Confessions of a "Woman-Owned Business" Owner

How I learned to love quotas.

Well, I finally did it. I bit the bullet and got certified as a WOB: a woman-owned business. It took a roots-up, religious-type conversion—I'd walked in darkness, then I saw the light. And now that I am a proud—or do I mean "humble"?—official victim, my company is entitled to all kinds of preferential treats. Whether ordained by law, as in government contracting, or as an example of aggressive good-guy-ism in the P.R.-conscious private sector, or even as a hopeful prophylaxis against employee or shareholder lawsuits, a passel of lucrative work is reserved for those with the best-crafted claims to prior oppression.

Well-wishers had been after me to go WOB for years, but I refused. Until my revelation, I regarded set-asides as strictly a pat on the head for second-raters. My company, Artkraft Strauss, has been provi-ding signs and outdoor advertising—and paying taxes—since 1897. We'd never imagined ourselves qualified for charity. Our firm gets and keeps customers by fulfilling their contracts, not by invoking their pity. Besides, using sex to get work smacks of a profession even older than sign building. The whole endeavor struck me as disreputable.

But then I realized I was a victim of something even more pernicious than discrimination: pride.

My chief of operations, Jimmy, put the matter into perspective. "What are you, nuts?" he asked, reminding me of how many hoops we've jumped through and rings we've kissed over the years to get jobs. "How's this different?" he wanted to know. "If a job is set aside for guys named Jimmy, my name is Jimmy, I'll take it!" Jimmy was right: Business is business.

A bank's name change provided the tipping point. We sign people love bank mergers. Every sign, canopy, directory, ATM, teller cage, and nameplate has to be replaced—sometimes, in the spirit of the famous Asiatic Fire Drill, overnight, per schedules set forth in the new company's new charter.

This particular changeover involved nearly 1,000 branches in five states. And as I learned when my phone started ringing off the wall with joint-venture pleas from companies I'd never heard of, the taking-over bank had a "utilization rate" of 18 percent. That is, nearly one-fifth of the money spent on construction work would go to WOBs or MBEs (i.e., minority business enterprises; presumably for reasons of euphony, minority-owned businesses generally are called MBEs rather than MOBs). Given how rare such businesses are in the sign trades, at least here in the Northeast, this cake had been baked for me.

Indeed, at the pre-bid conference, the bank's construction consultants were thrilled to see a genuine WOB among the bidders. Apart from the responsibility of physically reconfiguring a thousand banks, they had the head-scratching duty of coming up with the magical 18 percent of oppressed beings.

Their faces fell, however, when they learned I lacked certification. It turns out that it isn't enough to be a WOB; one has to be an officially certified WOB. The contract was to be awarded in only 10 days, and all the paper had to be in place. But state certification can take six to eight months, they told me, because of the volume of applicants and the demanding nature of the process.

Not to worry, I told them.

While Jimmy and his crew worked on the bid, I worked on the red tape. Getting certified as a WOB is something like getting certified insane: It takes time and talent. As I filled out forms and assembled documentation, I wondered how people who are authentically disadvantaged—or who may not have certified public accountants and English majors on staff—manage it. Anyone who can produce three years of audited financial statements, five years of income projections, a sheaf of valid "Rated-A" insurance certificates, answers to stacks of multiple-choice and essay questions, a book of "minority utilization re-ports," and a portfolio of supplier and customer references, bank references, and character references probably qualifies for a $100 million line of credit, if not an MBA.

In went the bid, marked "Certification Pending," and into the bowels of the New York State Division of Human Rights went the WOB application.

Undercover Brothers

Not 36 weeks but a mere 36 hours later, the Division of Human Rights called to schedule my interview to complete the process. How did I accomplish this feat? In an example of the old-fashioned "net-working" that affirmative action is supposed to obviate, a confederate at my insurance company called a counterpart whose sister-in-law works in Albany, and our application miraculously migrated from the bottom of the pile to the top. But hey, by now I wanted the job.

