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Homeboy IndustriesAn Incubator of Hopeand BusinessesDav
1. Homeboy Industries:
An Incubator of Hope
and Businesses
David Y. Choi
Fred Kiesner
This case presents the story of Homeboy Industries, which was
founded by Father Greg
Boyle, S.J. to offer employment opportunities to former gang
members in East Los Angeles.
Homeboy Industries has successfully launched several
businesses to hire and train
“homies” who otherwise may not have found jobs. Michael
Baca, the new operations
director, is faced with the decision of whether to pursue
expansion of the promising mer-
chandising division. Complicating the decision is the need to
balance both the social and
business objectives of Homeboy Industries while dealing with
the organization’s extreme
shortage of managerial and financial resources. This depiction
of an unusual entrepreneurial
environment also illustrates several organizational challenges
and philosophical dilemmas
that are common among social ventures.
The cool, pleasant morning was rapidly turning into a typically
steamy summer day
in Los Angeles. Michael Baca, a retired firefighter and since
2003 the operations director
for Homeboy Industries, drove along First Street toward the
organization’s headquarters,
3. Baylor University
769September, 2007
mailto:[email protected]
Boyle Heights
To a middle-class visitor driving down First Street, the Boyle
Heights neighborhood
of East Los Angeles felt like a different world, both familiar
and strange. A local market
sold milk, and children were walking to school. A group of
heavily tattooed young men in
baggy pants and Los Angeles Raiders football jerseys also
walked along the street, their
eyes seeming to show both fear and anger. Beyond a police
station, a building adorned
with graffiti came into view: Homeboy Industries. Across the
street from the police
station, children milled around their school yard. Farther down
the block, a pushcart
vendor sold fruit to two older women.
Boyle Heights, named in 1875 for Andrew Boyle of the Boyle-
Workman family, was
notorious for having one of the worst gang problems in all of
Los Angeles. Within its 16
square miles, 60 different gangs claimed 10,000 members—
among an official population
of 90,000. Their presence ensured violence and plenty of action
for the Los Angeles Police
Department (LAPD). The neighborhood’s intense gang activity
had historical roots in the
rapid migration of illegal immigrants to Los Angeles, where the
4. poorest of them concen-
trated in East Los Angeles. The center of Jewish and Japanese-
American life in the early
twentieth century, Boyle Heights was now 94.95% Hispanic or
Latino.1 Two large housing
projects, Pico Gardens and Aliso Village, made up much of the
neighborhood; most kids
lived in one or the other.
Attempts to slow the growth of the gangs had proved futile.
Community Resources
Against Street Hoodlums (CRASH), the LAPD’s special gang
unit, constantly patrolled
Boyle Heights. Even so, gang violence continued to wreak
havoc.2 Something else needed
to be done. Needless to say, Boyle Heights (like much of East
Los Angeles) offered its
children few opportunities. Instead of jobs, kids found
themselves looking for member-
ship in the local gangs. They saw their brothers and sisters, for
some their only role
models, running with gangs. For some, gangs were all they
knew and the only way to get
what they wanted in this neighborhood.
Homeboy Industries
Inside the Homeboy Industries building, there unfolded a study
of contrasts and
juxtaposition. The fashionably decorated, air-conditioned lobby
displayed a hub of PCs no
different from a customer service center at a larger corporation.
The receptionist was a
polite young Latino, professional in dress and appearance. A
closer look revealed multiple
tattoos on his fingers and face, all related to the gang life he
5. formerly called his own.
Young men and one woman worked at the PCs, answering
phones and working busily.
They wore baggy shorts and either black shirts bearing the
Homeboy Industries logo or
Raiders jerseys. A tattooed “LA” showed through the stubble of
one recently shaved head.
Another employee had horns tattooed on his forehead. The art
displayed on the office
walls included pictorial collages of life in the rough housing
projects of Boyle Heights.
They served as a reminder to Homeboy’s employees that they
had good reasons to stay out
of the gang life.
1. U.S. Census 2000, U.S. Census Bureau, available at
http://www.census.gov/.
2. See, for example, Earl Ofari Hutchinson (2002, Nov 24),
“L.A. Has to Gang Up on Violence.” Los Angeles
Times. pg. M.5, which discusses how years of antigang
campaigns have been unsuccessful over many years
in spite of the CRASH program.
770 ENTREPRENEURSHIP THEORY and PRACTICE
http://www.census.gov
Father Greg Boyle founded Jobs for a Future (JFF), a nonprofit
employment referral
center, in 1988. He believed that to eliminate gang violence, it
was necessary to root out its
cause—the lack of hope arising from a lack of opportunities. He
was confident that gang
violence in Boyle Heights would disappear if its young people
had the opportunity to “plan
6. their futures not their funerals.” JFF’s slogan expressed its
objective: “Nothing stops a bullet
like a job.” Here, former gang members could receive
counseling, job placement assistance,
and coaching in interview skills, all in an attempt to provide a
new future.
Many of JFF’s clients had been ordered to receive individual or
family counseling as
a condition of probation. JFF employed two professional
therapists on-site to provide
these services to the probationers and to anyone in the
community who needed the extra
support that counseling could not provide. Both JFF employees
and volunteers acted as
“navigators” for JFF’s clients. Navigators helped juveniles
released from detention facili-
ties to enroll in school, register for any required classes, check
in with probation officers,
obtain driver’s licenses, and attend job interviews. One of the
more interesting and
unusual services provided by JFF was free tattoo removal. “Ya
‘Stuvo3 Tattoo Removal”
offered gang members a way to erase a link to their past and
start clean. The program was
available to anyone who wanted it done, although priority was
given to facial tattoos.
Because of its popularity, there was a nine-month wait for this
service.
