Trust is good!

In a previous posting, I talked about “trust as a competency” and my discussions with Stephen MR Covey about his recent book The Speed of Trust: the One Thing that Changes Everything. So I was intrigued by a recent article “Corporate Philanthropy Inspires Trust: Does It Also Prompt Higher Profits?”  on the [email protected] web site. This article also ties in nicely with two topics that I will cover more in the future—trust and “doing good to do well”.

As summarized in the article's introduction:

"Wharton finance professor Vinay B. Nair and two other researchers looked at whether being charitable -- such as donating money to medical research or to organizations that promote economic self-sufficiency -- helps a company's financial picture. They concluded that it all depends on the type of industry.” 
And “They cite a survey last year by the Economist on corporate giving. Of the 135 executives and 65 investors who responded, 85% said corporate social responsibility was a "central" or "important" consideration in investment decisions. That figure was almost double the 44% who responded similarly five years before.  But Nair and his colleagues theorize in the paper that charitable giving may be good for the bottom line because it helps to convince consumers that a company and its products are trustworthy. Trust factors into many purchases, particularly when it is not obvious why one product is better than another. Nair uses the example of "natural food" products, which typically are priced higher than standard items even though they may not taste any better. Natural foods are a rapidly growing business."

While I’m very supportive of this notion of “doing well by doing good”, I think this article unfortunately exemplifies a very traditional approach to corporate philanthropy. In doing so, they miss an alternative model that can have much more impact for both sides and provide a very sustainable way for corporations to be very philanthropic. This alternative model is characterized by “enlightened self-interest” and is what I like to refer to as “strategic philanthropy”.

The Wharton research missed an opportunity when they specifically excluded from consideration:

“… good deeds that could also have the effect of boosting a company's productivity and, in turn, its profits. For instance, a company's decision to operate an environmentally friendly plant could increase efficiency. Likewise, a company that offers flex time and good maternity leave benefits may reap the benefits of a more loyal and productive workforce."

Strategic philanthropy is not an oxymoron!  Some define it as "how companies can provide money, capabilities, and partnerships to charitable causes in ways that sharpen their own competitive edge.”  One of the best explanations of this different approach to philanthropy was in a 2002 Harvard Business Review article “The Competitive Advantage of Corporate Philanthropy” by Michael Porter, University Professor, Harvard Business School, and Mark Kramer, Managing Director, Foundation Strategy Group.

In their article, they asked "Should corporations engage in philanthropy at all?" and argued that companies might be better off NOT engaging in traditional philanthropy if it is done in an ad hoc way, (such as a small amount of dollars being given to a charity or local cause) or is used just for public relations, advertising, or high profile sponsorships. However, Michael and Mark believe that when the philanthropy is strategic and tied to companies' social and business objectives, there are greater benefits.

Porter and Kramer found that only a few companies actually engage in strategic philanthropy. At the time, they cited Cisco as a company that has truly maximized the value of philanthropy by focusing on both its economic and social objectives through the development of the Cisco Networking Academy Program.

Since this Harvard Business Review article can only be ordered as a reprint , here is a good synopsis of the article:

“When it comes to philanthropy, executives increasingly see themselves as caught between critics demanding ever higher levels of "corporate social responsibility" and investors applying pressure to maximize short-term profits. Increasingly, philanthropy is used as a form of public relations or advertising, promoting a company's image through high-profile sponsorships. But there is a more truly strategic way to think about philanthropy. Corporations can use their charitable efforts to improve their competitive context—the quality of the business environment in the locations where they operate. Using philanthropy to enhance competitive context aligns social and economic goals and improves a company's long-term business prospects. Addressing context enables a company not only to give money but also leverage its capabilities and relationships in support of charitable causes. Taking this new direction requires fundamental changes in the way companies approach their contribution programs. Adopting a context-focused approach requires a far more disciplined approach than is prevalent today. But it can make a company's philanthropic activities far more effective.”

With this different model in mind, you might want to check into the “what and how” of your organization’s philanthropy.  I suspect that most of you will find that the traditional model is being practiced. And while I want to be clear that just about any form of philanthropy should be applauded (and certainly there is no end to the need for such giving back), I’d like you to consider how much more effective and lasting it could be if we were to adopt the model of strategic philanthropy. Wouldn't this approach be more effective, sustainable and able to increase over time?

As I mentioned at the outset, this topic of “doing well by doing good” and specifically this model of “strategic philanthropy” is one that I will return to in future postings. In the interim, please let me know if you have any examples or comments to support or refute this model.

For now, I’ll leave you with a great summary of philanthropy that I found on the web site of a company called Strategic Philanthropy:

An Effective Giving Strategy:

• Meets personal, corporate or organizational interests and passions
• Defines an essential mission, purpose and priorities
• Addresses/responds to real needs in local and world communities
• Incorporates clear, established rationale and operational procedures
• Integrates an ongoing evaluative component that is meaningful, flexible and accessible to all involved
• Benefits from, and contributes to, the experiences of others by connecting to the larger philanthropic community
• Is a journey of learning and listening

And…most importantly…is fun and deeply fulfilling.

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Comments

[Maggie F. Keenan, Ed.D.]

As someone who has been in the field of strategic philanthropy for over a decade, I am delighted to read your post. You are dead on what strategic philanthropy is and, foundations have been using this model for quite sometime. Companies in the past 6 years or so, are just coming around to fully practicing this model. As we all know, charity is a uni-lateral exchange of a gift. It's about simply writing a check or donating goods because its a good thing to do. Philanthropy on the other hand,is an organized approach to giving with a set of principles and methods to ensure that giving is effective and sustainable -- in it for the long haul and to create social change. It has to be strategic for it to work.

Strategic philanthropy does have a competitive edge to it, but should not be what it is about for corporations. I say if corporations want a marketing program that includes it's giving -- have a cause related marketing program (CRM). CRM is about giving through the promotion/sale of a product or service. It has a shelf life - and works so as long as the product sells. It's not a charitable deduction for corporations - rather a marketing expense. This model is all about promotion with a spin. I am not a proponent of CRM. If they want a marketing program with a spin, hire a marketing strategist. If they want a strategic philanthropy program that creates social change and makes an impact, hire a philanthropy strategist.

Lastly, strategic philanthropy can be measured. In loose terms we say they have 'made a difference'. In concrete, measureable terms, we say they have made an 'impact'. (impact evaluation).

cheers!

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