Managing a Business/MS-91 3
Discuss the nature of corporate philanthropy and the relevance of Strategic philanthropy for business organizations.
Corporate philanthropy or corporate giving is the act of corporations donating some of their profits, or their resources, to nonprofit organizations.
Corporate giving is often handled by the corporation, directly, or it may be done through a company foundation.
Corporations most commonly donate cash, but they also donate the use of their facilities, property, services, or advertising support. They may also set up employee volunteer groups that then donate their time.
Corporations give to all kinds of nonprofit groups, from education and the arts to human services and the environment.
Large corporations generally have well-defined corporate philanthropy programs that may include foundations, major event sponsorship, and corporation-wide employee involvement in volunteerism and organized giving, often to a well-organized charity such as United Way. But, corporate philanthropy presents an astonishing opportunity for small to mid-sized companies and organizations.
In 2008, despite the economic downturn, Americans donated $307.65 billion in charitable contributions, down 5.7% over 2007, when adjusted for inflation. Corporate philanthropy, which represents 5% of all giving, was down 8%. But, given the depth of the recession, these figures were remarkably generous given much greater losses in savings, 401(k)s, and corporate profitability during the same time period.
Reasons for Corporate Philanthropy
Corporate philanthropy provides significant rewards to the company and its employees, as well as to the organizations served.
• The company is respected as a good corporate citizen in the eyes of the charities served and the communities in which it does business. Employees are attracted to companies with reputations for social responsibility.
• The company and employee donations of money, goods in kind, and the hours of employee volunteering do real good for deserving people, causes, and events. A common method for giving, such as donations to a local food bank, allows the employee to voluntarily contribute and the employer matches that contribution with an equivalent amount, usually up to a specified limit.
• The corporation achieves name recognition, and advertising and marketing attention to the company and its products.
• Employees are proud to work for a giving company and the corporate philanthropy reinforces the company’s reputation as an employer of choice within its community or industry.
• Many supported events are local and require employee participation. This builds a sense of team and enhances employee skills in areas such as leadership, planning, and marketing.
• Corporate philanthropy promotes a sense of company pride and loyalty.
How to Approach Corporate Philanthropy
You may not have the financial wherewithal of a larger corporation, but you can engage the hearts and the minds of your employees in corporate philanthropy by these actions. I have seen these two approaches work for companies. In the first, the executive team determines the portion of the budget that will be devoted to corporate philanthropy. In an alternative method, a team of employees develops a plan for corporate philanthropy and requests the amount budgeted. Either approach can work for corporate philanthropy.
The best corporate philanthropy approaches use these methods.
• Assign a team to lead the corporate philanthropy efforts. I have experienced leadership of the team from community affairs, public relations, or Human Resources. Any leadership can work as long as the team members represent the other two disciplines and a cross section of additional members from across the company.
• Ask the team to come up with a corporate philanthropy plan. The plan must recognize existing philanthropic traditions, and stick within the corporate philanthropy budget, or propose one. As an example, a company had supported the March of Dimes as its key charity for ten years and it was an annual tradition to have a table at a run/walk event. Half the company attended to run or cheer – actually, in my last year there, three quarters of the company attended. When we started a corporate philanthropy team, they understood their efforts needed to build around this existing tradition which already had devoted leaders.
The corporate philanthropy plan must use a process of needs assessment to see what employees want to support: kinds of charities, types of volunteer activities, and amounts of money and in-kind donations that they can afford.
• The committee must recognize that the company must obtain a positive payback for the investment of company time and money, too. Sponsorships that are advertised and publicized, public recognition from the charity, and positive local press are examples of a company’s rewards for corporate philanthropy.
If you organize your corporate philanthropy efforts around approaches such as these, you will develop broad ownership of and participation in the activities. The participation and team work you hoped for among your employees will be an offshoot of your employees’ participation in corporate philanthropy. Employees will feel engaged, connected, and devoted to your company. The company will benefit from the broader positive community exposure.
