Briefing_PrisonEntreApr2013

BAT TEN BR IEFI N G INSPIRING THE WORLD THROUGH ENTREPRENEURSHIP AND INNOVATION

APRIL 2013

Prison Break: Can Entrepreneurship Solve the Recidivism Problem? contributors

Malgorzata Glinska Senior Researcher, Batten Institute glinskam@darden.virginia.edu

Derry Voysey Wade Communications Manager, Batten Institute waded@darden.virginia.edu

Over the past three decades, the United States has experienced an explosive increase

in its prison population. The number of incarcerated Americans climbed from 220 for every 100,000 adults and children in 1980 to 753 in 2008.1 This upward trend culminated in a sobering statistic: By 2008, more than one in every 100 adults was behind

bars.2 Today, nearly 2.3 million Americans are locked up, many serving time for drugrelated, nonviolent offenses.3

This staggering rate of incarceration—the highest in the world—translates into high costs for all of us. It has a negative impact on the offenders, their families and their

COUNTRIES WITH THE HIGHEST INCARCERATION RATES (2006-2008) Rates per 100,000 people Source: International Centre for Prison Studies

753

united states

communities due to lost jobs, broken relationships and neglected children.

And, of course, there is the more easily quantifiable cost to taxpayers. In 2008, federal,

state and local governments shoveled about 75 billion taxpayer dollars into corrections, the majority of which covered the cost of incarceration.4

95% of inmates eventually return to the free world. In 2009 alone, nearly 730,000 of

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them were released from state and federal prisons. Unfortunately, half end up back

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outside—including stigmatization—and unable to find legitimate employment, many

behind bars within three years.5 Unprepared to face the challenges of life on the return to a life of crime.

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But what if there was a way to significantly reduce recidivism? This Batten Briefing

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focuses on three programs that teach inmates to take an entrepreneurial approach to

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grams help them to create employment opportunities for themselves and others.

their unique challenges. In giving offenders tools and a positive framework, these pro-

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SPECIAL FEATURE

Resilience Education By day, Greg Fairchild teaches MBA-level courses in strategic management, entre-

preneurship and ethics at one of the world’s top business schools. By night, Fairchild, whom the Financial Times in 2010 named one of the top business school professors, teaches convicted felons how to be entrepreneurs.

With state-of-the art facilities, elite faculty and a student population consisting

largely of graduates of top-tier undergraduate institutions, the University of Virginia Darden School of Business, where Fairchild is an associate professor, seems a world away from a drab cinder-block classroom in a Virginia prison, filled with studentinmates serving time for crimes from drug possession to manslaughter.

But Fairchild questions the distance between those two worlds. “I’ve made mistakes.

I’ve been in trouble,” he said and noted that he can relate to people who get off to a

bad start and don’t recover. “Anyone who looks back at their college years and thinks

RESILIENCE EDUCATION Darden professor Gregory B. Fairchild and his wife, Tierney Temple Fairchild (MBA '94), founded Resilience Education in 2012. The nonprofit, based in Charlottesville, Virginia, is dedicated to building customized education programs for challenged populations, including prisoners and victims of domestic violence. www.resilience-education.org

about the time they bought drugs or got drunk and drove a car knows, ‘I could be one of those people in prison.’”

When Darden’s dean, Robert Bruner, shared with Fairchild a letter he had received from a prisoner seeking educational aid upon his release from Virginia’s Dillwyn Correctional Center, Fairchild saw only one possible answer to the inmate’s plea:

bring business education to prisons. A believer in the power of entrepreneurship to transform individual lives, communities and nations, Fairchild knew that teaching

inmates the skills MBA students acquire—critical thinking, problem solving, understanding how they can add value—might give them a shot at a new life after prison.

