WASHINGTON - At the National Indian Business Association Annual Conference
and Trade Show in September, Chuck Johnson of Johnson Strategy Group Inc.
placed particular emphasis on developing a capacity for "due diligence"
within tribes, so that tribes can discern good business deals from bad ones
and offer solid investment opportunities to the off-reservation equity
capital market. In the third in a series of articles drawn from Johnson's
presentation, he continues a countdown of the "dirty dozen" questions of
tribal due diligence, designed to pinpoint the major changes needed for a
transition "from" one set of practices and "to" another that will produce
and support tribal economic diversification. They are the "dirty dozen"
because they raise some difficult challenges.
6) From economic planning separate from other tribal plans ... To economic
planning as an element of larger tribal strategic plan
How many of you do economic planning separate from other tribal plans?
Versus make tribal pans as part of a larger strategic plan, where you do
have that vision, you do think a little broader about where you want to be
in five or 10 years?
7) From corporate performance using government-type accounting ... To
corporate performance using value measures and industry benchmarks
How many of you do [evaluate] corporate performance using government-type
accounting? [Versus evaluating corporate performance using value measures
and industry benchmarks.]
8) From analysis of impact and feasibility project by project ... To
analysis of impact of all tribal operations on the local and regional
How many do analysis of impact and feasibility project by project? My
experience in Indian country has been for about 20 or 30 years, most tribes
do lots of feasibility studies ... We called it "one-off feasibility
studies," versus analyzing the impacts of all the tribal operations on the
economy, and then deciding what sector or what deal you want to go into. So
this is sort of a chain proposition as you build not only the portfolio [of businesses], but build capacity.
9) From economic databases drawn from tradition sources (as in the Census)
and one-shot studies ... To an economic database covering all sectors and
money flows in the local and regional economy
... Economic databases from traditional sources, you know using just the
Census or one-shot studies, versus economic databases that cover all
sectors and money flows? And there are databases out there you can
purchase. I mentioned IMPLAN is one of them, where you can get, reasonably
[priced], fully up-to-date data by county, and then you can compare the
tribe to your surrounding counties, and you can compare your tribe to the
state. So you can basically do an analysis of how the tribal economy is
doing vis-a-vis other economies, including what are the high-growth
businesses in that county, and which jobs pay the most? Should you be
training tribal members to run c-stores [convenience stores] and truck
stops - I call those "round up the usual suspects" - or should you be
training tribal members in technologies and financial services and other
things where their job mobility is greater?
10) From economic success measured by jobs and revenues ... To economic
measures embracing the environment, social wellness, cultural preservation,
So basically economics itself is very often measured by jobs or revenues,
which is a very good political measure. Can we hire a bunch of people, and
how much money do they make? Let me suggest that's a very limited set of
indicators when you could also look at such things as wellness businesses,
which tribes could get into. You could look at such things as TTANF [Tribal
Temporary Assistance to Needy Families] retraining, you could look at such
things as environmental industries and consulting firms where the tribe has
a better chance at a higher mobility of not only jobs on the reservation,
but being able to export that service to off-reservation clients ... you
have food distribution, you have food sales, you have supplies and what-not
that you go off the reservation.
11) From round-up-the-usual-suspects, drive-by business selection (what you
see is what you get) ... To business selection based on high value growth
industries (locally, nationally and globally)
Eleventh [of the "dirty dozen"] is my favorite one. I would suggest that
... most tribal members think a business is the things they can drive by
and see. I can see a casino. I can see a hotel. I can see a restaurant. I
can see a convenience store. I can see a golf course. Let me suggest that
most of your economies, they may not be the growth industries of the
future. They may be high-profile industries everybody can see ... maybe
those things are low-scale retail jobs that have a high turnover and very
often are tough to manage. They're not necessarily the jobs of the future
in terms of both the local economy and the regional economy and your access
to national markets. So I call that round up the usual suspects because you
can see it ... There are successes in that, but the U.S. economy is not
built solely on retail operations. You're successful if you're in a
high-traffic flow area, like an interstate, or if it's a high-market area,
but there are other sectors out there you have to pursue.
So let me suggest that business selection should be based on growth
industries of the future, not what you can drive by and see.
12) From financing from lending, government sources and debt ... To mixing
and leveraging financing to include equity investment
So basically you get at the financing. And the old way is by blending
government sources of debt, and the new way ... is you mix and leverage
financing, and you get it in equity investment. That means you buy stock in
tribal businesses. Buy stock in joint capital kinds of businesses. When
they succeed, they'll buy back and you'll get a return on your investment.
America was not built on bank lending. The U.S. economy is not the most
productive economy in the world because of banks. It's because of equity
and venture capital. That's the engine of growth. So if Indian country is
going to be an engine of economic growth, it has to access the capital
markets. Now there's some issues because for many of the venture
capitalists, their floor investment may be a minimum hundred million dollar
deal, not a five million dollar deal. So basically you start aggregating
economies ... when you're trying to aggregate [bond] issues [among Indian nations and intertribal partners], you have more truck or more traction
with the larger investment community.