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Not long ago, a company’s philanthropic strategy largely boiled down to a decision about which large, generic charity would receive a donation and how big of a check should be cut. Employees were seldom involved save for very high levels and the giving, done overwhelmingly by big companies with deep pockets, had little to do with the rest of the company’s strategy for growth.
But times have changed. Although companies are still writing checks, they’re doing it in the context of carefully crafted strategies that target specific causes based on geography and/or alignment with business goals. When they do write checks, they expect transparency and results-oriented data. They supplement cash contributions with product donation, skills-based volunteering and long-term relationship building with nonprofit organizations to provide ongoing resources. The choice of cause to support is no longer dictated by the CEO’s passion but rather by company strategy, with employees contributing their vision for making the world a better place.
GIVING ON THE RISE
While still not at pre-recession levels, corporate giving rose by 12 percent in 2014 over the prior year to $17.8 billion, according to “Giving USA,” an annual report on American philanthropy.
The report attributed some of that upswing to faster growth in corporate pre-tax profits and the gross domestic product, but at least some of the increase can be attributed to more companies across the spectrum participating with in-kind donations and volunteer hours counting along with cash.
“Passing out United Way checks is faceless, nameless and, frankly, meaningless for creating a culture of helping people,” says Tony Aquila, founder and CEO of Solera, a 10-year-old, $1.3 billion provider of risk and asset management software and services to the insurance industry. Instead, Solera funds six philanthropic expeditions per year that allow employees to take up to a six- month paid sabbatical to work on an approved project.
Aquila believes that this deeply personal work benefits his employees and the company’s culture at least as much as those they help. “This is not about ‘corporate philanthropy,’” he asserts, noting that he objects to the term. “It’s about giving not only to those lives that you touch but the lives within your company that you allow to touch them.”
More and more often, companies are seeing the causal relationship between giving back to the community, whether local or global, and the company’s own health. “What’s changed over the years is that it used to be a ‘nice to do,’” says Daryl Brewster, CEO of CECP, a coalition of 150 Fortune 500 CEOs who believe that investing in societal engagement brings a critical return. “We’re
approaching an emerging sea change as leading companies move from occasional check-writing to increased community engagement, viewing societal advancement as a key measure of business success.”
The market has responded in kind. Brewster points to the 2012 study by Babson professor Raj Sisodia, which looked at 28 companies identified as the most conscious—“firms of endearment” as Sisodia calls them—based on characteristics such as their stated purpose, compensation, quality of customer service, investment in their communities and impact on the environment. Out of the 28, the 18 companies that are publicly traded outperformed the S&P 500 index by a factor of 10.5 over the years 1996-2011.
Jane Madden, managing director and head of U.S. Corporate Responsibility for global PR firm Burson-Marsteller, says the outperformance of socially responsible companies isn’t so much about investors rewarding companies for their good deeds as it is that those companies that invest in their environments and communities make better strategic decisions. “If you are measuring and
managing your environment, including social and governance impact, you’re just a smarter company. You’re minimizing risk and maximizing opportunity and that has a definite positive impact on the bottom line.”
MORE WAYS TO GIVE
John Ferdinandi makes it a practice to get engaged in the local communities in which his company, Milano Restaurants, operates. With 43 restaurants and 18 franchises located primarily in California, Milano habitually approaches local communities to find out what they most need. That presence and involvement gives Milano an advantage vis-à-vis other fast-casual restaurant chains.
“We want the consumer to know that we’re more than just a chain coming in,” says Ferdinandi. “It’s the idea that we’re not just here to sell you a good or service, but to participate. Your issues are our issues, and a stronger community is a benefit both to the community at large and to the business operating within it.”
The data show that consumers increasingly do make purchasing decisions based on a company’s corporate citizenship. According to Nielsen’s 2014 corporate social responsibility survey, 55 percent of global respondents said they are willing to pay extra for products and services from companies that are committed to positive social and environmental impact, up from 50 percent in 2012 and 45 percent in 2011.
Milano has primarily focused on youth-oriented philanthropy and projects that feed the poor, and is an example of the creativity companies are using to design efficient ways to give back to communities. Most recently, Blast 825 Pizza, a quick-fired pizza concept and division of Milano Restaurants, opened a new restaurant in Rocklin, California, and initiated a program called “Blast Buddies” to support pet-centric causes in each restaurant’s local area. Representatives from the charity come in and design their own custom pizza.
Then, for a month, that pie stays on the menu with proceeds going to the charity and Blast 825 matching. For the Rocklin opening, the Placer SPCA designed a signature pizza they dubbed the “Pet Lover’s Pizza,” which raised more than $6,000 for the charity. Ferdinandi notes that due to technology and social media the public is more aware and involved in different causes. “We can get more information out to more people about a subject like feeding the poor or helping animals than we could 10 years ago,” he says.