In 2011, Fairchild launched a pilot MBA-style program to teach inmates how to

start their own businesses, first at the Dillwyn Correctional Center for men and then at the Fluvanna Correctional Center for women, both in Virginia. As they would in a Darden classroom, the inmates learn from the case method, taught by Fair-

child and a cadre of Darden student volunteers. Graduates of the 30-session-long

program receive a Certificate in Entrepreneurship from the University of Virginia

The number one challenge ex-offenders face is the scarlet letter on their chest. That’s the first and only thing many people will see.”

Gregory B. Fairchild, Associate Professor, Darden School of Business; Academic Director, Resilience Education

School of Continuing and Professional Studies. Graduates of the first class—14 Dillwyn inmates—are now holders of the certificate.

The benefits of the program go beyond learning basic business skills. The classroom

experience has helped inmates open up to other people—to trust one another. Many develop a powerful bond with their fellow classmates. “The prisoners change—they start supporting each other,” Fairchild said.

But prisoners are not the only ones who change. Many Darden students who volunteer in Fairchild’s program find that their preconceptions about convicted felons are stripped away the first time they teach a class. “I have a dozen MBA students who

ask prisoners to do the financial analysis of breakeven, see them do it—see how serious they are—and then change their perception,” Fairchild said.

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BATTEN BRIEFING

THE TRANSFORMATIVE POWER OF ENTREPRENEURSHIP But some question the value of bringing business-school-quality entrepreneurship

education to those whom much of society has written off as irredeemable. Isn’t the

vocational training prisons provide enough? Fairchild counters by observing that entrepreneurship education offers exactly what those who hope to start anew need the

most: a new mind-set. “At its root, entrepreneurship is about recognizing that there’s

a problem and finding some way to add value to someone else,” Fairchild said. In the program, he noted, participants learn to recognize the value in themselves and create value for others.

In 2012, Fairchild and his wife, Tierney Temple Fairchild, cofounded Resilience

Education, a nonprofit based in Charlottesville, Virginia, whose mission includes

and surpasses prisoner entrepreneurship education. “We want to provide the type of customized executive education training offered at Darden to people whom

Darden doesn’t normally reach,” Fairchild said. In addition to the prison population, Resilience Education focuses on business education for women who are victims of domestic violence, juvenile offenders and ex-inmates who are trying to reintegrate into society.

Fairchild’s interest in the intersection of business and society has deep roots. In the

early 1990s, he gave up a fast-track marketing career at Procter & Gamble to focus

on social change. He decided to become a business professor because he came to believe that business schools and businesspeople can effectively address complex social issues and deliver positive social change. The path he chose led him to Columbia

University, where he earned a Ph.D. in the management of organizations, and then to Darden.

Fairchild’s research focuses on emerging domestic markets—people, places and

enterprises operating in low-income communities—or, as Fairchild put it, “business opportunities in unexpected places—places that are often overlooked.”

In 2007, the MacArthur Foundation awarded Fairchild a three-year, $850,000 grant to study community development financial institutions—nonprofit or governmental organizations that provide financial services to low-income customers.

If I can raise awareness and say, ‘Take the same problem-solving skills you’ve learned at a business school and apply them to this social problem, to this group of people with the most challenges—use your connections, networks, resources,’ then maybe I can make a bigger difference in society than if I tried to do it by myself.”

Gregory B. Fairchild

As someone who gave up a high-powered corporate job for an academic life, Fairchild is personally invested in his prison entrepreneurship program. It will test his

belief in the transformational power of education. “We’re testing the notion,” Fair-

child said, “that these methods we use at Darden, when used with prisoners—those who’ve had quite a different background than Darden students—can still make an

impact. And if they do, it’s the ultimate evidence that our work—how we teach, how we change the way people think about themselves and the markets they’re in—can make significant change.”