JFF annually placed over 350 clients in jobs—an achievement
that was only a small
fraction of the more than 1,000 gang members who passed
through the office in a typical
month. Demand far exceeded supply! The organization
desperately wanted to have a
7. greater impact. Many clients continued to struggle against
obstacles to their employment,
such as felony records, visible gang tattoos, and lack of work
experience.
It was for these most challenged individuals that Father Boyle
created Homeboy
Industries in 1992, following the Los Angeles riots. Homeboy
shared the building used by
JFF. Homeboy developed several business enterprises, each of
which hired the “homies”
who attended JFF’s training programs. Homeboy Industries
started with the purchase of
a bakery that became Homeboy Bakery. It grew to include
Homeboy Silkscreen,
Homeboy Merchandise, and Homeboy Graffiti Removal and
Maintenance. These busi-
nesses and the Homeboy headquarters employed over 70 homies
at any one time. Employ-
ees learned to clock in on time, to build lasting work habits and
skills, and to work side
by side with former members of enemy gangs.
A visitor to the Homeboy Industries office in 2004 would likely
notice its playful mood.
The teenagers laughed and told stories. The receptionist spoke
with evident pride about
everything Homeboy Industries had done to help him and the
community. He pointed to the
Homeboy brochure, which quoted an employee: “Because
Homeboy Industries decided to
believe in me, I decided to believe in myself. And the best way
I can think of paying them
back, is by changing my life, and that’s exactly what I’ve
decided to do.”
8. “Father G”
For over 20 years, Father Greg Boyle, who was known
throughout the neighborhood
as “Father G,” just “G,” or even “G Dog,” had embraced the
boys and girls others shunned.
(See Figure 1 for a picture of Father Boyle.) Visiting them in
hospitals and prisons, he had
prodded hundreds of gang members to trade their lives of
violent crime for honest work.
He had become a legendary figure in the barrio, where
widespread stories told of Father
Boyle driving his car or riding his bike into the middle of a
gunfight in an attempt to part
3. Translates into “That’s enough, I’m done with that.”
771September, 2007
feuding gangs. Father Boyle was known to be willing to give up
his life to keep the kids
from killing each other. Even so, Father Boyle had been forced
to bury over 120 young
people from the neighborhood, a somber reminder of the
challenges that remained.
Father Boyle, who was a Los Angeles native and was ordained a
priest in 1984,
became a pastor of the Dolores Mission church in Boyle Heights
in 1986. From there he
saw firsthand one of the worst gang problems in the United
States. Believing that someone
must help the young people escape from the horrible cycle that
had engulfed them, Father
9. Boyle developed a vision: Get these kids jobs, get them off the
street, give them market-
able skills, and remove them from the gangs that surround them.
“Jobs not Jails” and
“Nothing stops a bullet like a job” became mottos that
expressed his vision. As he put it,
“At Homeboy Industries what we try to do always is be a
manufacturer of hope in a
community with a fatal lack of it.”
Father Boyle was regularly asked to speak at functions and tell
stories about Homeboy
Industries. Those speeches both informed and inspired his
audiences:
[The homies] think they’re the bad son. I keep telling them over
and over, “You are the
son that any parents would be proud to claim as their own.”
That’s the truth. That’s not
some fantasy. As soon as they know that they’re exactly what
God had in mind when
God made them, then they become that. Then they like who they
are. Once they can
do that—love themselves—they’re not inclined to shoot
somebody or hurt somebody
or be out there gang-banging.4
4. Morrow, C. (1999, August). Jesuit Greg Boyle, Gang Priest,
St. Anthony Messenger Magazine. Available
at
http://www.americancatholic.org/Messenger/Aug1999/feature1.a
sp.
Figure 1
Picture of Father Greg Boyle
10. 772 ENTREPRENEURSHIP THEORY and PRACTICE
http://www.americancatholic.org/Messenger/Aug1999/feature1.a
sp
Father Boyle may have seemed a legend to many in the
neighborhood, but his
mortality was revealed in March 2003, when he was diagnosed
with leukemia. He was
deluged with visits, calls, and letters from people ranging from
the LAPD chief to homies
in prison. Homies he had not seen in a decade turned up, tears
streaming down their faces,
to offer their organs and blood. Other admirers brought juices,
vitamins, and offers of
Mexican healers and folk remedies. Actor Martin Sheen urged
Father Boyle to take an
all-expense-paid trip to Lourdes, France, where healing miracles
were said to occur.
“Death and life-threatening illnesses are not even on my top 10
list of things I dread,”
Father Boyle shrugged off the bad news. “How are we going to
pay our bills on Friday?
That’s real-life dread.” Despite chemotherapy, Boyle looked fit
and energetic. He claimed
that his cancer was in remission. No one at Homeboy Industries
was sure about his true
health. When people asked him about his health, his typical
response was “Sometimes I
run out of gas, but so do cars.”
The “Homies”
Each employee of Homeboy Industries had his own stories to
tell, a story of violence
11. and an inspirational story of a life being transformed. These two
are representative of
others as well.
Carlos Nieto’s résumé at age 24 included an armed robbery
conviction, several stints
in state prison for parole violations, and a 12-year membership
in the notorious Tooner-
ville street gang, where his moniker had been “Sneaky.” His job
skills, which were
acquired in prison, included the abilities to make tattoo ink by
melting down chess pieces
and to fashion a spear from a rolled newspaper and syrup.
Tattoos of demonic horns
seemingly sprouted from both sides of his shaved head; murals
of jailhouse ink ran the
lengths of his arms. But in 2 months at Homeboy Industries,
Carlos had begun to acquire
skills that could far better serve him outside prison. He learned
to show up daily at 9 a.m.,
clean, sober, and ready to work. Talking on the phone without
using vernaculars was
another lesson, as was suppressing the urge to be belligerence to
a coworker.
