MAKING CHARITY PAY: Companies such as Microsoft are becoming more strategic in the way they donate money, goods and services to charity - But is it worth the effort? Can charity buy a corporate image? Steve Lilienthal investigates

Quick. Name a company today grappling with severe image issues.

Quick. Name a company today grappling with severe image issues.

Quick. Name a company today grappling with severe image issues.



Chances are you thought of a little software outfit in Washington

state.



Microsoft and its leader, Bill Gates, have addressed the company’s image

problems in several ways over the past few years, and one of the things

they’ve done is to delve into philanthropy.



It remains to be seen whether Microsoft’s largess will melt away the

public’s money envy and give people a warm feeling inside when they hear

the company’s name. But Microsoft’s philanthropic activity raises that

very question: whether giving away millions can help revive a bad

reputation, or at least maintain a decent one.



Microsoft’s software donations to schools and libraries also point up

the biggest trend in corporate philanthropy today: giving to causes that

are linked to a company’s core competency - usually called ’strategic

philanthropy.’ More is likely to be heard about such strategic giving if

the newly formed Committee to Encourage Corporate Philanthropy succeeds

in raising annual donations to dollars 15 billion by 2004 (from just

under dollars 9 billion in 1998). ’We want companies to increase

strategic philanthropy,’ says Paul Ostergard, the committee’s president

and CEO. ’It’s not only altruistic but they also see a business value

for what they give.’





Getting what you give



But are they right in seeing that value in giving? ’You get what you

give’ may be an old saying, but it is highly relevant in today’s

competitive, measurement-oriented business environment. Companies are

starting to be known by the philanthropies they back, even though in

many cases that means being more selective in determining how and who

they support.



’Two key factors have changed the philanthropy landscape,’ says Harlan

Teller, the Chicago-based head of Hill & Knowlton’s global corporate

practice.



’There is the realization that corporate citizenship can have an impact

on issues management and the increasing occupation with corporate

positioning and branding.’



But the jury is still out on whether philanthropy improves a company’s

image.



On one hand, in a reputation survey done last year by New York

University’s business school, Microsoft ranked high for vision,

leadership and financial performance, but low in emotional appeal and

social responsibility - despite giving away dollars 25 million in cash

and dollars 79 million in software in fiscal year 1999.



’It seems to me that (Microsoft’s philanthropy) has had minimal impact

on its corporate reputation,’ says Robin Kim, a Cohn & Wolfe group vice

president and manager of the firm’s San Francisco office.



On the other hand, there are some statistics in philanthropy’s

favor.



The 1999 Cone/Roper study on social marketing shows that over 80% of

Americans have a more positive image of companies that support causes of

interest to them. The study also notes that among the 10% of the US

population considered to be ’influentials’ - people who help shape

trends - nearly half are able to spontaneously name a good corporate

citizen. Wal-Mart, McDonald’s, Procter & Gamble and Ben & Jerry’s are

traditionally among the leaders.



Merle Lawrence, senior manager for community affairs at Levi Strauss,

insists that one advantage of her company’s global giving program has

been to shield the company from bad press.



Sometimes the benefits can come from far afield. For example, in the

early 1990s, AT&T’s foundation addressed issues such as promoting the

importance of the federal welfare program Women, Infants and Children

(WIC). While that cause is outside the company’s immediate business

interest, AT&T’s lobbyists were at the same time advocating that

industry, rather than government, should be the main force in the

Internet’s growth. Because of the work on WIC, AT&T CEO Robert Allen

participated in a 1992 post-election summit. After addressing the

nutrition issue, then President-elect Bill Clinton called upon Allen to

discuss the information super-highway, which gave him the chance to

deliver the points favored by his government affairs staff.



But of course, giving away money or services isn’t a panacea.

’Philanthropy is only one of the pieces of the puzzle,’ insists Dinah

Waldsmith, the manager of communications initiatives at Business for

Social Responsibility, a group in San Francisco. ’A company can’t give

money to environmental organizations and then continue to drop toxic

waste and expect to be viewed as a good corporate citizen.’



Similarly, B.J. Cooper, senior vice president for strategic

communications at APCO Associates in Washington, DC, says a long-term

view is crucial; firms that think they’ll get a reputation quick-fix

through philanthropy should think again. ’If a company comes to us and

says, ’We want to raise the company’s profile by spending dollars

100,000 on this (charitable) project,’ we would tell them they do not

want to take such a cynical approach. There are better ways to go about

it.’





Strategic giving



One thing’s clear: good deeds can’t buttress a reputation if no one

knows about them. Being too quiet - which several experts say too many

companies are - can cost both the company and non-profits a PR boost.

’The fact is, there is no better opportunity to say nice things about

yourself - that people will actually sit still and listen to - than when

you’re demonstrating corporate largess,’ says H&K’s Teller.



Some large PR agencies such as APCO and H&K have set up practices to

help corporate clients develop more strategic approaches to giving.

Boston-based Cone is just one of the firms that has developed a strong

niche advising clients about philanthropy and cause marketing. But the

big change has been taking place in the corporations themselves.



The strategic approach is certainly a departure from the past. PR

professionals often say - derisively - that in the past the CEO simply

made his pet projects the beneficiaries of corporate charity. Giving was

done more from a sense of civic obligation than for any PR boost.



When, in the 1950s, many larger corporations started forming corporate

foundations, the giving process became institutionalized. However, it

was still often mired in a conventional pattern that lacked verve. By

the early 1990s, new managers were coming into prominence with a more

results-oriented focus. Giving away money while laying off workers

during that period’s recession, combined with the United Way scandals,

added impetus for new approaches that demanded more accountability and

measurement.