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Texas Prison Entrepreneurship Program When Catherine Rohr was 16, her friend was brutally murdered by two teenage

U.S. PRISON AND JAIL POPULATIONS (1980-2008)

boys. That traumatic event made her view everyone who was incarcerated in the

same harsh light. “To me, anyone who was in prison was an animal who should be

Shown in millions

locked up and should die,” Rohr said. “I was about as judgmental as I could be.” 6 Years later, another friend invited her to attend a Christian outreach at a Texas

2.5 M

prison over the Easter weekend. “My heart was broken,” Rohr recalled. “I realized

that many people end up in prison because it’s a generational pattern. They follow in

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JAIL 1.5 M

their parents’ footsteps. Had I been raised in that kind of system, I would probably end up there, too.” 7

At the time of her first prison tour, Rohr, a graduate of the Haas School of Business at the University of California, Berkeley, had a successful career in venture capital

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and private equity. Soon after her prison experience, she gave up her lucrative dream job hunting the hottest venture deals and relocated from New York to Houston, where she launched the Prison Entrepreneurship Program (PEP). She was 27.

Rohr founded PEP in 2004, on the premise that many convicted felons have proven business skills—many had managerial roles in the drug trade, overseeing teams 1980

1985

1990

1995

2000

2005

Source: Bureau of Justice Statistics

of dozens of people. “They understand proprietary sales forces; they understand

marketing and profit margins. They know how to execute,” Rohr noted.8 Consider-

ing their dire job prospects on the outside, why not capitalize on their street smarts

and penchant for creative self-employment and teach them how to start a legitimate business venture?

PEP thrived under Rohr’s leadership until a scandal broke. After admitting to

PRISON ENTREPRENEURSHIP PROGRAM Founded in 2004 by U.C. Berkeley graduate and venture capitalist Catherine Rohr, the Prison Entrepreneurship Program (PEP) is a nonprofit organization based in Houston, Texas. Headed by Bert Smith, who took the helm as CEO in 2010, PEP runs an entrepreneurship boot camp and re-entry programs for inmates from more than 60 Texas prisons. www.pep.org

“inappropriate relationships” with several graduates of the program, Rohr resigned in 2009. She later launched Defy Ventures, a New York City-based nonprofit organization modeled on PEP.

After Rohr’s resignation, PEP’s board asked Bert Smith, a commercial lawyer and investor who had volunteered with the program, to take over as CEO. As he put

it, “We came close to having the doors locked. Many people were convinced that without Catherine PEP would fail. I’m happy to say that it didn’t.”

In fact, the program is thriving. Every year, several hundred inmates in more than

60 Texas prisons compete to win a coveted slot in one of two classes, each of which

accommodates 100 to 150 men and lasts about a year. Smith noted that PEP recruits only men, mainly because they account for more than 90% of the inmate popula-

tion in Texas. The admissions process is rigorous. A key to the program’s success is

finding convicts who truly want to change—who show evidence of “heart” and have

the drive and ambition to complete the demanding program. “We look at their work ethic, at what they’ve done in prison,” Smith explained. “Have they volunteered for any work assignments? Have they taken any classes?”

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BATTEN BRIEFING

TURNING CONVICTED FELONS INTO LEGITIMATE BUSINESSMEN Successful applicants are transferred to a correctional facility outside Houston,

where the two-phase entrepreneurship program begins. Before the inmates start crunching numbers, they take a three-month preparatory course that focuses on

character development and effective leadership. “That’s when we begin the process of helping them to assess and transform their character,” Smith said.

Inmates who successfully complete the leadership foundation phase move on to a

six-month intensive MBA-style curriculum, attending classes 35 hours a week. They study finance, accounting, marketing and sales, as well as writing, public speaking

and interviewing techniques. They learn what it means to be an entrepreneur—what it takes to start and run a successful small business. “The participants’ main assignment is to conceive of a business that they’ll start upon release,” Smith said. “They

research and write a business plan and defend it many times before panels of execu-

There’s a high correlation between unemployment and recidivism.

More than 80% of the guys who are rearrested for a second or third time are unemployed at the time of their arrest.

We found that by preparing inmates to become entrepreneurs, they become highly employable. A lot of this has to do with attitude. They show up, they interview, and they are ready.”

Bert Smith, CEO, Prison Entrepreneurship Program

tives, whom we recruit.”

