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  Giving Back and The Value of Strategic Corporate Philanthropy

by Cliff Kurtzman
Chief Executive Officer, ADASTRO Incorporated.
 
 

October 14, 2003

Many of us feel that we have a responsibility to help create opportunities for those with the potential to excel but lacking the resources, and to use the fruits of our success to help build a better world for future generations. We do this in our personal lives, and we do it in through the corporations with which we are involved. We do it not simply out of altruism, but because we know that we and our children will benefit, and because only our collective goodwill can solve problems that might affect our lives and the lives of those we care about.

But according to Community Wealth Ventures, Inc., "United States corporations annually give away over $11 billion dollars to nonprofits, or 1.3% of pre-tax income. Many corporations, however, do not give their money strategically. Philanthropic donations provide a useful, though seldom fully leveraged, channel for improving outcomes for both the community and the corporation."

While corporate philanthropy provides a mechanism whereby businesses and organizations can contribute to and help the communities which have made them successful, and can also provide a powerful mechanism for fostering social change, a great deal of corporate money that is contributed to charity brings little societal value or value to the contributing business. Often, rather than being strategically driven, it simply becomes an unstructured outlet for giving money to a pet project. Further, with increasing globalization and the rising number of multinational corporations, corporate community involvement programs become increasingly complex, often needing to transcend geographic and cultural boundaries. The reality is that the value that corporate philanthropy brings an organization can be magnified considerably if it is done in a planned, strategic and considered manner.

HP Chairman and CEO Carly Fiorina articulated this philosophy well in a speech she gave in Houston on September 25, 2003 at the Houston Technology Forum:

"HP in all of our legacies has always believed that giving back to the community is part of our responsibility. It is part of who we are... I think that giving back to communities, making a positive difference in communities, and reaching out and engaging those that are underprivileged or underserved or underaccessed is not just the right thing to do, is not just a good thing to do, it is not just something that makes our hearts feel better. It is a smart business thing to do. We are a technology company. Innovation is our life's blood.

"And today when we look out into the world we see that only 10% of the world can buy our products. We see that unless we educate and excite more minorities and more women about the possibilities of technology, and get them engaged in science and engineering, then we will not have enough qualified engineers to do the work that we need to do here to help our company grow. In other words, giving back to the community, and reaching out and creating opportunities through the power and possibility of technology for those who are underprivileged or underaccessed or underserved is a smart business thing to do because those same people someday will be our customers, our partners, our employees."

But in order for an organization to truly realize the full potential of being a good corporate citizen, it must first develop a strategy that will align charitable giving activities with long-term corporate objectives and a vision of the desirable society of the future.

There are a wide variety of options that an organization can use in pursuit of its philanthropic objectives. These include:

  • Direct financial support of non-profit organizations through the donation of cash and the issuance of grants.

  • Employer matching of individual contributions to encourage individual philanthropy and increase the magnitude of donations beyond corporate resources.

  • Coordination of employee volunteer efforts to provide time and labor in support of charitable causes.

  • Donation of products and services, along with pro bono management expertise.

The corporation should start in a proactive manner by attempting to identify which charitable causes might help shape a future that will benefit the company, and by determining the appropriate mix of each of the above four options to be used in each instance. More progressive organizations (such as HP) go beyond merely identifying which causes to support among those which already exist -- they actually go out and create the philanthropic activities and foundations that offer the potential to return the greatest value.

This process begins by working with company managers and other key stakeholders to understand what the company stands for; what its core values are; how the company wants to participate in and care about the community; and how the company wants to make a difference in the world in which its employees live, work and do business. Interviews, surveys, and focus group may be a part of this process.

A framework is then created for strategic review. This would involve defining a set of questions that should be asked about each philanthropy approach that is contemplated. Examples might include:

  • Will this approach help the company improve its financial performance?

  • How can an activity help sustain employee loyalty and improve morale, and enhance employee recruiting strategies?

  • What should the organization do to encourage a society with greater need for the company's products and services?

  • Can philanthropic actions improve society's perception of the company and its products and services?

  • Is increased visibility and loyalty to the company along with its products and brand a result of this activity?

  • Does the activity increase the reach of the company to new customers?

  • Are long term relationships, partnerships and alliances created within the communities in which the company works and lives?

The next step is to conduct research and analysis of issues, corporate and community needs, and promising approaches based on the above framework. Among the large number of options available, a process can then be put in place to prioritize which causes and communities the business should create or support in order to maximize the value of the organization's philanthropic activities. This should result in the design and development of a strategic philanthropic mechanism for the organization.

Such a mechanism would necessarily include a structure for governing and managing the philanthropic activities. In some cases, this might involve establishing a corporate foundation. A communications and community relations strategy then needs to be crafted and implemented in order to achieve the greatest impact on both community needs and business goals. The plan should also monitor and evaluate the results, and periodically revisit and refine strategies.

The bottom line is that by planning and strategizing your corporate philanthropic activities, you will find an opportunity for your organization to maximize its opportunities, increase its value, and shape the best possible future. Please don't hesitate to contact us if you would like to discuss your options in greater detail.

Additional Reading (these references provide additional online resources on corporate philanthropy, however, the approaches they take are not necessarily endorsed by ADASTRO):

The Corporate Giving Standard: A Measurement Model for Corporate Philanthropy http://www.givingstandard.com/

Committee to Encourage Corporate Philanthropy http://www.corphilanthropy.org/

onPhilanthropy: A Global Resource for Non-Profit Professionals http://www.onphilanthropy.com/

 
 
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