Bob Wallace

November 1, 2006 Daniel Vance

Fairmont Area Chamber of Commerce president and Southern Minnesota Initiative Foundation past chair helping spark renewal in rural southern Minnesota.

Bob Wallace says this isn’t about Bob Wallace.

And it really isn’t. It’s more about Fairmont, this gleaming city of five lakes learning to walk on water.

Bob Wallace the last ten years has been president of the Fairmont Area Chamber of Commerce and as such has been involved to some degree in a city’s emerging renaissance. He makes a first-rate spokesperson: a personable, optimistic, 35-year resident who at one time owned and operated a regional chain of junior department stores. He also is a recent chair of the Southern Minnesota Initiative Foundation.

Gleaming lakes, a state-of-the-art aquatics park and the treasured Fairmont Opera House aside, this city really had fallen on hard times and would have remained in a grand funk if not for waking up to reality. Fairmont seems to have learned a valuable lesson not yet mastered in all southern Minnesota: Build on your strengths.

The Fairmont area had plenty of soybeans and corn, an aging population, and with I-90 the whisper of once again becoming a primary retail destination. Those were its strengths. Just within the last few years Fairmont has added a CHS soybean processing facility and a soon-to-be ethanol plant. And it has added a college campus—offering college classes/degrees from Presentation College, Minnesota West, Minnesota State, and Riverland—that in part educates future medical professionals to care for Fairmont’s aging population. As for being a primary retail destination, a generously proportioned Wal-Mart up and running next year just north of I-90 already has spurred a great deal of new spin-off retail interest.

Fairmont’s future, which once seemed clouded as an Oklahoma dust bowl, now appears white-bright, steady and tall as the massive wind turbines weaving electricity south of town. And still it has those five gleaming lakes, an aquatics park and the Fairmont Opera House.

CONNECT: Bob, your personal history?

BOB WALLACE: I’m from a retail background. In 1915, my grandfather started “Bob Wallace Mercantile Company” in Fairmont at the same location we closed at in 1996. So it lasted 81 years. The business started out as a grocery store back when every other business was a grocery store. My grandfather owned stores in smaller communities around Fairmont, too. Then he sold those smaller stores, yet kept the Fairmont store, and expanded to the larger cities of Albert Lea and Austin, and ultimately Willmar and Estherville. In Fairmont we were right downtown, and had downtown locations in every other city except Willmar, where we were in a mall for 20 years. At our zenith we owned five junior department stores, carrying linens, domestics, and men’s, children’s and ladies apparel, and draperies, to name a few. Several stores had floral shops. It was a long history that involved an evolution from groceries to piece goods, to fabrics, and then to ready-made apparel. My grandfather was really good figuring out the next opportunity. And it took the third generation to screw it up and put us out of business. (Laughter.)

What happened to the business?

It was part of the evolution of retail that is still going on today. Discounting hurt our business the most. Smaller retailers do not have the same buying power as larger retailers, even though we worked through a buying office in New York. When discounting arrived, it began on weekends; first it was 10 percent, then soon it was 20 percent. In the end, the margins just didn’t justify our staying open any longer. There aren’t any junior department stores left in southern Minnesota: Brett’s, Ehler’s and Wallace’s are all gone. It’s the evolution of retail.

People fear competition, Daniel. But in the mid-’70s, we had 13 stores in Fairmont competing in ladies apparel. Yet those were some of our best years. Fairmont was a retail destination. People want to shop where there is choice.

And River Hills Mall changed that for Fairmont?

Sure. There isn’t as much customer loyalty as there used to be. I think people would prefer shopping in their local community; the popularity of our chamber gift certificate program is a testimonial to that. This program is extremely strong.

You literally grew up in department stores?

In 1955 I began working at Wallace’s in Austin at age 13. I started out cleaning sidewalks, washing windows and making signs. In 1970 I moved to Fairmont and eventually became president of the company. I really feel strongly that if you’re going to be a good manager, you have to be willing to do anything and everything that you’re asking your employees to do. You should be first to sweep the sidewalks or shovel snow, for instance—doing whatever it takes, even if you’re the CEO. Don’t forget where you came from. I don’t care what level you are in a company.

You’ve talked about the evolution of retail. As we speak, Wal-Mart is doing site preparation for its new Fairmont location. What are the pros and cons of Wal-Mart?

