On-the-Job Goes Online

United Ways seek to capitalize on success of electronic drives

Electronic giving, long touted as a revolutionary way to make soliciting and processing on-the-job donations easier,

cheaper, and more efficient, may finally be living up to the hype. Last year employees pledged tens of millions of dollars online, and experts predict that number will climb into the hundreds of millions of dollars with campaigns set to start this fall. Some think the total could reach $1-billion by 2005.

For local United Ways, long the dominant players in on-the-job charity drives, the trend represents a high-stakes battle for the philanthropic loyalty of millions of American workers. If United Ways can capitalize on the growth of online giving, they will be free of much of the administrative burden and expense of running paper-based campaigns, allowing them to focus more on attracting new donors, identifying social problems in their localities, and developing plans to help solve them.

But if United Ways fail to take advantage of the new technology, they risk ceding their historic franchise to a growing list of for-profit competitors. Many of those companies are offering employers not only sophisticated electronic-pledging systems, but also the technology to help them manage their matching-gift and volunteer programs.

Collaborative Approach

Responding both to a rising number of employers that want to move their charity drives online and to the growing wave of for-profit competition, United Ways are banding together to build electronic-pledge systems — collaborative efforts that encompass United Ways in more than one state.

The largest such effort is United-eWay.org, founded last year by Valley of the Sun United Way, in Phoenix. United-eWay is made up of 65 United Ways across the nation.

Merl E. Waschler, president of United-eWay, estimates that member United Ways will raise $250-million to $300-million through the pledging system this year, up from $20-million collected in a test of the system during the 2001-2 campaign season.

Bank One Corporation and Intel Corporation are among the companies that will use the United-eWay system to run their employee charity drives this year.

Sprint Communications Company last year used United-eWay to run its annual campaign for the 20,000 employees that work at the company’s Overland Park, Kan., headquarters. Workers donated $2.8-million, up 17 percent from the year before.

Julie Hershey, Sprint’s group manager for corporate relations, says that the company saved tens of thousands of dollars in printing and processing costs and hundreds of hours of time by moving its campaign online. And, she says, the online system’s “thermometer” feature that tracks the results of the drive in real time added an element of drama to the campaign.

“Employees could see very quickly what the progress was toward making our goal,” she says. “That was exciting because we didn’t have that capability when we did paper pledge cards.”

Competition From Business

Current and former officials of the Phoenix United Way say it was competition from the commercial world that spurred them to start United-eWay. In the late 1990s, the United Way found itself for the first time vying with for-profit companies — many of them flush with venture capital — for on-the-job campaigns, according to Brian T. Hassett, then president of Valley of the Sun and now head of United Way in Chicago. “We felt like we were losing control of our donor corporations’ United Way campaigns,” recalls Mr. Hassett.

The Phoenix United Way spent approximately $100,000 in 2000 to build an electronic-pledge system, which it used during the 2000-1 campaign season.

Although the system met the needs of the companies that had asked for an online-campaign option, the United Way quickly realized that it wouldn’t be able to compete on its own with the for-profit companies that were moving onto its turf.

“What we realized was that to do this right, it was going to take resources beyond our own,” says Mr. Waschler, who also serves as chief operating officer at Valley of the Sun United Way. “We believed there was enough commonality in what we were doing at our United Way with other United Ways that we could work together.”

Besides the United-eWay system, smaller collaborations also are springing up among United Ways. The United Way of Greater Toronto has developed a pledge system called UnitedWay@Work, which is being used by United Way of Massachusetts Bay, in Boston, and several United Ways in Canada. In addition, the United Way Processing & Information Center, a nonprofit organization in Georgetown, Ky., provides six United Ways, in Indiana, Kentucky, North Carolina, and Ohio, with administrative services, including online-campaign technology.

Michael Schreiber, group vice president for Internet strategies at United Way of America, the Alexandria, Va., umbrella group for 1,400 United Ways, sees benefits in online collaborations that extend beyond technology. In recent years, he says, United Ways have been looking for ways to operate less like a loose association of independent entities and more like an integrated national system. The demands of electronic-pledging technology have hastened those changes, says Mr. Schreiber.

Mr. Waschler, of United-eWay, echoes his point. To run on-the-job campaigns for large, national companies that have offices in multiple cities, he says, United Ways will have to improve the way they work together and agree to some common campaign procedures.

“You can’t ask these regional or national companies to create a set of operating parameters that are different in 150 locations,” says Mr. Waschler. “Things that have to do with health and human-service delivery, that clearly needs to be local. But when it comes to some of these business rules — how you communicate information or transfer money — those things are going to have to be standardized.”

Before the Technology Bust

The efforts of United Ways to build online-pledging systems began in earnest at a time when a plethora of well-financed technology start-ups were setting their sights on the business of philanthropy.

Foremost among the early competitors was Charitableway, a San Carlos, Calif., company that raised $43-million in venture capital to build its business. In the fall of 2000, Charitableway administered 12 campaigns, for companies such as Agilent Technologies, the Hewlett-Packard Company, and Morgan Stanley Dean Witter, that brought in more than $13-million. But in March 2001, citing slower-than-expected revenue growth, Charitableway closed.

Despite the company’s demise, United Ways continue to face stiff competition from for-profit companies, including several that survived the dot-com bust on solid financial footing.

CreateHope, a Bethesda, Md., company founded in 1999, for example, was privately financed and expects to reach profitability with several new contracts that it has signed.