Carlos said he planned to use what he was learning at Homeboy
Industries to launch
a new life that he hoped would include college and a career as a
counselor to troubled
teens. A recent conversation with Father Boyle had convinced
Carlos that he would stay
out of prison for good. “He looked at me the other day and said,
‘I want you to know that
I’m very proud of you,’ ” Nieto recalled. “He said, ‘Now I know
that when my day comes
12. I can rest in peace knowing that my son is doing something with
himself.’ ”
Felipe Antonio had also turned his life around, thanks to
Homeboy Industries. A
young man with a gentle demeanor, he recalled his childhood:
“I didn’t have parents. My
sister raised me from the time I was eight. Nobody was
checking on me—I was free. I was
in a gang. We went to parties, got into fights. We did graffiti.”
In 1997, as Felipe climbed
from his car one evening, he was shot in the spine. He was only
17. “I just passed away
a little bit,” he recounted, “and when I woke up I couldn’t feel
my legs no more.” Now he
was in a wheelchair, paralyzed from the chest down.
Nevertheless, Felipe was hopeful
about his future and planned to attend California State
University-Los Angeles for a
degree in social services.
A Series of Commercial Enterprises
Since its founding in 1992, Homeboy Industries had launched a
series of business
ventures. By 2004, Homeboy’s commercial ventures comprised
four units.
773September, 2007
Homeboy Bakery—The First Venture
After the riots in 1992, Father Boyle raised enough money to
buy an old bakery in
13. Boyle Heights. It was at “Homeboy Bakery” that Father Boyle
saw his vision become a
reality. His homies turned the bakery into a fully operational,
successful business. It put
troubled teens to work, giving them a hands-on job experience,
and generated profits to
fund other Homeboy ventures—until a fire destroyed the bakery
in 1999. Since then,
Father Boyle had been on a mission to start another bakery. In
2003, an opportunity
presented itself for Homeboy Industries to acquire a profitable
bakery with a monthly
revenue of $700,000. Its impressive customer list included
Trader Joe’s.5 The bakery’s 75
employees all could eventually be replaced by homies. Father
Boyle thought that the
bakery could earn up to $800,000 annually, which would
support all of Homeboy’s
operations without future fund-raising.
Father Boyle and the board of Homeboy Industries decided to
go after the acquisition.
The business, including its land and building, was priced at $4.8
million. Father Boyle and
the board engaged in an aggressive capital campaign to
purchase the bakery. They planned
to raise the purchase price plus enough for needed renovations
and contingencies. With the
help of private foundations, the federal government, and private
donors, Homeboy had
raised more than $3.6 million by early 2004.
Homeboy Silkscreen
The idea for Homeboy Silkscreen came from Ruben Rodriguez,
who believed that he
14. owed his changed life to Father Boyle. Struggling with drinking
and holding down a job,
Ruben had looked to Father Boyle for direction. Just a few
meetings with Father Boyle
changed Ruben’s life—forever. Father Boyle got him to stop
drinking and helped him land
a steady job with the city.
Wanting to repay this kindness, Ruben saw an opportunity to
utilize his wife’s
silkscreening skills. In Spring 1996, he presented Father Boyle
with the idea of starting a
business to offer custom silkscreen and embroidery services for
t-shirts, sweatshirts, hats,
bags, and several other products. Most important, it would hire
some of the kids from the
neighborhood. Father Boyle loved the idea because it would
provide even more jobs for
young people in Boyle Heights.
Ruben spent hours searching for great deals on used, high-
quality silkscreen equip-
ment. When he showed Father Boyle his budget based on what
he had found, Father Boyle
was concerned by the numbers. He told Ruben that he need not
find the cheapest
equipment; in fact, he said, a new business should have all new,
top-of-the-line machines.
Father Boyle did not want to cut costs at the outset for fear of
dooming the venture from
the beginning. Although new equipment meant significantly
higher investment, Father
Boyle thought that skimping on equipment could be extremely
costly in the long run.
Ruben revised his figures to reflect the new equipment, and
Father Boyle approved the
15. new budget.
Finding a location for Homeboy Silkscreen proved to be
difficult. Landlords feared
that the ex-gang members would break into other tenants’ or
customers’ cars. Another
challenge was that several of the possible sites lay inside the
territory of one gang or
5. Trader Joe’s is a popular specialty retail grocery store with
about 200 stores in Arizona, California,
Connecticut, Delaware, Illinois, Indiana, Maryland,
Massachusetts, Michigan, Missouri, Nevada, New Jersey,
New Mexico, New York, Ohio, Oregon, Pennsylvania, Virginia,
and Washington. It is widely know for its
unique grocery items and for having the highest revenue per
square footage in the industry.
774 ENTREPRENEURSHIP THEORY and PRACTICE
another. Members or former members of rival gangs would risk
their lives just to get to
work. Eventually, Ruben found the perfect place—outside the
gang territories but still
close enough for the kids to get there.
Homeboy Silkscreen received a boost in its early months when
Power 106 FM, a
favorite radio station of teenagers throughout Los Angeles,
ordered 10,000 t-shirts for
$45,000 and began running free commercials for the business.
Ruben remembered in 2004
that every time a commercial aired, 20 callers would ask
Homeboy Silkscreen about its
16. services. Over the years, Power 106 had remained as one of
Homeboy Silkscreen’s
biggest clients. Through the radio station’s connections, several
record labels also became
silkscreening customers.
Ruben and his employees were proud of the quality of their
work. Homeboy Silk-
screen employed 11–15 workers at any time and had employed a
total of 350 homies over
the life of the business. Homeboy Silkscreen usually kept
employees for 90 days to ensure
proper job training and adjustment to the working world until
they were deemed ready for
other employment by Michael or Father Boyle and referred back
to JFF.
