nation-building approach

Joseph P. Kalt: The Practical Issues of Business Development - Some Things to Consider: Legal Structure

Native Nations Institute

Harvard Project on American Indian Economic Development Co-Director Joseph P. Kalt discusses the types of corporations that Native nations can charter and what they should consider when deciding which type to choose.

Resource Type

Kalt, Joseph P. "The Practical Issues of Business Development - Some Things to Consider: Legal Structure." Building and Sustaining Tribal Enterprises seminar. Native Nations Institute for Leadership, Management, and Policy, Udall Center for Studies in Public Policy, University of Arizona. Tucson, Arizona. March 29, 2007. Presentation.

"They've asked me to just say a few words here to kick off this session and talk about the kinds of entities and structures that we're seeing used out there and that are working or not working in Indian Country. And I guess it's our gig at the Harvard Project and at NNI is to try to focus on what's working, but we often start with what's not working. And I want to describe two -- I won't even name the two tribes I'm about to say something about -- but it's sort of a lesson in what not to do. And here's the way they're going about economic development and development of tribal enterprises. They have an economic development committee. The economic development committee is just appointed, it's unpaid, appointed by the tribal council, has its roots in the old U.S. Department of Commerce Economic Development Administration grants. They ran out of the grant money, but they sort of kept the committee and the committee's job is to, number one, go out and find us some businesses to invest in. Number two, bring those investors to us, the tribal council, and sort of vet them and tell us whether we should invest in them. And this sort of strategy, and then the end result if they're successful, in one case one tribe actually has three enterprises, all of which are losing money rapidly and the tribe is trying to get out of [them]. If they're successful, this economic development committee, in finding a business, as if you're sort of, I don't know, looking for a four-leaf clover or something. If you're successful what happens is the tribal council basically buys a business, owns it, as if they were buying pencils for the office. It has no separate legal structure, it's just a tribal enterprise and the tribal council will appoint -- as if it were another grants program -- an enterprise manager. And again and again and again this, which is really, you can hear the way I'm telling the story, a holdover from the old grantsmanship days where getting an enterprise was just like landing a grant. You just sort of found one and then appointed someone to be the head of the grant or head of the enterprise. And time and again across Indian Country, this has been a recipe for failure.

You see at the other extreme -- and Diane Enos came in and did it, the other extreme -- which is to build the legal structures to protect yourselves, to put in place -- I thought she said it beautifully -- it's not that you're taking politics out of these enterprises, it's that you're structuring them within a rule of law. And that's critical here. There is a huge job to be performed in the management of tribal enterprises by the tribal politicians. Someone needs to sit there and filter and make those decisions. Is this the direction we want to go? Is this the strategic step we want to take with our nation's assets? But it's not the tribal council's job to go figure out who gets the contract for the pencils in the office and I've wasn't pencils in the office, it was the printing of envelopes, bring down a tribal chairman. The guy got himself impeached over the envelope contract. That is, the day-to-day meddling in the business end. The same goes for tribal administration. So there's a critical job to be played by the tribal politicians and that is to set in place the legal structures and to make the big strategic choices. Do we want -- you hear at Salt River in a beautiful way -- do we want the interior of this reservation developed or not? Or are we going to set up a nine-mile corridor out on the edge of Scottsdale? 'Oh, that makes more sense to us.' Those are the critical strategic decisions that you want your elected officials to make. We often get associated with this phrase 'get politics out of business.' Yes and no. Politics properly by the rules, setting the overall directions and it should properly stay out of the decision who gets the contracts to print the name 'Salt River Sand and Gravel' on the side of this pen. So what kind of structures are we seeing out there?

The first structure is what I mentioned, it's a failing structure, unfortunately -- many tribes are learning -- and that's just go buy a business and run it like it's a grant. The alternatives to that, there's three main families that I'll touch on briefly here. There are three main structures that we see tribes using. One is the federally chartered corporation, Section 17 typically. These are corporations chartered by the federal government and really chartered under essentially the laws of the United States Congress. These Section 17 corporations give the tribe a legal entity chartered by the federal government. There isn't an explicit waiver of sovereign immunity and indeed these entities can be subject to suit. But, you can't get at the core tribal assets of tribal land or other assets not being held outside of that entity. In fact you can hear Diane talking a little bit about this, they're not talking these so-called Section 17 federal corporations. In other words, if that corporation owns some pickup trucks, yeah, those could be taken from you in a lawsuit over these Section 17 federally chartered corporations. But the Section 17 corporation does not let that car dealer or whoever it might be get at core tribal assets away from and outside of this entity. Why do this? It's sort of weird in an era of sovereignty and either you follow the ones that Joan and others and I do, we keep saying, 'Look tribes, run it yourself, run it yourself, run it yourself.'

Why do a Section 17 federal? Well, I was sort of surprised. We had one very interesting case out there, the Blackfeet in Montana have a corporation called Siyeh Corporation, S-I-Y-E-H, it's like the name. And it's very interesting, you ask Blackfeet, 'Why'd you go have the feds set up your corporation?' And they said, 'Look, to us it was an act of sovereignty and a little bit of desperation.' Many of you have heard about some of the Blackfeet Enterprises, Blackfeet Writing Instruments, the pencils and so forth that we used to get in grade school and so forth, Blackfeet National Bank. It had trouble, it had trouble finding that balance between politics that sets direction versus politics that constitutes meddling in the daily affairs. And they said, as a community, 'Look, we're having problems with our political systems and we're a little bit unstable, but at least as a community we can agree we'd like to get these enterprises in a way that they're insulated in terms of day-to-day meddling.' And so it's very interesting. It shocked me cause I've been Mr. Pro-Sovereignty. This is a case in which a tribe said, 'As a sovereign, we're going to ask another sovereign to charter this corporation to try to give us some time to work on our own political system over here at the same time we're trying to get some enterprises going.' So it's an interesting strategy, and one that as I say it sort of shocked me because we've been so hard on this horse of charter them yourselves, set them up yourselves, etc. So there are some cases apparently where a sovereign nation, in this case the Blackfeet, might make a choice to go with a federally chartered corporation.

The next layer down, of course, are state-chartered corporations, and for many tribes this is the quick way to get a corporation chartered. The owner of the enterprise is the tribe, but you get a corporation chartered under the laws of either Delaware, where everyone does the national corporations, or perhaps your own state. Under these state-chartered corporations typically, and I'm not a lawyer so don't take me as legal advice, but typically these state-chartered corporations do not provide for sovereign immunity but they essentially build a shell around the assets of the enterprise so that what can be sued is the enterprise, not the entire tribe. More and more tribes are moving to now a new model, after the federally chartered, the state chartered, more and more tribes are moving to a new model, which is tribally chartered corporations. And to us I think this represents the wave of the present and the future indeed, to Mike Taylor who has been very instrumental actually in developing a lot of this and that's partly what Salt River is doing. Under tribally chartered corporations, they typically involve a five-step, at least a five-step process. First, the tribe will pass a law of corporations establishing the rules, procedures, etc., under which tribes as an entity, individual tribal citizens, and even non-citizens can charter new businesses within the jurisdiction of the tribe. So just like here in the State of Arizona, if I want to go open a McDonald's or something I'll probably charter a corporation under the State of Arizona. More and more tribes are adopting the equivalent of the State of Arizona's laws of incorporation and they become Colville Tribe's laws of incorporations or Eastern Cherokee Tribe's laws of incorporation, and so forth. And that's critical because it sets down the framework, you've got to establish enterprises, but it's basically laying down all those rules, how board of directors will be created, what will their responsibilities be, what will their liabilities be, all these kinds of things.

The second layer that actually has to happen at the same time...Typically the law gets passed if you will and almost at the same time if not before tribes work on building up their own tribal court's capacities to handle business law. And so you find cases where tribes are simultaneously creating laws of incorporation and some tribes, for example, have begun to create a business court. So many tribal courts are buried as are everybody's courts with the family law cases, the juvenile cases, the drug cases, assault and so on and so forth that tribal judges just like the judges of Pima County are so often unschooled in and not ready for that really handling business law. And so you'll find tribes beginning to do things like create a tribal business court. Often it doesn't mean a whole lot other than we designate you as our business judge and we'll send you to some training, but at least you're trying to start that process of saying, 'We will adjudicate our own laws and our own laws of incorporation.'