Participants constantly refine their business plans, working with advisors. “The men arrive on the unit before the leadership phase starts, and they stay after the six-

month course ends,” Smith explained. “On the inside, the work is very intensive for

RECIDIVISM Three-year “return to prison” rates

about a year.”

Several dozen executives and business students volunteer as teachers, advisors and guest lecturers.

PEP also offers post-release programs for its graduates, such as transition housing, free or low-cost dental and medical care, and an evening entrepreneurship school where volunteers teach and mentor.

Since PEP began, the program has graduated more than 800 inmates, many of

50%

National PEP: Prison Entrepreneurship Program

25% Texas

> 5%

whom had been incarcerated for violent crimes. For the past two-and-a-half years,

every PEP graduate has found employment within 90 days of release. “That’s pretty extraordinary,” Smith said. He gives some credit to the program’s strong network of

employers in the Houston and Dallas areas, which generate job leads for the graduates. “At first, we encouraged these employers to take a chance on one or two men, and that was a good experience for them because of how well prepared our graduates are, and we’ve built on that,” he noted. In addition, PEP graduates, who have

themselves launched 100 successful businesses, hire one another when possible. “A lot of good momentum has been built over the past several years,” Smith said.

Another extraordinary achievement—something of which Smith is particularly

proud—is that while more than half of the nation’s prisoners return behind bars

within three years, the recidivism rate for PEP graduates hovers at just below 5%.

Most of the 2.3 million people who are in penitentiaries today will be released someday. It is a community problem, and it requires a communitywide solution. We may not solve it, but we can chip away at it. We can help these people so that when they leave prison they have a new way of thinking and a new network of people who continue to reinforce this new way of thinking. Our program demonstrates that this can be done.”

Bert Smith

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Inmates to Entrepreneurs Brian Hamilton—the cofounder and CEO of Raleigh-based Sageworks, Inc., and one of the Research Triangle’s most successful entrepreneurs—is no stranger to

INMATES TO ENTREPRENEURS

prisons. He spent hundreds of hours in North Carolina’s correctional institutions

Founded in 2008 by Sageworks CEO

Hamilton’s solution? Entrepreneurship. “You should be able to walk out of here and

Brian Hamilton, Inmates to Entrepreneurs is a prison outreach program based in Raleigh, North Carolina. It focuses on teaching inmates how to start productive, low-capital service businesses upon their release from prison. www.inmatestoentrepreneurs.org

teaching murderers, drug dealers and armed robbers how to turn their lives around. start a small service business,” 9 Hamilton would tell his students, many of whom were repeat offenders.

Entrepreneurship had offered Hamilton an escape from a stifling job at a bank

where he toiled in a cubicle, doing credit analysis. He quit and launched Residential Care Co. “It was the best three years of my life,” Hamilton recalled, “because I actually learned how to run a business.”10 At its peak, Hamilton’s landscaping business had seven employees and cleared enough to pay for his MBA at Duke.

In 1998, Hamilton cofounded Sageworks, a financial data analysis firm, which has

been enjoying 40% annual growth in recent years. The company has been named to

[The inmates] did not have positive affirmation that if you try to swing a baseball bat a hundred times, you’ll probably get better at it and get more hits.

[There is] a large segment of this inmate population running around thinking the world is random … because they never had those formative experiences when they were younger. And it breaks my heart, because it’s all stuff we just accept.” 11

the Inc. 500 list of the fastest-growing privately held companies in the U.S. and to

Brian Hamilton, Cofounder and CEO,

neurs, a prison outreach program funded by Sageworks. The program’s mission is to

Sageworks, Inc.; Founder, Inmates to Entrepreneurs

the Deloitte Technology Fast 500.

In 2005, Hamilton’s cousin—a high-school dropout who had battled addiction most of his life—killed himself while in jail. This tragedy inspired Hamilton to volunteer in North Carolina’s prisons. He began offering a two-hour crash course on how to

start and run a small service business. The course covered the basics, such as getting a business license, insurance, business cards, a website and—most important—the first customer.