Homeboy Graffiti Removal Services and Homeboy Maintenance
Services
Homeboy Graffiti Removal Services removed graffiti in an
effort to beautify Boyle
Heights and reduce the violence that gang graffiti provoked.
The service, available to
anyone in the neighborhood, proved very popular. Homeboy
received several requests a
day for its services.
Newer to Homeboy Industries was its maintenance program, a
separate but related
business. Homeboy Maintenance acted as a general service to
“keep the neighborhood
clean.” It collected and hauled refrigerators, furniture, and other
large items to its recla-
mation center. Homeboy Maintenance also sponsored
neighborhood clean-ups and trash
17. collection for the residents of Boyle Heights.
Both Graffiti Removal Services and Maintenance Services
proved very powerful
because they not only put the teens to work, but also helped
make the neighborhood a
better place to live. Both of the services were paid for by the
city of Los Angeles.
Homeboy Merchandise
Homeboy Merchandise started soon after Homeboy Silkscreen
began production in
1996. No one was sure who should be credited for starting
Homeboy Merchandise or who
created the initial design for the merchandise. Homeboy
Industries had begun printing
t-shirts with the Homeboy logo that many employees wore
proudly (see Figure 2). Even
Father Boyle often sported a denim shirt with the logo
embroidered on the right pocket.
The uniforms proved to be popular; soon, friends of Homeboy
were asking where they
could get a Homeboy t-shirt. In response, Homeboy Industries
began printing a wide
range of Homeboy-themed products.
Homeboy’s new catalog contained all of its current
merchandise. The catalog was
professionally done, with sharp pictures of merchandi se
surrounded by social messages in
the foreground. Its approximately 40 items included t-shirts
with the Homeboy or Home-
girl logo, children’s and baby clothes, bags, mouse pads,
wallets, hats, and coffee mugs.
Prices ranged from $15 for basic t-shirts to $25 for the
18. Homeboy attaché bag. All of the
items came in a range of colors, some with different types of
artwork on them. The t-shirts
displayed various catchy phrases associated with Homeboy
Industries. Customers could
mail or fax orders and pay by credit card, check, or money
order.
775September, 2007
Homeboy Merchandise was in charge of the design, marketing,
and distribution, while
it outsourced the production of its clothing to Homeboy
Silkscreen. In reality, most ideas
for new products appeared to come from the silkscreen
operation. Some Homeboy
employees felt that the Homeboy logo and the design of the
merchandise offered by
Homeboy Merchandise needed a “makeover.” Homeboy’s online
catalog was a passive
website that did not make transactions.
Homeboy Merchandise struggled to find retail outlets to for its
products. Its biggest
sales occurred at religious conferences where Father Boyle
spoke. The Religious Educa-
tion Congress was Homeboy Industries’ biggest sales event each
year. At one such event,
Homeboy would sell $6,000–7,000 worth of its merchandise. In
fact, Father Boyle was the
company’s No.1 sales person.
Figure 2
19. Sample Homeboy Merchandise
776 ENTREPRENEURSHIP THEORY and PRACTICE
Michael Baca
Michael Baca, a good friend of Father Boyle, was similarly
dedicated to the cause of
helping homies. Having grown up in the projects himself, he
was very familiar with the
gangs and the devastation they caused to families. In fact,
Michael’s three brothers had
been gang members, and one was still serving a 26-year prison
sentence. Even as a child,
Michael was never interested in joining the gangs. Instead, he
wanted to make a life for
himself and at the age of 20 became a firefighter and a certified
emergency medical
technician. Unfortunately, 6 years later in 2000 his career ended
abruptly when he fell
from a roof and injured his back.
Rather than feeling sorry for himself while hospitalized,
Michael began giving back
to his community. He realized that the best opportunity to
intervene in the life of a gang
member was when he was being received at the hospital for a
gunshot wound, had just
been connected to an IV, and was crying “Don’t let me die!” So
Michael started the first
hospital-based gang intervention program. It offered extensive
counseling, GED planning,
tattoo removal, and job mentoring, many of the services that
Father Boyle was offering.
20. Thus, when the operations director of Homeboy Industries
resigned late in 2002, Father
Boyle asked Michael to accept the position. Although Michael
was not an experienced
corporate manager, Father Boyle was confident that he had
many talents critical to
Homeboy Industries.
Michael projected a vastly different personality than Father
Boyle. He was less
philosophical and more serious, intense and hands-on. Although
Michael shared Father
Boyle’s vision, he was more focused on day-to-day operation
and achieving measurable
results. Michael mentioned to the case writer that most of the
pressures and stress he felt
on the job were self-imposed. He felt a sense of urgency that the
organization should be
doing even better and accomplishing more. The more successful
Homeboy Industries was,
the more homies it could help.
The Homeboy Organization and Processes
While many observers were impressed with Homeboy
Industries’ ability to create
new businesses, Father Boyle did not view Homeboy Industries
as an incubator—at least
not in the same sense that most business people would.
Homeboy Industries remained a
division of a 501 (c) (3), nonprofit organization, with
community-based board of directors
overseeing the operation. Its stated mission was “to assist at-
risk and former gang involved
youth to become contributing members of our community” and
mentioned nothing about
21. businesses. Furthermore, Father Boyle did not consider himself
to be an entrepreneur or
businessman.
Homeboy Industries’ standard for success was vastly different
from those of most
business incubators. Actually, Father Boyle hesitated to speak
in terms of success or
failure. “I feel called to be faithful, not successful,” he
expressed in a Catholic family
magazine.4 “I feel called to be faithful to an approach and to a
certain wisdom about who
these kids are. I believe that if they are given a chance, then
they’ll thrive and they’ll begin
to imagine a future for themselves.”