After that there's a set of, a third, a next layer, third layer of laws. Those laws often deal with the business environment, adopting some version of a commercial code. It doesn't have to be the uniform commercial code of all, actually I think about 47 states are uniform now, but some version of laws that provide for garnishment, for the rules under 'if I need to repossess your truck, how long do I have to give you to repay?' and all of the... what are the procedures for taking you to tribal court and so forth so some form of a commercial code. In addition, as tribes create enterprises, either tribally owned or tribal member-owned corporations under their own laws, tribes find they need to do what most other governments in the world do, things like registration.

There's a very interesting case going on right now. Crow, in fact they may have done it this week, about to or just did. Crow sits there and they're trying to get some businesses going, they're going through everything I've just described, all these stages, and they look around and think, 'We need to register these corporations so they can go to court, people will know whose corporations they are.' They don't have the computer capacity right now and the record-keeping capacity. They're signing a memorandum of understanding with the State of Montana, Secretary of the State, not giving up any sovereignty, basically on a contract basis hiring the record-keeping services of the State of Montana, so that you can punch a button and call up, probably type in the word Crow, here comes all the Crow corporations. No jurisdiction at all, it's just purely the computerized record-keeping, which Crow recognizes that they need.

So there's the basic laws of incorporation, there's the strengthening of the tribal court around business law, there's then the laying in place the legal environment for businesses, the uniform codes, the recordings, etcetera. Then you get to the point of actually creating real enterprises, and we're talking enterprises, and I won't go into it today, others will and I think Joan in particular, but often this begins with the creation of a board of directors and a great deal of paperwork. It was fascinating, Diane carrying that big thick notebook that she showed you. There's a lot of paperwork that goes into just laying down, 'okay, here's how we're going to select members of the board. Here's how many can be from non-citizens of the tribe, how many citizens,' all these rules. 'What are the terms of office, terms for removal?' all of those things critical to have in place.

And then lastly once you've got the corporations created, then you're ready to actually begin to make investments. I went through this in order like this because so often I see tribes desperate...elected officials desperate for the ribbon cutting. That is for, I've got to show that I'm doing something, we've got a new business and often the cart gets way out ahead of the horse and you see tribes, 'Well, we'll buy a business and then later will pass the laws and we'll create a board of directors,' and so forth and so on and again and again and again without those structures that Diane Enos had in that notebook. That's where you see problems arise because there's no way then by which to say, 'Wait a minute, you didn't tell me you were going to wait six months to create a board and you promised me I could be on the board.' All of those problems arise without that laid in place, that infrastructure, the legal infrastructure prior to going out and buying a business. And so this has been a quick run-through, but those are the three models that we see, the federally chartered corporations, the state and the tribal. But you can't just do that, you've got to put that other infrastructure, your courts, the laws and so forth in place. So that's what we're seeing out in Indian Country, what's working."

Stephen Cornell: Governance, Enterprises, and Rebuilding Native Economies

Native Nations Institute

Harvard Project on American Indian Economic Development Co-Director Stephen Cornell discusses the two basic approaches Native nations typically take as they work to build and sustain nation-owned enterprises, and shares a number of examples from across Indian Country.

Resource Type

Cornell, Stephen. "Governance, Enterprises, and Rebuilding Native Economies." Building and Sustaining Tribal Enterprises seminar. Native Nations Institute for Leadership, Management, and Policy, Udall Center for Studies in Public Policy, University of Arizona. Tucson, Arizona. March 29, 2007. Presentation.

Stephen Cornell:

"Well, good morning and thanks to all of you for being here. We've been looking forward to this. This is an experiment on our part. It's the first of a series, we hope, of focused seminars like this. A lot of the work that we do in executive education is very comprehensive. We spend two days with the tribal council, with the senior leadership of a Nation going through nation building from sort of A to Z, talking about constitutional reform, talking about policy, talking about strategic planning as well as economic development. But as Joan [Timeche] said this morning, we thought we've had enough interest from people in spending some focused time on nation-owned enterprises and we decided maybe we should think about doing some more narrowly focused seminars. And this is actually our first shot at it -- so you're all guinea pigs in this experiment -- and if this works I think we'll be doing more of this kind of thing. We've got one coming up in May, May 14. We're going to be doing a seminar; it's not an open one. It's a little bit different, but the focus is on sovereign immunity issues that a lot of nations are wrestling with. And we want to do one -- we've been asked by the National Congress of American Indians to do one on per capita distributions. A lot of you have probably dealt with those kinds of issues. A lot of nations are trying to think about how to handle the revenues that they're beginning to generate from the sorts of enterprises we're talking about today. So there's a number of opportunities to try to provide hands-on experience, research results, information to people on some of these narrow topics, narrower topics.

So this is the first effort at that. And I'm the guy we have to get through before you get to the meat of this, because what we're really pleased to have this morning is the panel that comes next, because we were able to persuade -- as Vern [Bachiu] said, it was tough persuading those from Saskatchewan to come to Tucson in March -- but we were able to persuade four nations to come here today and talk simply about their experience. These are all nations, and we've got the Meadow Lake Tribal Council, the Gila River Indian Community, the Tulalip Tribes, the Osoyoos Indian Band -- all four of whom have done interesting things, encountered all the problems, come up in some cases with solutions, in some cases maybe are still wrestling about some of those problems, but we wanted to ask those four nations to come and say a little bit about, 'Here's what we tried to do: here's what's worked, here's where we are today and where we're going,' and kind of tap into their experience. So I'm looking forward to that part of this and also there's time in the agenda to have some dialogue about asking them, ‘Well, how did you handle this?' or ‘what happened? Did you encounter this problem that we're having? How did you deal with it?' That sort of thing. And then this afternoon we've got a second panel that looks thematically at some of the nuts and bolts of organizing nation-owned enterprises and it's kind of an information exchange. We expect to learn something out of this as much as anyone in the room.

The Native Nations Institute, we're a vacuum cleaner for information and we spend a lot of our time listening to what people are doing. We don't see ourselves as an organization with answers, we see ourselves as an organization that helps communicate what Indigenous nations are doing that works. That's where the answers are coming from. The answers are coming from nations out there encountering these issues, solving them. What we do is try to learn, ‘Oh, you did that? Great, we can tell other people how you solved that, maybe that'll help them.' So that's what this is really about. My job in the next 40 minutes or so is to try to give you a little context for how we think about this issue, for some of what we've learned and kind of set the stage. As we' Joan said, this work at the Native Nations Institute goes back now for more than 20 years, back to the founding of the Harvard Project on American Indian Economic Development. And over those years we've begun to learn a lot of stuff and I've tried to put some of it together this morning in this presentation.

One of the things of course that's apparent is that all across North America and elsewhere -- we've recently been doing some work in Australia and New Zealand. And that wasn't our idea to go do work there but Manley Begay and I -- Manley would be here and sends his apologies -- but Manley Begay and I got a request from some Aboriginal Indigenous peoples in Australia and New Zealand saying, ‘We hear so much about what's happening in North America -- what Indigenous nations are doing there -- we want to learn from what they're doing. We understand you gather some of those stories. Can you come tell those stories?' And what's been interesting to us is when we hear about the problems they're facing, they're similar to the problems Indigenous nations here are facing. The politics are different, the legal situations are different, but here are Indigenous peoples trying to reclaim their place at the table, trying to reclaim control over their lands, trying to figure out how to solve the tough problems that they face. One of the tough problems faced everywhere is the economic problem and we tend to think of it as a set of challenges that Indigenous nations are facing. How do we reduce -- we hear this a lot -- how do we reduce our dependence on outsiders, federal governments and others who are paying the bills, often? How do we reduce that? How do we get in a situation where we're in the driver's seat? We don't have to ask permission from somebody because it's our money, it's the product of our work, we're in control, we can shape our communities the way we want to. There's that challenge of how do you provide opportunities for your citizens to live productive, satisfying lives.