In 2008, as demand for Hamilton’s course grew, he launched Inmates to Entreprereduce recidivism by offering a combination of business seminars and one-on-one

mentoring to help people with criminal backgrounds create their own employment opportunities. Even though Hamilton no longer teaches, the program is in good

hands; three successful business owners oversee the teaching and mentoring duties.

Program participants are advised to launch a one-man business that does not require a lot of start-up capital and provides the kind of work others need done but do not copyright BATTEN BRIEFINGS, April 2013. Special Edition, published by the Batten Institute at the Darden School of Business, 100 Darden Boulevard, Charlottesville, Virginia 22903. batten@darden.virginia.edu | www.batteninstitute.org ©2013 The Darden School Foundation. All rights reserved.

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BATTEN BRIEFING

want to do themselves, such as cleaning, window washing, car detailing, painting, yard work and tree removal.

A CRASH COURSE IN HOPE AFTER PRISON That advice makes a lot of sense to A.J. Ware, an ex-convict and owner of a successful painting company generating nearly $3 million in annual revenue. He

joined Inmates to Entrepreneurs as a mentor and speaker in 2009 and now serves

as its executive director. “We’re a little bit different than a typical entrepreneurship

program,” Ware explained. “Writing a business plan and looking for funding—that’s great, but people get out of prison today, and they have to eat tonight. What can they do?”

After the crash course, which is free and open to all who have a set release date,

inmates fill out a questionnaire that serves as an informal business plan. The newly

released inmates are then paired with a mentor who has experience in their desired

FROM PRISON TO PROSPERITY Lawrence R. Carpenter is a convicted felon who started selling drugs at the age of 11.

He is also a successful entrepreneur, mentor and teacher in the Inmates to Entrepreneurs program.

Having spent six years behind bars for armed robbery and drug dealing, Carpenter was determined to stay out of prison.

“I made mistakes,” he said, “and I didn’t

field and can advise them on their first steps.

want to spend the rest of my life in poverty

“We’ve helped a lot of people start businesses, but many don’t stay with it for what-

that I had a criminal record and ... it was

ever reason,” Ware said. “We’re trying to figure out why they stop. We don’t want to waste our mentors’ time.”

Although not an alumnus, Ware believes in the program’s mission. He recognizes

the burden recidivism places on society. As he put it, “Eventually, we’re all going to pay for it in some kind of way. I may become a victim of a crime. Or I can choose to help ex-offenders to stay out of trouble—start a business where they can hire somebody and pay taxes.”

SOMEONE WHO’S BEEN INCARCERATED FOR 10, 15 YEARS—THEY PROBABLY WON’T FIND A JOB. WE ARE THEIR LAST RESORT. WE GIVE THEM HOPE. OFTEN, THEIR FAMILIES HAVE TURNED THEIR BACKS ON THEM. SO WE REALLY HAVE TO BE THERE FOR THEM.” A.J. Ware, Executive Director, Inmates to Entrepreneurs

because of those mistakes. I also knew going to be pretty difficult finding a job anywhere. I didn’t want to use that as an excuse. I knew that in order for me to realize the goals I had financially, my only option was to start my own business and create my own market.”12 And so he did. In 2004, with no money, limited education and no cleaning experience, he launched SuperClean Professional Janitorial Services, LLC. Today, Carpenter’s commercial cleaning business, based in Durham, North Carolina, employs more than 60 people, has contracts in several states and generates more than $2.5 million in annual revenue.

It is a belief that Ware has put into practice. Despite his significant role with In-

mates to Entrepreneurs, he does not draw a salary. “I volunteer my time,” Ware said.

His vision of the program’s future includes developing an ambitious business cur-

If this business were to fail, my only option is to go and start another one.” 13

501(c)(3) nonprofit, expanding to all 50 states,” Ware added.