Michael thought that one quantitative measure of success could
be the number
of Homeboy Industries’ past and current clientele. But he
agreed with Father Boyle that
there were other important standards of success. “We also
measure success in terms
of how much an individual changes,” Michael explained. “Also,
when two enemy gang
members all of a sudden get along, that is success.” However,
Homeboy Industries as an
777September, 2007
organization was not systematically tracking the number of
“successes” or “failures” of
any kind. Michael agreed that there were still a wide range of
financial and operational
objectives that could be defined and measured. “We cannot
22. depend on divine intervention
alone,” Michael explained. “We must do a much better job and
be more effective opera-
tionally. To be more effective, we need to define our goals and
measure our progress.”
Certainly, everyone at Homeboy Industries regarded it as a
success when an ex-gang
member who learned good work habits and skills “graduated”
from Homeboy and landed
a respectable job. Some of the homies were ready for the
workforce in 90 days, while
others would take 6 months or even years to change their ways.
About half dropped out of
Homeboy’s programs rather than graduate. While working for
Homeboy Industries, most
homies were paid close to $9 an hour.
Father Boyle’s approach with respect to his ventures was quite
different from that of
Brother James Holub of Milwaukee, Wisconsin, who borrowed
the concept and started
Homeboy Enterprises, his own version of Homeboy Industries.
Brother Holub’s
Homeboy Enterprises included Homeboy Printing and
Homeboyz Graphics. Unlike
Father Boyle, Brother Holub saw himself as a businessman and
focused on making his
ventures self-sufficient. Although Homeboy Enterprises’ main
purpose remained getting
gang members off the streets, its businesses were believed to be
profitable. On the
contrary, most of Father Boyle’s ventures were struggling (see
Figure 3).
Homeboy Industries operated with an annual capital budget that
23. was reviewed and
approved by its board of directors each year. The business
operations were far from being
profitable and had to be supplemented through three major
fundraising activities: a yearly
dinner, a direct mail campaign, and Father Boyle’s speaking
engagements.
Homeboy Industries employed several professional staff
members in the office who
headed up the programs or divisions within Homeboy Industries
and JFF (see Figure 4).
Some business units did not have full-time general managers.
Michael often found himself
rushing between businesses and projects, in effect continuing
his career as a firefighter but
with figurative, business “fires” to put out. Turnover among the
staff members and homies,
while not documented, was thought to be low compared to most
businesses or nonprofit
organizations.
Father Boyle had not implemented formal structures or
consistent processes for
making important decisions for Homeboy Industries. He queried
and consulted with
Michael or the board of directors on some issues and, at other
times, he made decisions
all by himself. Despite Father Boyle’s imperfections as a
manager, the board was usually
sympathetic with him. Father Boyle was, after all, a beloved
figure, and the directors did
not want to challenge what were certainly admirable methods
and achievements. Never-
theless, there were talks among board members about setting up
finance and human
24. resources committees that would create more formal structure
and processes at Homeboy
Industries.
The Merchandising Opportunity
Many people at Homeboy Industries, including Michael, had
often thought that
Homeboy Merchandise could be a much bigger business and
raise the brand recognition
of the entire organization. Merchandising offered a chance to
tell the “story” of Homeboy
Industries, which could have a broad commercial appeal.
In the past, Homeboy Industries had attempted to sell its
merchandise to various
retailers in the Los Angeles area. This was a challenge from the
beginning as many of the
homies who worked as sales reps reacted badly to rejections,
taking them personally and
778 ENTREPRENEURSHIP THEORY and PRACTICE
reacting with anger or dejection. Michael Boca thought that
selling was a difficult task for
most homies considering that they had faced rejection all their
lives.
In the mid-1990s, Homeboy Industries placed its merchandise in
a handful of stores
in shopping malls but was unable to maintain stable
relationships with the merchants,
causing most of the arrangements to disintegrate. For a time,
Homeboy Merchandise sold
25. its items via a kiosk in the Santa Monica Shopping Center, a
hub for shoppers and tourists.
Unfortunately, it could not sell enough volume to pay for the
lease and operation of the
kiosk and had to cancel the project, forfeiting all the
investments that had been made.
Furthermore, there were rumors that other merchants
complained that Homeboy’s pres-
ence detracted from the mall’s atmosphere.
Homeboy Merchandise had never attempted direct marketing.
Unfortunately,
Homeboy Industries had not kept a good database of its past
supporters or customers.
Nonetheless, a direct mail campaign for donations at the end of
2003 yielded a 12%
response and raised $180,000. To Michael the campaign’s
success indicated the level of
support Homeboy Industries received from the community. He
thought that direct mar-
keting by Homeboy Merchandise could garner a similar
response.