It’s human nature to fear competition. But again I have to reiterate that our best business years at Wallace’s were when we had the most competition. More competition means that your community becomes more of a retail destination, and that likely means more people will shop there because they have more choices. If Wal-Mart had decided on building this superstore in Jackson or Blue Earth, Fairmont would be the loser, because people would shop there anyway. In reality, most of our businesses right now are already competing with Wal-Mart stores in Blue Earth, Mankato and Albert Lea. And they are driving to another community to do it.

In having to compete with Wal-Mart, you really first have to understand how it operates. They use certain loss leaders, so if you’re a retailer you have to stay away from featuring those. You also have to find the niches Wal-Mart isn’t in. You can really grow a business that way.

And those niches?

I don’t think Wal-Mart does the gift business well. And there are niches for businesses that can feed off Wal-Mart’s traffic flow, such as coffee houses and tearooms and restaurants. And also, not all Wal-Mart employees have a good knowledge of the products they sell—customer service is key to competing with them.

Now to running a chamber: What role should a chamber president play?

The president is responsible for the general management of the organization, coordination of activities and carrying out of the policies established by the board of directors.

Do you have a philosophy by which you operate?

Chambers should be run similar to a business. In running a business, you are there to serve your customers—so that means chambers exist to serve their membership. Chambers should also strive to have revenue exceed expenses each year in order to build a reserve to carry them during a difficult period. If a committee wants to have a special project or support a community event or program, the committee responsible for the project should raise its own funds. This way committees have a purpose and the volunteers have a stake in the project and do not rely on the chamber core for funding. Chambers should strive to generate half their income from non-dues revenue. By having committees fund their own projects—this can be accomplished. Too often chambers rely on only membership dues revenue.

When you say you try to take care of your customers, what do you mean? Can you give an example?

For instance, we refer requests for business services to chamber members first, and we give out a lot of referrals. If we don’t have a chamber member offering a particular service we refer them to someone else in the area. We also provide networking opportunities, something critical to businesses. It’s crucial to help businesses already here to grow. I’ve read that 80 percent of business growth in an average community comes from existing businesses. It’s easier to take care of the customers you have than to create new ones.

When you say networking opportunities, what do you mean?

For one, we have a group called Bureau 14. The name is a throwback to the early 1900s, when communities had different associations, or “bureaus,” for different professions, such as ones for Realtors, car dealers, and bankers. Business people in Fairmont at some point decided that the presidents of each bureau should form a group. They originally called themselves the Bums and Loafers, and were the early evolution of our present-day chamber of commerce.

Our Bureau 14 then was the industrial association of our community, and I speculate that it has a 100-year history in Fairmont. Bureau 14 meetings are an opportunity for the chamber membership to network, have a meal, and hear featured speakers on a regular basis. We also offer After Hours and other meetings that other chambers have.

As for political involvement: What would be the pros and cons if the Fairmont Chamber were to endorse candidates for office?

As a chamber we would risk alienating 50 percent of our membership. I do think chambers have a definite role to play regarding policy. They ought to endorse policy that affects the chamber membership. I am leery of endorsing candidates outright. And whether we endorse a particular candidate or not would be up to our board of directors. I’m strictly the servant. (Laughter.) They are the policy makers, and we in the chamber staff are here to execute their decisions.

Has the fact you’ve owned a business given you a slight advantage over other chamber presidents?

I do not know if it has given me an advantage but by having been in business a person can better understand the issues the business community is dealing with, such as budgeting, sales, employee relations, and marketing. Again, the chamber is a business. All these tools you learn running a business are certainly apropos to a chamber of commerce. And you really understand when businesses say no that there is usually a good reason. You have a better understanding if you’ve been there.

What are the major objections businesses give when deciding not to become chamber members?

They say we don’t directly do business in Fairmont, so the Chamber doesn’t benefit me. My feeling is this: You choose to locate your company here and this is where your employees live and work. And if you want a quality workforce and the amenities the community provides, you need to be supportive of your community—one way or another. If you don’t support the community with a chamber membership, I certainly hope you support it in some other way. You’re here in the Fairmont area for certain reasons and you should support the area to help perpetuate those reasons.