The prospect of an investigator's coming in to establish my female bona fides evoked the image of a burly guard out of a 1950s Women's House of Detention movie marching me into the ladies' room and demanding to see the cut of my undergarments. Instead, the investigator turned out to be a grave young man attired in a three-piece suit with Edwardian collar and gold watch fob. He requested my company's original charter and certificate of incorporation; all minutes and bylaws and amendments from inception to date; all stock certificates issued, canceled, and outstanding; and the factory's original certificate of occupancy—a complete set of century-old documents, much of which I managed to produce by sheer luck. The investigator took careful note of my office décor, plants and curtains evidently witnessing more in my favor than cordovan leather and sports memorabilia would have.

What he was really looking for, he explained, was uncles and brothers hiding under the desk. "You'd be surprised," he told me flintily, "how many people try to put one over on us."

No, I wouldn't. Not with all those set-asides in the offing. Add the 10 percent price bonus the designated oppressed are entitled to charge—"price evaluation adjustment," in federal procurement?speak—and the incentive to fudge becomes overwhelming.

Set-asides and "evaluation adjustments" are as pervasive at the big-business end of the private sector as they are in government contracting. Expensive and inefficient these programs may be, but lawsuits are worse. The best defense against discrimination claims, corporate officers are constantly told, is an explicit, detailed, and overarching "affirmative action program" respecting hires, fires, and contracting. Point to this program, and a bevy of bugbears, from disaffected employees to muckraking journalists, will disappear. Besides, it's good P.R., and it allows corporate policy makers to feel good about themselves.

They're entitled to some self-esteem too.

These incentives give rise to preferences of mind-boggling complexity. Consider the "utilization chart" from a bid that came across my desk. It's for $9.5 million worth of work at a laboratory in Princeton, New Jersey. The categories can be sliced and diced indefinitely, creating a dazzling array of permutations. They may specify non-Dominican Caribbeans or non-Korean Asians, disabled people of various stripes, or inhabitants of selected neighborhoods.

The utilization rate for suppliers of "No. 1 Diesel And No. 4 Fuel Oils" adds up to 300 percent, a foot-note explains, because "incumbent supplier is a disadvantaged, women-owned, HUB-Zone small business." (A HUBZone small business is one in a "Historically Underutilized Business Zone.") Try competing with that!

I suppose it's not so different from the old days, when the incumbent supplier was apt to be the project manager's brother-in-law—but it certainly isn't an improvement.

The old-time project manager wasn't forced to hire his brother-in-law, and he might even have had a chance of exercising some quality control over him. In this new, desperate rush to hire one-eyed Central Asians from south of the railroad tracks, price and quality necessarily weigh second at best.

My investigator congratulated me on passing his tests, apologized for their complexity, and shook my hand. My WOB documentation came through the next day. To my disappointment, it was not the fancy, frameable certificate dripping with ribbons and seals that I believed all my effort and angst—not to mention my newfound oppressed status—entitled me to, but just a faxed letter from the New York State Division of Human Rights.

Why'd We Wait?

It's still difficult for me to grasp just what is so hapless about us WOBs and MBEs that we merit entire taxpayer-funded bureaucracies to handhold us through the process of participating in the U.S. economy. According to the U.S. Census Bureau's 1997 Economic Census, the latest for which comprehensive data are available, both women-owned and minority-owned businesses are growing at a rate more than four times the national average. Between 1992 and 1997, the number of MBEs grew by 33 percent and the number of WOBs grew by 37 percent, while the total number of firms grew by only 7 percent.

In 1997 women owned 10.1 million American businesses (up from 6.4 million in 1992), or 46 percent (up from a third) of all domestic firms. They employed more than 18 million people (up from 13 million five years earlier), or one worker in seven, generating $2.3 trillion in revenues (up from $1.6 trillion). Similarly, revenues of the nation's 2.8 million minority-owned firms (up from 2.1 million in 1992) rose 60 percent, to $335.3 billion, while revenues for U.S. firms as a whole—an aggregate that includes these high achievers—increased by just 40 percent.

Growth rates during the previous five years were comparable, and nothing suggests that they have slowed down since. Clearly these sectors are dusting the rest of the economy. In fact, these stunning rates of expansion would be even greater if the Census Bureau hadn't decided in 1997 to change the way it defines MBEs and WOBs, omitting entire categories of firms that were previously counted. Publicly traded companies were dropped, along with firms whose successful, qualifying founder gave up equity to raise additional capital for growth.