[I was] talking once with Chief Phillip Martin from Mississippi Choctaw. Many of you may be familiar with what's happened at the Mississippi Band of Choctaw Indians, but they've transformed their economy over the last 20 years. And when you ask Chief Martin ‘What's the benefit of it?' He says, ‘Well, in the 1970s everybody was leaving, now they're all coming home.' Because what they've done is create an opportunity for their own citizens to live productive, satisfying lives on Choctaw land and to him that was the goal in part, to be able to do that. And you're also trying to create the means of supporting your own governing processes. If Indigenous nations are serious about reclaiming control, then they've got to find ways to support Indigenous governance where it's not dependent on somebody else saying, ‘Well, we'll pay for this but we won't pay for that.' Well, who's in the driver's seat when that happens? [I was] talking with Brian Titus from Osoyoos Indian Band and Chief Clarence Louie up there, and one of the key goals in their whole development effort has been ‘how do we get to the point where we can do what we want to do, support our own government, support our own priorities?' So those challenges are out there and we think those challenges lie behind this effort by Indigenous nations to create enterprises that are under their control and use those enterprises to produce new sources of revenue. Well, we've been looking at this for a while and I thought we'd begin with two real quick stories about some enterprises from our research files because they show, we think, some of the differences in approaches that we've seen over the last 20 years. And I think the last 20-30 years have been years of learning for Indigenous nations. But here are some of the ways that things get done.

I won't tell you what enterprise or nation this is but here's a quick capsule. This is Enterprise A -- and we came across this sometime in the early 1990s -- it's a tribally owned business. This tribe has a large forest on its lands. This enterprise cuts trees on the nation's forest and turns them into fence posts, sells them to a national broker who markets them across the United States. I say it does this, it doesn't actually exist anymore -- the enterprise -- but it was doing this. The manager is hired by and reports to the tribal council. Councilors repeatedly interfere in hiring and firing decisions by, for example, calling up the manager and saying, ‘You need to hire more people from our district.' When we were up there doing research and talked to this manager, he said, 'oh,' he said, ‘We've got a...,' I don't know, can't remember. I think it was a seven-member tribal council. He said, ‘I've got seven bosses. There's not a week that goes by that someone doesn't call me up and say, ‘I've got a personnel issue we need to talk about or my cousin's moving back here after ten years, moving back to the rez, needs a job, I want you to hire him.'' The manager says, ‘I'm running an employment service; my labor costs keep rising. Soon I'll have the most expensive fence posts in the country.' And that was exactly what he ended up with. And the result was he couldn't compete in the tough market because of the rising labor costs. Eventually the enterprise, which was being subsidized by the nation, eventually folded, end of all the job opportunities, etcetera. So that's Enterprise A, and that's a story which I all have worked in this business longer than I have, or a lot of you have, it's not an unfamiliar story of how some things happen.

Enterprise B: this is an Indian nation, which in the early 90s was one of the early casino builders, became dependent largely on its own casino revenues. As one councilman said, ‘We've gone from dependent on the feds to being dependent on the casino.' But it has...then it started to face competition because the state it was in liberalized gaming law and pretty soon a couple of new casinos were opening up -- non-Native casinos -- located right between this tribe and its primary market. So its revenues looked like they were going to fall as these casinos came online. They were going to start losing jobs and losing resources so the nation established a tribally owned corporation, wholly tribally owned corporation, and directed it to diversify the nation's economy. That's its goal and they said, ‘We want you to make profits that we can use, you can use to get us into, get us out of our dependence on gaming. We don't want to leave gaming -- that's a core activity -- we want to be doing other things,' and insulated this new corporation from tribal politics and hired top quality managers. The chairman of the tribe said, ‘One thing we've learned in our experience is that politics and business decision-making are a bad mix. So we're going to set this thing up in a way that insulates, tries to manage that,' tough challenge in small nations. But in five years, the corporation is generating substantial profits and jobs from multiple businesses. They succeeded in diversifying the economy dramatically and today they're, in a sense, much more dependent on the multiple businesses that that corporation is running than they are on their original casino operation. And in fact, the casino revenues have fallen because these other casinos have been successful.

Now, one way that we look at these two enterprises is we look at very different ways to organize things. Enterprise A fits in our book under what we sometimes call the council-run model of a nation-owned enterprise and you can see it diagrammed up there. You've got the council, the CEO reports to the council, employees supposedly report to the CEO, there may be a board of directors but it's actually an advisory board. That may not be the original idea, but in fact the council is running things. And elected leaders are basically making the business decisions, political considerations loom large, employees have figured out where the power lies and realize, well, the way to get a complaint dealt with is you go around the CEO. Why talk to the board, they don't have any power; you just go straight to the council. So the council's become the personnel grievance process, the complaint department and everything else in that situation. Enterprise B -- the one I talked about responding to the casino challenge -- they've got a very different structure. They've got a council, they've got a board that reports to the council, the CEO reports to the board and employees can't go around. They've got a personnel grievance system that is built into their corporate structure. So if you have a complaint, there's a way to deal with it within the business structure. The council's job is to think about where are we going? What's the strategy here? Do we want to be in this kind of business? How should we use this chunk of land? What should we do with this windfall land selling? The big issues the council is dealing with, but then the council has appointed a board of talented, skilled people with integrity and said, ‘Here's our strategy, you guys execute it. If you depart from the strategy, we'll pull you in but you do the day-to-day execution of it.' Now this isn't the whole story of those two enterprises. As anybody in this room knows, there's a lot more going on than this, but to us this illustrates the point -- which came out very clearly in our research -- which is that how you organize the business and how you organize the business development process is at least important as what business you're in. The guys in Nation B, when they faced this casino challenge and they created that corporation and said, ‘Go make money, diversify our economy,' we talked with the people who were involved in those council meetings and one of them said to us, ‘You know, we never talked about what business to get into.' He said, ‘We didn't spend those meetings saying, ‘I think we ought to do something in transportation. I think we ought to get into retail. I've got a great idea, I know a guy who could get us into X.'' He said, ‘The discussion was all about how do we organize a structure that's capable of supporting and sustaining business, whatever the business is? We didn't really talk about what business to be in, that was the corporation's job: where are the golden opportunities?'

So I thought I'd just look for a moment at what the old days, the approach to business development. And this is a bit of a caricature of it, but this is kind of the way for a long time I think a lot of nations approached business development. It's being left in the dust by what many of you in this room are doing today, which is a very different approach, but this is what it used to look like I think. Whose job was development? It was the planner. You hired a planner, you told them economic development, ‘We need economic development here, go find something we should do.' It was the planner's job. I remember in the late '80s arriving at one reservation saying we wanted to talk to someone about their economic development strategy: ‘This is Joe Kalt.' And he said, ‘Oh, economic development? Down the hall, third office on the right.' You know, this was a councilor. It was if, ‘Oh, that's their job. We hired a guy. He's supposed to do economic development. We've got other things.' It's the planner's job. What's the strategy? Pick a winner, the home-run syndrome. This young lady is from, came from Pine Ridge, right? From Albuquerque. Somebody here though...well, there was a fellow up there when we were up there about three years ago and he said, ‘One of our problems is we've got the Messiah complex.' I said, ‘What's the Messiah complex?' He said, ‘it's the belief that someday the Ford Motor Company's going to roll in here with 500 jobs and save us all.' And he said, ‘We finally realized, no one's going to save us. We've got to do it ourselves.' Picking the winner, finding that home-run project that's going to solve all the problems is not what economic development is about, but it's often the way it used to be done. Pick a winner, get a grant, or -- the more sophisticated approach -- do an asset analysis, then pick a winner and get a grant. Either way the strategy focuses on what we can persuade funders to fund.

