October 30, 1997 | Read Time: 4 minutes
The recent union — and now ugly legal divorce proceedings — between the American Medical Association and the Sunbeam Corporation should serve as a cautionary tale for charities looking to forge income-producing ties to the business world.
Joint marketing ventures can be extremely lucrative, but they can also backfire if charities do not adequately assess the core values of their corporate partners — not to mention their own.
In August the A.M.A., America’s most powerful non-profit physicians’ organization, signed a five-year exclusive agreement with Sunbeam that allowed the company to put the medical group’s name and logo on home-health-care products, in nine selected categories, as an endorsement. In return, Sunbeam would include A.M.A. educational materials — paid for by the A.M.A. — with its products and give the medical association an undisclosed portion of the profits. The doctors’ group said it would use its royalty payments for health, education, and research programs on smoking, family violence, women’s health, and other public-health issues.
The deal, which could potentially have raised “millions” for the doctors’ group, according to press reports, immediately prompted a large public outcry, with consumer advocates, watchdog groups, and many of the A.M.A.’s own members assailing the perceived betrayal of the public’s trust in the association.
After the A.M.A. announced that it was reconsidering its “error,” Sunbeam sued the association to force it to honor the agreement. As a result of the fiasco, three top A.M.A. executives have lost their jobs, an ethics panel has been created within the A.M.A. to examine all such commercial ventures, and the credibility of the 150-year-old medical group has been sullied, perhaps permanently.
Ironically, the A.M.A. failed to do what all physicians do upon a routine visit to their office by a new patient: conduct a careful and thorough review of past history, followed by a diagnosis based on an analysis of the facts.
A close examination of Sunbeam’s policies, as set forth by its chairman, Al Dunlap, should immediately have raised a red flag for the association.
Known by the nickname “Chainsaw Al,” Mr. Dunlap, the author of Mean Business, has a well-earned reputation for ruthlessness in the treatment of his employees. Within 60 days of his taking over at Sunbeam in November 1996, he fired half of Sunbeam’s 12,000 employees. He then eliminated the company’s $1-million-a-year giving program.
Mr. Dunlap’s philosophy of giving is pretty simple: “The purest form of charity is to make the most money you can for shareholders and let them give to whatever charities they want,” he has said. Such a philosophy should have indicated to the medical association that Sunbeam might not be such a good partner in promoting issues of importance to a group of care givers.
For a joint marketing venture to prosper, the core values of the non-profit and corporate partners need to be aligned, and there must be innate trust between both parties, fair and equitable financial benefits, and the potential for long-term growth. Most importantly, each of the partners should be able to stand solidly behind the other’s “product.” If any of those key considerations is missing, the collaboration can quickly fall apart.
Charities must insure that all those elements are in place — from the outset. Such an approach requires them to do a lot of homework. They must investigate a prospective corporate partner’s history to know with whom they are dealing. And they must be willing to walk away from situations that, while lucrative, are not appropriate.
In addition to not realizing with whom it was dealing, the A.M.A. made another critical error: It agreed to endorse new Sunbeam products without actually having established its own product-testing process. That situation would undoubtedly have raised serious questions about the association’s professional integrity.
And integrity and credibility are non-profit organizations’ most important assets. As a society, we expect a far deeper level of truth and conviction from organizations that serve human beings than from organizations that serve Wall Street. While corporations are held accountable mainly to their shareholders, non-profit groups represent the collective expression of society’s sense of right and wrong. They are our “truth keepers.” When partnerships fall from that standard — or even when they are perceived to fall — the non-profit partner usually bears the brunt of the criticism.
Faced with declining corporate contributions, increased competition for donated dollars, and cutbacks in government funds, charities will no doubt continue to seek out innovative ways to raise funds. Integrity, values, and good business sense can be mutually inclusive, but charities need to take the lead in insuring that principles aren’t compromised in the pursuit of new revenues.
Stan L. Friedman is a managing partner in WorldCom, a company that builds partnerships between corporations and non-profit groups. It has offices in Oakland, Cal., and Richmond, Va.