What role should a chamber president play in economic development? For instance, did you play a role in Wal-Mart siting in Fairmont?

Wal-Mart made that decision. They didn’t spend any time in the chamber, other than coming in after the decision to site had been made. The only role we played was to offer a board resolution to support the annexation of the land. If we as a city are going to grow and prosper, we need to annex the land that makes the most sense to develop. Whether Wal-Mart or someone else would have chosen to locate here, we would have supported the annexation. Without annexation you aren’t going to have the land you need to grow your community.

As for economic development, I believe the chamber plays a significant role. But more than that, economic development should be inclusive—everybody in the region needs to feel part of it. It isn’t just certain people that drive economic development. Literally everyone needs to have their ears open for opportunities to pass on, then let the professionals handle the implementation.

Economic development also gets down to attitude. It’s often easier to be negative than positive. It’s the unique community that is always positive about itself. If you really take a hard look at what goes on in your communities, you’ll see a lot of good. People need to be more positive. For instance, if they run into someone—perhaps a stranger at the gas station passing through town—who asks, What do you think of the Fairmont area? If people are upbeat and talk about our benefits, that could result in another business locating here.

We have a great place to live. I think because we are an I-90 community, and the heart of our city isn’t visible off the Interstate, people don’t realize all we have. I just heard again the other day of a gentleman leaving our community because of a job promotion. He can’t pass up the opportunity to relocate, but man, would he love to be able to pick up his house and community and take it with him to Wisconsin. We hear that often. We also hear of people transferring from other communities who don’t want to move again once here. Even if their job is eliminated. It’s a safe and caring community.

Are there other advantages to having Wal-Mart?

Wal-Mart in time will drive retail growth for other businesses. When I was in business with Wallace’s, we always took a sales drop when new larger stores or malls opened. In our case, in a couple years, we were better off than before their appearance. I learned from a manager of one large business that their sales dropped when Wal-Mart went into Spencer, Iowa. But within two years their business was better off than before Wal-Mart’s appearance.

The new Wal-Mart will foster retail growth in Fairmont. With Wal-Mart, it is possible we could get back to being a regional hub. The additional businesses will help us give consumers more of a selection.

It would seem there are two other elements that could help you become a regional hub again. First is healthcare, and second is the new college center.

Our largest employer now is our medical community, which includes assisted living, long-term care, Mayo Health System facilities and the Center for Specialty Care.

As for the college center: Fairmont used to be one of the few communities its size not offering post-secondary educational opportunities to its citizens without having to travel. When pursuing a fit for us we were fortunate to find Presentation College of Aberdeen, South Dakota. It’s a very progressive institution, meaning they don’t talk about how they are going to do it; they just do it. After talking with them about our community’s medical needs, within a few months their key people and board of trustees were here visiting. They saw a business opportunity. Within a 60-mile radius of Fairmont lives a population equal to one-third the population of all South Dakota.

The City of Fairmont recognized the opportunity and transformed a former grade school into a modern college facility by providing a $1.7 million renovation package. Four colleges have begun offering courses there: Minnesota West Technical and Community College, Minnesota State University, Presentation College, and Riverland Community College. Through surveys, we learned what the community needs were, and went out to these institutions to ask if they would be willing to offer the appropriate classes. We assisted by helping them recruit the critical mass they needed to make it work.

Presentation College alone has 140 students working toward associate and bachelor’s degrees in medical and business. It is neat to see the parking lot full and the building lit up at night and full of students. Now we have the opportunity to offer classes for students graduating from area high schools so they can go to school here, and not some other location.

Education is so key. I can’t stress this enough. Nowadays you need something beyond a high school education to succeed. If not, you will likely have to settle for a lower-paying job. We are becoming a much more technologically oriented society.

Getting your workforce better educated is one way to retain people in your community and to keep the businesses here. What other efforts are being done to attract and retain?

The Fairmont Economic Development Authority (FEDA) and Mike Humpal came up with the idea of regularly mass mailing all local graduates that are now of child-rearing age. Initially it was a brochure, and then it evolved into a postcard, with words that help people remember our quality of life, asking them to come home for the holidays.

It was astounding to learn while doing the database for this project that more than 50 percent of those graduates of our school system were already living in this zip code. This amazed us. That flew completely in the face of what everyone thought, that most of our young people were leaving town. Of course, many of them may have left initially for college and since returned.