Everyone wins when your company supports worthwhile charitable causes, community events, and annual giving plans. Your corporate efforts at philanthropy are cherished by your employees, the company, and the causes you support.
As corporate social responsibility takes hold, big business is increasingly becoming part of the solution rather than the cause of the problem. From cleaning up their own act to taking proactive steps to help others, companies are stepping up to do more than just make money. In these Social Innovation Conversations educational podcasts, learn what businesses are doing to improve our world by investing in local communities, improving labor practices, greening supply chains, and generally giving back. Get inspired about how you can turn your company into a force for corporate social responsibility in big and small ways.
AS PART OF THEIR CONTRIBUTION TO THE SOCIETY,
SOME ORGANIZATIONS HAVE BEEN PRACTISING SUCH PROGRAMS AS
-better pay for local workers in the under-developed countries.
-avoiding under-age employees.
-support for local community sports.
-offer of free sports gears for talents.
-sports events sponsorship.
-supporting the construction of sports grounds.
-cheaper brands for selected countries
-local water supply
-community developments like sports etc
-local school sports support
-scholarships for talents
BENEFITS OF CORPORATE PHILANTHROPY
Many studies show that corporate charitable giving helps improve a company's bottom line. According to data from the 1999 Cone/Roper Cause Trends Report:
• 76% of consumers indicate they would switch brands or retailers to one associated with a good cause, when price and quality are equal
• 87% of employees at companies with philanthropic programs feel a stronger sense of loyalty to their employer
External benefits of corporate giving:
• Improved customer loyalty
• Enhanced reputation and standing in the community
• Increased positive name recognition and brand awareness
• New and enhanced relationships with key community leaders and officials
• Beneficial business-to-business relationships with nonprofits
• A reservoir of goodwill within the community
• Healthier, more livable and economically stronger communities
Internal benefits of corporate giving:
• Competitive advantage in attracting and retaining employees
• Leadership and development opportunities for employees
• Exposure of senior staff to new ideas, points of view and important social movements
• Improved internal communication and common purpose
CORPORATE GIVING OPTIONS
If you own a family business or are an officer of a corporation, there are at least four options for you to consider for your company’s charitable giving: a corporate giving program, a corporate foundation, a corporate donor advised fund, and employee matching & non-cash giving.
Corporate Giving Program
Many corporations operate an annual giving program to make charitable grants, funded as part of their annual operating budgets. Business owners can blend their family business with family philanthropy by channeling their charitable support through their family corporation(s). A corporate giving program has no independent endowment, and its budget is typically administered by corporate staff and directed by the CEO or an advisory committee of management staff members. A corporate giving program is not subject to the rules and regulations governing private corporate foundations.
A company can create a corporate foundation as an independent, tax-exempt private foundation. A corporate foundation is usually started with a single gift that can become the endowment, to which the company can add future contributions as it wishes. The foundation's officers are usually the company’s owners and key executives, although leaders from headquarters communities are sometimes included. At some companies, employee committees make giving recommendations about projects they believe are worthy of support. The corporate foundation is subject to the same rules and regulations applicable to other private foundations.
Companies can create their own donor advised funds at a community foundation of their choosing. For more information on this option, see Give to or through a Community Foundation.
Employee Matching & Non-Cash Giving
In addition to awarding cash grants to charity, companies often offer to match their employees’ gifts of cash and volunteer time to nonprofit organizations. Many companies assist and encourage their employees to give by organizing workplace giving programs (also known as "federated funds") and by facilitating payroll deductions for employees' charitable gifts. Companies sometimes match gifts that their employees make through workplace giving programs.
Some companies also organize employee workplace volunteer efforts, donate "in-kind" gifts of their products, or offer their services to charities on a free "pro bono" basis.
KEYS TO SUCCESSFUL CORPORATE GIVING
, a recognition program for corporate givers, there are four key ingredients to successful corporate philanthropy:
1. Encourage employee participation. 89% of Keystone survey respondents involve their employees in the company’s charitable giving decisions.