In a 1994 Harvard Business Review article, corporate philanthropy expert

Craig Smith noted that companies such as IBM and AT&T ’have come up with

an approach that ties corporate giving directly to strategy.’



Caryn Pawliger, program director at the Public Affairs Council, says,

’More and more giving is moving toward the areas where companies know

best,’ while APCO senior vice president Ellen Mignoni insists that

strategic philanthropy should be considered part and parcel of ’how the

company views itself and its mission.’



For example, at its start in the mid-1990s, the Bill and Melinda Gates

Foundation focused on health issues and improving life in the Pacific

Northwest. But Gates later broadened the scope to include donating

computers to libraries and schools, and Microsoft moved to match that by

giving software (both entities have promised to give dollars 200 million

each).





Giving in all areas



In another example of strategic philanthropy, last year the PacifiCare

Foundation, the charitable arm of the California-based health

maintenance organization, established a partnership with the American

Diabetes Association to heighten awareness of the disease among senior

citizens. The goal is to have, through better management, fewer hospital

stays and emergency room visits by seniors at PacifiCare and other

health facilities. The foundation gave a check for dollars 500,000 last

year to the ADA and has pledged dollars 1 million this year.



’It seemed to be a natural match,’ says Nick Franklin, PacifiCare’s

senior vice president for public affairs. ’Diabetes is one of the

disease conditions targeted by our medical management team.’



In October 1999, ConAgra launched a more strategic philanthropic program

to capitalize on its status as America’s second-largest food

producer.



Former corporate communicator Lynn Phares is now president of the

ConAgra Feeding Children Better Foundation. ConAgra has partnered with

Second Harvest, a national network of food banks, to provide the

computers and trucks that can bring about better coordination between

food banks and food processors.



Similarly, it’s not surprising that much of Levi Strauss’ giving

addresses issues concerning younger adults; the company’s strongest

market is 15-to-24 year olds, according to Lawrence, the company’s

community relations manager. In recent years, the foundation and the

company’s marketing department have been jointly sponsoring projects

like PAX, a national student-led group tackling gun violence. The brand

gave money for a concert tour last summer, during which PAX conducted

community outreach. This year, the concert tour is being repeated and

the foundation is upping the commitment to dollars 250,000 to cover

Internet and grass-roots organizing.



Levi’s has traditionally devoted 2.5% of pre-tax profits to corporate-

and foundation-giving programs - more than double the typical average

for a US company. Because of the tough times the company is going

through, that percentage has been falling. Last year the company’s

combined giving was just over dollars 20 million in over 40 countries.

This year it will be about dollars 16 million.



A strategic approach is often centered on the community in which the

company conducts its business. For example, Wal-Mart is a heavy

contributor to community causes, donating an estimated dollars 163

million in 1999 through a variety of efforts. Much of the giving is done

on the local level, providing college scholarships and funds for

churches, community charities and the Boy and Girl Scouts. Home Depot

conducts similar charitable efforts on the local level.



In Levi’s case, the company’s community giving can mean global

giving.



As much of the clothing maker’s work has shifted overseas (it closed

nearly 20 US plants in recent years), so has its philanthropy; 40% of

corporate and foundation giving is currently done outside the US to

communities that Levi’s relies on to assemble its products, including

towns where subcontracting is done. At the same time, it maintains

charitable programs in US cities three years after plant closings, with

an emphasis on job training and creation.



It’s not always about the cash



As Microsoft’s software donations show, philanthropy doesn’t mean giving

only cash. In fact, ’show me the money’ apparently means little to the

public when measuring a corporation’s citizenship. In a 1998 H&K

Corporate Citizen Watch survey, 43% of respondents said that donations

of products or services are the ’most impressive’ forms of commitment,

while another 37% cited employee volunteering. Only 12% cited giving

large sums of money.



Optical retail chain LensCrafters has donated eyeglasses to 1.3 million

underprivileged people. LensCrafters doctors also visit nursing homes,

shelters and health fairs to provide screening and repair services.

Similarly, Timberland, in addition to providing cash contributions, has

promoted employee volunteerism through its association with City Year, a

community service program in Boston for youth that served as the model

for AmeriCorps.



Timberland employees donated over 20,000 hours of service in 1998.



One downside to the strategic trend may be cynicism on the part of some

observers that a company is really giving for selfish reasons. In

Microsoft’s case, several critics say Gates and company were donating

equipment and software only to expand their market - by hooking

teenagers on Windows.



’Giving away software is a sound marketing strategy, but it’s not

philanthropy, any more than it would be if the Ford Foundation gave away

millions of dollars worth of free transmission parts that only fit Ford

cars,’ wrote Tom McNichol in a 1997 Salon article.



The criticism does not ruffle Bruce Brooks, Microsoft’s director of

community affairs. Brooks points out that the company donates its best

products to libraries and they are free to add or drop programs as they

choose.



’It is a tangible product that we have here and we think it helps

people,’ he says. He likens the barbs to rebuking grocers for giving

away food to food banks. Brooks disclaims the idea that Microsoft would

try to ’buy’ reputation, though he hopes its charity helps put forward a

human face for the company.



The issue is clearly a sticky one for many companies. ’Companies put

themselves at risk of being questioned for their motives or being

defensive about something that’s inherently a good thing,’ says C&W’s

Kim. ’But just like you’d have a crisis communications strategy in place

before the crisis hits, you want to be a good corporate citizen before

that reputation is ever questioned.’



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