is conducted in our city.”

In 2005, University Hospitals (UH) announced Vision 2010 a five-year strategic growth plan. The most prominent “bricks and mortar” feature of Vision 2010 was the new construction of five major medical facilities throughout Northeast Ohio, as well as the expansion of a number of existing facilities. The total budget for Vision 2010 was $1.2 billion, of which $750 million was earmarked for construction.

“As an institution based in Cleveland for nearly 150 years, University Hospitals has consistently displayed its sincere and deep commitment to the vision of shared prosperity, helping its surrounding neighborhoods flourish by buying local and creating jobs for people in Cleveland,” said Ronald B. Richard, President and CEO, The Cleveland Foundation.

From the outset of Vision 2010, UH’s senior leadership began to fashion an innovative strategy to leverage the $1.2 billion investment to create jobs, build community wealth, and open up the opportunity for local, small businesses to position themselves for success in the future.

“We thought, what are the components that go along with making Vision 2010 a true, community-based project?” reflects Thomas F. Zenty III, University Hospitals Chief Executive Officer. “How are we going to engage community members as part of our overall decision-making process, and engage them in meaningful ways that they have not been engaged before?”

Three core commitments shaped the implementation of the UH initiative: (1) including as many local minority- and female-owned businesses as possible; (2) achieving an economic multiplier effect by directing as much spending as possible toward businesses based in the City of Cleveland and the greater Northeast Ohio region; and (3) producing lasting change in Northeast Ohio by pioneering a “new normal” for how business should be conducted by the region’s large institutions.

“We decided early on that we were going to essentially break all the rules,” says Steve Standley, UH Chief Administrative Officer, “And we were not going to even send bids to anybody who was not committed to Northeast Ohio.”

UH sought to reach its goals for Vision 2010 through three specific strategies: First, diversity and local spending goals became a key part of the Project Labor Agreement (PLA) signed by UH and the Cleveland Building & Construction Trades Council with the City as a third-party beneficiary. Second, UH retained an independent firm, Minority Business Solutions (MBS), to monitor progress toward the goals and to create various processes for achieving them. Third, UH instituted internal administrative changes to its traditional business practices to give preference to local vendors. For example, the Vision 2010 goal of using regionally based companies encouraged non-local companies to meet the regionalism goal by opening a Cleveland office and employing Cleveland residents.

To fulfill its commitments, Vision 2010 also established concrete goals pertaining to diversity, procurement, and hiring local residents. By the project’s conclusion, some 110 minority- and female-owned businesses had received contracts, and three of the four Vision 2010 goals pertaining to inclusion were met. All told, more than 5,200 jobs in construction and related fields were created during the five-year period, with salaries totaling $500 million.

MIT and University of Maryland’s case study captures in detail the strategies, challenges and impact of UH’s Vision 2010 on the City of Cleveland and includes new resulting initiatives. For the full case study go to: www.uhhospitals.org/anchormission

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