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The Salish-Kootenai tribe has succeeded where others have failed. Its secret: Think business, not bureaucracy

Like a lot of job opportunities, this one first
popped up at a golf course.

Standing at the tee, George Kishigian was feeling, well, stuck in middle
management. His playing partner started talking about an Indian tribe in
Montana. The tribe owned an information-technology company looking
for more work at Georgia’s nearby Warner Robins Air Force Base.

By DAN MORSE Wall St. Journal

Mr. Kishigian doesn’t remember what he shot that day, now three years
ago. He does remember being intrigued enough about that IT company
to start noodling around. Maybe, he wondered, there was something at
that company for him.

What he found was even more intriguing than he had hoped. For the
Salish-Kootenai tribe was prospering at something that has eluded
many Indian tribes before it: running small businesses.

The tribe’s two main ventures — the IT company and an older enterprise that makes circuit boards — don’t
wait for customers to come to rural Montana. Their first goal is profits, not jobs. And they’re not messed
with by their tribal politicians.

That last point is perhaps the most important. Even as the
number of tribe-owned businesses has increased in recent
years — seeded in part by casino revenues — tribal politicians
still get in the way too often, micromanaging their way down to
who gets hired, who gets fired and what color the walls should
be painted.

And that’s not what Mr. Kishigian wanted: "You can’t do a job like this if your hands are tied," he says.

Within weeks, he was back at the Landings Golf Club, this time in a private dining room. Rita Matthews,
the secretary-treasurer of the tribe’s IT firm — S&K Technologies Inc. — was hammering out a deal with Mr.
Kishigian, trying to get him to run the company’s Georgia office, one of four regional sites. "He was still
wavering a bit," Ms. Matthews recalls. "And he was the one I wanted."

Global Reach

Mr. Kishigian now supervises 70 staffers here in Warner Robins working on an Air Force contract that will
generate $4 million of revenue over four to seven years. The job is to assist with the service of F-15 fighter
jets flown by some U.S. allies, and increasingly with those flown by the U.S. Air Force as well. When F-15
parts need repair or replacement, S&K Technologies finds vendors and tracks their progress. It’s a big job,
considering that many of the jets are more than 20 years old, and involves hundreds of vendors and
customers around the world.

The Air Force derives advantages from hiring the American Indian company, apart from the work S&K
Technologies does. It’s good public relations, for one thing. There’s also less red tape. When a contract
goes to a company run by what the government classifies as a "socially and economically disadvantaged"
entity, such as the Salish-Kootenai, a sole-source contract with no dollar limit can be awarded, eliminating
requirements for the often cumbersome bidding process. That’s something S&K Technologies promotes
heavily as it hunts up new business.

Still, the prospect of dealing with a business overseen by a tribal government worries a lot of people.

"I thought we were going to get into a situation where there was a lot of bureaucracy," admits John Willis,
an Air Force executive who brought S&K Technologies in with only a one-year contract at first. But "right
off the bat we saw the bureaucracy was not there, and they could make quick decisions," Mr. Willis says.
One likely reason the company is so efficient: The tribal politicians stay out of it. "I’ve never met any of the
tribal council or any of that stuff," Mr. Willis says.

Faster and Cheaper

Under the management of S&K Technologies, Mr. Willis says, the jet parts are repaired more quickly, by
more vendors and for less money than under the previous contractor, a large aircraft maker. Much of the
company’s work is directed at F-15s flown by the Royal Saudi Air Force, a program in which the firm has
cut parts-repair costs by an estimated 23%, he says.

Mr. Willis admits he had to negotiate with S&K Technologies at the beginning to get them to lower their
manpower costs. But on the flip side, he says, he can call up the company, ask for a report he needs that
will require two days of research, get the report two days later — and never be charged for it.

"They’re hungry," Mr. Willis says.

The Salish-Kootenai tribe, officially known as the Confederated Salish and Kootenai tribes, is actually a
grouping of Salish, Kootenai and Pend d’Oreilles Indians, who came together at the Flathead reservation in
Montana after an 1855 treaty with the U.S. government. The picturesque lands surrounding Flathead Lake
have pockets of poverty. But the reservation has always drawn tourists, and it held enough timber rights,
timber jobs and agricultural jobs to help its residents rise above the widespread poverty of some other
reservations.

