Last month, several colleagues and I attended the chance Finance Network's Small Business Finance Forum in Chicago, a celebration focused on strengthening the capacity and networks of Community Development Finance Institutions (CDFIs, like PCV) that purchase small businesses in underserved communities through the Usa. Over 150 representatives from CDFIs, banks, foundations, research organizations as well as online lenders attended this two-day event, which included on the dozen sessions covering an assorted group of topics relevant to small company investors.
Most sessions focused on approaches to increasing CDFIs' efficacy and scale (e.g., pipeline development, underwriting, improving technical assistance programs, partnering with internet lenders), while a few focused explicitly on opportunities for CDFIs to amplify their social impact. My colleague Brenna McCallick and that i were thrilled to attend a panel focused on the methods that CDFIs supports the creation of quality jobs, because PCV InSight is leading a study project about this very topic. Our research seeks to identify the core characteristics of a high-quality job and also the ways in which CDFIs can perhaps measure and contribute to the creation of quality jobs – not only the quantity of jobs – therefore we were excited to understand using their company CDFIs committed to tackling this important social issue within our country.
The session was moderated by Jose Garcia, program officer in the Surdna Foundation, who led a discussion with three CDFIs who've implemented different methods to supporting and measuring job quality. The three panelists were Michael Jeans of Growth Opportunity Partners, a small CDFI located in Ohio; Sean Murphy of Fund Good Jobs, a young hybrid investor located in the Bay Area; and Raquel Valdez from BCL of Texas: a sizable and established CDFI purchasing growth stage businesses. The discussion centered around three key questions: 1) What is the definition of an excellent job? 2) How can panelist's organizations measure job quality?, and 3) How can small company investors effectively support the development of quality jobs?
What does an excellent job look like?
Encouragingly, panelists shared similar views on the defining characteristics when you compare job. Michael Jeans stated that a quality job is one that offers “meaningful wages”, that they understood to be employment that pays beyond a basic living wage, and also supplies a path to improved quality of life and marketable skills. He went on to discuss the significance of employees developing the core competencies they have to not just excel in their jobs, but that offer them skills to advance along a job path. Relatedly, he stressed that employers must offer opportunities for promotion when they want to create quality jobs, and that employees must understand how his or her role contributes to the success of the business. Building on Jean's ideas, Rachel Valdez of BCL stated that the quality job is one that offers professional growth opportunities and isn't simply a income source or benefits. Sean Murphy echoed the statements made by Jeans and Valdez, stating that a quality job is one that provides health advantages and professional development. Further, he stated, a quality job be forced to pay a living wage, which is determined by living costs where the employee is located.
How are you able to measure job quality?
While panelists were generally in complete agreement with the meaning of a quality job, we quickly found that each CDFI takes a unique approach to measuring the quality of jobs offered by their borrowers.
Growth Opportunity Partners
Jeanes described his organization's hands-on method of job quality measurement, which relies on a CRM platform to collect monthly fiscal reports and employee payroll data. This wage information is then when compared with average income levels within the area, to make sure that employees from the financed companies are being supplied with “meaningful-wage” jobs, because he previously defined. Jeanes stated that while several borrowers initially thought that this reporting requirement would be burdensome, Growth Opportunity Partner's staff could communicate the significance of this ongoing reporting for their work supporting smaller businesses in Northeast Ohio. Explaining the objective of ongoing data collection efforts, Jeanes explained, has led borrowers to understand and even appreciate Growth Opportunity Partner's approach to job quality measurement.
BCL of Texas
Valdez explained that although BCL of Texas is really a 25-year old CDFI, it has recently explored other ways it may better support the development of quality jobs. BCL of Texas extensively researched the constituents of a quality job and the meaning of a full time income wage, which drew significantly from the Living Wage Calculator, a tool produced by researchers at MIT which estimates the wage rate required to pay the minimum standards of just living in a particular community or region. BCL of Texas' research also focused on the aspects of a job which are important to not just meeting basic needs, but additionally that improve employees' quality of life. To measure job quality, BCL of Texas conducts annual surveys and interviews with borrowers to identify whether employees receive living wages. These surveys offer staff a window into companies' culture, which helps these to understand if the business is supportive of employees' professional development. Additionally, BCL of Texas has set an interior standard that 25 percent of its portfolio companies must pay their employees a living wage, that is determined by the MIT's Living Wage Calculator 's estimates for the cost of living in every community where borrowers can be found.
Fund Good Jobs
Murphy of Fund Good Jobs explained that his organization utilizes a “proactive” measurement approach, that they described as his organization's efforts to explicitly communicate upfront with borrowers about reporting requirements and also the reasons why supporting good tasks are vital that you his organization. Murphy explained that Fund Good Jobs has embedded its commitment to supporting good jobs into its deal sourcing, because it only considers investing in businesses if a resolve for creating quality jobs is “in their DNA”. To assess the caliber of the jobs its investees supports, Fund Good Jobs regularly collects and assesses fiscal reports to gauge employee wage levels, and performs on-site appointments with meet with staff and find out workplace conditions.
How can small business investors effectively support the creation of quality jobs?
Jeanes and Murphy both stressed that communication with borrowers and funders alike lies at the bottom of effectively supporting the development of high-quality jobs. Jeanes mentioned he felt it was important that funders understand this issue, and that CDFIs trying to support quality jobs should contact banks that they can meet their Community Reinvestment Act (CRA) mandate while also addressing this critical issue. Both Jeanes and Murphy explained that expectations and reporting requirements need to be discussed early and frequently with borrowers, to ensure that borrowers buy into the lenders pursuit to support quality jobs and so are more prone to set of and enhance the excellence of the jobs they offer.
Beyond effective communication with stakeholders, Valdez described concrete approaches that BCL of Texas has piloted to inspire its borrowers to support and create quality jobs. BCL of Texas has hosted several two-hour seminars for borrowers about this topic, which have included group discussions focused on defining an excellent job and understanding the value of providing good jobs for workers and employers alike. Additionally, BCL of Texas has also offered one-on-one technical assistance for borrowers to assist them to comprehend the aspects of job quality and approaches to improving their hiring and HR practices. Lastly, BCL has conducted a cost analysis for companies to show the company case for investing more financial and human resources into employees. The very first analysis that BCL of Texas has performed has focused on the hospitality industry, because a substantial portion of its borrowers operate in this particular sector.
At PCV we strongly think that our industry can do more than concentrate on the quantity of jobs created or supported. There is definitely an opportunity for CDFIs to work more closely with the businesses we support to advertise the development of good livelihoods and tangible professional opportunities for people in underserved communities. We're excited by the work these three CDFIs have undertaken, and we'll be incorporating their approaches and suggestions into our quality jobs research.
If you have ideas on what is really a quality job or ways small business investors can measure job quality or promote the development of quality jobs we'd love to know what you think.
The Community Reinvestment Act is intended to encourage depository institutions to assist meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, in line with secure operations. The CRA mandates that each depository institution’s record in assisting meet the credit needs of their entire community be evaluated by the right Federal financial supervisory agency periodically. See: http://www.federalreserve.gov/communitydev/cra_about.htm