How is the effort organized, sort of as a branch of tribal administration? Businesses are often run like tribal departments or social programs, the relationship of business to tribal government, the council controls the business, makes the decisions on hiring and firing, decides how the revenues are going to be spent, etc., essentially they're the business operator. What role does political and legal infrastructure play? Not much. Nobody pays a whole lot of attention to it. The authority rests with the council and maybe with the funders who told you, ‘Here's how you have to use the money we just gave you.' There are few consistent rules about how you do things, there's little effort to keep politics out of business decisions. What role does financial management capacity play? Pretty modest. Businesses are dependent on grants, they're run like programs, you fill out the grant application, show where the money goes and you're pretty much done. Not a lot of investment in building financial management capacity on the ground. Key tasks: hire a planner, get a grant, start a business and employ as many people as possible -- the old approach. What does the process look like? This comes out of talking with a number of tribes about how these things happen. There's a tribal election, new leadership comes in, they look around and say, ‘We need to get something going around here. Anybody got any ideas? We better hire a planner; you hire a planner. Okay, let's get a grant; you get a grant. Start a business, any business, whatever you get a grant for, that's fine. Hand out the jobs to your relatives and supporters.' So the business gets going, not much money comes in, but as long as the grant holds out, the jobs hold out. Then there's another election, a new group of leaders comes in, they look around at the business and they say, ‘Whoa, those jobs ought to be ours. Let's fire everybody and put our people in there.' Six months later, ‘We're short of cash. We need some money. That business is bringing in money, let's take the money from that and solve our problem.' Three more months the business is in trouble. ‘Quick, get another grant. Get another grant.' Six months more it's going down, ‘Run for cover.' Everybody splits. ‘Fire the planner. What happened to the jobs? Aren't there anymore grants? The chief's an idiot. Vote him out. Elect me,' etc. So the business dies, next election, another elected set of leaders comes in promising to build a sound economy. Look around, ‘Boy,' they say, ‘those guys sure made a mess of things. Good thing we got elected. Now let's get something going,' and here we go again. ‘Anybody got any ideas, etc.?' And the outcomes of this approach tended to be failed enterprises, few profits, few jobs, a discouraged community that wonders, man, when is something going to really stick.

Well, the alternative, and we think some of you in this room have been inventing this. We'll hear about some of them this morning and some of you have been doing it that we don't even know about. It's a very different approach to business development. We call it the nation-building approach, but that's just a name for it, but it looks very different. It doesn't go after the home run or look for the quick fix. It basically says, 'We've got to put in place a governance environment that can support and sustain development and we've got to determine our strategic priorities.' What is it we're trying to create here -- that Joan [Timeche] talked about this morning? What kind of community do we hope will be here on this land 50 years from now and what does that mean for the business decisions we make today? Joan and I actually had dinner last night with four representatives of a tribe in the Southwest who are wrestling...and they've been extremely successful, have done a brilliant job of business. And one of them said, ‘We're realizing that while we've become really good at some of these business techniques, we're beginning to lose touch with some of the Indigenous knowledge that we're trying to preserve. So we're at that point of trying to say to ourselves, okay, we've solved this piece of our strategic objective, we're making the money we need to free ourselves, but we haven't yet solved this part of our strategic objective. How do we do both at once and what does that mean for the businesses that we're in?' They're thinking about, 'Hey, have we got the right strategy here?'

Features of the nation-building approach? And some of you who are familiar with our work will be familiar with a lot of this, but it emphasizes who's in the driver's seat, self-rule, Indigenous nations making the decisions, exercising control over their own affairs; backing up that authority with sound governing institutions; matching those institutions to their own Indigenous values, culture, the things that are most important to them; thinking strategically about where they're going, turning tribal government not into this boxing ring where families or factions fight to control the resources but into the engine that carries the nation forward. That's sort of the nation-building approach. But it approaches business development a little differently. Whose job is development? It's too important to be left to the planner. It can't be in the office three doors down. It's what the nation's about. How are we going to free ourselves from that dependence? How are we going to provide our citizens with opportunities? How are we going to support a government? Those are huge challenges. What's the strategy? It thinks about these issues. What kind of community are we trying to build? What do we hope to change? What do we hope to protect and not change, preserve? And given our priorities, our assets, the opportunities in front of us, what should we do? The relationship of business to tribal government, strategic direction is in the hands of the council or other leadership, the day-to-day management is insulated from politics, and there are multiple ways of doing that. We're going to hear about some of them today. Some people do it with independent boards, separate charters, established rules that govern how people deal with their own businesses. But that is a major piece of the task of running successful nation-owned enterprises.

We've looked at this council-run versus separated model, those two diagrams I showed you. We did a running study of 121 tribally owned and operated enterprises on about 30 reservations and we asked people, senior leaders from these nations, which of these models do you fit into? Does the council control everything, hiring, firing, day-to-day business management? Is that essentially council business or is it separated somehow? You have specialists, those who know that side of how to run the enterprise who are doing that. And then we asked them, are you profitable or not? And the interesting thing was 63 of them under the council-run model, percent that are profitable: 49 percent. Odds of profitability: less than even. Under the separated model, 58 of those, 83 percent of them profitable, odds of profitability almost five to one. And this is one of the things that taught us that this issue of how you manage that place where politics and business come together turns out to be a critical piece of whether or not the business succeeds in meeting the objectives of the nation. And we think actually on the left that the situation would be, that that actually overstates the successes, because of course what it doesn't capture is all the businesses that folded because of interference like that timber operation that I started with, which didn't last because it had been turned into an employment service for council."

Audience member:

"Would the 31 also include casinos?"

Stephen Cornell:

"At the time we did this, I would say there are casinos in this list, but I couldn't tell you how many. Some of this was in '91 and '92 and I think in those two groups, those two rounds of this, there were very few casinos but probably there are some in here. A lot of this is non-casino. And actually someone said to us last night, the nation that Joan and I were talking with last night has a very successful casino among other businesses. And this one gentleman said to us, ‘Well, the problem with a casino is if you're making a lot of money, it can cover over a lot of problems.' And he said, ‘What we've discovered is when we get into businesses other than a casino,' at least if you're in a place where casinos are making a lot of money, that is if you're close to a big market, he said, ‘When we get into businesses other than casinos, we find we have to ramp up our management game. It's a whole lot tougher.' He said, ‘We've had to find much better management skills outside the casino business. Running casino you've got to know how to run a casino but,' he said, ‘as a general set of management challenges, if the money flows in, boy, you can cut a lot of corners and still show a healthy profit. In our other businesses, the tolerances are a lot less. We haven't been able to tolerate the mistakes that we often made in our casino biz. We've had to be much more skilled.' So that's an interesting question.

What role does the political and legal infrastructure play? Treat it as a key piece of the puzzle. This is what we've got to solve. It's that nation with the casino challenges, Nation B that I talked about, not talking about what business to be in, but talking about, 'What's the political and legal infrastructure we're going to put in place that can support any business we want to get into?' Without a political and legal infrastructure, laws, codes, separations of powers, roles, etc., that can support development, changes of success are slim. What role does financial management capacity play? Another key piece, putting in place reliable financial systems that are effective, they're enforced, they're transparent, so people trust them. It's not only essential to business success, but this is one of the ways you reassure citizens, partners, funders. There's a fellow named Jason Goodstriker with the Blood Tribe in Alberta. He's a council member there and he said, ‘We used to have all these rumors about what's really happening to the money.' He said, ‘Nobody...we all knew what was happening to the money cause the council got all these reports, but out in the community, ‘Oh, I know what they're really doing with that money, you know where that money came from, I know what's behind that whole thing,' and it seemed like a big rumor mill. We kept talking about how do we control this? And finally someone said, ‘Tell everybody what's happening to the money.' So we simply started publishing the tribal budget in the newspaper every quarter, everything. ‘Here's where it's coming from guys, here's where it's going and we put it in there.'' And he said, ‘Anybody with the patience and the mind for that mind-numbing task of just looking at numbers, could figure out...we made it as clear, as simple as we could.' And he said, ‘Overnight the rumor mill wound down.' It was the lack of knowledge that had made a lot of our own citizens say, ‘I don't know about this, it looks fishy. We made it transparent and the trust level rose.'

What are the key tasks? In this approach, determine strategic priorities. What are we trying to create here, where are we trying to go? Create a governance environment that can sustain the development effort and business success. Invest in financial management capacity. Find talented people and support them. And when we look at the business development process, it's the same four points and probably others that we can talk about. It's very different from that, anybody got any ideas, let's get a grant, let's start whatever we can persuade someone to fund; very different approach.

What are the likely outcomes? Well, our research at least says increase profits, reduce dependency, jobs that last, they don't get tied to political cycles, things like that and resources the nation can use to support its priorities. That's a real quick sort of overview of some of what we think we've seen on this question of nation-owned enterprises, how they work, some different approaches to thinking about them.