Over the years, the Salish-Kootenai started a number of small businesses that didn’t fare so well. Their
hot-springs resort fizzled when local wheat farmers started to vacation in Arizona, says Larry Hall, a
descendant of Salish Indians and former economic-development director for the tribe. Another venture,
Char-Koosta Homes, had a decent run producing modular housing but petered out after expanding to offer
furnished houses.

Even as the ventures sputtered, however, the tribe was refining its governance structure and its judicial
system, making the latter a less-political institution than some of its peers in Indian Country. This helped
assure potential business customers that their contracts would be honored.

Separating the Board

In 1984, the 10-member Salish-Kootenai governing council established S&K Electronics Inc., a
printed-circuit-board and electronics manufacturing company. The council made itself the sole, single
shareholder, but it didn’t declare itself the board of directors, as often happens at other tribes. Instead, it
appointed a board, composed of tribal members, and required the business managers to come before the
council only once a year.

The circuit-board venture had trouble finding customers, largely as a result of what Mr. Hall calls the
chicken-and-egg challenge of rural economic development. "How can you get the best employees when
you don’t show much promise?" he says. "And how can you show much promise when you don’t get the
best employees?"

The tribal council subsidized the venture, though some members wanted to pull the plug because it wasn’t
making money. Slowly, the venture’s managers learned to take better advantage of minority-contracting
preferences for U.S. government work, and the company began attracting better workers.

Drawing Notice

Finally, in the early 1990s, S&K Electronics started to make money. The tribal council quit subsidizing it,
while the company invested profits back into its business. Private companies took notice and started
showing up on the reservation.

Intermec Technologies Corp., out of Everett, Wash., was
one. A division of Unova Inc., a Woodland Hills, Calif.,
industrial-automation company, Intermec makes hand-held
scanners and other electronics equipment and buys about
$2 million of printed circuit boards a year from S&K
Electronics. "They’re working us hard to get more business,"
says Intermec Procurement Director Dave Jones. "They’re
going to get more."

Mr. Jones adds that S&K Electronics helped him overcome
some long-held stereotypical views of tribal governments that
had resulted from his childhood growing up outside the
Tulalip Indian Reservation north of Seattle. His father owned
a machine shop on land that was sold by the Tulalips, he
says, and battled with the tribe over taxes.

Mr. Jones works closely with Larry Hall, the onetime
Salish-Kootenai economic development director, who now
presides over S&K Electronics. Mr. Hall’s posting follows the tribe’s practice of having people from the
reservation in top management positions. "It’s just so different from a normal company," Mr. Jones says,
explaining that S&K isn’t as hierarchical as other companies he works with. "There’s a sense of urgency, a
sense of teamwork."

Making printed circuit boards can be tough sledding for small manufacturers. They often must find niche
customers, willing to pay extra for small production runs. But in 2001 — a brutal year for the electronics
manufacturing industry — S&K Electronics had net income of $119,272 on sales of $8.8 million, according
to their most recent financial filings with Dun & Bradstreet credit reports. Dun & Bradstreet assigns the
company a credit rating of "2," on a scale where 1 is best and 4 worst. About half of S&K Electronics
customers now are private firms.

Playing Offense

In 1999 S&K Electronics spun off its IT unit, creating S&K Technologies. "It was an offensive move," says
Greg DuMontier, a tribal member and president of the IT firm. Mr. DuMontier figures that western Montana
is so gorgeous, and so safe, that traffic-harried IT firms in places like Silicon Valley are going to find their
way there soon enough.

With regional offices in Georgia, Texas, Ohio and Washington, S&K Technologies employs about 125
nontribal workers outside the reservation. The company also employs 25 people at its reservation
headquarters, 13 of whom are tribal members. The hope is that as the regional offices find more computer
work, more of it can be done on the reservation.

Last year, S&K Technologies had net income of $186,258 on sales of $8.6 million, according to Dun &
Bradstreet, which assigns the company a credit-risk ranking of "2," citing some late bill payments.