KindMark, founded in March 2000, has raised $6-million in venture capital — more than enough, company officials say, to attain profitability by the end of the year.

Other competitors are established companies offering new services. Creative DataProducts, which started in 1974 as a business-forms and printing-distribution company, supplies more than 500 United Ways with printed products such as pledge cards and reminder notices. Last year, the Greer, S.C., company introduced the test version of a new online-pledging system.

JK Group, in Princeton, N.J., was founded in 1989 as a software-consulting company, and its online-campaign offerings developed as an offshoot of the company’s business helping corporations run their matching-gifts programs.

Playing Down Competition

Officials of the for-profit companies are careful to say that they don’t consider themselves competitors of United Ways. But they do point out that corporations are looking for systems that can help with their whole corporate-giving programs — and not just collecting and distributing money from employee charity drives, traditionally the focus of United Ways.

A case in point: Cisco Systems, in San Jose, Calif. After four years of running its online employee-giving program internally and one year with another vendor, the computer-networking company signed a three-year contract with CreateHope in October.

Rebecca Wang, a program manager in corporate philanthropy at Cisco, says that the company was looking for a system that could incorporate the company’s matching-gift program into the donation process, manage its employee-volunteer program, and allow Cisco to expand its giving programs to its overseas offices.

Adam Goozh, president of CreateHope, questions whether United Ways and other nonprofit organizations have the expertise to develop technology to handle such complex functions.

“United Ways do a good job of allocating funds within their communities, and that’s what they should focus on — not necessarily on the fund-raising side of it,” says Mr. Goozh. “That’s what we specialize in, the handling of the money and capturing of data, so we can distribute and process the money most efficiently.”

He adds, “We don’t regard United Ways as a competitor, although I’m sure they regard us as one in a lot of instances.”

Earmarking Gifts

Regardless of who runs electronic campaigns, some United Way officials worry that the ability to make online pledges will accelerate two trends that have challenged them for years.

One is the growing tendency of donors to earmark their gifts for particular charities or causes, leaving less money for United Ways to allocate on the basis of community needs. Some observers worry that online-pledging tools may make it even easier for donors to earmark their contributions.

The other trend is one in which more and more employers are opening their campaigns to nonprofit organizations and charity federations outside the United Way system. Online technology could hasten that trend, some United Way executives believe, because the cost and administrative burden of adding other organizations is much lower with an online pledging system.

“Technology offers, with the flip of a couple switches, a wide-open-choice environment where United Way just becomes one little part of the universe that employees can choose from,” says David C. Odenbach, senior vice president for resource development at the United Way of Greater St. Louis.

Not all United Way officials share that concern, however. Donald X. Campbell, vice president for information technology at the United Way of Southeastern Pennsylvania, in Philadelphia, acknowledges that the Internet can facilitate more choices, for both individual donors and employers. But he thinks that it will improve his group’s ability to communicate with donors and dissuade them from earmarking gifts.

For example, when an employee who had previously earmarked gifts to a youth-services group logs on to an electronic-pledging system to make another gift, the system could show the employee’s giving history, explain that the United Way supports a wide variety of local children’s organizations, and describe the benefits of making an undesignated gift.

“On paper you cannot do that,” says Mr. Campbell. “Online we can.”

The forthcoming annual fund-raising drive will mark the third year that the Philadelphia United Way has offered companies an online-campaign option. Last year, 15 electronic campaigns brought in just under $5-million, almost 10 percent of the $54-million the organization raised through on-the-job charity drives. Donor designations remained flat in most of last year’s Internet campaigns, and decreased slightly in a few, according to Mr. Campbell.

Alternatives to United Way

Charity federations outside the United Way system have mixed feelings about the potential of electronic workplace drives to lead to greater openness.

Internet technology does make it easier for employers to add more choices to their campaigns, says Matthew Howe, executive director of the National Alliance for Choice in Giving, in Portland, Me., an association of more than 50 charity federations. “You can fit only so many choices on a paper pledge form,” he says.

Yet the federations that belong to the National Alliance also fear they could get lost in a sea of options offered to donors online. “When you are one of 10 or even 20 federations on a pull-down menu on an electronic-giving page, it gets a little harder to be visible,” says Mr. Howe.

What’s more, simple inclusion in a list of electronic options may not be all it’s cracked up to be, says Katy Lowery, executive director of the Community Solutions Fund, a federation of 42 social-justice groups in Minneapolis and St. Paul. Depending on how a campaign is run, nonprofit groups and federations may be included in the drive, but not receive the names and contact information of the workers who give them money, she says. Without that information, they cannot thank the donors personally and start to develop a relationship.

With that in mind, the Community Solutions Fund has developed its own online-pledging system. “It was a strategy to prevent getting cut off from connection to our donors,” says Ms. Lowery. The fund tested the Internet pledge system, communitE-solutions.org, in two campaigns last year, bringing in $10,000.

Despite some trepidation about the changes that Internet technology is bringing, United Way executives say they are confident that their organizations will be survivors in the new world of Internet fund raising.

“Being able to buy stocks online didn’t take away the value that a mutual fund plays,” says Mr. Schreiber, of United Way of America. As electronic-pledge technology frees United Ways from the administrative tasks involved in running campaigns, he says, they will be able to focus more attention on identifying local human-service needs, creating plans to solve them, and helping companies develop smart approaches to their fund-raising drives.

Says Mr. Schreiber, “I wouldn’t disagree that there’s a declining value for just shuffling paper, but I don’t know of any United Way that sees that as a meaningful role for today or tomorrow.”