It's impossible to say how much MBE-WOB growth is driven by "utilization goals" and set-asides. A contrary theory holds that old-fashioned prejudice, glass ceilings, and corporate inflexibility—the nexus of oppression—do more to stimulate minority and female entrepreneurship than all the set-asides combined. New business founders are preponderantly impatient refugees from the establishment.

Hopefully not too impatient. My certification trials were not yet over: I had yet to be named to the customer's "Approved M/WBE Vendor List," for which the state certification is only a prerequisite. To this end, the bank summoned me to an interview at its headquarters across town. I asked my assistant to call me a cab. "I'm taking a limo to Park Avenue," I told her, "to get us approved as oppressed persons." She rolled her eyes.

In the bank's burnished conference room I faced a photogenic board of equality facilitators that looked like a magazine ad for Your Friendly Utility Company: three men and three women, one from each of the currently approved minority groups. Big corporations maintain entire departments to monitor employee racial balance and vendor affirmative action compliance, so I wasn't surprised that the bank's don't-call-it-quotas crew reflected those ideals. But they already had all my information: the same financial statements, the same business and personal and bank and insurance references I'd submitted to the state.

So what was left for them to administrate but my attitude?

Which was sorely tried. I felt like a criminal waiting to be discovered. The whole setup bore an unfortunate resemblance to a parole board hearing.

I knew I was a fraud, participating in a charade for which Adam Smith should have ordered the whole lot of us taken out and shot. At the same time, I was taking lightly the principles that provided not only their livelihood but the justification for their existence. Trapped between my conscience and the wrath of scorned bureaucrats, my future appeared foreshortened.

Still, the first part of the meeting reduced me to a con-fused state of complacency. I'm used to competing for jobs, not being helped over the finish line and shown how to fill out payment requisitions. The nice people explained the advantages of being a WOB in such a way that it hardly seemed a boondoggle. After all, they told me, the contractor has to be able to perform the work; getting one's company on "approved vendor" lists is no different from any other form of marketing. Marketing, they explained, is the use of various methodologies to promote one's products or services. They paused for questions.

I'm familiar with the concept of marketing, I told them.

Oh yes, they said, recalling my hundred years in the sign business. They were amazed, they said, by the age of my company. The vast majority of WOBs and MBEs, they told me, are start-ups.

"You don't say," I said. Lulled by all the baby talk, I failed to see where this might be going.

Then came the stumper.

"Why didn't you do this before?" one of them asked me.

"Do what?" I asked, feeling the trap closing.

"You could have applied for this program nine years ago," she said—rather menacingly, I thought. "Why did you wait until now?" Six expectant pairs of eyes, the whole Rainbow Inquisition, awaited my answer.

That's it, I thought. The jig is up. I'm busted. Trapped. The word will go out to all the banks, and I'll never get another bank job. Or a letter of credit. Or an ATM card. How will I explain this to Jimmy and the boys in the shop?

Then, revelation! I know what I'll do, I thought: I'll come clean. Tell the truth. Throw myself on their mercy. (They may like that.)

"In the past, I was philosophically opposed to it," I admitted carefully.

"And now?"

Gulp. "I consider that I was being naive."

My confession evidently satisfied them. It even invited their confidence: For the rest of the meeting they described their frustration at the shortage of applicants. Even they can see that this is a program where administrators outnumber clients. I promised to recommend some if I should think of any.

The Wonder of Womanship

In the end, the bank job was divided among six companies. (There's your 18 percent "utilization rate.") And as with any construction job, if we survived it and even got paid, we considered ourselves geniuses.

So far the principal benefit of my new WOB status is a clutch of complimentary subscriptions to minority- and woman-owned business magazines. Soft-core S&M for the affirmative action set, they feature photos of silver-haired old-boy executives grinning weakly while presenting excellence awards to entrepreneurs who wear their minority-hood and womanship like earned badges of honor.

But WOB isn't just about tangible benefits. It's so much more. I now feel a part of something larger than myself: the great chain of being that tumbles from the well-meaning, through the impractical, to the absurd—replacing the dismal script of capitalism with a delightfully random set of entitlements and rewards.