S&K Technologies says more than 90% of its work is for government contractors. The company hopes to
gain commercial customers as it grows, but now finds itself going through the same chicken-and-egg
challenges on the reservation for IT workers as it did earlier for circuit-board makers.

For now, at least, S&K Technologies will address those and other challenges at its home office without
tribal politicians looking over its shoulder every day. Fred Matt, chairman of the tribal council, says he’s
satisfied with having the S&K managers come before the council for only one scheduled shareholders
meeting a year. Mr. Matt, who has been on the tribal council for 12 years, says S&K executives will
typically come before the council only one or two other times a year.

Of course that arm’s-length approach could always change. Tribal council members — particularly those
new to office — occasionally make plays to gain more control.

"It does ebb and flow," says Mr. DuMontier. "But their own tribal attorneys are quick to step in." The
lawyers’ argument: Staying out of day-to-day operations maintains a liability wall between the tribe’s private
ventures and the deep pockets of its land holdings.

"At that point," Mr. DuMontier says, the tribal council’s thinking becomes, " ‘Oh yeah, OK, we better
retreat.’ "

Creating Conditions for Ventures to Thrive

His fellow American Indian political leaders don’t always like hear it, but Larry Wetsit thinks they should:

"The landscape is just littered with failed tribal businesses that have not been allowed to run independently," says Mr. Wetsit, former
chairman of the Fort Peck Assiniboine and Sioux Tribes in Poplar, Mont. Mr. Wetsit now serves as chairman of A&S Tribal
Industries, his tribe’s manufacturing company, which has enjoyed some success making products ranging from camouflage netting to
automobile air-bag canisters.

Many tribal-owned businesses fail due to lack of capital and lack of customers, of course. But, like academic experts who have
studied tribal businesses, Mr. Wetsit says another big factor is that tribal councils — like any legislative body — are ill-structured to
move quickly enough to run businesses. Yet they keep trying.

The councils often interject themselves into day-to-day management, says Charles Gourd, a former aide to the chief of the
Cherokee Nation in Tahlequah, Okla., and an entrepreneur himself. "They start telling the business managers who to hire, who to
fire; when to open, when to close; what kind of business they’ll go into, what kinds they won’t go into." The main motive behind the
businesses is providing jobs instead of making a profit, and the councils subsidize the businesses giving themselves even more
control. "Politics has to stay out of it," Mr. Gourd says.

Part of the problem is cultural. On reservations, many leaders have never run a private business — and they often don’t see many
thriving ones to emulate.

But a lot of it is human nature. Consider the point of view of a typical council member. Your constituents, the tribe, essentially own
the business. A lot of their questions are legitimate, such as, how will that business spend any profit it makes? And a lot of them live
down the street.

The Harvard Project on American Indian Economic Development, which has studied tribal enterprises for 15 years, says poor
conditions on many reservations halt enterprises not just because of the conditions themselves, but because of the mentality they
foster.

That is, too many tribes spend their days seeking government grants or the one big project that will cure all their ills. Instead, they
should be instituting stable governments, institutions and policies that will attract and retain private enterprise. Tribes that separate
political interference from their enterprises are four times as likely to turn profits, the Harvard program concludes.

Andrew Lee, executive director of the program, affiliated with Harvard University, Cambridge, Mass., says more tribes are starting to
separate business from politics, and that bodes well for reservations. His other recommendations:

Tribes should administer their own governmental programs, as allowed by the Federal Bureau of Indian Affairs. More local control
should, in theory, mean quicker response to business needs.

Tribal councils should establish, in writing, a structured separation: appointing a board of directors is often a good idea, instead of
serving on it themselves.

It’s fine for managers to come before the council, but it should be for general guidance, not day-to-day operational issues.

Tribes must set up court systems independent of their legislative bodies.

— Dan Morse

–Mr. Morse is a staff reporter in the Wall Street Journal’s Washington Bureau.

Write to Dan Morse at [email protected]

Copyright 2002 Dow Jones & Company, Inc. All Rights Reserved

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