FEDA sends a mailing out before each of the major holidays. And we tie the postcard in with our website that lists area jobs. We encourage all our businesses to post job openings on the Minnesota Workforce Center website, which is linked directly to our city and chamber website.

Also, Mike Humpal aggressively promotes the city. As an economic developer, he probably has the toughest job in the community. Economic development—the job shouldn’t be just his; again, it should be all of ours. We all need to be involved in creating jobs, encouraging people to return and keeping a positive attitude.

Yes, we get inquiries. As for JOBZ, Mike is the expert in this area. He is the coordinator for JOBZ for our southern Minnesota region. We explain the basics of the tax deferments and then refer them to Mike. We have found that JOBZ is most effective for the small employer with five to ten employees. In reality, these are the businesses creating the most jobs anyway. It’s an effective tool.

The prevailing wage law has been the biggest limiting factor in businesses deciding not to use the JOBZ program. Part of that is because Greater Minnesota wages aren’t as high as in the metro area. The prevailing wage is required for JOBZ. Some legislators are trying to change that, but haven’t been successful.

Our philosophy is that we want to create better-paying jobs. If you look at the demographics, Martin County has done a good job of increasing its base wage. Part of that increase comes from businesses with higher-paying wages we’ve attracted recently, such as the CHS soybean processing facility. We also have higher-paying employers, including 3M, Harsco, and Avery Weigh-Tronix. The ethanol facility when it’s built will be another good-paying employer. As for the future, factor in the spillover effect during the next few years of several hundred construction jobs the ethanol plant will provide.

The Minnesota Chamber several years ago asked chambers of commerce to become more involved in economic development. Wasn’t that a hot potato?

It was because of the way the information got out and was perceived. The Minnesota Chamber was trying to get chambers more involved in economic development—and not have it strictly left to economic developers. Unfortunately, the way it was perceived was that economic developers weren’t doing their jobs and that chambers could do it better. I go back to my belief that economic development is everyone’s responsibility. And I don’t know too many chamber executives with degrees in economic development. Initially, the state chamber’s words created some ill feelings between economic developers and the Minnesota Chamber. The Chamber went ahead with the Grow Minnesota! program. All that said, I think they are all working together again. I don’t think the Chamber’s position was presented well; they just want us all to play a more active role in economic development.

Discuss your involvement with other chambers?

I’m involved with the Southwest Minnesota Chamber of Commerce Executives. In the Connect Business Magazine reading area that includes chamber executives in New Ulm, Sleepy Eye, Waseca, St. Peter, Blue Earth, St. James and Madelia, but not Greater Mankato. We talk about legislative issues affecting businesses and our stances and we share ideas and programs. There aren’t many original ideas anymore. It’s great that so many chambers are willing to share and mentor one another. This industry has a lot of turnover, so it’s good we have a mentoring program to help new chamber executives understand their responsibilities.

Have you taken any particular chamber executives under your wings?

I have worked with Jackson, and currently am working with Winnebago. It’s whomever I’m assigned to. They try to keep the assignments within a reasonable driving distance.

Are any legislative issues really hot right now?

The Minnesota Chamber is our driving political entity. They survey local chambers and businesses regarding issues that are of the most concern to the business community. It’s well orchestrated. Transportation has been a big issue of late, focusing on the constitutional amendment affecting the gasoline tax. I would have preferred to see that handled by the legislature and governor rather than through a constitutional amendment. It makes sense to me that money coming from the various taxes generated by motor vehicles should go into the transportation fund. Part of the money that has been going into the general fund—they will have to backfill in some way. Why not do it legislatively?

And your involvement with Southern Minnesota Initiative Foundation (SMIF), currently as past board chair?

McKnight Foundation began SMIF 20 years ago with a grant of three million dollars. As the result of this first grant the Foundation has invested over 34 million dollars in local community and business development projects. In addition the Foundation has leveraged its resources to grow a regional endowment fund of over 23 million dollars. All six Initiative Foundations are in greater Minnesota. They originated as a result of the economic crisis of the mid-’80s. Our particular foundation involves the 20 counties in the South Central and South Eastern region of the state. Martin and Watonwan are the two most western counties.

