Globalization Could Erode Corporate Giving in U.S., Expert Warns

As companies expand their operations overseas and make long-term cuts in their work forces over the next decade, corporate philanthropy in the United States is likely to decrease, an expert on business and charity told fund raisers gathered here last month for the 25th annual Fund Raising Day in New York conference.

Susan Raymond, managing directorof research, evaluation, and strategic planning at Changing Our World, a New York consulting company, predicted that the globalization of corporate operations could prompt many businesses to increase the amount of charitable giving they do overseas, which may cause cutbacks in domestic giving.

The financial and insurance industries will become global in the next five years, she predicted, and since many of the companies in those industries have well-established, significant corporate-giving efforts, the effects could be substantial. What’s more, the growth of the electronic marketplace, which lessens the importance of a company’s or customer’s physical location, could further erode companies’ practice of restricting much or all of their giving to the neighborhoods and communities where they do business.

“If I were a community organization,” she said, “I’d be worried about it.”

Ms. Raymond said that nonprofit officials should periodically set aside time to forecast the effect of such economic trends on their ability to support the programs and services they offer — or plan to offer — and she advised fund raisers and nonprofit leaders to read publications such as The Economist and The Financial Times.

Ms. Raymond added that economic changes “are the early-warning systems and the trends you have to get out in front of.”

She also said nonprofit groups could be affected by the rising number of jobs that have been permanently eliminated by fundamental changes in various industries — especially as technology has changed how many companies operate. Corporations in industries undergoing such structural change, she said, are likely to curtail giving or lose their connection to the communities or causes departing workers cared about.

Furthermore, Ms. Raymond noted, many companies are turning to temporary workers, who don’t have the same job security and benefits as other workers — and therefore might not feel as comfortable making donations.

If philanthropic giving by companies declines in coming years, however, charities may be able to offset resulting losses by taking advantage of another growing trend: increasingly sophisticated marketing deals between charities and corporations, said Michael P. Hoffman, chairman of Changing Our World.

A growing number of companies have agreed to work with a select number of charities in multiple ways, such as sponsoring events, enlisting employees to volunteer, encouraging customers to make gifts to an organization, earmarking a portion of product sales for donations, and paying for publicity and advertising materials about a charity’s cause.

Companies have many reasons for wanting to step up their efforts to collaborate with charities, Mr. Hoffman said. Chief among them: the desire to appear more socially responsible in the wake of highly publicized financial scandals involving WorldCom, Enron, and other companies; an interest in finding cost-effective ways to reach new audiences in a slow economy; and studies showing that consumers and employees respond favorably to companies that support charitable causes.

As a sign of corporations’ growing interest in broadening their affiliations with charitable causes, Mr. Hoffman pointed to his own business, which was one of four companies specializing in working with charities that have been purchased in the past six years by Omnicom Group, which manages advertising, marketing, and broadcast and digital media companies that serve corporations worldwide.

Omnicom made the deals, he said, because it believes companies are increasingly seeking an avenue to charities and new relationships that can enhance their image and the bottom line.

While companies may be more interested in working with charities, many nonprofit organizations accept corporate and other grants that they should walk away from, said Gregory L. King, vice president at JPMorgan Chase Bank’s corporate-giving program. For example, he said, charities frequently accept grants for new programs that include little or no money to cover administrative and other overhead expenses.

In addition, he said, fund raisers often make little or no effort to negotiate the terms of a corporate gift.

“What’s missing from the discussion is the recognition that you can speak up.”

Many fund raisers, he added, appear to be overly fearful of losing a gift when, in reality, most corporate-giving officers appreciate a give-and-take discussion and are under increasing pressure to smooth out problems that could keep their grants from achieving desired results.

Compared with their counterparts at private foundations, corporate-giving officers must justify their grant-making decisions to more people, including senior executives, customers, employees, stockholders, lawmakers, grant-ees, and other community leaders, many with competing interests, said Mr. King.

Some people with significant power at his company, he added, are not happy that the bank gives away $86-million a year, since that money could instead be applied to profits. The corporate-giving office, he said, “is forced to try and keep them happy — or at least not angry. Every single day, I have to explain why we do what we do, even five years after making a grant in some cases.”

To appeal to corporate grant makers, he said, charities should strive to show how their work is related to a company’s objectives and, if possible, the bottom line.

Mr. King also said he wished more charities would concentrate on finding cost-effective ways to carry out their missions of fighting poverty, illiteracy, and other problems, since eradicating those conditions would vastly improve the climate in which his company does business.

Instead, he said, too many fund raisers are bent on impressing corporations with ideas for new programs and statements about excellence that are often not supported by the facts.

“I don’t want to see glossy proposals and new ideas,” Mr. King said. “I’d rather hear about the 75 families you helped buy a home last month. Stick to your knitting and sell me that.”

