The living conditions on many Native American reservations are some of the worst in the country. Unemployment is high and poverty runs rampant. To make matters worse, tribal governments are severely restricted in their ability to raise tax revenues, making it difficult to fund welfare, public works, or employment programs. In recent years, many tribes have relied on casinos and other gaming operations for economic support. A number of tribes, however, have turned to other entrepreneurial ventures, with varying degrees of success.
For those tribes that rely on more diverse business ventures, tribal politics often impede economic success, delaying the decision-making process and obstructing business growth by prioritizing social goals, not financial gain. The Winnebago tribe of Nebraska, however, took a different approach, incorporating its economic development wing and insulating it from Tribal politics. The astounding success of its venture, Ho-Chunk, Inc. (HCI), is due to this unprecedented autonomy granted by Tribal leaders coupled with a keen business strategy that takes full advantage of the corporation's comparative advantages.
The corporation was founded in 1994 in reaction to the sudden decrease in revenues from the Tribe's gaming operation. Tribal leaders recognized that in order to create a strong economy, they couldn't depend simply on one or two strong businesses. Instead, they needed to create a strong business. As a result, the council carefully crafted the Tribe's Business code and related ordinances in order to maximize HCI's chances for success.
First of all, the council conferred on HCI all Tribal privileges, including sovereign and federal-tax immunity. The council also established an oversight and reporting relationship that would keep council members at arms-length when HCI needed to make short-term economic decisions, but would ensure steady communication and trust between the two groups. Finally, and perhaps most unusually, the Council allowed HCI to reinvest all of its profits for the first five years, at which point the company would begin paying dividends to support Tribal government programs.
The comparative advantages, autonomy, and five-year grace period conferred on the corporation by the Tribal leaders gave HCI the ability to learn and to grow without fear of council interference or reprobation. Led by CEO Lance Morgan, the company pursued an "outside-in" strategy, focusing initially on off-reservation business opportunities in order to build up management talent and to ensure broader market access. The company then used the skills and connections acquired off-reservation to improve the economy on the reservation, where federal tax exemptions and loan guarantees would further strengthen the position of Winnebago businesses.
HCI has been an unqualified success. HCI operates 15 subsidiaries in six major business areas, both on- and off-reservation. In 2000, revenues approached $25 million, approximately $1.3 million dollars of which was income. And on April 1, 2001, HCI presented the Tribe with its first dividend check, for $225,000. Before gaming and HCI, the Tribe's only source of income was $150,000 from land leases. HCI also provides for the Winnebago Tribe in more substantial ways. Due in large part to the success of HCI, unemployment on the reservation has fallen from over 50 percent to under 10 percent. Nearly half of HCI's 265 employees live on or near the reservation, and approximately 60 are Native American. The company has contributed to the refurbishment of dozens of reservation buildings and is currently constructing a new town center and planned community, with subsidized housing for Tribe members. And perhaps most impressively, HCI has provided both inspiration and impetus to other struggling Native-American communities, consulting with dozens of other tribes on the replication of the program and establishing legal precedent on issues of Tribal sovereignty and taxation limitations.