Figure 3(A)
Homeboy Industries Statement of Activities 2003
PUBLIC SUPPORT Total
906,978$snoitubirtnoC
080,536stnarG noitadnuoF
Government Grants and Subcontracts 1,499,136
TOTAL PUBLIC SUPPORT 3,013,825
26. REVENUE
401,396selaS neercskliS
014,21emocnI esidnahcreM
963,6emocnI rehtO
TOTAL REVENUE 711,883
TOTAL PUBLIC SUPPORT
AND REVENUE 3,725,708
EXPENSES
123,102,3secivreS margorP
070,534lareneG dna tnemeganaM
319,432gnisiardnuF
TOTAL EXPENSES 3,871,304
CHANGE IN NET ASSETS (145,596)
NET ASSETS, BEGINNING OF YEAR 1,825,576
NET ASSETS, END OF YEAR $ 1,679,980
779September, 2007
Figure 3(B)
Homeboy Industries Schedule of Revenues and Expenditures
2003
REVENUE
27. Management and General $ 280,989
571,213gnisiardnuF
855,546retneC ffO porD
835,802yrekaB
137,264itiifarG
750,428Jobs for a Future
207,41esidnahcreM
074,596neercskliS
888,812margorP esaeleR
006,26NIW tcejorP
TOTAL REVENUES 3,725,708
EXPENSES
275,432,1segaW dna yralaS
786,011sexaT lloryaP
840,86ecnarusnI htlaeH
577,88noitasnepmoC s'rekroW
SUBTOTAL 1,502,082
136,02gnitnuoccA
28. 031gnisitrevdA
067,21esnepxE tbeD daB
563,2segrahC knaB
896,001noitaicerpeD
765,3esnepxE tnempiuqE
768,531 gnisiardnuF
241,27ecnarusnI
935,52sriapeR & ecnanetniaM
831,71suoenallecsiM
292,811esnepxE tnempoleveD weN
108,61gnihtolC egamI weN
628,02seilppuS eciffO
344,89seilppuS itiffarG dna tniaP
567,51sexaT/esneciL/stimreP
619,7yrevileD dna egatsoP
694,32noitcudorpeR dna gnitnirP
085,46seeF lanoisseforP
600,231seitivitcA margorP
29. 878,984srehcuoV - seitivitcA margorP
865,64sesaeL/slatneR
888ytiruceS
879,144sdnepitS
436,1tenretnI/sranimeS/noitpircsbuS
801,87esnepxE enohpeleT
Travel, Meals, and Entertainment 38,853
627,31seitilitU
006,15sesnepxE elciheV
701,603dloS sdooG fo tsoC
698,1seilppuS enihcaM yrediorbmE
421,9seilppuS gnineercskliS
TOTAL EXPENSES $ 3,871,304
NET INCREASE $ (145,596)
780 ENTREPRENEURSHIP THEORY and PRACTICE
Homeboy’s financial statement showed that the merchandising
business had sales of
about $14,000 in 2003 (Figure 3). However, the figures did not
account for the free
30. merchandise that Father Boyle gave liberally to donors, visitors,
and friends. There was a
storage room inside the office for merchandise, but until
recently, no one had kept track of
the inventory.
Figure 3(C)
Homeboy Merchandise Schedule of Revenues and Expenditures
2003
TOTAL REVENUES 14,702
EXPENSES
926,31segaWdnayralaS
272,1sexaTlloryaP
-ecnarusnIhtlaeH
041,1noitasnepmoCs'rekroW
SUBTOTAL 16,041
-gnitnuoccA
-gnisitrevdA
-esnepxEtbeDdaB
-segrahCknaB
-noitaicerpeD
-esnepxEtnempiuqE
32. 574seitivitcAmargorP
Program Activities - Vouchers
-
-
sesaeL/slatneR
-ytiruceS
-
-
sdnepitS
Subscription/Seminars/Internet
-
-
esnepxEenohpeleT
Travel, Meals, and Entertainment
-seitilitU
-sesnepxEelciheV
288,6dloSsdooGfotsoC
Embroidery Machine Supplies
33. -
-
seilppuSgnineercskliS
TOTAL EXPENSES 25,420$
$
NET INCREASE (10,718)$
781September, 2007
Another reason for Michael’s optimism about the merchandising
business was that
many celebrities had expressed over the years their interest in
helping Homeboy Indus-
tries. The producer of ABC’s comedy “8 Simple Rules for
Dating My Teenage Daughter,”
whom Father Boyle had taught in high school, placed a large
merchandise order and was
interested in having his cast’s teenage girls wear Homegirl t-
shirts. Actor Martin Sheen
was a longtime supporter and personal friend of Father Boyle.
Angelica Huston was an
associate board member of Homeboy Industries, while Kirk
Douglas had donated quite a
bit of money.
Nevertheless, Michael was perplexed about Homeboy’s target
market. Speaking
broadly, the teen market was the largest target. However, he
34. was aware that not all teens
would want to own Homeboy clothing. Homeboy Industry was
seen as an “eastside”
organization, and teens elsewhere might not want merchandise
tied to East Los Angeles.
On the other hand, he thought, the gang culture had become so
popular that a “white boy”
from Pacific Palisades might want to buy Homeboy gear.
Michael could foresee targeting the “hip-hop” culture that had
been so lucrative in the
past few years. Two related growth areas in the apparel market
were the “urban youth” and
the “antiestablishment” segments. One leading urban youth
brand was Phat Farm, which
was owned by record mogul Russell Simmons. Fubu was
another firm that was popular
with the urban youth. Fubu (which stood for For Us, By Us)
began as a clothing firm
targeting young African-Americans but successfully crossed
over to other segments,
reaching annual revenues of $1 billion. The antiestablishment
segment also appeared to
have exploded in high schools across the United States. The
trend had been around for
Figure 4
Homeboy Industries Organization Chart
Father Gregory Boyle, SJ
Executive Director
Michael Baca
35. Operations
Director
Felix Garcia
Finance Director
Allison Gustorf
Development
Director
JOBS FOR
A FUTURE
HOMEBOY
INDUSTRIES
Sarah Weiss
Case Mgmt,
Staff Dev
Mario Prietto
Release
Program
Counseling
Norma Gillette
Sr. Job
Developer
36. Maintenance
Ruben
Rodriguez
Silkscreen
Bakery
Jaime Saldana
Graffiti
Removal
Fabian Montez
Sr. Job
Developer
Gabby Guillen Johnny Green
Elizabeth Parra
Tattoo
Removal
Merchandise
782 ENTREPRENEURSHIP THEORY and PRACTICE
years and now retailers like Hot Topic were able to cash in on
it. Hot Topic specialized in
punk fashion by selling t-shirts that featured bands, skulls and
crossbones, and anarchist
37. symbols as well as chains and body piercings.
