Moving the Needle on Economic Inclusion

For the past year, I’ve been working with a group of regional leaders in the forefront of advancing economic inclusion.  One of the challenges they’ve been wrestling with is that, even when the programs they run are wildly successful, those programs do little to move the needle on key indicators of economic inclusion.  

The normal response would be to double down and run more and even better programs, on the assumption that moving the needle requires changing as many things as possible by as much as possible.  However, while lighting a lot of bonfires can make it look like big things are happening, it takes a lot of effort to keep those bonfires going.  And most flame out when the funding runs out, leaving the underlying systems largely undisturbed.  

So, what does it take to change the underlying systems?  After three decades of research, the renowned systems expert Donella Meadows concluded that the greatest leverage for changing complex systems lies in establishing a new narrative, new goals and new rules for those systems.  In other words, the key to moving the needle in complex systems is to go deep, not wide.

I came to the same conclusion while consulting with an insurance company back in the 1990s.  They had been losing money for several years, and their parent company was threatening to sell them off if they couldn’t get things turned around. 

The conventional wisdom in the C-Suite, based on what had worked well in the past, was that market success comes from selecting low-risk customers at or above the market price, retaining them with good service, keeping volume up, and keeping expenses down.  That narrative had held sway for some time, and most of the systems in place were designed to support it. 

But, because of changing conditions, that approach was no longer delivering the same results, and many employees were starting to question the conventional wisdom.  A new narrative was beginning to take hold in the branch offices.  It maintained that if the company increased its claims and underwriting capacity (actually adding expense), risks could be managed more carefully, prices could be determined more accurately and set at levels that were profitable, losses would fall, and volume could be maintained through stronger relationships with the independent agents who wrote the policies. 

Both narratives were living side by side in the organization sending mixed messages, which caused employees to feel stuck.  And because the existing systems were designed to support the old narrative, it was difficult for new initiatives to get much traction. 

I’ve been watching those same dynamics play out in the economic development arena in Northeast Ohio, where I’ve done a lot of work over the past decade.  Back in the 1980s and 1990s, the conventional wisdom was that economic success would come from retaining large corporations with long-standing ties to the region by creating a favorable business climate and by providing targeted incentives and services through institutions at the local level. 

However, by 2001, with the economy still declining in what Cleveland’s Plain Dealer characterized as a “Quiet Crisis,” a new narrative had begun to emerge.  It maintained that it wasn’t enough to retain large corporations.  Economic success also required attracting businesses from outside the region, supporting the growth of new businesses and emerging industries (particularly in high-tech), and focusing more attention on small businesses (particularly in manufacturing).  The new narrative maintained that these activities could best be carried out at the regional level.  

Ten years later, frustrated that economic performance in Northeast Ohio was continuing to lag the rest of the country, a group of business and philanthropic leaders came up with a new narrative in the course of developing the Regional Economic Competitiveness Strategy (RECS).  It maintained that economic success would come from targeting driver industries, making the retention and expansion of small businesses a top priority, focusing on scale-ups in addition to start-ups, and better aligning workforce development efforts with employer needs.  That, in turn, would require closer collaboration between regional economic development intermediaries and their local partners. 

Today, right on schedule, there is again growing frustration with the lack of economic progress in the region.  And once again, a new narrative is beginning to take shape.  It maintains that it’s not enough to just grow more jobs.  Those jobs need to be good jobs, and there need to be effective systems in place to help people, particularly low-income residents, prepare for and gain access to those jobs.  That will require targeting particular neighborhoods or corridors for development, better integrating economic development, workforce development, and community development efforts at the local level, and forging closer links between neighborhood-based efforts and resources at the regional level.  

Just like the insurance company example above, old and new narratives continue to live side by side in Northeast Ohio, sending mixed messages.  Clearly, it would be helpful to get everyone on the same page and moving in the same direction.  

But that, by itself, may not be enough to move the needle.  Over the years, new programs have often been layered on top of old systems, or tried to work around them.  

Ultimately, the new narrative will need to be embedded in new policies and in new structures designed to carry out those policies.  That will require systematically weeding out old assumptions, policies, and structures that have outlived their usefulness, so that new systems can take root.  

That’s hard work, but it’s well worth the effort.  Without it, the new narrative could just end up being the latest chapter in an old story that seems to keep repeating itself.

Pete Carlson is president of Regional Growth Strategies