Lawrence R. Carpenter, former convict and

riculum with Wake Tech Community College in Raleigh. “Next year we will be a

owner of SuperClean Professional Janitorial Services, LLC

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Impact and Growth NOTES 1

Schmitt, J., Warner, K., and Gupta, S. 2010. “The High

Budgetary Cost of Incarceration.” Center for Economic and Policy Research.

2

Warren, J. 2008. “One in 100: Behind Bars in America

2008.” The Pew Center on the States. http://www. pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/ sentencing_and_corrections/one_in_100.pdf. (Accessed 19 February 2013.)

3

As of 30 June 2009, state and federal prisons and

local jails had custody over 2,297,400 inmates. Bureau of Justice Statistics. http://bjs.ojp.usdoj.gov/index. cfm?ty=pbdetail&iid=2200. (Accessed 19 February 2013.)

4

Schmitt, J., Warner, K., and Gupta, S. 2010.

5

Langan, P.A., and Levin, D.J. 2002. “Recidivism of

Prisoners Released in 1994. Washington, D.C.” U.S. Department of Justice. Bureau of Justice Statistics.

6

“Defy.” Catherine Rohr interviewed by Dave Gibbons.

Newsong Church, Irvine, CA. 2 September 2012. http:// vimeo.com/48728104. (Accessed 30 November 2012.)

7

Ibid.

8

Knight, R. 2008. “Prisoners with Enterprising Convic-

tions.” Financial Times.

9

Murkawski, J. 2009. “NC CEO Leads Prison Class

about Starting Business.” Associated Press Newswires.

10

Bailey, D. 2011. “Out on Your Own.” Business—North

Carolina. 31 (11): 49-52.

11

Programs such as Resilience Education, the Texas Prison Entrepreneurship Program (PEP), and Inmates to Entrepreneurs are gaining popularity across the country

and abroad. Teaching offenders who face meager job prospects on the outside how to work for themselves and achieve success as entrepreneurs is an effective way to reduce recidivism and slash the soaring incarceration rates.

The Texas PEP, the oldest and largest such program in the country, has an impressive track record. However, the recidivism rate of less than 5% is not the ultimate

measure of its success. Every graduate of the program pays on average $7,000 per

year in income taxes, rather than draining $21,000 per year as an inmate.14 “We have pioneered a program that directly attacks that problem and is scalable and replicable,” said Jeremy Gregg, PEP’s Chief Development Officer.

In Virginia, the founders of Resilience Education have their work cut out for them.

Among other aspirations, they are busy raising capital for course development.

Today, they have 23 business case studies Greg Fairchild developed to teach entre-

preneurship. “I’d love to have a bank of 200 cases that people all around the country could use,” Fairchild said. “I’d like to have scale through digital platforms.”

What’s on the top of Fairchild’s wish list for the prison entrepreneurship program?

In addition to a network of mentors to advise ex-offenders upon their release, Fair-

child would like to create a revolving loan fund to help prisoners receive loan capital for their start-ups. He also has plans to launch a couple of businesses that would employ the program’s graduates soon after they are released from prison.

Virginia’s prison entrepreneurship program is the youngest in the country. Its graduates are still behind bars, refining their business plans. However, they are awaiting their release dates with new tools, new plans and newfound hope.

Colasurdo, N. 2011. “Business Education, One Prison

at a Time.” FoxBusiness. http://www.foxbusiness.com/ personal-finance/2011/09/23/business-education-oneprison-at-time/. (Accessed 30 November 2012.)

12

Rock, H. 2012. “City Startups Taps into the Inner

City.” Upstart Business Journal. http://upstart.bizjournals. com/companies/hatched/2012/09/20/city-startupsand-lawrence-carpenter.html?page=all. (Accessed 20 November 2012.)

13

Ibid.

14

Prison Entrepreneurship Program. http://www.

prisonentrepreneurship.org/who/results.aspx. (Accessed 19 February 2013.)

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BATTEN BRIEFING

Looking Ahead The next Batten Briefing will feature several graduates of the Texas Prison Entrepreneurship Program who launched profitable, legitimate, growing businesses that are hiring.