Homeboy Industries projected an image vastly different from
the usual “hip-hop” or
“antiestablishment” brands. Its brand stood for positive
messages such as “a second
chance” or “a place of hope.” Still, Michael suspected, some
parents (mostly in middle-
class Los Angeles suburbs) could worry that their kids might be
labeled as gang members
if they wore Homeboy clothing.
Michael also wondered about licensing, a lucrative business in
recent years even for
organizations that were not part of the fashion industry.
Examples included National
Geographic’s codeveloped outerwear for multiple climates,
Mountain Dew’s branded
apparel, and the SNL brand that started Saturday Night Live’s
fashion licensing. For these
organizations, success in licensed fashion had become a
promotional catalyst for their
core businesses.
Michael, who devoted about 10–20% of his time to Homeboy
Merchandise, was the
closest thing to a general manager for the division. He oversaw
most of the business and
did most of the ordering from Homeboy Silkscreen. One of the
homies, Juan Carlos, was
in charge of filling mail orders, which eased Michael’s burden.
The New Venturing Decision
Father Boyle, Michael, and the staff were constantly looking for
new opportunities.
38. The more jobs Homeboy Industries’ businesses offered, the
better the chance that
someone who walked into the office could find something he or
she would pursue.
However, starting a new business inside Homeboy Industries
was complicated and
depended on a wide range of financial and nonfinancial factors.
Pointing to the picture of a proposed “Homegirl Cleaners” on
his office wall, Father
Boyle recalled how someone came in with the idea for that
business. However, Father
Boyle turned down many business ideas. Some were rejected not
because they were bad
ideas, but because Father Boyle questioned the intentions of the
people proposing them.
Inevitably, there were people who seemed to be trying to take
advantage of Father Boyle’s
generous nature. It was up to him, the staff, and the board of
directors to sort out the
genuine ideas. Some business ventures did not fit w ell within
Homeboy Industries, while
other ideas fit nicely but lacked the right personnel to run them.
Homeboy Industries
already lacked a champion or manager for several of its existing
businesses.
A few years ago, two brothers from the neighborhood had
wanted to start a plumbing
business. Father Boyle welcomed the idea and bought a truck
and equipment for them.
However, Homeboy’s board of directors consisting of attorneys,
businessmen, and com-
munity leaders were concerned about the venture. They worri ed
about its viability and the
costs involved, especially since the management of Homeboy
39. Industries was already
spread thin. The board ordered it closed from the concern that it
was a poor fit after only
a couple of months in operation.
Another new business idea was the Homeboy Café. Back in
2001, Homeboy Indus-
tries had bought an empty lot in downtown Los Angeles near
Little Tokyo with the idea
of building a new bakery. Now in 2004, with the current
pending acquisition of an existing
bakery, the land could be used for a café instead. However,
Father Boyle and his staff were
so focused on planning for the new bakery that they had not
given it much thought.
Few of Homeboy Industries’ staff worried about the start-up
funding for the café or
other business ventures. They relied on Father Boyle, a prolific
fund-raiser. While money
783September, 2007
was scarce, it appeared that whatever Homeboy Industries
needed, Father Boyle would
generate somehow. As long as he had an idea and a plan, he
found a way to raise the
necessary funds.
Father Boyle was at times successful in recruiting highly skilled
volunteers to help
with Homeboy’s and JFF’s services and businesses. Dr. Luis
Moreno of Ya’stuvo Tattoo
Removal Clinic had graduated from Harvard Medical School
40. and was finishing his
residency at UCLA. He was making hospital rounds when
Father Boyle walked in and
asked Luis to work for him. After 8 or 9 months, Homeboy
Industries officially added Luis
to its staff. He came in twice a week while still working in the
emergency rooms at three
hospitals.
When it came to Homeboy Merchandise, Father Boyle and
Michael were not sure
whether they should try to turn it into a serious business or
maintain it as sort of a “gift
shop” for visitors and donors of Homeboy Industries. Some of
the volunteers had told
Father Boyle and Michael that the Homeboy brand was a gold
mine. With the right mix
of design, sales, and support, Michael agreed, the business
could be hugely successful.
Furthermore, Homeboy Merchandise’s success could enhance
the Silkscreen business.
Michael imagined many positive messages and slogans that the
merchandise could
display, such as “Be part of the story” or “Work for a better
tomorrow.” Not all products
had to mention Homeboy Industries, he noted. The opportunity
might even be larger if the
business could make items with positive social messages
without any reference to
Homeboy.
Ever since Michael joined Homeboy, volunteers came up with
ideas for expanding the
merchandising business. One idea was to sell to the Chicano
stores and colleges in East
Los Angeles, so that the residents could have access to the
41. positive messages. Another
interesting idea came from Jesuit-in-training Phil Cooke, a
summer volunteer. He thought
that a great target market would be the 28 Jesuit colleges and
universities in the United
States. These schools would be willing to do business with
Homeboy Industries since
many of them would be aware of Father Boyle and Homeboy
Industries. Jesuit universities
in the United States included Georgetown, Santa Clara
University, Loyola University of
Chicago, and Loyola Marymount University. (See Figure 5 for a
list of Jesuit institutions
in the United States.) Phil thought that this initial customer
base, although small, could be
a great starting point while Homeboy Merchandise established
its credibility and fine-
tuned its business operations. The next target could be
additional hundreds of Catholic and
Christian colleges followed by other universities nationwide.
Phil could imagine a section
of each college bookstore carrying Homeboy goods with a life-
size image of Father Boyle
promoting the merchandise.
Phil also believed that Homeboy Industries could more
aggressively pursue direct
mailing. The response rate that Homeboy experienced over
Christmas was too impressive
to ignore. Phil believed that with some investment in mailing
addresses and online
ordering capability, the business could grow substantially.