Any questions or anything you'd like to raise from all of that?"

Michael Taylor:

"What did you advise the tribal leaders who you had dinner with last night about this issue of maintaining the tribal-ness of these kinds of enterprises? What did you tell them?"

Stephen Cornell:

"Well, this is going to sound like a real slippery answer, but they didn't actually ask us for advice, which I was relieved about. I think Joan and I were sitting there thinking, ‘Boy, this is...' I'll tell you, there were two issues they raised and both of them -- as Joan and I talked about this afterwards -- both of us thought, these are issues we're beginning to hear more and more about and they both were really interesting issues. That was the first one was the question of, 'We're getting really good at this side of this kind of cultural divide, are we losing too much on this side?' And I think if they'd asked for an answer, one of the answers I would have given them from other peers too to talk a little bit about what other tribes are doing. Mississippi Choctaw, they pour profits from their enterprises into things like language retention, into running their own schools. One thing we did ask them was who controls the schools on your rez, are all your kids going off to public schools where you don't have any influence over the curriculum, or have you actually got some influence and they sound like from what they said, one of those nations in the fortunate position of actually exercising control from nursery school to middle school, they run their own school. That's an opportunity to create a curriculum that does at least part of what they're concerned about. At Mississippi Choctaw they put a lot of revenues into language and that sort of thing. The Cherokee Nation in Oklahoma has launched in the last couple of years a major language revitalization initiative. They did a survey and they discovered that there were no fluent Cherokee speakers on the rez, on their lands, under the age of about 45. And the Chief said, Chad Smith, 'We've got a national emergency here. This is the future of the nation at stake and what we've got to do is make some tough decisions about how we spend our revenues.' They don't have a lot of revenues. They don't have a large casino generating a great deal of money."

Audience member:

"They do."

Stephen Cornell:

"They have some large casinos, but they aren't in the situation of some of these tribes which have a great deal of discretionary income coming in that they can just put into a new program. And what the chief said was, ‘We had to approach some of our programs and say if we're going to invest in language revitalization, we're going to have to take money from some programs that are already established because these are expensive.' They went and found out how do you do language revitalization and the research says you start with the littlest children. You don't do high-school language classes; you go to three- to five-year-olds. And the Native Hawaiians and the Maoris in New Zealand were doing these immersion classrooms for three- to five-year-olds where not a word of English is spoken. So the Cherokees started one of these classrooms. But the director of education said, 'It costs me $90,000 a year to run one of those and I need to run four or five of them. So I've got to find money from other pieces of the tribe to do that.' And the response of the other pieces of the tribe was, 'Of course.' So they're saying, 'Okay, this piece is critical and we've got to make some tough decisions and put some revenue into that.' The second issue they came up with was they said, 'Our economic development arm is very successful and it's drawing talent away from our tribal government piece. Our successful enterprises are soaking up a lot of our talented people and tribal government is having trouble recruiting our own citizens who are talented because the enterprises are doing it. So we're facing sort of a human capital challenge on the governance side.' And that's another issue, which they saw coming out of this type of success."

Michael Taylor:

"Let me give you a couple of ideas that have worked at Colville. I had the opportunity to have a hand in developing one of the early recipients of the Honoring Nations award, which was Colville Tribal Enterprise Corporation and they recollection is they did receive it. It's been a long time. When we drafted the charter of the corporation, it had a provision in it, which required the corporate board to expend time and resources assisting tribal members in developing their own businesses. And that -- after the outside board came in -- the board didn't like that. They tried to get the tribal council to remove that obligation from it. So there was one of those internal political wars over a provision in the corporate charter requiring the corporation to make substantial efforts and show that they were assisting tribal members in developing their own businesses. But the tribal council refused to do that and so still today there's a provision in their charter and a requirement that they, as business managers and as a corporate board, they feel like they suffer under this requirement. But I would argue that the reason Colville Tribal Enterprise Corporation is still in existence today after 23 years is that provision, because they're obligated to go into the community, find people who have ideas, and help them develop those ideas. Another aspect of what we did in developing that corporation was we obligated the corporation to...we subjected the corporation to the TERO requirements of the tribes and that also was a bone of contention with the board of directors. Most tribes have hiring preferences, but when you get into the business the corporate managers always want to hire the most experienced, most productive people. And often, as in the case of Colville, that wasn't the tribal workforce. That may be changing today, but I don't think so. And so subjecting the corporation to the jurisdiction of the tribe's TERO organization also I think is a reason why Colville Tribal Enterprise Corporation is still going strong."

Stephen Cornell:

"Those are interesting. Anybody else have a..."

Alex Yazza:

"Stephen, Alex Yazza with the Gila River Indian Community. Just a question with regards to the tribal communities that you've worked with: have you seen the experiences of maybe a number of those tribes that have made significant changes to possibly their governance structure in building not only their administrative capacity but their financial management capacity in order to become more successful? Was that any part of their strategic outlook and doing so, i.e. government reform, or even reformation of their constitution bylaws? Have you seen that in Indian Country?"

Stephen Cornell:

"Yeah, and I don't want to steal Brian Titus's thunder but -- who'll be on the panel next -- but the Osoyoos Indian Band in British Columbia, when they decided they were going to vigorously pursue economic development. We recently did a case study of what they've done and they actually spent a considerable period of time focused just on what do our financial management procedures look like? Do we have the capacity to account for every dollar, to make intelligent investment decisions? And have we built that? And let's do that first. And actually there's a period of time in the history of their development over the last 15 years where you look and you say, ‘Boy, what's really going on here is building financial management capacity. That's what they're about.' And once they got to that point it began to really show up in what was happening with their businesses. The Grand Traverse Band of Ottawa and Chippewa Indians in Michigan, they went through a period of having some enterprises that certainly had potential but weren't delivering and they read some of the research that we, and others, have done looking at this business-politics mix. And as a result of that they reorganized their...they basically separated their development corporation from their council and it had been one in the same and they pulled those two apart and rethought some of the constitutional issues there. George Bennett and John Petoskey and others up there see that as the point where they really began to see different results. They were at the same time trying to diversify their economy away from gaming so those two kind of went together. But yeah, I think we have seen tribes that have looked at constitutional issues as a critical piece of making economic development work. Rocky Barrett from the Citizen Potawatomi Nation in Oklahoma, Rocky -- I heard him give a speech at the University of Oklahoma -- and he said, ‘If you're not thinking about constitutional reform, you're not in the economic development ballgame.' That's a line that stuck with me. It was the first time I heard a tribal chairman put constitutions and economic development in the same sentence. And he was reflecting their experience. His feeling was, until we dealt with the constitutional issues, we weren't able to make it happen."

Audience member:

"I have two questions and one is related actually to Rocky Barrett, because there are a number of tribes in Oklahoma where there's a three-party government and the executive branch manages the businesses. Rocky's a good example of that, and it's a little bit different from separated model. I was wondering if you've done any research into that. And the second question is among your separated-model businesses have you looked at the distinction between those that are successful and those that aren't and what are the characteristics of the businesses that are separated but not successful? Because it would be good to know where the pitfalls are if you go that route."

Stephen Cornell:

"Let me mention the second one of those first. The business/politics mix is just one piece of the development puzzle as all of you know. It's not as if solving that suddenly everything takes off. And yeah, we've seen plenty of places where they've succeeded in dealing with that, but it comes back to things like the financial management capacity issues. They may not have got their financial management house in order or they may be in a position where they're very reluctant. I remember up at Yakama, this wasn't so much business, it was the management of wildlife up there, but they had a very strong Yakama preference policy and the wildlife biology guy had said to us, ‘Well, we had to break that policy. We had to go to the council because there wasn't anybody here who knew anything about wildlife biology. And if you're going to manage a mule deer population and do it right, you better know what you're doing.' But he said what they did was when they hired me -- this guy who was the manager, he's a white guy -- he said in your job description is a five-year directive that within five years you will have trained a Yakama to replace you. He said, 'I'll only be successful here if I work myself out of a job.' So those kinds of issues come up as well and the separated model is no panacea, no guarantee. You still have to make intelligent business decisions and as all of you know, that's tough to do even when you're set up perfectly, the number of businesses that fail because of mistakes. So I don't think the separated model, we wouldn't hold it up as a panacea, but we would say that when you don't find a way to effectively manage that mix, you're inviting a lot of difficulties that even if you do the financial management right, even if you do a lot of the other stuff right, you're going to run into problems. On this question of this sort of these different structures, we've not systematically looked at that. What we're I think increasingly aware of is that there are a number of ways to skin this cat, and even within what I call the council-controlled model there are ways to manage politics within that model. You can do it by having very clear roles and rules about what council may and may not do. It's a model that's more susceptible or more dependent on electing the right councilors, because it opens some doors to people who may eventually get elected who don't have the best interest of the nation at heart. But I think what we're becoming aware of is that there are a number of different ways of addressing this political challenge. We've not done systematic research on this sort of executive as the managers separate from the legislative branch but still under tribal government and that's actually a good suggestion. We ought to look systemically at places like Potawatomi that does that."