Adding to recent pressure on corporate-giving officers and grantees alike is continuing upheaval caused by mergers, acquisitions, and executive turnover, Mr. King and other speakers said. Having been through three mergers, Mr. King said that, with each one, it took three or four years before the corporate-giving program was operating smoothly and both its staff and grantees were comfortable with the new direction.

Mergers and acquisitions, said Christine Park, president of the Lucent Technologies Foundation, in Murray Hill, N.J., frequently involve changes in corporate-giving staff and a reshuffling of priorities, if not a complete re-thinking of philanthropic objectives.

“Very seldom does it mean more money,” she said. “My sense is that overall giving stays flat or goes down. Even when they promise the same or more money, it’s only for the short term.”

When Honeywell International, in Minneapolis, merged with AlliedSignal, in Morristown, N.J., in 1999, the newly formed entity announced that its giving in the Minneapolis region would remain at $7-million in 2000. But, Ms. Park said, donations have since declined. (Honeywell did not respond to repeated requests from The Chronicle to provide a figure for how much it gives annually in the region.)

Ms. Park, who has led three corporate-giving programs through mergers or other corporate restructuring, said grant seekers need to realize that it often takes awhile for decisions to be made. She said that she was irritated by grantees who insisted on meeting with her immediately following the announcement of a merger or other significant shift.

“I didn’t respond well to the frantic people,” she said. “And it doesn’t work to say, ‘But you’ve always funded this.’”

She suggested that fund raisers should ask when the corporation will know more about its grant-making direction and be ready to consider proposals. They may then be able to find winning arguments for how their charities are a good match with the revised philanthropic program, though in other cases, she said, “you may have to move on.”

For charities to weather mergers and other organizational changes that endanger their corporate support, “your relationship shouldn’t just be with one person at a company,” said Gregory L. Boroff, vice president for external relations at the Food Bank for New York City. Instead, he said, fund raisers should try to establish close relationships with executives from as many parts of the company as possible.

Mr. Boroff offered the following additional advice for groups seeking fund-raising partnerships with corporations, based on his experience of working to recruit and retain about 300 corporate supporters for the food bank, up from only about 50 two years ago, and his observations of other successful colloraborations between businesses and charities.

Don’t be afraid to make cold calls. Fund raisers are sometimes advised against making cold calls to donors, but that approach can open doors at companies, said Mr. Boroff.

Two years ago, the food bank used cold calls to create its annual “Bank to Bank” campaign, which has recruited 175 financial institutions that hold month-long food drives to solicit food and cash donations from customers and employees.

The food-bank staff simply telephoned the banks and asked for a 15-minute informational interview with someone in the marketing or corporate-giving department, said Mr. Boroff.

At the meetings, he said, “we told them, ‘We’re not here to make an ask but to brainstorm an idea.’” In addition to recruiting many banks with that approach, he said, every informational interview yielded referrals or introductions to officials at other financial institutions.

Avoid rushing into complicated marketing deals. Instead of attempting multiple revenue streams in a new corporate partnership, charities should add new fund-raising components gradually, only after an initial joint effort proves to be appropriate, effective, and mutually beneficial, said Mr. Boroff.

The best relationships between companies and businesses build over time, he said. “You don’t just get it all in the first year.”

Be a bridge to desirable audiences. Charities can sometimes persuade corporations to participate in lucrative promotional partnerships by giving a company the chance to interact with potential customers, Mr. Boroff said.

He noted that a food-tasting event held by Share Our Strength, a Washington organization that raises money to fight hunger nationwide, raises more than $4-million each year in more than 60 cities by featuring chefs and restaurateurs who provide samples of their dishes.

Corporate sponsors, including cooking-equipment, bottled-water, and table-linen companies, donate cash or supplies to the event to get their names and products in front of chefs and restaurant owners.

Charities can also appeal to corporate officials by giving them a chance to meet each other, said Mr. Boroff.

His food bank recently started a series of breakfasts to discuss the food bank’s activities. A big draw for executives who attended was the chance to meet other local executives, and many exchanged business cards at the event, Mr. Boroff said. “Everyone’s looking for more business and connections,” he said.

Reach out to corporate supporters’ employees. “My ultimate goal with any corporate sponsor is to get to their employees — and their customers, if possible,” said Mr. Boroff. For example, he has invited groups of employees to food-bank gatherings where they help pack food baskets for the needy. Such activities often do far better in attracting new donors than direct-mail or telemarketing appeals, he said.

Know a company’s portfolio and its competitors. Companies that have marketing relationships with charities often own or partner with other companies. “You can almost always gain entry into those companies by saying that you’re working with their sister company,” Mr. Boroff said. “It makes a world of difference.”

On the other hand, he added, charities can easily turn companies off by not knowing who their competitors are. “If you have a dinner, and you have a champagne sponsor, you may also need a wine sponsor,” he said. “But if you feature a wine made by one of their competitors, that’s a bad deal.”