However, Michael was not sure whether merchandising was the
right business for
Homeboy Industries. The venture appeared to be a misfit with
42. the skills and temperaments
of the youths Homeboy served. The venture also required
marketing and sales expertise
that Homeboy did not possess. Michael pondered: “It takes
weeks to train our guys to
show up to work on time. They are so far away from developing
marketing skills. Selling
is probably the worst type of job for our homies. What if our
kids took those rejections
personally?” However, Michael also knew that some of the
necessary resources and
expertise could be hired, and in some cases borrowed. For
example, as a volunteer had
suggested, Homeboy Merchandise could engage one of the well -
known fashion colleges
in Los Angeles to develop a new design concept.
784 ENTREPRENEURSHIP THEORY and PRACTICE
Figure 5
Jesuit Colleges and Universities in the United States
Institution Location Enrollment
Boston College Chestnut Hill, MA 14,528
Canisius College Buffalo, NY 5,095
College of the Holy Cross Worcester, MA 2,773
Creighton University Omaha, NE 6,226
Fairfield University Fairfield, CT 5,060
43. Fordham University Bronx, NY 15,814
Georgetown University Washington, DC 13,164
Gonzaga University Spokane, WA 6,100
John Carroll University Cleveland, OH 4,350
Le Moyne College Syracuse, NY 2.900
Loyola College in Maryland Baltimore, MD 6,111
Loyola Marymount University Los Angeles, CA 7,500
Loyola University Chicago Chicago, IL 12,605
Loyola University New Orleans New Orleans, LA 5,279
Marquette University Milwaukee, WI 10,892
Regis University Denver, CO 9,129
Rockhurst University Kansas City, MO 2,727
Saint Joseph's University Philadelphia, PA 6,961
Saint Louis University St. Louis, MO 13,847
Saint Peter's College Jersey City, NJ 3,282
Santa Clara University Santa Clara, CA 7,356
Seattle University Seattle, WA 5,852
Spring Hill College Mobile, AL 1,484
44. University of Detroit Mercy Detroit MI 6,023
University of San Francisco San Francisco, CA 7,917
University of Scranton Scranton, PA 4,615
Wheeling Jesuit University Wheeling, WV 1,515
Xavier University Cincinnati, OH 6,523
785September, 2007
The biggest concerns were expressed by Father Boyle and
Ruben of Silkscreeen, who
were against promoting Homeboy gear. Ruben was concerned
that if everything worked
out well, Homeboy clothing would be hip enough to become
gang wear. “The last thing
I want to do,” said Ruben, “is to see some kid committin g crime
in the clothing we make.”
Both Father Boyle and Ruben wanted to make sure that the
Homeboy name was used only
in a positive light. Michael understood Ruben’s concern. Not
knowing for sure how big or
successful Homeboy Merchandise could become, it was difficult
to muster a strong
argument for investment in the business. At times, Michael
thought that it would just be
easier to keep the merchandising business at the current level.
Homeboy Café was another option that Michael could pursue
immediately. The
location appeared to be viable. Although part of Boyle Heights,
45. it was near Little Tokyo,
a much nicer part of town. Daytime foot traffic included
professionals who worked nearby
in downtown Los Angeles. A Starbucks and similar shops were
close by, and many
shopping malls, restaurants, and retail stores were within
walking distance. The café could
train homies quickly and provide job opportunities for dozens of
them. However, Michael
realized that the decision was much more complicated:
Everyone seems to love the Homeboy Café idea, but they don’t
know the challenges
associated with running a coffee shop or restaurant day in and
day out. Poor service
could destroy the business. The local professional clientele
wouldn’t have any
patience with any kind of misbehavior, especially with all those
other coffee shops
like Starbucks within a couple of blocks. And what if there is a
drive-by-shooting?
The business would go under in a minute. Plus, does serving
coffee really train our
kids for better jobs in the future? At least in Homeboy
Merchandise, we could provide
training for skills that could be really useful for their future
careers.
Michael was still pondering the options as he pushed open the
door to the meeting
room. Several of the volunteers and employees of Homeboy
Industries were already
inside, discussing the future strategies for Homeboy
Merchandise. All heads turned to
Michael as he shut the door behind him. They were eager to
hear what Michael had to say.
46. David Y. Choi is Assistant Professor of Management and
Entrepreneurship and Associate Director of the
Hilton Center for Entrepreneurship at Loyola Marymount
University.
Fred Kiesner is the Conrad N. Hilton Chair of Entrepreneurship
at Loyola Marymount University.
786 ENTREPRENEURSHIP THEORY and PRACTICE
![where a staff meeting would soon begin. He had pondered all
morning what to do about
Homeboy Industry’s merchandising division, whether to make
the investment of capital
and effort to expand the division’s business or to leave it the
way it was. Several people
in the organization had become excited about the market
potential of Homeboy Merchan-
dise over the years, and now in 2004 they were eager to take the
next steps. They wanted
to propose an expansion plan for the division to Father Boyle,
the founder and Executive
Director of Homeboy Industries, and they wanted Michael’s
support. Others in the
organization thought that the merchandising division was a poor
fit with Homeboy
Industries. Father Boyle and others worried that its merchandise
might become gang
wear—the last thing that the organization wanted to have
happen. Michael knew that all
the staff members wanted his opinion. As he pulled into
Homeboy’s parking lot and
entered the building, he knew he had only a few minutes to
make a decision one way or
the other.
Please send correspondence to: David Y. Choi, tel.: (310) 338-
2344; e-mail: [email protected]
The case was prepared solely to provide material for discussion
and is not intended to illustrate either effective
or ineffective handling of managerial situation.
PTE &
1042-2587
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