2. Manage the process. Have a rationale for what you are doing, develop guidelines and objectives, budget your giving and stay focused.
3. Keep top management involved. The single most important ingredient for starting a corporate giving program is a strong value and support for corporate giving from top management.
4. Just do it!
CORPORATE GIVING EXAMPLES
Some examples of corporate giving:
• Elmer L. Andersen/H.B. Fuller
• Kenneth R. Larson/Slumberland
• Paul White/BTD Manufacturing
For some varied examples of how corporate foundations and giving programs have set up their missions, guidelines and grantmaking policies, visit the websites of the Minnesota-based corporate grantmakers listed below (note: although most of the companies on this list are fairly large, their giving programs have many elements that are equally applicable to smaller businesses):
• 3M Foundation and Corporate Giving Program
• ADC Foundation
• Best Buy Children's Foundation
• Cargill Foundation
• H.B. Fuller Company Foundation
• General Mills Community Action
• Medtronic Foundation
• Target Foundation
Corporations can use their charitable efforts to improve their competitive context —the quality of the business environment in the location or locations where they operate. Using philanthropy to enhance context brings social and economic goals into alignment and improves a company’s long-term business prospects—thus contradicting Friedman’s first assumption. In addition, addressing context enables a company not only to give money but also to leverage its capabilities and relationships in support of charitable causes. That produces social benefits far exceeding those provided by individual donors, foundations, or even governments.
A handful of companies have begun to use context-focused philanthropy to achieve both social and economic gains. Cisco Systems, to take one example, has invested in an ambitious educational program—the Cisco Networking Academy—to train computer network administrators, thus alleviating a potential constraint on its growth while providing attractive job opportunities to high school graduates. By focusing on social needs that affect its corporate context and utilizing its unique attributes as a corporation to address them, Cisco has begun to demonstrate the unrealized potential of corporate philanthropy. Taking this new direction, however, requires fundamental changes in the way companies approach their contribution programs. Corporations need to rethink both where they focus their philanthropy andhow they go about their giving.
Where to Focus
It is true that economic and social objectives have long been seen as distinct and often competing. But this is a false dichotomy; it represents an increasingly obsolete perspective in a world of open, knowledge-based competition. Companies do not function in isolation from the society around them. In fact, their ability to compete depends heavily on the circumstances of the locations where they operate. Improving education, for example, is generally seen as a social issue, but the educational level of the local workforce substantially affects a company’s potential competitiveness. The more a social improvement relates to a company’s business, the more it leads to economic benefits as well. In establishing its Networking Academy, for example, Cisco focused not on the educational system overall, but on the training needed to produce network administrators—the particular kind of education that made the most difference to Cisco’s competitive context.(For a more detailed look at that program, see the sidebar “The Cisco Networking Academy.” )
The Cisco Networking Academy
Cisco Systems’ Networking Academy exemplifies the powerful links that exist between a company’s philanthropic strategy, its competitive context, and social benefits. Cisco, the leading producer of networking equipment and routers used to connect computers to the Internet, grew rapidly over the past decade. But as Internet use expanded, customers around the world encountered a chronic shortage of qualified network administrators, which became a limiting factor in Cisco’s—and the entire IT industry’s—continued growth. By one estimate, well over 1 million information technology jobs remained unfilled worldwide in the late 1990s. While Cisco was well aware of this constraint in its competitive context, it was only through philanthropy that the company found a way to address it.
The project began as a typical example of goodwill-based giving: Cisco contributed networking equipment to a high school near its headquarters, then expanded the program to other schools in the region. A Cisco engineer working with the schools realized, however, that the teachers and administrators lacked the training to manage the networks once they were installed. He and several other Cisco engineers volunteered to develop a program that would not only donate equipment but also train teachers how to build, design, and maintain computer networks. Students began attending these courses and were able to absorb the information successfully. As Cisco expanded the program, company executives began to realize that they could develop a Web-based distance-learning curriculum to train and certify secondary- and postsecondary-school students in network administration, a program that might have a much broader social and economic impact. The Networking Academy was born.