Mary Thomas:

"Less than 15 years ago we were a very, very poor tribe. We had just a handful of businesses that were struggling. So when we got into the enterprises of entertainment, mainly gaming, that proved to be such a huge success that it was a benchmark and other businesses that followed almost had to strive to be try to reach that same benchmark and that was a hindrance I think. But keeping that up and trying to get as profitable as possible in a quick turnaround time, it has helped. And that's the main thing that I wanted to share with you is that you set a benchmark and then you try to achieve it and that's part of our success. But investing in people at the top when you're successful also helps, because now they're coming back and they're taking over and I just see the brightest future ever with all these bright minds coming in."

Stephen Cornell:

"Thanks. And we're going to hear more from Gila River during the next panel about some of what they've done. Other comments or questions? Yes, Roger."

Roger Willie:

"My question kind of goes back to this cultural aspect. You mentioned that certain tribes are starting with the youth. What about in terms of financial education, starting with the youth, what are tribes doing all the way down to like pre-K, elementary years, and so forth?"

Stephen Cornell:

"Well, I don't know if I've got an answer for you other than I think as many of you know, this issue of financial literacy is a very big issue right now in Indian Country, and there are several major initiatives underway, some by the Oweesta Corporation and First Nations Development Institute. Some of you know Joanna Donovo who is very involved in some of this. The Federal Reserve has been very interested in some of these financial literacy issues. And I think a number of them are focusing on not quite as young as you're talking about Roger, but certainly high school level and how...we hear from a lot of tribal leadership who are working on, thinking about education issues. We hear them saying to each other, ‘Have we thought through what it is we want our kids to learn on both sides of this cultural gap?' And I think some of them are thinking about the sorts of issues you're raising, financial literacy. We had a tribal chairman a couple of years ago who said to us -- no, he wasn't a chairman, he was a councilor -- and he said, ‘You know, my kids know all the latest stuff in popular culture but they don't know what I do. They don't know what it means to be a councilor. They don't know what tribal government is about.' And he said, ‘That's my worry. Thirty years from now who's going to run this place if my own kids...we're not somehow in our high school capturing their imagination with the challenge of nation building and of development and of what we could be doing on this land?' So I think there's a lot of talk about this, but I don't know examples of exactly what you're talking about."

Native Nation Building TV: "Moving Towards Nation Building"

Native Nations Institute

Manley A. Begay, Jr. and Stephen Cornell contrast the two basic approaches to Indigenous governance -- the standard approach and the nation-building approach -- and discusses how a growing number of Native nations are moving towards nation building. It provides specific examples of how implementing the five keys to nation building bring wide-ranging benefits to Native communities.


Native Nations Institute. "Moving Towards Nation Building" (Episode 10). Native Nation Building television/radio series. Native Nations Institute for Leadership, Management, and Policy and the UA Channel, The University of Arizona. Tucson, Arizona. 2006. Television program.

Mark St. Pierre: "Hello, friends. I'm your host, Mark St. Pierre and welcome to Native Nation Building. Contemporary Native Nations face many challenges including building effective governments, developing strong economies that fit their culture and circumstances, solving difficult social problems and balancing cultural integrity in change. Native Nation Building explores these often complex challenges in the ways Native Nations are working to overcome them as they seek to make community and economic development a reality. Don't miss Native Nation Building next."

Mark St. Pierre: "Over the last decade or so, many Indigenous nations have been moving to an approach to economic development that has been described as nation building. Today's program examines this nation-building approach to development and contrasts it with the older approach that remains pretty common today, the so-called standard approach. With me today to discuss these two approaches are Drs. Manley Begay and Stephen Cornell. Dr. Begay, a citizen of the Navajo Nation, is the Director of the Native Nations Institute for Leadership, Management and Policy at the University of Arizona, where he also serves as senior lecturer in the American Indian Studies program. Dr. Cornell is the Director of the Udall Center for Studies in Public Policy and a Professor of Sociology and Public Administration and Policy at the University of Arizona. Welcome, gentlemen. It's nice to have you both here today. The Native Nations Institute in its extensive research has found that there are basically two approaches to Native Nation governance. Can you describe these?"


Manley Begay: "The standard approach has been in existence probably for the better part of the 20th century, and it's really an outgrowth of [a] long-held belief that dependency is the way to go by the federal government and also by many state governments as well. And the nation-building approach is a recent phenomenon sort of borne out of the political research and stuff of the '70s. Interestingly enough, I think the roots of the standard approach is really around colonization, forced dependency, and as a result political decision-making has been very slow. Others besides those that are most effected make development decisions, and it sort of views Indigenous culture as an obstacle to development, whereas on the nation-building approach which has been recently pushed and thought of by Indigenous peoples is really rooted around the exercise of sovereignty, claiming jurisdiction, building effective political systems and institutions of self governance, using culture as a way to design political systems and also to design economic systems as well. And so it's really two very different type of approaches, and also has produced two very different types of results."


Mark St. Pierre: "Steve, when you talk about the standard approach, what are some of the inevitable outcomes?"


Stephen Cornell: "Well, I think the standard approach -- as Manley has indicated -- the results have not been very positive for Indian nations. I think you have to sort of realize that the standard approach makes an assumption, it assumes that Indigenous nations are not really capable of making major decisions for themselves, so the priorities in development are ones that are put together in Washington, D.C., put together by federal bureaucrats who are saying, 'Man, these tribes poor, we've got to do something about it, let's come up with a program to help them.' So they design a program and they fund it and they make decisions about how the program will be run and Indian Country experiences the results. But if you look at that model, it's one in which tribal priorities do not appear, bureaucratic priorities do, Washington's priorities do, federal priorities do."


Mark St. Pierre: "You could almost call that the well-intended approach."


Stephen Cornell: "It's a very well-intended approach, it's just not a very well-accomplished approach. So tribal priorities don't appear in there, tribes do not exercise real decision-making power. In many cases, what it creates is this expectation that well, 'It's up to the feds to do it for us so you get this kind of looking to the feds as the source of not just money, but ideas and suggestions and solutions, so tribes get excluded from the decision-making process, they get excluded from thinking through what kind of development they want. The result over the -- Manley said it sort of dominated the 20th century -- if you look at the 20th century in Indian Country, the performance in economic development is pretty poor."


Mark St. Pierre: "Steve, you talked about the standard model, sadly the traditional model of planning that's been used by the EDA [Economic development Adminitsration] planners that tribes hire. Give us an idea of what that process looks like."


Stephen Cornell: "Well, as we were saying, a lot of the ideas for what tribes should do tend to come out of Washington. I think very often what happens is an Indian nation, facing tough unemployment, difficult time getting people through the winter -- all the kinds of problems that we see in extremely poor rural communities -- those nations just, they've got to get something going. And so you call in the tribal planner and you tell the tribal planner to go get a grant, go find some money, go get something started. So the planner goes off and looks for whatever they can find out there, where are the federal dollars, has anybody else got anything I can apply for. You start whatever you can fund. You appoint your relatives or your political supporters to run the projects. The council micromanages the heck out of it, and everybody just prays that something will work. We think of it as this sort of six-step model for planning in the standard approach. I think we've seen a lot of that."