The Foundation is currently focusing on three areas: its Business Success Program; its Community Success Program, and Voices for Southern Minnesota.

The first deals with helping businesses succeed to the next level. For instance, Fairmont Foods was one of the early recipients of a Southern Minnesota Initiative Fund loan, and the company has grown over the years, and now has more than 300 employees. We do more than just provide dollars. As we look ahead it is our intent to engage in longer lasting partnerships, using the asset based development philosophy as the foundation for our work, supporting innovative entrepreneurs and community coalitions that use local assets to achieve goals.

An example of the Community Success Program is SMIF involvement with our Early Childhood Initiative in Fairmont and throughout the region. We are working hard trying to prepare every child for kindergarten; helping parents from the time the child is born to when they start school. All six Initiative Foundations are part of the Minnesota Early Childhood Initiative. The business community is involved because they realize children are our future workforce. There is so much research on brain development on how critical the first few years are. Art Rolnick of the Minneapolis Federal Reserve is a strong proponent of this whole initiative. Overall, the Community Success Program helps communities identify their assets and gives them the tools to build on their strengths and make a difference.

And Voices for Southern Minnesota?

The Voices for Southern Minnesota program, for one, has a Leadership Circle that includes key corporate CEOs of businesses in our 20-county region. They meet on a regular basis to discuss issues affecting the business community and our region. Tom Rosen of Fairmont is a member of the leadership circle. These individuals may know of one another, but never before been offered the opportunity to get together to help the region. Early childhood was identified as a concern and so have initiatives on healthcare and workforce development.

Does Voices for Southern Minnesota drive what the Foundation does?

Yes. All of the voices of Southern Minnesota play a role in how the Foundation allocates its resources related to economic and community development. Ultimately it is up to the board of directors to set policies and priorities, with the input of our very competent staff. Bottom line: the Southern Minnesota Initiative Foundation is a leader and partner in building strong businesses and communities in Southern Minnesota.

When first moving to Minnesota in 1995, I had trouble understanding what the Initiative Foundation was all about. I thought it was some sort of government agency.

It’s a private foundation. Being private gives it more flexibility, because that way we can develop our own programs. We can make and receive grants. Our board, and not the government, sets our policy. We can drive our own focus—and each of the six Initiative Foundations has a different focus that best suits their region.

Were you approached to run the Chamber while still with Wallace’s?

No, Wallace’s had been closed for six months before the Chamber position became open. The irony is that I was one of the final interviewees, but wasn’t offered the job. It was offered to someone with chamber work experience. That person said yes before reconsidering. I got this job by default. Anyone out there thinking they feel bad because they don’t get chosen—things have a way of working out. I’ve been here 10 years. I tell people not to burn any bridges, because you never know how critical certain relationships may be in the future.

Any advice for a new chamber president?

Part of the key to being an effective chamber leader is to build a good network, which takes time. If you don’t know the community, you need to listen to the opinions of more than just one person—otherwise you will not know if you’re listening to the “right” person. That was one benefit of me already being in this community. People have a tendency to look outside their community for so many things, when often there are individuals or groups inside the community who can do the job. You just need to look. As for being a new chamber president, just be sure to help everyone succeed.

LARRY HAUGEN REFLECTS ON BOB

When I was chamber director in Austin, Bob Wallace owned the retail store next door. Back then he lived in Albert Lea, where he also owned a store. I remember visiting with him when he was a Chamber member, when he was selling his business in Austin. Of course, I know him much better now that we are fellow chamber directors. I have a lot of respect for him.

What he brings to his job is the management background and organizational skills needed to run a chamber well. As chair of SMIF his leadership skills are showing. I often see him at meetings of the 20-member Southwest Minnesota Chamber of Commerce Executives. He was president of that group a year ago. —Larry Haugen, president, St. Peter Chamber of Commerce.

GETTING TO KNOW YOU: BOB WALLACE

Born: October 25, 1942, in Albert Lea, Minn.

Education: Albert Lea High School ’61 and Macalester College B.A. ’65. (Former Connect Business Magazine cover Fred Lutz of North Mankato graduated from Macalester College in 1962.)

Children: Debra.

Organizational involvement: Southern Minnesota Initiative Foundation; Minnesota Chamber of Commerce Executives; Blandin Community Leadership Program graduate.