The Business of Philanthropy: Blending Social Impact With Financial Goals

The Business of Philanthropy: Blending Social Impact With Financial Goals

Corporate philanthropy initiatives are on the rise, yet often unconnected to business goals. Most initiatives fall into one of two categories – commonplace activities that fulfill moral obligations or build goodwill for their respective companies.

However, some companies have adopted an approach that aligns more closely with competitive objectives and context-focused philanthropy is also amenable to collective corporate action that helps reduce free riders and share costs more evenly.

1. Increased Customer Satisfaction

Few philanthropic programs align completely with company goals. Instead, most are created purely for public relations reasons–an act of cause-related marketing–while this strategy may have some positive results, it often is not enough to create the desired business impact.

Philanthropy must be closely tied to competitive context, such as improving skills, technology and infrastructure required by firms for competitive advantage, or improving demand conditions in markets in which the firm holds strong brand positions. These specific aspects of an environment tend to have more of an effect than more general conditions such as reducing taxes or creating infrastructure.

Numerous companies can enhance their contextual advantages through collaboration, such as joining clusters. Unfortunately, though, very few collaborate with competitors as philanthropy often seems like competing activity rather than an opportunity to address shared challenges.

2. Brand Recognition

Many corporate philanthropy programs don’t align with financial goals and risk alienating employees. Cause-related marketing initiatives don’t qualify as valid charitable donations because their tax deductible donations cannot be tax deductible.

Other philanthropic initiatives can more closely align with financial goals. When corporate philanthropy ties into cluster-specific needs–like increasing skills or technology essential to industry or demand in an underserved market segment–then its efforts will reap greater returns for both firm and charity alike.

Context-focused philanthropy requires companies to work collaboratively, breaking through any reluctance to collaborate that has plagued corporate giving in the past. Employee engagement must also be fostered through matching gift programs or crowdfunding tools that enable other employees to join.

3. Increased Employee Satisfaction

Employees expect their companies to contribute positively to the greater good, and will remain with those that share this goal. This means implementing programs beyond making an annual donation to a well-known nonprofit organization; such as tieing product designs directly with specific charity causes.

Employees who feel engaged with their company’s philanthropic efforts may become more engaged, which in turn increases productivity and reduces turnover. Companies known for being socially responsible are also likely to draw talented applicants with increased ease – helping their organizations build stronger competitive environments through talent recruitment efforts. Achieve this success depends on factors like transparency business practices and an encouraging regulatory environment.

4. Higher Profits

Business leaders used to balance the value of charitable contributions with short-term profits as they decided on financial goals for their companies. This approach created tension among critics demanding greater donations while investors desired short-term gains over long-term sustainability.

Many corporate philanthropy programs are scattered and unfocused, consisting mainly of small cash donations to local civic groups or universities. Others reflect executives’ and employees’ personal beliefs or values.

Strategic investments can make an even larger difference to society. Companies can take an indirect route to investing in social improvement by targeting specific aspects of a region’s research and development infrastructure or administrative institutions as key sources of competitive edge – especially if their market cluster is dominant, like Cisco in networking equipment – through targeting specific aspects like improving its competitiveness at specific locations.

5. Increased Employee Engagement

Employee engagement can help philanthropic businesses meet financial goals more easily. A Gallup survey shows that employees who are engaged with their jobs tend to work harder and experience higher productivity levels than disengaged workers.

Companies with highly engaged workforces tend to have greater success adapting to rapidly shifting market conditions than those without high employee engagement. Philanthropic activities that leverage your company’s unique abilities may create more impactful efforts, and employees who feel invested in these activities tend to have more positive workplace attitudes overall.

Corporate philanthropy can also strengthen a company’s brand image and attract more talent to its workforce, as prospective candidates prefer companies that demonstrate commitment to social change and community involvement.