Because the social goal of the program was tightly linked to Cisco’s specialized expertise, the company was able to create a high-quality curriculum rapidly and cost-effectively, creating far more social and economic value than if it had merely contributed cash and equipment to a worthy cause. At the suggestion of the U.S. Department of Education, the company began to target schools in “empowerment zones,” designated by the federal government as among the most economically challenged communities in the country. The company also began to include community colleges and mid-career training in the program. More recently, it has worked with the United Nations to expand the effort to developing countries, where job opportunities are particularly scarce and networking skills particularly limited. Cisco has also organized a worldwide database of employment opportunities for academy graduates, creating a more efficient job market that benefits its cluster as well as the graduates and the regions in which they live.
Cisco has used its unique assets and expertise, along with its worldwide presence, to create a program that no other educational institution, government agency, foundation, or corporate donor could have designed as well or expanded as rapidly. And it has amplified the impact by signaling other corporations in its cluster. Other companies supplemented Cisco’s contributions by donating or discounting products and services of their own, such as Internet access and computer hardware and software. Several leading technology companies also began to recognize the value of the global infrastructure Cisco had created, and, rather than create their own Web-based learning programs, they partnered with Cisco. Companies such as Sun Microsystems, Hewlett-Packard, Adobe Systems, and Panduit expanded the academy curriculum by sponsoring courses in programming, IT essentials, Web design, and cabling. Because the project was linked to Cisco’s business, it could gain the support of other companies in its cluster and use their contributions effectively.
Although the program is only five years old, it now operates 9,900 academies in secondary schools, community colleges, and community-based organizations in all 50 states and in 147 countries. The social and economic value that has been created is enormous. Cisco estimates that it has invested a total of $ 150million since the program began. With that investment, it has brought the possibility of technology careers, and the technology itself, to men and women in some of the most economically depressed regions in the United States and around the world. More than 115,000 students have already graduated from the two-year program, and 263,000 students are currently enrolled, half of them outside the United States. The program continues to expand rapidly, with 50 to 100 new academies opening every week. Cisco estimates that 50 % of academy graduates have found jobs in the IT industry, where the average salary for a network administrator in the United States is $ 67,000. Over the span of their careers, the incremental earnings potential of those who have already joined the workforce may approach several billion dollars.
To be sure, the program has benefited many free riders—employers around the world who gain access to highly skilled academy graduates and even direct competitors. But as the market-leading provider of routers, Cisco stands to benefit the most from this improvement in the competitive context. Through actively engaging others, Cisco has not had to bear the full cost of the program. Not only has Cisco enlarged its market and strengthened its cluster, but it has increased the sophistication of its customers. Through these tangible improvements in competitive context, and not just by the act of giving, Cisco has attracted international recognition for this program, generating justified pride and enthusiasm among company employees, goodwill among its partners, and a reputation for leadership in philanthropy.
In the long run, then, social and economic goals are not inherently conflicting but integrally connected. Competitiveness today depends on the productivity with which companies can use labor, capital, and natural resources to produce high-quality goods and services. Productivity depends on having workers who are educated, safe, healthy, decently housed, and motivated by a sense of opportunity. Preserving the environment benefits not only society but companies too, because reducing pollution and waste can lead to a more productive use of resources and help produce goods that consumers value. Boosting social and economic conditions in developing countries can create more productive locations for a company’s operations as well as new markets for its products. Indeed, we are learning that the most effective method of addressing many of the world’s pressing problems is often to mobilize the corporate sector in ways that benefit both society and companies.
That does not mean that every corporate expenditure will bring a social benefit or that every social benefit will improve competitiveness. Most corporate expenditures produce benefits only for the business, and charitable contributions unrelated to the business generate only social benefits. It is only where corporate expenditures produce simultaneous social and economic gains that corporate philanthropy and shareholder interests converge.