Manley Begay: "We were in southern British Columbia working with a group of First Nations and we had an executive education session and this is sort of the steps that Steve mentioned. We talked about those steps and then at the end of the presentation one elder in the back raises his hand and he says, 'I know what's wrong with that planning process'. He says, 'They should have prayed first!' Basically he was eluding to the fact that the nation-building approach is very different in terms of planning than the standard approach. There's actually forethought and there's long-term planning, rather than sort of the short, grant-type of mentality. And you're actually more proactive in thinking about how you're going to plan, rather than reacting to the agendas being set by Washington or those that you're getting the money from. And then you're setting the development agenda, not someone else. So the planning process is very different under the nation-building approach."


Mark St. Pierre: "Let me follow up with this. If tribal officials are feeling pressured out of desperation to solve immediate, crisis-type problems, they would have to be politically brave to go with the longer vision, to map out something that might take years to accomplish."


Stephen Cornell: "It's not that they shouldn't be chasing the federal dollars. From our point of view, there aren't enough federal dollars in Indian Country. There will never be enough money to compensate for what's been taken from Indigenous nations nor to take care of all the problems that are out there. You need those federal dollars and it's right to be pursuing them. The problem is with an approach to economic development that stops there, that simply is looking for where's the homerun project that's going to solve all our problems. 'Oh, man, let's go for this grant, maybe that'll solve our problems. Let's go for this one...' instead of saying, 'How do we build an environment here that can sustain long-term economic growth? How can we build an environment that will actually produce the jobs and the economic activity that fits our culture, fits what our people want and has -- as Manley says -- long-term staying power?' And if tribes manage to do both of those at once, let's find the dollars to deal with the crisis we've got today, but let's not neglect the task of building a nation that's capable of supporting its people for the long run without having to depend on Washington, D.C. That's what tribes need to be doing and it is tough. I think it's...Indian nations face terribly difficult tasks, but they've demonstrated over and over again that they can handle difficult tasks. It's going to take work, but it can happen."


Manley Begay: "And Indian nations know best what their needs are. An occasional politician that arrives on the reservation might think, 'Oh, you need a motel right there. That's a good intersection.' So he gets the money, a hotel is built there, and it doesn't work, because that's not exactly what the nation really needed and wanted at that time. It didn't fit into their scheme of things. So somebody else promotes that rather than Indian nations themselves."


Mark St. Pierre: "A lot of tribes suffer from brain drain. Do either of you want to talk about that problem and how that comes about?"


Stephen Cornell: "Yeah, I'd be glad to say something about that. I think brain drain in fact is one of the characteristics of the old way of doing economic development in Indian Country. One of the things this sort of grant mentality does, it turns tribal government into simply a grants-getting organization, and you begin to encourage an idea among tribal citizens that that's really what tribal government is about. It's a funnel. It's a funnel for jobs, money, services that come from the federal government and they land at tribal government, and tribal government distributes them out to communities and people. And so your idea of tribal government is, there's nothing particularly impressive or ambitious about it, it's just kind of a hand-out-the-goodies organization. And then you look at, let's say, young people on a reservation, the young citizens of the nation and when they imagine what they might do with their lives, are they going to think about, 'Boy, I'm going to get involved in the leadership of this nation'. But if that's all government is, what's exciting about that? When you shift to nation building, a couple of things happen. You move decision-making out of federal hands and you put it in Indigenous hands. Suddenly the burden of responsibility is on the nation itself to decide, 'What kind of future do we want? How are we going to create that future?' And it starts to get real because you feel you're in the driver's seat. You may actually be able to make that future come alive. Suddenly it's starting to get to be an interesting thing, this tribal government business, 'Hey, if we could do that...' So young people may be more likely to stick around. Plus, if you back up that decision-making power with capable government, so that if I'm a young person and I want to invest time and energy and ideas in the future of the nation, I actually have an opportunity to do that. It won't depend who I voted for in the last election or who my relatives are. We've got a more competent government than that. We've got a government that is focused on producing good things for the nation, not on just distributing goodies to friends or something like that. Then I'll begin to think it might make some sense to invest here. I might stick around because I could really build something for my family, my community, for the nation. That begins to slow down that brain drain that has young people headed off to Minneapolis or L.A. or Rapid City or Houston or someplace, and that's a critical thing for the future of Indian Country, is to retain the incredible array of talent and resourcefulness that is in tribal communities and get it working on behalf of these nations."


Manley Begay: "Could I just add to that. As Steve was mentioning, it creates a sense of hope. When somebody else is dictating to you how you're going to live, you lose the incentive to do things for yourself. So it becomes more appropriate to just have Washington, D.C. decide for you. Or to compare to Eastern Europe. For a long time, all decisions were made in Moscow, so you'd just go to Moscow. Up in Canada, you go to Ottawa for decisions to be made, and there's less of incentive to do good things and to hope for good things because somebody else is deciding for you. So as a human being, you want to be in a decision-making position about determining for yourself what the future is going to look like. If somebody else is doing it for you, you say, 'Well, forget it.' You have less of a vested interest."


Mark St. Pierre: "Some of this seems to be buried in or attached to the original IRA [Indian Reorganization Act] constitutions which were two-year elected terms. Is this relevant to the discussion? Is the fact that many tribes operate on a two-year cycle related to the fact that they can't plan long term?"


Stephen Cornell: "If you look at those IRA constitutions, the boilerplate constitutions -- which were not Indigenous creations --those were created in the U.S. Department of the Interior for Indian nations. It was the United States saying, 'We know how you should govern yourselves. Here's the model, take it and go.' If you look at those models, they're very simple models of governance, they tend to put a whole lot of power in the hands of a tribal council, of elected officials. They make no provision for judicial functions or dispute resolution, things that tribes had enormous experience for generations in doing. It's not part of that government. The terms of office are short as you say. You get these two-year terms in many of those governments, so you get real rapid turnover in leadership, and Manley was mentioning you combine that with the federal funding cycles, and basically something's changing every year in the array of people who are working on development. So it's tough to get continuity. Now having said that, that doesn't mean everybody needs four- or five-year terms. We've seen some nations with two-year terms or even shorter, some nations where the senior people in government turn over every year. If the rules by which you govern stay the same, then you can get the kind of stability and continuity that capable governance needs. The real problem is if every two years when that administration perhaps changes, if it's a whole new ballgame, pretty soon you get people sitting there saying, 'Man, I'm heading out of here, I can't deal with this. You never know what the rules are, you never know whether you can trust the people you're working with to still be there tomorrow.' So I think, yeah, the standard model is a model that tolerates very high instability in tribal government, encourages very high instability in tribal government. That's one of the reasons why it's a pretty lousy approach to development."


Manley Begay: "And if you don't have staggered terms, it gets even worse."


Mark St. Pierre: "That's where I wanted to follow up, Manley. If you could talk a little bit about tribal governments that are operating more within the nation-building approach. What do they look like, tell us what they look like?"


Manley Begay: "As Steve was mentioning here earlier, we find that those that are operating within the nation-building approach have stability and stability in the rule of law. We find that to be quite important, because rule of law allows for the understanding that when a new administration comes in, things aren't going to change, contracts don't have to be rewritten. Rather, it creates this stability and so investors begin to feel as though, 'That's the place where I want to invest.' The Indigenous elementary school teacher says, 'I want to go there and work there because I know my investment of time, energy, education is going to be safe and that's where I want to be, and I don't have to leave elsewhere to provide a stability for my family. Rather, this is the place where I want to be.' Outside investors begin to feel as though that their investment will be safe as well because the rules don't change, it's very stable, and you get less of a conflict-of-interest situation where the court system is very stable, it provides for good rules of order, good law that's been set in place, and I think that you find economic development occurring much quicker and in a much better fashion in the long run."


Stephen Cornell: "Can I jump in and add a little piece to that which Manley reminded me of? In the standard approach, one of the other characteristics of that approach is the tribal government does everything. Now if you do that, one of the things that happens is you get a lot of political involvement in business management, because you're basically asking councilors to wear a political legislator hat for certain decisions but then take that hat off and be a business manager for other decisions, and for most of us that's tough to carry those kinds of roles and keep them straight, particularly when you're under pressure from constituents. In the nation-building model, one of the striking aspects of that model is the pulling apart of political decisions and the management of enterprises. You begin to get tribal governors, councilors, focused on certain core issues. What are the laws that we need? Do we have the appropriate governance capabilities in place? Do we have a set of policies and rules that will -- going back to the brain drain question -- keep the talented people here? Those are the kinds of things you want elected leadership to deal with, but then when the tribally owned enterprise gets going, you hope that business managers will be able to make intelligent, smart business decisions free from the kinds of political interference that the old model almost guaranteed."


