CEO Charles Bannerman learned that the most effective social activism is a healthy bottom line.
When the Mississippi soybeans grow high late in the summer you can can drive down U.S. Highway 61 and barely see Mound Bayou Manufacturing Co.'s blue prefab plant just a few hundred yards off the road.
The plant, which takes its name from the town, makes bicycle wheels. It is the only factory this all-black Delta town of 2,913 has ever had, and summer is usually its busy season. But not the summer of '82. Mound Bayou's parent company had ended any rigorous marketing of bicycle wheels. Indeed, management was thinking of abandoning the wheel business altogether and using the Mound Bayou plant to assemble cockroach traps, which would require fewer people, show a better profit potential, and help the parent corporation's sagging bottom line.
"We have to put our money into areas where there is growth potential," explained Charles Bannerman, chairman and chief executive officer of the parent, Delta Enterprises Inc. "We can't afford any more slim margins. "
Conventional business judgments come easily to Bannerman today, but 13 years ago he would have been shocked to hear himself put profit margins ahead of jobs. To begin with, in 1969 Bannerman didn't know what a profit margin was. He and a group of liberal social activists were about to tap federal grants and private charities for money to create a jobs program for black workers. Along the way, though, the jobs program turned into a for-profit business, Bannerman became a businessman, and a small but growing number of Mississippi blacks began speaking a business language only white men spoke there not many years before.
When Bannerman arrived in Greenville, Miss., in 1967, he had a political science degree from Ohio State University. After college he had taken a job in the Franklin, Ohio, welfare office and spent much of his time organizing fellow employees into a union. The Washington, D.C. -- based Citizens Crusade Against Poverty had hired and dispatched him to Mississippi in 1967 to start a training program for community organizers. He arrived wearing an Afro and a dashiki tunic.
The country was waging Lyndon Johnson's War on Poverty, the Voting Rights Act of 1965 had existed for two years, and southern blacks were organizing themselves politically. Equal-opportunity laws made job discrimination on racial grounds illegal. The South was changing, and Bannerman, a Harlem native, had come to the blackest part of the South, the Mississippi Delta, to hurry that change along.
Using federal money and grants from private foundations, civil rights activists in Mississippi were busy setting up community health clinics, getting Head Start programs under way, building new housing to replace rural shanties and sheds, and registering black voters. Admirable work, but, as Bannerman says, "In 1969 there were still 250,000 blacks walking around the Mississippi Delta with nothing to do. It occurred to some of us that the equal-opportunity laws we had passed wouldn't be any good to anyone if there was no work."
The national economy was performing well at the time, but the Mississippi Delta, like Appalaehia and the Ozarks, is a pocket of persistent poverty. It is ironic that most of the Delta's people are so poor precisely because the land there is so rich.
The Delta is that part of northwest Mississippi, starting just below Memphis, that runs south along the twisting Mississippi River to Vicksburg, 200 miles away. East and south of the Delta, Mississippi is hilly. Delta land, lake-flat, is rich and black, laid down in thousands and thousands of annual river floods to a depth of 35 feet in places. It is cotton land, the best there is.
In the 1830s white planters from states to the east and north had brought black slaves and mules to clear the forests, to build the levees, and to plant and pick the cotton. In the 1930s, when tractors became affordable, they laid off the mules. In the 1960s, when the mechanical cotton picker was perfected, they laid off the blacks.
There was no industry in the Delta and no trained labor force to attract industry. In the middle of the twentieth century, the average Delta black felt as at home in a factory as the average auto worker would feel today in an unplowed field with a hoe and a bag of soybean seeds.
"In 1969," Bannerman says, "we were simpletons. We didn't know anything about business. . . . You're looking at a guy who learned to read a financial balance sheet after he became a CEO." Nevertheless, he and a dozen other activists -- preachers, teachers, union organizers, social workers -- set out to create an organization that would employ black workers and train black managers. Profit was not one of their motives.
They organized the Delta Foundation. Then they dug $10,000 from their own pockets, borrowed $100,000 from a church, a national foundation, and a government agency. They parlayed those loans into a $350,000 bank loan with a Small Business Administration guarantee. With the borrowed money, Delta Foundation started Fine Vines Inc., a for-profit company that made blue jeans for other companies' labels.
Three years later the foundation bought Mid-South Stamping Inc. in Memphis and moved it to Sardis, Miss. Near Sardis, in Sledge ("Home of Charley Pride," says the sign on the highway), it added another blue jeans plant. Delta bought a maker of attic fans and moved it in with Mid-South Stamping. It picked up an electromechanical-parts manufacturer in Canton, near, but not technically in, the Delta. It bought a maker of attic stairs in Memphis and then a competitor in Little Rock, where it consolidated its stair-making.
The Mound Bayou bicycle wheel plant followed. Last year, in Metcalfe, another all-black town 10 minutes outside Creenville, Delta set up a railroad-spike plant. This past summer, it was negotiating the purchase of an electronics company in Dallas, part of which would be moved to Mississippi.