For customer-facing retail food service companies like Milano, it may be relatively easy to find a charitable cause that integrates well with the company’s mission. Others have to reach outside their core competencies, but they operate on the same principle that a better world means a better world for business as well. “If you had a factory in Guatemala or Mexico, and you were surrounded by villages who were very hostile to you, it would be to your best interest to go out and create prosperity and stability in those villages, so you would have more freedom to operate and wouldn’t have the pressure of security, or the need to move your factory at great expense,” says Stephen Miller, CEO of Dillon Gage Metals, who objects to the term “giving back.” “It kind of implies that business people have taken things and now we’re feeling guilty, so we’re going to give it back to the poor folks.
Most of the men and women I know in business have worked their tails off and sacrificed a great deal for the success they enjoy. So, for me, this kind of work is not a social payback. It’s just plain smart business.”
In 1984, Miller cofounded the nonprofit HELPS International to provide relief and development services for the country of Guatemala. The organization also provides loans to farmers to purchase quality fertilizer and tools to grow corn more efficiently. Executives and employees at Dillon Gage support HELPS by participating in community projects, including installing new stoves and water filters in homes, which save villages hundreds of thousands of dollars each year. Other employees participate by raising money or covering for employees who travel to Central America to donate time and service.
Miller notes that people genuinely like to work for “good” companies. “They like to know that the people who employ them are concerned about others and are developing programs that give back and allow employees to give back,” he says. The more connected they feel to their employer, outside of their normal job description duties, the longer they’ll remain with the company, which ultimately saves the company thousands of dollars in turnover costs.
Miller is among many CEOs finding that good corporate citizenship is increasingly an advantage in the ongoing war for talent. A 2011 Deloitte Volunteer Impact study found that 61 percent of Millennials consider a company’s commitment to the community when making a job decision.
“One of the things I’ve seen in the Millennial generation is that they have a real desire to give back to the community. But it’s also intensely personal for them,” says Joe Schumacher, president and CEO of Goddard Systems, which operates the Goddard School franchise. Schumacher instituted a program to offer the company’s 140 corporate-office employees “volunteer time off,” or eight VTO hours to help the charity of their choice. “I’m not an expert on the evolution of this, but 10 or 20 years ago, corporations would say, ‘This is what we’re doing.’ I felt that empowering employees to make their own choices would be more meaningful.”
Bob Boudreau, CEO of WinterWyman, a global recruiting firm, agrees. When he formalized the company’s giving strategy 10 years ago by creating a new role for community development and employee engagement and establishing a new committee to develop philanthropic projects and execute them, he was clear on one thing: “I said, ‘I don’t want this to be the Bob Boudreau philanthropic club. I want it to be what you guys want it to be’. I do not have veto power.”
Even as a recruitment firm, WinterWyman’s senior team did not expect the new strategy to impact its own recruiting. “That wasn’t even on our radar screen,” says David Sanford, EVP, client relations. “[Doing good] was our initial driver, but what we found was that when you do this stuff, you end up reaping these ancillary benefits you didn’t anticipate when you started out. As we were working the marketplace and trying to attract people, 20- and 30-somethings, that became an important part of why they wanted to come here.”
Bill Austin, founder and CEO of Starkey Hearing Technologies, puts it simply: “People like to be served by people who care.” Starkey, a Minnesota-based, 4,100-employee company that is the largest hearing aid manufacturer in the U.S., has its own foundation that has pledged, as part of the Clinton Global Initiative, to fit one million people across the globe with hearing aids this decade.
Austin spends the majority of his time doing hearing aid fittings for challenging cases around the globe, and freely admits the company could be earning more if he worked more hours on the business side. “But then I’d have no life. So I traded money for life,” he says, pointing out that many younger employees are all too happy to make that same trade-off today. That might not work as well, he adds, if his company were not privately owned. “I would be sued by my shareholders if I was public,” he says.
Edwards Lifesciences is a public company, but CEO Michael Mussallem says they’ve been able to keep the board happy by watching global-giving norms among high performing companies. “We try to stay mindful of that and responsible from a shareholder point of view.” That means creating clear goals with measurable results. Last year, the Edwards Lifesciences Fund celebrated its 10th anniversary by launching a new initiative called “Every Heartbeat Matters,” with a 2020 goal to impact the global burden of heart valve disease by supporting the education, screening and treatment of 1 million underserved people. The fund will support 25-plus nonprofit partner organizations selected to help Edwards Lifesciences reach its target.
“We expect, in return, that they will be able to tell us what their results are,” Mussallem says. “How many people who were underserved did you treat, how many were screened and so on. We keep score on that.” The company also has a challenge that every one of its 9,500 employees participate in at least one charitable activity per year. They’re close to 75 percent now, and Mussallem is confident they will reach full participation.
Mussallem notes that for a long time, the prevailing wisdom was that it might be idealistic to think you could have both a rewarding return for shareholders and be a great place to work. But, as it turns out, the two really go hand in hand. As Boudreau puts it, “It’s not rocket science. It’s just got to matter to you.”