Manley Begay: "The root of that type of stability creation really is around claiming jurisdiction, claiming sovereignty. Rather than having somebody else make decisions for your people, your resources, and all the issues that you deal with, you're in the decision-making position. You decide how your resources are going to be allocated, you decide how your political system is going to be developed, and it essentially marries decisions to consequences, whereas in the past, decisions were being made by other folks and you didn't have this marriage actually occurring, and as a result if somebody really messed up from outside of the tribe, they moved to Ohio or Denver or elsewhere. But for Indigenous people there's a vested interest there. You have to make good decisions to get the consequences that you want, and so that's very critical and part of that is just gaining control of the decision seat it seems to me."


Mark St. Pierre: "It seems to me that one model tends to foster confidence, growth, hope -- that sort of thing -- but I'm sure even within the nation-building approach, conflicts arise. How are conflicts resolved in either model?"


Stephen Cornell: "I think in the standard model, conflicts are resolved by firing people or the feds step in and say, 'We're yanking the grant,' or something like that. And in the nation-building model, ideally, you have some kind of mechanism that is rooted in community, custom, law, tradition so that it has respect in the community, so the people believe in it -- some mechanism that's capable of resolving disputes in a way that the various members of the community think is fair. The question is, how do you deal with those disputes and can you deal with them in ways that don't rip the society apart, so that the disagreement between these two families doesn't suddenly become or eventually become an immobilizing piece of community life where nobody can agree about anything and people are constantly at each others' throats and anything that you get is my loss and that sort of thing? So that sort of dispute-resolution mechanism -- and in many cases, it's an independent tribal court, in some cases, it might be a set of elders who have the authority and the stature to help resolve disputes, it may be traditional kinds of peacemaking approaches. There are a lot of ways to do it, but you've got to have a mechanism like that because there are bound to be disputes."


Mark St. Pierre: "And because a nation-building approach, the way you describe it, apparently draws on local culture, tradition, history, it's not a one-size-fits-all sort of situation like sadly the IRA government attempted to be. Manley, when you look at the nation-building approach, how does that affect strategic planning or strategies that tribes can develop over time?"


Manley Begay: "The strategic orientation focus in the nation-building approach way of thinking about things really allows for long-term thinking. Rather than the three to five years or 'grant mentality,' you're thinking about, 'What are my kids going to be doing 50 years from now? What kind of clothes will they be wearing? How will they be worshipping? What kind of language will they be speaking?What kind of education will they have? What kind of homes will they be living in? What kind of jobs will they have?' These are questions that must be answered by the leadership, and so [in] the nation-building model, you begin to address those questions, whereas in the standard approach somebody else is making decisions for you. It's just very short-term thinking. So as a result of the nation-building approach, you're planning for the long haul."


Mark St. Pierre: "Let's take a few minutes then to look at in your experience -- and you both have a broad experience in this -- some successes and some failures based on these two approaches."


Stephen Cornell: "There are a lot of stories out there, because the nation-building approach is not something we came up with. It's something that Indian nations came up with, and I think since really for about 30 years now, since the mid 1970s, we've begun to see a growing number of Indian nations who are taking control of their own affairs, putting in place capable governments and beginning to think very strategically as Manley described and accomplish things. One of the nations that I like to talk about is the Citizen Potawatomi Nation in Oklahoma. In the mid 1970s, that Nation had -- today it's a very large nation, more than 20,000 citizens. In the 1970s, they had a tiny land base and almost no money in the bank. They had some ideas. How do we get people to come and invest here so we can create some jobs for our citizens? And the young tribal council member went out to talk to business people around Oklahoma and say to them, 'Hey, you should come and invest in our community. We're good people, we'll give you some tax breaks, come build with us.' And some of these business people, their response was, 'Well, okay, that all sounds real interesting, but let's say I get into a dispute with somebody on the reservation or with the tribe itself. Have you got a court system that I can depend on?' 'No, we don't have a court system.' 'Okay. And how do I know that the promises that you're making to me to help get me to work with you are going to be respected if when the administration changes. Can I count on the rule of law?' 'Well, we haven't really thought that part through.' Eventually this council member came back to the nation and said, 'We've got some political work to do. We've got some governance work to do before we're going to be successful at pulling these people here.' They did that work. It took a long time. They did it piece by piece. They built a capable set of governing institutions and they began to get the kind of investment they were after, not just from outsiders, from their own people. It's a nation that has taken enormous strides by kind of seizing control of its own destiny and then doing the hard work to put the institutions in place that could support what they wanted to do."


Mark St. Pierre: "Manley, what's one of your favorite stories? What would you like the viewers to hear?"


Manley Begay: "Some of my favorite stories really is around Indian nations actually grabbing hold of sovereignty and moving forward, sort of the first piece of the puzzle in the nation-building approach. There seems to be these defining moments where things just change from the standard approach to the nation-building approach. Some of the nations did it very smoothly and in a calculated fashion, as Steve just mentioned: Citizen Potawatomi. Some Indian nations, you had near violence. For instance, like at Fort McDowell Yavapai Nation. When gaming was first being initiated, you found two opposing views of whether that nation should have gaming or not, which led to essentially the closure of a road into the casino and you basically had a standoff which forced negotiation to occur. And at that moment in time things began to change. The Indian nation began to think about themselves as truly a sovereign entity with all the rights and responsibilities of a nation, and there are a number of stories throughout Indian Country about this where Indian women would go into the Bureau of Indian Affairs office and literally threw the superintendent out. And at that moment things began to change. It's not unlike Lech Walesa in Poland saying to the Soviet Union, 'We're going to do things our way.' It's not unlike Nelson Mandela in South Africa saying, 'No more Apartheid, it's got to stop here.' And there are a number of these stories out in Indian Country like that."


Mark St. Pierre: "Let's look at First Nations in Canada. What are some examples of First Nations that have gone through a similar process? Steve?"


Stephen Cornell: "There's actually a lot happening in Canada right now with First Nations. I can think of a couple of the interesting ones to us. The Meadow Lake Tribal Council in Saskatchewan is a group of nine First Nations, some Dine, some Cree, who first got together to try to do economic development together. They realized that if they started doing development planning as a single group of nations they would get more leverage and be able to do better. Today, they're beginning to build political institutions at that same tribal council level. The Ktunaxa Tribal Council in British Columbia -- that's five First Nations and they're doing kinds...building the kinds of governing institutions that we're talking about at the tribal council level where these five First Nations are cooperating. Right now, they're involved in trying to design a government that will support their long-term strategic goals for preservation of the land, preservation of their culture, development of enough prosperity and productivity to support their community. So it's happening in a lot of different places, and if we had the time we could give you quite a list."


Mark St. Pierre: "Well, it's pretty apparent that Native nations that want a successful future have to invest tremendous time and effort into those issues, and I want to thank our two guests today, Dr. Manley Begay and Dr. Stephen Cornell, for appearing on this edition of Native Nation Building. This is a program of the Native Nations Institute for Leadership, Management and Policy at the University of Arizona. To learn more about Native Nation Building and the issues discussed here today, please visit the Native Nations Institute's website at Thank you for joining us and please tune in for the next edition of Native Nation Building."

Stephen Cornell: Two Approaches to Building Strong Native Nations

Bush Foundation

Harvard Project on American Indian Economic Development Co-Director Stephen Cornell presents the research findings of the Harvard Project and the Native Nations Institute, specifically the two general approaches that Native nations pursue in an effort to achieve sustainable community and economic development in their communities (and why one works so much better than the other).

Resource Type

Cornell, Stephen. "Two Approaches to Building Strong Native Nations." Tribal Leaders Summit. Bush Foundation. Prior Lake, Minnesota. October 2, 2009. Presentation. (, accessed January 22, 2024)