So, by 1982 Delta Foundation owned, through an operating subsidiary called Delta Enterprises, seven factories making eight different products. In 1981 Delta Enterprises's sales hit $11.7 million, and employment rose to 650. Black Enterprise magazine has listed it among the 100 largest black-owned companies in the country. But Delta Enterprises still isn't profitable, for reasons thut are not hard to see.
The legacy of its early and middle years as a job-generating, not profit-generating, organization is too many small plants making too many different products. "We fought a lot," Bannerman says, "over what kinds of businesses we ought to own and where they ought to be. In the early years a lot of tangential social concerns got in the way of managing our business in a businesslike way."
* Delta entered such industries as the attic-stair business because they were labor intensive, even though profit potential was low.
* It bought the metal-stamping business, Bannerman recalls, not because there was a heavy demand for metal stampings, but because a business that employed mostly men would be a good gender balance to Delta's jeans plant, which primarily employed women.
* Delta located its bike-wheel plant in Mound Bayou and its rail-spike plant in Metcalfe not because either location provided a business advantage, but because both towns needed jobs.
* For several years after Delta's founding, managers were hired not because they were capable but because they were black.
"You have to understand," Bannerman says, "that we were in a hurry -- to cure not only economic problems, but social problems as well."
So long as Delta was getting financial help from the federal government and from foundations, profitability did not have to take first place in the company's thinking. By Bannerman's estimate, the government pumped $4 million in direct aid to the Delta Foundation over the years. The foundation used some of that money to support day-care centers and other community social welfare activities, although much of it supported business overhead.
Direct and indirect aid also came from other sources -- the Ford Foundation and the Eli Lilly & Co. Foundation, for example -- and has amounted to $3 million. And Cummins Engine Co. of Columbus, Ind., and Control Data Corp. of Minneapolis have both lent exeeutives to Delta Enterprises with salaries paid for up to two years. Some of these executives, white and black, have stayed in Mississippi.
The last federal check arrived two years ago, but long before that, while the funds were tapering off during the 1970s, Delta management began to acknowledge that the company existed in an economic world where prices and costs must bear some relationship to one another and where customers won't buy an inferior product just because it is made by Mississippi blacks who need work.
One of the first concessions Delta's founders had to make to economic reality was to hire experieneed line managers, even if they were white. A significant step in that transition was the hiring of Sam Moncure. More than once Fine Vines had come close to failure before Delta brought in Moncure, a white Virginian, to take charge there in 1976. "I was brought here to get off the social shit and start making money," says Moncure.
"It became obvious," says Bannerman, who had long since traded in his dashiki for white, buttoned-down shirts, "that we were going to have to change our policy of trying to grow our own managers. We needed people who knew what they were doing, and that meant people with experience. I knew when we started the change what was going to happen. The whole corporate management became white."
That is no longer the case, however. Moncure still heads Delta's apparel division, consisting of Fine Vines and Wilsew Inc., another blue jeans plant in Sledge, a two-hour drive north of Greenville. The manager of the Wilsew plant is black. Delta's corporate vice-president for finance is white, but the vice-president for personnel is black. The company isn't color blind, but no longer is it color bound.
"When I got here," Moncure, 47, says, "there was a good plant but no leadership. People thought they were doing a good job, but they'd never seen a good job." Even today some black Delta workers say it helps if plant supervisors are white, regardless of their experience. Lucy Mae Dodson, 50, has picked cotton and worked in Delta's fan plant in Sardis. "Black workers won't do what a black man tells 'em to," she says. The plant manager at Sardis, a black, agrees with her. "A white man," he says, "would get more respect."
Delta also has had to deal with the difficulties of trying to conduct a manufacturing business with people who have no manufacturing skills. One Delta plant supervisor recently tore a machine down and put it back together again twice without it being repaired. "It was still drilling offcenter holes," says Tom Robinson, Delta's vice-president for manufacturing. "We'd sent the man to Germany for training. They could teach him to take it apart and put it back together, but they couldn't give him the engineering background he needed to see what was wrong and to fix it."
The Delta Foundation board, with much internal disagreement over changes in priorities, allowed Bannerman to reorganize the business operations over the years. A separate subsidiary, Delta Development & Management Corp., was created to be the foundation's venture capital arm. Delta Enterprises, a second wholly owned subsidiary, was formed to operate Fine Vines and the other business enterprises yet to come.
The company's attitude toward profits has undergone change, as well. Delta's founders were not contemptuous of profits; they were naive, assuming, Bannerman says, that anyone who had money could make money. Delta Enterprises's new president and chief operating officer, Carl Banyard, holds no such illusions.
Banyard, 30, a native of Jackson, Miss., went east and lost his southern accent at prep school in Vermont, college at Yale, and business school at Harvard. He came to Delta from Cummins Engine, where he had headed the effort to move its 10-liter diesel engine from the design to the production stage. That project comprised his entire management career, about six months' worth, before he moved to Delta.
If Banyard is short on experience, he is long on drive. He has no interest in applying for federal grants. Banyard never mentions job creation or any agenda of social objectives he has for the company. Instead, he talks about the long-range financial plan he prepared for Delta.
"The nature of this five-year goal," the plan reads, "requires that Delta Enterprises adopt courses of action and allocation of resources that enable the company to establish and maintain conditions/focus conducive to this financial target."
That means, Banyard translated from his business-school jargon, that if Delta is going to reach sales of $42 million and profits of $2.5 million by 1985, some divisions may have to be sold or closed -- maybe metal stumping and bicycle wheels -- and some divisions built up -- maybe blue jeans and electronics. Out of "naivete and altruism," he said, "we've kept some things going longer than necessary."
Chester Smith, another young Mississippi native who left the state for an education but has returned to build a career, is vice-president and general manager of the investments division at Delta Development & Management. Like Banyard, Smith is changing the nature of the company's business. Before 1980, he said, much of its portfolio consisted of small loans, $75,000 or less, made to local, mostly black, retail companies. "We were putting the wrong foot first, giving money to people before they knew anything about business." Most of those loans have been called in, and Delta Development's investments now run to things like cable television and radio stations. It has made short-term real estate investments. It participates in some deals with Control Data's venture fund. From his $6 million portfolio, Smith said he expects to generate $2 million in revenues this year.
Bannerman says he has turned capitalist, too: "I've changed from a social activist to a businessman. My idle time is spent buying real estate, in making investments, in working. I never did that before."
Banyard's personal goal is, by age 40, to "own a business in some very narrow niche that is wildly profitable and takes very little time." Those are not the same idealistic, socially motivated goals that people talked about 13 years ago when Delta was founded, and Mississippi is still not the black promised land.
Bannerman, for example, is a regular visitor to the White House, but in 15 years he has not been asked to join the country club or the yacht club in Greenville. "This is still pretty much a segregated society," he says. "I move around pretty freely, but I don't get invited to many dinners unless somebody wants something. There are still signs around this town saying 'white' and'colored."
Eugene Cooney, Delta's vice-president for finance, is white and Irish by birth, but he has lived in the United States long enough to learn that "one doesn't want to give the wrong impression" by spending too much time after work with his black business colleagues.
The C&G, Greenville's trendiest lunchtime restaurant, is partially owned by Delta Development. The waiters are black, and the hostess is white, as are most of the diners. "I'm not going down there," says Smith, the director of investments, "and screw it up by hanging out a sign saying this is a black-owned restaurant. Let 'em make money."
The people running Delta say their objectives haven't changed, just their tacticsAnd, they say, just because the effects of their progress are sometimes subtle, they are no less real.
Recently, Smith says, a white man proposed a deal involving an investment by Delta Development. "He asked me if I thought the 'colored boys' would be interested in that. I told him they might, if he'd stop calling them colored." The point of the story, Smith says, is that the color line in Mississippi isn't easily erased. "But at least we're talking the same language now -- because we've got money. "
"I can sit here," Smith says, "and talk about a 35% to 45% return on investment and still be talking about the mission Delta Foundation was talking about in 1969. . . . We've always gone about black economic development in the wrong way, spending money on jobs until we run out of money. I'd rather go out and create a $35 million business. Then you've got something to work with. In five years I expect to be able to hand Delta Foundation $1 million [in dividends from Delta Development] so they can support black education. That's my idea of black development: You go out and make it in the mainstream."
Banyard says the point of his efforts to bring growth and profitability to Delta is to make the company a "major force in black economic enfranchisement." The fact that Banyard and Smith, both black, are in Mississippi at all, Bannerman says, is evidence of the change that Delta has made in Mississippi in a little more than 10 years. "In 1968 there were only five black lawyers in the state, no black CPAs, no black MBAs, no black bankers. Now we have all those, and, at Delta, we're building a cadre of black managers and entrepreneurs . . . people who have left here to go to other businesses. We've created a few models for black kids. . . . When we give a company picnic at Fine Vines and I see all those mothers, and their children wearing shoes, I feel good about what we've done."
Layoffs are a part of the new sense of reality, Bannerman says. "It's a question of whether you shut it all down or just those parts that are a drain on profits. Ten years ago we [on the Delta Foundation board] would have struggled with these questions. Now our course is clear: You learn to live to fight another day. We'll be serving fewer people, and that's unfortunate. But profit represents true independence and freedom. And isn't that what we really sought in the first place? If we survive, we'll be a business. We set out to demonstrate a model, not to solve all the problems in Mississippi. . . . The most important thing we've done is to create an entrepreneurial center in the black community, whether Delta lives or dies."